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Business Method Patent Protection Under New USPTO Interim Guidance

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This week, IP Watchdog published a blog on allowances for business-method inventions. The post was completed before the release of the new USPTO guidelines. Following are comments from the author on her view of the impact of the interim guidance on future allowance rates:

This week, the USPTO released its interim guidelines addressing how claims are to be evaluated under the subject matter eligibility specifications of 35 U.S.C. 101 in view of Alice. Corp v. CLS Bank. As compared to the preliminary guidelines issued this summer, the interim guidelines include greater detail in terms of what claim characteristics may qualify a claim directed to an abstract idea to nonetheless be eligible for patent protection. For example, the guidelines indicate that the machine-or-transformation test remains good law. Further, the guidelines indicate that an examiner is to evaluate a claim determined to be directed to an abstract idea as a whole and determine whether the claim includes an “inventive concept” or additional features that indicate that the abstract idea is being “applie[d] … in a meaningful way.” To illustrate, the guidelines indicate that if a claim includes “a specific limitation other than what is well-understood, routine and conventional in the field” or any “unconventional steps that confine the claim to a particular useful application,” the claim may be eligible for patent protection.

Thus, overall, the interim guidelines seem to provide examiners with more latitude in terms of being allowed to determine that business-method claims comply with 35 U.S.C. 101. However, as perhaps was expected, the interim guidelines lack a bright-line rule for assessing eligibility. Therefore, for a particular applicant, a 101 fate of a software application will seemingly be highly dependent on an examiner’s interpretation of fuzzy issues such as what constitutes an inventive concept, what is well-known, what is an abstract idea, and what steps are routine.

It is my prediction that, in the months to come, we will see a moderate decrease in 101 rejections and a moderate increase in allowances in business-method art units. I do not expect that these numbers will return to pre-Alice levels. I also predict that, given the high subjectivity of the 101 analysis set forth in the interim guidelines, the variability of 101 prevalence in office actions across examiners in business-method art units will greatly increase. Further, given the flexible standard and the tying of the 101 analysis to a determination of what constitutes an “inventive concept,” I predict that some examiners will begin to tie this analysis to prior-art analyses and that examiners’ 101 prevalence will be anti-correlated with their pre-Alice allowance rates.

Thus, overall, for applicants landing in the business-method art units, I believe that the interim guidelines provide some hope that their application will be allowed (while there seemed to be minimal hope while the preliminary guidelines were in place). Yet, the use of a “flexible” standard will seemingly facilitate rejection-prone examiners in the business-method art units to routinely issue and stand by 101 rejections. Patenting prospects for business-method applications may then, more than ever, depend on chance examiner assignments. Should this unpredictability come to be, it will remain to be seen whether companies continue to be willing to invest in software innovation, such as those used in by our health-care systems, to prevent fraud and in banking systems. Companies may decide that it is not worth the research, develop and maintenance effort if it is highly unpredictable whether their innovation will be determined to even be eligible for patent protection.

Kate Gaudry, Ph.D., is an associate in Kilpatrick Townsend & Stockton LLP’s Washington, D.C., office.