Economic impact of Alice.
However post the USPTO guidelines, there was an increase in the number of rejections in software and business method patents. The aftermath of Alice also saw an impact on the economic factors contributing towards innovation and growth. The basic notion behind obtaining patent protection is to allow for the inventor to enjoy exclusive rights for a limited period and more importantly recover its investment costs. Since Patents are considered temporary monopolies the post Alice scenario has impacted their dynamic and static costs. The limited exclusive right conferred upon an inventor when a patent is granted would result in an increase in the dynamic costs and incentivise technological developments, in turn leading to various benefits enjoyed by the inventor . The static cost of the these inventions would play in the picture by excluding users of those inventions who pay a price which is lower than the price that the inventor would charge, when using the patent . When analysing the cost-benefit analysis of the Alice scenario, it can be noted that since all the patents were directed to be abstract in nature; thus resulting in the patents being invalidated, there was a decrease in the dynamic costs as opposed to the static cost . This down plays the incentive for the inventors to engage in any kind of innovative discoveries. The other area affected by Alice was that of the increase in the cost of litigations as companies vigorously try to challenge the vague rejections of their patents in light of Alice. With Patents spurring innovation; the uncertainty caused by Alice also made it difficult for start-up companies to find investors due to the high risk of rejection of patents under the current scenario. Thereafter many inventors waited for further clarity from courts with regard to the position of Alice. Hence Alice’s patent invalidation rate seemed to have only increased with the implementation of stricter standards. Does that mean the obtaining business method and software patents was now an impossible task? Was it practical for such claims to be patentable eligible? Two years after the uncertainty provided by Alice, the courts finally opened doors to the granting patents under step 2 of Alice, even after such patent claims were directed towards an abstract idea.
Piercing through step 2 of Alice analysis – survival scenarios.
A general review of the patent claims in light of Alice showed that many of these claims were directed towards being abstract in nature and hence could not be proceeded beyond the first step of Alice. The question remains if there is a possibility for these patent claims to overcome the obstacle of step 1 of Alice and be granted patentability under step 2? To answer this question the Supreme Court analysed three major judgements that survived Alice. These three judgements from the third wave of subject matter patentability which became a beacon of hope for business method and software patents.
DDR Holdings case became the first case to survive the Alice test. It introduced the “idea that claimed solutions necessarily rooted in technology that solve problems arising in the realm of computer might be patent eligible” . It upheld the validity of an e-commerce patent claim after the decision in Alice. DDR’s claim represented an idea of generating a webpage on a host site with the same look and feel of the host site, but containing content from a third party . The system here comprised of the look and feel of the host website, which in turn provided a link which was activated when a visitor visited the website. This system allowed the visitor to purchase third party products without navigating to the third party website, having the visitor on the host website improved the e-commerce for the website . When the court applied the Alice two step test, it did not attempt to define an abstract idea. The court recognized that DDR’s claims may be abstract in nature and hence decided to bypass step 1 of Alice as identifying the nature of the abstract idea wasn’t as precise in nature as Alice and focus on step 2 i.e. the inventive concept. The court found that DDR’s claims, ” do not merely re-cite the performance of some business practice known from the internet world but instead provide a technical solution to a technical problem unique to the internet, which is a solution rooted in a computer technology in order to overcome a problem arising in the realm of computer networks” . Thus in this case the court recognized that the business method used by DDR didn’t recite the performance of a business practice already known. The claims specified the interaction with the internet which in turn yielded a result that was different than the conventional result . DDR’s holding set a new standard for deciding patent eligibility of claims which failed the first step of Alice. The implications of this decision provided a roadmap for future claims when they face an issue under 35 U.S.C. § 101. Thus this case supports the proposition that if an invention fails to overcome the first step of the Alice test, the inventive element test would not afford much of an obstacle to such an invention as long as it is novel in nature.
Similarly in Enfish the Court went a step further in establishing that not all software patents were abstract in nature. This case was primarily directed towards all software patents. The claims in Enfish were directed towards a data storage and retrieval system for a computer, which allowed for all of the database information to be stored in a single tablet. This case is particularly interesting because the court here decided not to read step 1 of Alice too broadly instead decided to interpret the claims by asking “whether the claims were directed to an improvement to computer functionality versus being directed to an abstract idea” Thus the claim wasn’t analysed further for step 2 of Alice instead patent eligibility was granted at step 1 itself.
The next case of Bascom Global Internet Services v. AT&T Mobility LLC, established that abstract softwares may contain an inventive concept and hence considered patent eligible. The case reflected a new light to all rejections post Alice. The claim under this case was regarding filtering content on the internet. The claim in this case was about a content filtering system which retrieved content from the internet by individual controlled access network accounts . The filtering system comprise of a local client computer which generated access requests for individual controlled access network accounts, a filtering scheme, sets of logical filtering elements and a remote ISP server coupled with the user’s computer and the internet computer network . The three methods used in this claim were: first the software on the user’s computer allowed for better individual customisation for the end user, second the software at the internet computer network allowed companies to easily block all websites from all their users and third the ISP’s would filter websites for all their subscribers . The court held that when Bascom’s claims amounted to an abstract idea of the filtering content and hence would be patent ineligible at the first step. While applying step 2 of Alice, the Court observed that the additional features when viewed individually are “merely generic computer networking components performing generic computer and network functions and that the inventive step could be found in the combination of all the elements of the claim” .