Update on Section 101 Rejections at the USPTO

In my June post, The One Year Anniversary: The Aftermath of #AliceStorm, I surveyed the frequency of Section 101 rejections at the USPTO. My analysis was based on approximately 300,000 office action and notices of allowance received from Patent Advisor.

As a reminder, the Section 101 rejection rates from the June post at the level of the USPTO Technology Center (TC) are shown below. The numbers here are the percentage of all events in the cohort (TC and time period) that had a Section 101 rejection. An event is either an allowance or a rejection; other events such as restriction requirements, advisory actions, and so forth are not counted.

Since June, I've received a significant amount of new data from Patent Advisor. The trends we saw before are continuing, with some interesting new developments.

First, TC 3600, which includes the E-commerce work groups (3620, 3680, 3690) continues to have the highest rates of § 101 rejections. Second, all of the TCs showed a significant increase in § 101 rejections in June. Tech Center 1700, which covers chemical and materials engineering saw an unexpected three-fold increase! Rates dropped back down in July and August. As explained before, TC 3600 covers both E-commerce and non-Ecommerce work groups and it is the former that contribute to the high rejection rates. Similarly, the rejection rates in TC 1600 appear generally low, but this obscures higher than average rejection rates in biotechnology work groups. If we filter for those work groups we find the following:

We can then drill down into the specific technologies in these respective work groups for their § 101 rejection rates:

To assess how these rejection rates impact prosecution outcomes in the E-commerce groups in particular, I reviewed the status of all applications in these work groups that had a significant prosecution event in the last seven months (March 17 to October 17). Here is a complete breakdown of the status of these applications:

Of interest are the 3,633 applications abandoned for failure to respond to an office action. Also interesting is the filing of the 506 appeals during this period. This is a harbinger of things to come. I also aggregated the status by work group technology:

The average number of office actions before abandonment here was 3.13, as compared to 3.27 office actions to allowance and patenting, not a significant difference. Here is a view of the distribution of the number of office actions to abandonment, allowance

This shows that almost 25% of abandonments occurred after the first office action, whereas most of the allowances occurred by the fourth. Cumulatively (not shown here) the behavior was the same: 80% of abandonments and allowances occurred after the fourth office action. Some applicants (or some examiners, depending on your perspective) fought to the bitter end, with 18 cases having ten or more actions before abandonment. The average abandonment rate at 16.5% is about twice the abandonment rate for the rest of the Office. The allowance rate at 1.9% is strikingly low. These two statistics are disturbing when you consider the following. In this time period, the vast majority of applications have been amended in view of previous § 101 rejections and the Office's own Interim Guidance, and arguments have been presented that the claims are not abstract ideas or fundamental business concepts, that they do not preempt all practical applications, that they offer improvements in some technology, and that they contain claim limitations reciting significantly more than the mere judicial exception. And yet more than 98% of the time, these arguments are rejected. In the July 2015 Update to the Interim Guidance, the USPTO states that when it comes to economic concepts, the "term 'fundamental' is used in the sense of being foundational or basic". Is it truly likely that most, let alone all, of the 3,633 abandoned patent applications claim nothing more than foundational or basic economic practices? That the applicants in these cases did nothing more than implement some foundational economic practice on a computer, without doing anything more? That the thousands of patent counsel prosecuting these cases couldn't draft a single eligible claim? From a business perspective, abandonments are more harmful to small companies with a small number of patent filings than to larger companies. If you are a large company with hundreds of applications, abandoning 20% of them because of Section 101 rejections still leaves you with plenty of applications. But if you are a small company, you tend to file on the core, crown jewel technology. If you have to abandon even one or two applications, the impact can be dramatic: a loss of a competitive advantage, the withdrawal or delay in funding by investors, the loss of potential customers. In this light consider the following:

This chart shows that over 1,000 companies have abandoned 100% of their applications in the last six months, accounting for 1119 applications, fully 30% of all abandoned applications. Overall, companies with greater than 50% abandonment rates had 6 or fewer applications. As the final total shows, these companies accounted for 43% of all abandonments in the last six months.

Now, not all news is bad news. As the charts show, there are 452 allowed applications that will issue within the next several months. These applications are likely the best evidence of the kinds of amendments and arguments that are getting over 101 rejections. I've included a partial list of 244 of these applications at end of the posting. The list is sorted by art unit and then by examiner, so you can easily find applications in an art unit of interest. By identifying an examiner on one of your cases, you can review the kinds of amendments and arguments that the examiner has accepted and plan your strategy accordingly. Abandonments and rejections aside, there are E-commerce examiners who are allowing cases, and they deserve recognition and support. Here is a list of the top examiners, those who have an allowance rate (allowed+patented / total cases) over the past six months of 15% or more, which puts them well ahead of the rest of the E-commerce group.

In future posts I'll explore the biotechnology groups in a similar manner.

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Partial Listing of Allowed Applications

Note: Many of the titles have been shortened by removing the stock "Methods, Systems, etc." from the beginning; any typographical errors are my own.

*The perspectives expressed in the Bilski Blog, as well as in various sources cited therein from time to time, are those of the respective authors and do not necessarily represent the views of Fenwick & West LLP or its clients.