Updated February ex parte decisions show Alice-based rejections getting overturned at a dizzying rate

For the past year, the PTAB has increasingly reversed so-called abstract idea rejections (Alice). But in recent months, the pace of these reversals has been nothing short of remarkable. Here, we report updated February numbers, which show the PTAB continuing to overturn abstract ideas at an unprecedented rate. We also look more deeply into how these rejections are getting overturned. It turns out the Board is increasingly relying on step 2A (Step 1 of Alice/Mayo) thanks to new guidance that makes it more difficult for an examiner’s rejection to hold.

As we recently reported on Patexia, the new examination guidance (effective early January) has fueled reversals at the Board. Now, with increased numbers for February 2019, this effect can now be seen much more dramatically.
reversalratefebup

In February, there were 61 completely reversed decisions from a total 149 such rejections. This yields an astonishing 41% reversal rate. This is of course astonishing by standards of Section 101 judicial exceptions. We have long reported that many grounds of rejection are overturned by the PTAB (such as Section 112 and Section 102) at even higher rates. But even just over a year ago, the PTAB routinely sided with examiners on abstract idea grounds upwards of 90% of the time. Now the climate is completely different.

Notable changes in reversal rates can be seen from the color-coded timeline events in the graph above. Red refers to when Berkheimer and similar Federal Circuit decisions were decided, which put a higher evidentiary standard on showing that claims did not recite an “inventive concept.” With a little lag, the reversal rate ticked up. Then in the fall of 2018, Director Andrei Iancu started more actively promoting better (more consistent) Section 101 examination, eventually resulting in new 101 Examination guidance shown by the yellow line. The PTAB appears to quickly adapt to case law, guidance and internal cultural changes.

And these results do not appear to be from a sample size distortion (because applicants have already given up). while the total number of abstract idea rejections decided did not reach months seen last year, this is likely due to the PTAB picking up the new year on a slow note, which is historically the case. In fact, February 2019 saw the Board decide more abstract idea rejections than February 2018. See below. And even with the total number of decisions deciding abstract idea grounds of rejections being lower than prior months, it still set a record in the total number of such reversals (61) breaking the previous record of December 2018 (58).

totalabstractreversalsfebup

How is the PTAB overturning these rejections? Thankfully, the Anticipat research database makes this question easy to answer, cataloging the specific rationale (tag) that is used in overcoming the rejections. As shown from the following graph, Step 1 (which the USPTO refers to as Step 2A) has now separated itself from Step 2.

abstractideastep2a

A good practitioner will tell you that thanks to the new Section 101 guidance and other case law developments, it is now easier to overcome Abstract Idea rejections. These Board decisions directly show this at the final stage, but results can also be felt farther upstream of these decisions. 

Like many USPTO personnel, PTAB judges are quota-motivated. Because of this, end of quarters typically have higher output of decisions. For this reason, expect March 2019 to be a big month in the volume of abstract idea rejections decided and in the total number of reversals. If history is any indication, we could be looking at another record month.

PTAB’s Abstract Idea Reversal Rate Surges in January after New Examiner Guidance Takes Effect

At last week’s Utah IP Summit (and subsequently published in a post at IPWatchdog), Gene Quinn squarely blamed the Federal Circuit for the “101 crisis”. And his point is hard to ignore as many divided Federal Circuit panels seem unwilling to distinguish Alice and Mayo even in the face of strong dissents that would. As much as Director Iancu would like to move the needle of patent-eligibility in a more straightforward and predictable way, the USPTO is bound by these majority Federal Circuit panels–not strong dissents. But the PTAB seems to be quietly listening to all the buzz, being more willing to reverse abstract idea rejections under Section 101 than ever before.

The new subject-matter eligibility guidelines took effect in early January 2019 and almost immediately Board panels started citing to the guidelines in their analysis. The result on reversals was profound. Of 91 total abstract idea decisions, the Board completely reversed 32. This is an astounding 35% reversal rate, a rate not seen in two years, which saw a significantly lower sample size than January 2019.

revisedreversalrate

While the reversal rate for January 2019 was dramatic, it is too early to tell whether this high of a reversal rate will continue, especially with the lower-than-expected total number of abstract idea decisions. While 91 such total decisions is not paltry, such a low number has not been seen since last February. This is not completely unexpected as the PTAB typically starts out the calendar year slow. But the next couple months will be insightful to see whether the high reversal rate continues even with a higher volume of abstract idea appeals being decided.

revjanabstractidea.png

The PTAB (previously BPAI) has a rich history in shaping patent-eligibility. The Supreme Court case Diamond v. Diehr moved the 101 needle in finding an algorithm claim to be patent-eligible because of its practical application to curing rubber. This decision originally stemmed from the CCPA (predecessor to the Fed circuit) reversing a Board decision that affirmed the Examiner’s 101 rejection. Another Supreme Court decision, Diamond v. Chakrabarty, paved the way for patenting man-made genetically-modified living organisms. This decision also stemmed from a Board rejection of the claims under 101, with the CCPA again reversing the Board’s affirmance of the examiner’s 101 rejection. 

Expect the PTAB to continue to reverse improper Section 101 rejections as it has a tail wind at its back. This could benefit the entire patent bar at least for predictability sake. Just by virtue of the Board deciding a more diverse set of applications than courts, there are more shades of gray to work with. And some of these gray cases can be good candidates for testing the proper boundaries of what is patent-eligible. Even if the Board affirms the rejections as patent-ineligible, appeals that go higher up could help give the Federal Circuit (like its CCPA predecessor) a chance of redeeming itself as the 101 conundrum culprit.

December 2018: PTAB Records Highest Total Number of Abstract Idea (Alice) Reversals

The PTAB continues to decide a large number of Alice-based (Section 101 – patent-ineligible subject matter) decisions. December continues both the large number of abstract idea reversals and the high reversal rate, compared to previous months. Expect the appellant-friendly trend to continue with revised USPTO Examiner Guidance, which the PTAB is bound to follow.

December 2018 showed two interesting data points. First, the total number of abstract idea reversals was record-setting. For context, the previous record number of such reversals was in November 2018 with 42. In December, the PTAB quietly crushed this previous record of reversed abstract idea rejections with 58 total such reversals. It was a quiet crushing because the holidays and end-of-year logistics at the USPTO resulted in a long lag-time for decisions to finally publish.

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Second, the total reversal rate for these rejections was very high as well. We previously reported that in November 2018, the PTAB hit an abstract idea reversal rate of 20%, which it had not done in quite some time. December continued November’s high reversal rate trend with 58 complete reversals out of 232 total abstract idea decisions, yielding a reversal rate of 25%. The last time the PTAB saw two consecutive months with such a high reversal rate was two years ago. The obvious difference is that two years ago saw much fewer abstract idea appeal decisions.

On January 7, 2019, the USPTO put into effect Examiner Guidance that looks to make it more difficult for Examiners to maintain abstract idea rejections. We have already seen many reversals citing to this Guidance. See below screenshot from Anticipat’s Research Database.

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More on this in a follow-up post. Expect in the coming months abstract idea rejections to continue to be reversed at higher rates and at a higher volume.

 

The PTAB continues to increase reversal rate of abstract idea rejections

Recently, the state of patent-eligibility (especially abstract ideas) has been the talk of the patent bar. Yesterday, revised examination guidelines took effect, changing the direction for examiners to examine abstract ideas at the USPTO. For its part, the PTAB has been playing a role in the abstract idea flux as applicants increasingly turn to the Board for overturning difficult rejections. Here, we report that the reversal rate for abstract ideas continues to climb slightly higher.

October 2018 had 30 decisions out of 185 total decisions in which the Board wholly reversed abstract idea rejections, or a reversal rate of 16.2%. This is up from the previous month (September) and it continues a largely unbroken streak of 5 consecutive months with relatively high reversal rates. In fact, during this streak, each month experienced an abstract idea reversal rate over 15% with the sole exception of September, which came close at 14.4%. Prior to this streak, the PTAB had a much gloomier streak for abstract idea appellants, where the reversal rate for abstract ideas was below 15% for eight consecutive months, as we reported here.

Below is a snapshot of October 2018 being queried for abstract idea rejections on Anticipat’s Research page. You can find all these decisions for this time frame, for other time frames, and a whole host of other issues on appeal to guide your prosecution strategy.

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To access this and other types of appeals information using Anticipat’s Research database, feel free to sign up for a 14-day trial.

With new leadership at the USPTO, and as seen from recent appeals data, the pendulum of patent-eligibility continues its slow swing in favor of applicants, even if this swing is at times unpredictable.

Section 101 Alice (Abstract Idea) Appeal Decisions Surge, but Reversal Rate Stays Steady

Abstract idea rejections (mostly Alice-impacted in computer-implemented inventions) are experiencing a surge at the PTAB. We previously reported that August 2018 saw a record number of abstract idea appeals decisions. But the following month shattered this record number of appeals decisions by a large margin. Practitioners have been increasingly appealing abstract idea rejections and it is dramatically showing itself in the final written decisions. The most recent data show that appeals are a more attractive option to overcoming such rejections with still small but not hopeless odds.

As we previously reported, August 2018 saw a record number of reversals (30) based in part from the equally record number of total abstract idea decisions that month (207). The following month of September saw these records shattered at the PTAB. Even with a modest total increase in the total number of decisions (771 to 840, or about a 9% increase), the number of abstract idea decisions for September increased to 257, a 24% increase.

abstractideanumbers

That surge in abstract idea decisions resulted in a record-setting 37 reversals. So while the total number of abstract idea reversals was impressive, the actual reverse rate (14.4%) stayed relatively level, on par with previous months and far lower than other grounds of rejection. As we reported, June and July saw a Berkheimer bump above the 16% reverse rate.

While the reversal rates of recent August and September months are lower than June and July, considering the substantial number of appeals with these rejections, it appears that practitioners are looking to the PTAB for relief. That is, rather than abandoning cases with determined Examiners standing by their Section 101 rejections, practitioners are increasingly using less-trodden techniques (appeals) with overcoming these rejections. After all, some practitioners view appeals as a last resort, especially in some technology sectors, due to the substantial time commitment to reach a final written decision.

Continue to expect appeal decisions that decide Section 101 rejections to increase, as the unpredictability at the USPTO plays out. Also, check out the new Research user interface that allows you to select the specific issues and subissues that you are interested in.

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The PTAB quietly hit a milestone in June in reversing Alice Section 101 rejections

As we have pointed out in a previous post, for more than a year, reversal rates for abstract idea (Alice) rejections have been extremely low. We are finally seeing an uptick of reversals likely due to Berkheimer and other Federal Circuit case law and recent guidance by the USPTO. As we’ve previously predicted, this reversal rate should continue (and may even go up). But until leadership at the USPTO clarifies its policies, it remains to be seen by how much.

As we’ve previously reported, from August 2016 to April 2017, the PTAB had months where it reversed abstract ideas in the 20 and 30 percentage range. That is, if a month had 100 abstract idea decisions, the Board would reverse the examiner on 20 or 30 of those cases. But May 2017 saw a dismal change in appellant fortunes: the reversal rate for abstract idea rejections tanked. For this period of over a year ago, many months saw only single digit reversal rates. Indeed, no month during this time exceeded a 15% reversal rate. The period was bad for Alice appellants.

abstractideareversals

But all this may be starting to change. Last month (June) saw a high number of abstract idea appeals decided, 176. Of those, 29 were wholly reversed, yielding a complete reversal rate of 16.5%.

It may be premature to characterize June as a watershed moment for patent eligibility at the PTAB. But there are three reasons for such hope.

First, June had a sizable number of reversals. In other words, the PTAB did not exceed a 15% reversal rate through a blip attributable to a small sample size. For some context, the number of reversals for the single month of June (29) was almost double the number of reversals for the six months between July 2016 and December 2016 (19).

Month Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18
Reversal Rate 33% 33% 27% 33% 29% 14% 28% 39% 20% 3% 11% 14% 15% 8% 15% 11% 14% 11% 14% 11% 10% 12% 9% 16%
Reversed 2 2 3 2 7 3 17 15 16 1 7 13 16 7 10 9 8 2 9 8 21 16 15 29
Total 6 6 11 6 24 22 60 38 81 31 63 94 108 93 68 83 56 19 64 73 203 137 172 176

Second, the number of decisions where the Board partially reverses an abstract idea rejection is increasing as well. In June, two decisions partially affirmed such rejections, pushing up the total rate with at least one claim reversed to 17.6%. March saw seven such decisions. These nine decisions for these months are more than the previous 9 months. The partial reversal rate tells a more complete story about how the Board is treating abstract idea rejections. As seen, the Board’s trend is toward increasing both the number of complete reversals and partial reversals. This means that the Board appears more willing to entertain dependent claims as patent-eligible, giving the appellant some options.

Finally, the Board is recently more holistically relying on both steps for reversing. We are starting to see a return to previous months where the PTAB has been more aggressive in reversing these types of rejections. Part of this is due to case law, which the Board follows. Berkheimer and Vanda guidelines may play a role. We previously noted that Berkheimer temporarily changed the way in which panels reverse. That is, whereas before panels primarily relied on Step 1 to overturn an abstract idea rejection, for a few months it was about even as to whether the Board uses Step 1 or Step 2 of the Alice/Mayo framework to reverse. June saw a return to the disproportionate reliance on Step 1 vs Step 2 reversal rationales (2:1). This goes to show that the Board may not be limiting itself to reversing cases just because of a single Federal Circuit decision (Berkheimer), but is developing a less erratic and more cogent way of deciding such rejections.

Why did the PTAB quietly hit this milestone in June? The PTO’s FOIA website, from which a majority of Anticipat’s data comes, has recently been delaying the time it takes to upload decisions to its page. Before a normal data upload would be a few business days and Anticipat Recap emails would play it safe by waiting until two weeks after a particular date to send a recap of a day’s decisions. So while we typically keep users updated on reversals using Recap emails after two weeks, for many days there have been no decisions to report on. Instead, we accessed this information by using the Research page.

After speaking with the USPTO’s webmaster, we were assured that the decisions will be more quickly uploaded going forward. This did not entirely assuage our concerns. So in the meantime, we are updating our Recap email functionality so that a user can modify the email settings to be sent in whatever way is most helpful to one’s practice. Stay tuned for updates very soon.

Berkheimer’s biggest effect on PTAB outcomes

After Federal Circuit decisions Berkheimer and Aatrix held that abstract idea inquiries required a factual finding, this blog predicted that the number of abstract idea rejection reversals at the Board would dramatically increase. The logic being that many examiners did not perform the rigorous analysis seemingly required for Step 2 of the Alice/Mayo framework in light of these Federal Circuit decisions. It has now been over 4 months since Berkheimer was decided and we can safely say that this dramatic change has not yet happened.

In fact, take the decisions involving abstract idea rejections in the year leading up to Berkheimer (March 1, 2017-March 1, 2018, accounting for some lag time after Berkheimer was decided). In this year, the 107 reversals over the 901 total decisions yields a reversal rate of 11.9%. Post Berkheimer (from March 1, 2018 to present), there have been 54 reversals over 525 total decisions. This reversal rate is 10.3%–lower than the pre-Berkheimer range. (All these decisions can be found using the Anticipat Research page)

But there has been something that has changed: the way that the Board performs its analysis. Historically, the Board has favored relying on step 1 of the Alice/Mayo framework by almost a 3:2 ratio. That is, for every three decisions where the panel reversed because the claims were not directed to an abstract idea under step 1, there were two decisions where the panel reversed because the claims recited something more than the asserted abstract idea under step 2. From March 1, 2017 to March 1, 2018, there were 63 step 1 analyses versus 35 step 2 analyses.

An important piece of the step 2 analysis is whether the claims recite an element or combination of elements that are more than well-understood, routine, or conventional elements. As the Federal Circuit has made clear, this inquiry is an element of fact. And Examiners have been charged in the recent Berkheimer memo to carefully apply factual bases to this step. So it would make sense that the Board, in light of Berkheimer, is reversing under this step more frequently than before.

And that is exactly what is happening. Recently, the two steps are equally used in reversing abstract idea rejections. From March 30, 2018 to present, the Board has used step 1 analysis to reverse 16 times while using step 2 an almost equal 15 times. This means that the Board has become much more receptive to arguments of step 2 in light of Berkheimer–even if the reversal rates have not noticeably increased.

The lower post-Berkheimer reversal rate is not easy to explain. It may stem from a confluence of factors. Perhaps applicants are getting more aggressive and appealing claims that are less patent-eligible. It could be that some applications that would otherwise be reversed if appealed all the way to a final decision are getting allowed at the appeal conference stage or earlier.

Regardless of the success rates of appealing abstract idea rejections, the change in the way that the board reversed these decisions highlights a good practice tip. Focus appeal argumentation on step 2 where appropriate. For those appeals that have long since been forwarded to the appeal, it is not too late to bring this up to the panel by way of an oral hearing. During the oral hearing, explaining the step 2 piece could be helpful to the panel, assuming that some sort of step 2 argument has been made. And of course when interviewing and otherwise responding to Office Actions in response to abstract idea rejections, step 2 has become a powerful step.