Why it matters: In Alice Corp. v. CLS Bank, the U.S. Supreme Court held that claims for a computer-based software method for reducing financial-settlement risk were patent-ineligible "abstract ideas" that were not made patent-eligible merely by requiring the use of a computer for implementation. Although the Alice holding was not specific to computer-implemented software patents, the Federal Circuit and district courts nationwide have since relied on the two-part test established in Alice to overwhelmingly invalidate such patents as they come before them. Here, we take a look back over the period since the July 2014 Alice decision to see how it has impacted the legal landscape via the courts.

Detailed discussion: In Alice Corp. v. CLS Bank, the U.S. Supreme Court held that claims for a software method for reducing financial-settlement risk performed by a computer were "drawn to a patent-ineligible abstract idea" under Section 101 of the Patent Act, and that "[m]erely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention." The Court established a two-step test for ascertaining patent eligibility under Section 101: (1) first, determine whether the claims at issue are directed to one of the "patent-ineligible" concepts of abstract ideas, laws of nature or natural phenomena; and (2) if so, determine whether any of the remaining elements, either alone or in combination with the patent-ineligible elements, contain sufficient "inventive concept" to transform the claim to become patent-eligible; in this regard the Court noted that simply applying an abstract idea on a generic computer is not enough for patent eligibility. In affirming the conclusion of patent ineligibility with respect to the specific facts before it in the Alice case, the Court urged the courts and agency tribunals to "tread carefully" going forward in construing inventions and innovations to be non-patent-eligible abstract ideas "lest [the exclusionary principles] swallow all of patent law." Many courts, however, have failed to heed the Supreme Court's words of caution; even though there was nothing in theAlice opinion that specifically tied its two-part test to software patents, when confronted with such patents, the courts post-Alice have overwhelmingly declared them to be patent-ineligible. The statistics compiled by practitioners tracking such post-Alice decisions from the Federal Circuit and the two district courts with the most cases decided/highest rates of invalidation—California (Northern and Central) and Delaware—illustrate this (for contrast, we've also included statistics from the Eastern District of Texas, which doesn't appear to be embracingAlice as whole-heartedly—it decided the third-highest number of Section 101 cases but had a comparatively low rate of invalidation):

Post-Alice federal court decisions invalidating computer-implemented software patents (7/19/14 – 10/31/15)*

  • Nationwide (Federal Circuit and District Courts):
    • Total decisions: 174
    • Total invalid: 127
    • Percentage invalid: 73%
  • Federal Circuit (appeals from District Courts, PTAB, etc.):
    • Total decisions: 19
    • Total invalid: 18
    • Percentage invalid: 94.7%
  • District Courts:
    • California—total decisions: 37
      • Northern District
        • Total decisions: 19
        • Total invalid: 15
        • Percentage invalid: 78.9%
      • Central District
        • Total decisions: 18
        • Total invalid: 13
        • Percentage invalid: 72.2%
    • Delaware—total decisions: 31
      • Total invalid: 28
      • Percentage invalid: 90.3%
    • Eastern District of Texas—total decisions: 23
      • Total invalid: 8
      • Percentage invalid: 34.8%

* Statistics provided by BilskiBlog, "#AliceStorm for Halloween: Was It a Trick or a Treat? (11/6/15)"

As the statistics show, the Federal Circuit has upheld invalidation on the basis of Alice in all but one of the cases (the December 2014 case of DDR Holdings, LLC v. Hotels.com), that have come before it in the period through October 31, 2015, and the rates of invalidation in the California and Delaware district courts are very high. The following are just a few recent Federal Circuit decisions affirming lower court determinations of software patent ineligibility based on Alice, including two on appeal from the Northern District of California:

Intellectual Ventures v. Capital One. On July 6, 2015, the Federal Circuit upheld a determination of invalidity by a district court for the Eastern District of Virginia with respect to two of the plaintiffs' patents, one claiming methods of assisting online users to budget (within preestablished, self-imposed spending limits), track and store information relating to the users' spending habits; and the other claiming methods for providing users with customized web page content based on user-specific information and navigation history. The Court applied the Alice test and found the patents to be ineligible as they were drawn to abstract ideas and implemented on a generic computer.

Internet Patents Corp. v. Active Networks, Inc. On June 23, 2015, the Federal Circuit upheld the dismissal by a district court for the Northern District of California of four infringement claims on the grounds of patent ineligibility. The patent at issue claimed methods for a system allowing an online user to retain/reclaim information lost in the navigation of online forms via an online application consisting of "dynamically generated web pages" through the use of a "conventional" web browser. Again, the Court applied the Alice test to find that the claimed methods were drawn to abstract ideas and that the use of the Internet and a computer to implement them did not constitute an "inventive concept" that transformed them to patent-eligible.

OIP Technologies, Inc. v. Amazon.com Inc. On June 11, 2015, the Federal Circuit affirmed the judgment on the pleadings entered by the district court for the Northern District of California against plaintiff/appellant OIP Technologies for failure to claim Section 101 patentable subject matter. The patent at issue, which OIP Technologies claimed Amazon infringed, involved claimed methods for a computer-implemented program that helped the user arrive at optimum pricing of a product for sale based on current market conditions. The Court once again applied the Alice test to find that the claimed methods were drawn to an abstract idea and implemented via "generic computer functions."

There may be a glimmer of hope for owners of software patents as it is possible that the Federal Circuit is rethinking, or at least grappling with, the larger implications of Alice. Scott Graham of Law.com was present on October 8, 2015, when a Federal Circuit panel heard oral argument in the case of Amdocs (Israel) Limited v. Openet Telecom, Inc. The Amdocs case involves an appeal from a grant of summary judgment by a district court for the Eastern District of Virginia that had invalidated two "data mediation" software patents on Section 101 grounds. Graham reported that the panel, consisting of Judges Pauline Newman, Jimmie Reyna and S. Jay Plager, sounded "extremely skeptical" about the district court's decision (per Judge Plager, post-Alice software patent invalidations are a "pla-a-a-gue on the patent system nowadays) and subjected the attorneys to lively and somewhat comical questioning about how to define and limit the concept of an "abstract idea" (here, Judge Plager noted to one attorney that "[y]ou haven't really told us what an abstract idea is, but you notice the Supreme Court hasn't either"). Judge Reyna grilled another attorney with a line of questions specifically about software patents: "[a]t the end of the day, we can look at almost any software application and say it's abstract, correct?... [s]o somewhere along the line, there is software that is patent-eligible, correct?" As Graham said, however, "[i]t's sometimes too hard to tell from arguments whether [the Federal Circuit judges] are really gearing up to push back on Alice, or just venting about having to apply a precedent they consider irrational and unworkable." Moreover, as Graham pointed out, Judges Prager and Reyna wrote the decisions in two recent Federal Circuit cases that upheld Section 101 invalidations. It will be interesting to see how the Federal Circuit rules in Amdocs—we will be watching and report back.

See here to read the 7/6/15 Federal Circuit opinion in Intellectual Ventures v. Capital One.

See here to read the 6/23/2015 Federal Circuit opinion in Internet Patents Corp. v. Active Networks, Inc.

See here to read the 6/11/2015 Federal Circuit opinion in OIP Technologies, Inc. v. Amazon.com Inc.

See here to read the 10/12/15 Law.com article by Scott Graham titled "Panel Pushes Back on Software Patent Challenge."