University of Minnesota Law School Scholarship Repository Minnesota Law Review 2020 Eligible Subject Matter at the Patent Office: An Empirical Study of the Influence of Alice on Patent Examiners and Patent Applicants Jay P. Kesan Wang, Runhua Follow this and additional works at: https://scholarship.law.umn.edu/mlr Part of the Law Commons Recommended Citation Kesan, Jay P. Wang, Runhua, "Eligible Subject Matter at the Patent Office: An Empirical Study of the Influence of Alice on atentP Examiners and Patent Applicants" (2020). Minnesota Law Review. 3212. https://scholarship.law.umn.edu/mlr/3212 This Article is brought to you for free and open access by the University of Minnesota Law School. It has been accepted for inclusion in Minnesota Law Review collection by an authorized administrator of the Scholarship Repository. For more information, please contact [email protected]. Article Eligible Subject Matter at the Patent Office: An Empirical Study of the Influence of Alice on Patent Examiners and Patent Applicants Jay P. Kesan† and Runhua Wang†† Introduction ............................................................................................................ 528 I. The Supreme Court Decision in Alice Corp. v. CLS Bank .................. 536 A. The Alice Decision Regarding Eligible Subject Matter ......... 537 1. Abstract Idea and Statutory Limits ..................................... 537 2. Implementation by the PTO ................................................... 543 B. Uncertainties in Eligible Subject Matter .................................... 545 1. Innovation and Uncertainties Created by the Language of Judicial Exceptions ........................................... 545 2. Uncertainties in the Federal Courts .................................... 546 3. Uncertainties at the PTO .......................................................... 550 4. Previous Empirical Studies of Office Actions by the PTO ............................................................................................ 552 5. Revised Guidance from the PTO to Reduce These Uncertainties ................................................................................. 553 II. Empirical Study of the Impact of Alice on Patent Prosecution ... 555 A. Data and Methodology ...................................................................... 555 1. Data Sources and Study Objects ........................................... 556 2. Descriptive Analyses .................................................................. 559 3. Methodology .................................................................................. 564 B. Regression Results .............................................................................. 568 1. Correlation Between Alice Rejections and Other Statutory Rejections ................................................................... 568 2. Difference-in-Difference Regression Results .................. 573 III. Implications .................................................................................................... 588 † Jay P. Kesan is Professor and H. Ross & Helen Workman Research Scholar at the University of Illinois at Urbana-Champaign. Copyright © 2020 by Jay P. Kesan. †† Runhua Wang is an Empirical Intellectual Property Fellow at Illinois Insitute of Technology Chicago-Kent College of Law. Copyright © 2020 by Runhua Wang. 527 528 MINNESOTA LAW REVIEW [105:527 A. Increased § 101 Rejections by USPTO Patent Examiners ............................................................................................... 588 1. Bioinformatics .............................................................................. 589 2. Business Methods ....................................................................... 590 3. Software Art Units ...................................................................... 591 B. The Ability of Patent Applicants to Overcome § 101 Rejections ................................................................................................ 593 1. Difficulties in Overcoming § 101 Rejections in Bioinformatics .............................................................................. 593 2. Diverse Reactions in Business Methods and Software .......................................................................................... 596 C. The Future of Shifting Transaction Costs to the PTO ........... 599 Conclusion ............................................................................................................... 604 Appendices .............................................................................................................. 605 Appendix A ...................................................................................................... 605 Appendix B ...................................................................................................... 608 Appendix C ...................................................................................................... 608 Appendix D ..................................................................................................... 615 INTRODUCTION In May 2019, Senators Tillis and Coons and Representatives Col- lins, Johnson, and Stivers drafted a bill to reform 35 U.S.C. § 101 of the Patent Act to address issues related to patent eligibility.1 Since the Su- preme Court ruling in Alice Corp. v. CLS Bank,2 the industry has been confronting uncertainties in the prosecution of patent applications and in patent enforcement as a result of the law governing patent eli- gibility, which arguably harms innovation.3 In the next year or two, Congress is once again likely to be under pressure to address eligible subject matter reform, as the U.S. Supreme Court has recently chosen not to revisit this topic by denying certiorari in a series of cases in- volving patentable subject matter in both the software and biotech- nology fields.4 1. Sens. Tillis and Coons and Reps. Collins, Johnson, and Stivers Release Draft Bill Text to Reform Section 101 of the Patent Act, THOM TILLIS U.S. SENATOR FOR N.C. (May 22, 2019), https://www.tillis.senate.gov/2019/5/sens-tillis-and-coons-and-reps-collins -johnson-and-stivers-release-draft-bill-teXt-to-reform-section-101-of-the-patent-act [https://perma.cc/KU5S-LRDV]. 2. Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). 3. See Gene Quinn, The Road Forward for Software Patents Post-Alice, IPWATCH- DOG (Feb. 25, 2015), http://www.ipwatchdog.com/2015/02/25/the-road-forward -for-software-patents-post-alice [https://perma.cc/UWM5-KL2G]. 4. The Supreme Court has recently denied certiorari in these eleven patent eli- gibility petitions: Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018), cert. denied, 2020] IMPLICATIONS OF ALICE 529 Eligible subject matter in patent law is a threshold requirement of patentability and refers to subject matter that can legitimately be the subject of a U.S. patent.5 Patent law accepts four categories of in- ventions—machines, articles of manufacture, compositions of matter, and processes—as properly being the subject of a U.S. patent.6 By ju- dicial exceptions, however, abstract ideas, natural phenomena, and laws of nature are categorically excluded from patent protection.7 It has been difficult to define what the three categories of exclusions mean in practice, partly because the meanings of these exclusions are unclear. As a result, courts have struggled to specify legal tests to op- erationalize these exclusions. 140 S. Ct. 911 (2020); Vanda Pharms. Inc. v. West-Ward Pharms. Int’l Ltd., 887 F.3d 1117 (Fed. Cir. 2018), cert. denied, 140 S. Ct. 911 (2020); Athena Diagnostics, Inc. v. Mayo Collaborative Servs., LLC, 915 F.3d 743 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 855 (2020); Power Analytics Corp. v. Operation Tech., Inc., 748 F. App’x 334 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 910 (2020); Cellspin Soft, Inc. v. Fitbit, Inc., 927 F.3d 1306 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 907 (2020); ChargePoint, Inc. v. SemaConnect, Inc., 920 F.3d 759 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 983 (2020); Trading Techs. Int’l, Inc. v. IBG LLC, 767 F. App’X 1006 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 955 (2020); Trading Techs. Int’l, Inc. v. IBG LLC, 921 F.3d 1084 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 954 (2020); SRI Int’l, Inc. v. Cisco Sys., 773 F. App’x 1090 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 1108 (2020); MaXell, Ltd. v. Fandango Media, LLC, 779 Fed. App’x 745 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 2509 (2020); Reese v. Sprint Nextel Corp., 774 F. App’x 656 (Fed. Cir. 2019), cert. denied, 140 S. Ct. 2507 (2020). Thus, patent eligibility is still a continuing problem unaddressed by the Supreme Court which perhaps opens the door for Congress to act. See Views from the Top: IP Leaders Sound Off on Supreme Court’s Refusal to Wade into Patent Eligibility Debate, IPWATCHDOG (Jan. 13, 2020), https://www.ipwatchdog.com/2020/01/13/views-from -the-top-ip-leaders-sound-off-on-supreme-courts-refusal-to-wade-into-patent -eligibility-debate [https://perma.cc/HY2U-LUM3] (criticizing the passive reactions of the Supreme Court and the Federal Circuit that will harm the domestic economy and technology development in the U.S., which should be taken care of by Congress); see also Gene Quinn, A Window Is Open to Save U.S. Patents—Don’t Let It Slam Shut, IP- WATCHDOG (Feb. 2, 2020), https://www.ipwatchdog.com/2020/02/02/window-open -save-us-patents-dont-let-slam-shut [https://perma.cc/7EVD-UUFR] (urging Con- gress to handle the chaos about patent