By Sheri Qualters, From The National Law Journal

In the year since the seminal U.S. Supreme Court ruling in Alice v. CLS Bank International, courts and the U.S. Patent and Trademark Office increasingly have nullified inventions involving computers or the Internet.

The high court held in June 2014 that Alice Corp.’s claims for a method of reducing financial-settlement risk performed by a computer were not patent-eligible under Section 101 of the Patent Act. “Merely requiring generic computer implementation fails to transform that abstract idea into a patent-eligible invention,” the justices said.

Robert Sachs (left), a San Francisco intellectual property partner at Fenwick & West, has compiled data about the trend. He found that, as of Friday, 76 of 106 rulings by federal trial judges and the U.S. Court of Appeals for the Federal Circuit cited Section 101 in invalidating patents in whole or in part.

He also examined 200,000 patent office rejections during two-week periods from 2012 to 2015 and for all of March through May of 2015. For the 10,398 electronic-commerce patent applications in nine categories, Section 101 rejections rose from 42 percent before Alice to 93 percent after it. You can view some of his data here.

Sachs spoke with The National Law Journal about what the trend means for patent cases and attorneys. The comments below have been edited for clarity.

NLJ: What does your analysis of the 106 court decisions involving Section 101 indicate?

Sachs: [The Alice ruling] unleashed a flurry of motions and subsequent decisions, many which go against the patent holders. One would think that a motion to dismiss would not be as readily granted.

NLJ: Why is that?

Sachs: Under the current patent law, patents are to be presumed valid by the courts. That’s based on the idea that a government employee, an examiner, did his or her job and there was an on-the-record analysis.

NLJ: Have certain areas of technology been more affected by this case law trend?

Sachs: It’s everything from shipping management to gaming to insurance. You name it. There’s not a field of software technology that has not been touched. You can’t just say it’s affecting bad business-method patents, because it’s not.

NLJ: What does this mean for software patent filers?

Sachs: For some, it decreases the value of their portfolio. Five years ago, you didn’t worry about having a patent invalidated upon filing an infringement case in court. Now, there’s a substantial risk you almost certainly will get a motion to dismiss filed against you. I was at a conference last week when someone said it would be malpractice to not file a motion to dismiss [a software patent case]. It’s a big sea change that shifts the balance of power away from patentees to patent defendants.

NLJ: What is the impact of the spike in patent office rejections of electronic-commerce applications?

Sachs: It’s scary out there. If you’re in the affected categories, there’s an 85 percent to 95 percent chance your patent is going to be rejected on eligibility alone. It’s not because they have a lousy invention; it’s because the rules have changed midstream. It’s now also very hard to get around those rejections.

NLJ: How are companies and people who innovate in this area responding to this?

Sachs: For those companies that are large and have large patent budgets, they may shift a little bit but they’ll certainly continue to file. For much smaller companies, this is daunting. Getting zero out of three patents accepted, for example, is an intolerable risk for a smaller company.

NLJ: Do any of the pending patent reform bills in Congress have language to address these issues?

Sachs: There’s no Section 101 legislation actually being considered. Also, it’s unclear to what extent Congress would be interested in addressing it.

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Credit: pheonix3d/iStockphoto.com

Robert Sachs of Fenwick & West. HANDOUT

For more on this story go to: http://www.nationallawjournal.com/id=1202730283930/Its-a-Scary-PostAlice-World-for-Software-Patents#ixzz3e4jMCAri