The Supreme Court’s March 2012 Mayo and June 2014 Alice rulings have undeniably changed the landscape of patent practice. The latter of these rulings, in particular, has pushed patent subject matter eligibility under 35 U.S.C. § 101 from relative obscurity into the spotlight. The increased attention to Section 101 can be seen across patent fora. For example, in December 2014, the U.S. Patent and Trademark Office updated its Section 101 guidance to personnel regarding pending patent applications and post-grant proceedings. At the same time, filings for patent infringement lawsuits are notably down as patentees re-evaluate the soundness of their portfolios. Finally, and perhaps most apparent to patent litigants, district court motion decisions rendering patents invalid under Section 101 have dramatically increased.
The sharp uptick in rulings of invalidity raises the question of whether Alice has caused the district courts to change their approach to motions based on Section 101 despite Alice having applied the same two-part test first promulgated in Mayo. This brief study examines that question by considering and comparing district court decisions in two periods: (1) following the issuance of Alice, and (2) between the issuance of Mayo and Alice. Moreover, this study considers changes in district court determinations on Section 101 motions brought under Rule 12 compared with motions brought under Rule 56. The data thus far supports the following conclusions about the post-Alice landscape:
- 400% increase in Section 101 motion determinations
- An approximately 10% increase in grant rate of Rule 12 motions for Section 101 invalidity (the Alice-effect)
- Negligible change in grant rate for Rule 56 motions for Section 101 invalidity
- Grants rate of Section 101 motions brought under Rule 12 grants now outpaces those brought under Rule 56
The study identified district court decisions on motions to dismiss, motions for judgment on the pleadings, and motions for summary judgment of invalidity under Section 101 in two distinct time frames corresponding to the decisions in Mayo and Alice. The research results are summarized in the following table:
Click here to view the table.
In the three years since Mayo issued, district courts have ruled on over 80 Section 101 based Rule 12 and Rule 56 motions. However, 46 of those determinations have been made in just the last 9 months. This represents a dramatic increase in the use of patent subject matter eligibility as a defensive tool. In the 27 months between Mayoand Alice, 37 determinations were made—about 1.4 per month. Since Alice issued, district courts have made about 5.4 determinations per month. This is a nearly 400% increase. But why? Mayo specifically addressed whether a patent claim was eligible under Section 101 as directed towards a law of nature, not as an abstract idea. Alicemade clear that the two-part Mayo test applies to all patent eligibility questions under Section 101.
This clarification may represent the end of a cycle in the patent law related to software and business method innovations. Beginning in the early 1980s, the landmark Supreme Court decision in Diamond v. Diehr, 450 U.S. 175 (1981) changed established patent law by holding that at least some software could be patented. Then, in the late 1990s, the Federal Circuit ruled in State Street Bank & Trust Co v. Signature Financial Group Inc., 149 F.3d 1368 (Fed. Cir. 1998) that business methods could also be patented. Within this rubric of expansive patentability, the Internet age saw a rapid increase in patent issuance as software innovations boomed. The lack of a clear test for patent eligibility may have failed to keep this in check. Many of the patents from this period would later become the subject of lawsuits brought by non-practicing entities, as patent litigation filings soared. Courts began to shift in view of these results, but early cases, such as Bilski v. Kappos, 561 U.S. 593 (2010), failed to adequately clarify the standard for patent subject matter eligibility. Alice, however, finally addressed the standard for software and business method patents.
But has Alice resulted in an over-correction by the district courts? The data above indicates just over a 10% Alice-effect for Rule 12 motions brought under Section 101. For both motions to dismiss (69% v. 64%) and motions for judgment on the pleadings (89% v. 80%), the grant rate has clearly increased. That same effect is not evident in the grant rate of Rule 56 motions that challenge patent subject matter eligibility, which remains constant at about 71%.
The decisions reviewed suggest that the Alice-effect is prevalent when Section 101 challenges are raised as a threshold question. Rarely has patent validity been a Rule 12 basis prior to Alice. Grant of a Rule 12 motion based on Section 101 not only ends a litigation but simultaneously invalidates an issued patent. Given the presumption of validity enjoyed by issued patents, district courts are thus more easily finding not just sufficient basis for dismissal but clear and convincing evidence that the patentee should not have had the right to bring suit in the first instance. Accordingly, as a result of the Alice-effect, the grant rate of Rule 12 motions under Section 101 now outpaces that of Rule 56 motions challenging patent subject matter eligibility.
The rate at which Section 101 challenges are brought is unlikely to change in the immediate future until the delineation of patent eligible and ineligible subject matter becomes clearer. Eventually, the culling of patents directed to ineligible subject matter will complete and the challenge rate will subside. The number of Rule 56 motions directed to Section 101 should slow first as cases well underway before the issuance of Alice pass the summary judgment stage, and cases dismissed by post-Alice Rule 12 motions will not progress to that stage. Thereafter, the rate of Rule 12 motions under Section 101 will likely decline. This will occur primarily because the Patent Office will act as a gatekeeper for patents now subject to invalidation under Alice. Additionally, Rule 12 motions under Section 101 will decline as potential litigants choose not to assert patents potentially subject to Alice.
Will the Alice-effect wane? I believe so. First, decisions coming from district courts with the most active patent dockets (shown above) reflect a degree of stability between pre- and post-Alice grant rates. This suggests that, over time, increased familiarity with Section 101 issues and experience applying the two-part Mayo test may temper theAlice-effect nationally. Second, motions that have been decided since the issuance of Alice are now proceeding through the appellate process. The Federal Circuit’s review and discussion of these cases will provide guidance to district courts moving forward, hopefully resulting in greater consistency and predictability in future Section 101 motion practice. For the time being, though, the Alice-effect will persist.