Shock to Software/Business Method Patents: The Alice ruling had an immediate and profound effect on software and business method patents. Observers described it as “upending” the existing understanding of patent law for these fields mondaq.com.

In the months following Alice, the USPTO sharply curtailed the granting of business-method patents. Patent issuance data showed a significant drop in the number of business method patents (classified in USPTO Class 705) issued per month – less than half as many were issued after Alice compared to the months before en.wikipedia.org.

By one measure, the share of business-related software patents fell from about 10% of all software patents granted to roughly 5% post-Alice en.wikipedia.org.

The USPTO essentially “tightened the spigot” on these patents theatlantic.com, as examiners now had clear authority to reject claims that were just computerized versions of economic or organizational practices. This contraction is illustrated by the trend in patent grants: Figure: USPTO issuance of business method patents (blue line) dropped sharply after the June 2014 Alice decision, compared to all software patents (red line). The number of Class 705 (business method) patents issued per month fell by more than half in the aftermath of Alice. Before the decision, roughly 1 in 10 software patents was a business method, whereas afterwards it was closer to 1 in 20 en.wikipedia.org.

On the litigation side, there was a surge in § 101 challenges to issued patents. In the year after Alice, district courts decided over a hundred motions arguing patent-ineligibility, with the majority resulting in patents being invalidated (one study found a 68% success rate for § 101 motions in the first year) finnegan.com.

Because Alice provided a relatively quick way to dispose of lawsuits involving abstract software patents, many defendants seized that opportunity. Courts became more amenable to resolving eligibility early (even at the Rule 12(b)(6) motion-to-dismiss stage), especially in jurisdictions like the Northern District of California and District of Delaware, which saw many software patent cases finnegan.com.

The Eastern District of Texas – a forum popular with patent owners – was initially more resistant, denying more § 101 motions, but even there Alice made an impact finnegan.com.

Overall, Alice contributed to a noticeable dip in patent litigation by “patent trolls” (non-practicing entities relying on broad software/business method patents), since many of their patents were now easier to knock out in court theatlantic.com.

Clarifying the Two-Step Test: The decision also standardized how courts analyze patentable subject matter. After Alice, every court facing a § 101 question applies the two-step Alice/Mayo framework en.wikipedia.org.

This brought consistency but also initially some uncertainty as lower courts worked out what counts as an “abstract idea” and what counts as an “inventive concept.” The Supreme Court in Alice did not define “abstract idea” with precision – it gave examples (like intermediated settlement, hedging in Bilski, mitigating risk, etc.) and referenced the notion of longstanding fundamental practices supreme.justia.com.

Similarly, “inventive concept” was described in functional terms – something “significantly more” than the abstract idea itself, beyond merely well-known, routine, or conventional steps en.wikipedia.org.

This left room for interpretation, and indeed in the years following Alice, courts wrestled with these prongs en.wikipedia.org.

Many software patents failed at Step 1 because courts found they were directed to an abstract goal (like organizing information, intermediating a transaction, or analyzing data) expressed at a high level of generality en.wikipedia.org.

And if they got to Step 2, patentees often struggled to point to anything in the claims beyond generic computing steps. As one judge put it, such patents typically “simply describe a problem, announce purely functional steps that purport to solve the problem, and recite standard computer operations to perform some of those steps,” without any inventive solution – thus falling short under Alice en.wikipedia.org.

“Abstract Ideas” and the Need for Technical Improvements: A key takeaway of Alice was that patent eligibility now hinges on technical merit, not just idea novelty. In practice, this meant that to survive § 101, a software or business-method invention must either not be abstract in the first place (often by being anchored in a specific improvement in computer technology), or if it is abstract, it must include an unconventional, inventive implementation. The Alice decision itself noted that Alice’s claims did “not improve the functioning of the computer [or] any other technology” supreme.justia.com – implying that had the software improved computer performance or solved a technological problem, the outcome might be different.

The U.S. Solicitor General, during Alice’s oral argument, gave an example that a “specific…technological” solution (like a particular encryption technique to improve security in credit card transactions) might be patent-eligible even if it relates to a business context en.wikipedia.org.

This foreshadowed how courts and the USPTO began distinguishing “technical solutions” vs. abstract ideas in the post-Alice era. Indeed, the USPTO’s subsequent guidance to examiners (such as the 2019 Revised Patent Subject Matter Eligibility Guidance) instructs that if a claim integrates an abstract idea into a practical application (e.g. by improving technology), it can be deemed patent-eligible at Step 1, without even needing an “inventive concept” analysis. Broader Effects and Ongoing Debate: Over the past decade, Alice has had a sweeping influence on U.S. patent law. Thousands of patent claims – spanning software, business methods, e-commerce, and even biotech diagnostic methods – have been invalidated as ineligible based on the principles of Alice and its forerunners Mayo and Bilski jdsupra.com.

Proponents of the decision argue it successfully weeded out overly broad, innovation-stifling patents (the “low-hanging fruit” of bad patents that “never should have issued in the first place” honigman.com).

In the first few years, invalidation rates were very high, creating what some called a “101 panic” in the patent world. However, over time the system has adjusted: the USPTO refined its examiner guidelines and began allowing more software patents that clearly recite technical improvements, and courts developed a body of case law that provides examples of eligible vs. ineligible claims. By around 2018–2020, the initial spike in § 101 invalidations tapered off and some equilibrium was reached honigman.com).

Patent applicants learned to draft claims with Alice in mind (focusing on concrete inventions rather than abstract results), and truly innovative software inventions are still being patented – but Alice has filtered out many that lack genuine technical substance. That said, Alice remains controversial. Detractors argue that § 101 (a brief provision in the statute) was never meant to do the heavy lifting of weeding out “bad patents” – that job was supposed to be done by requirements like novelty (§ 102), non-obviousness (§ 103), and definiteness (§ 112) honigman.com.

They claim Alice’s two-step test is too opaque and unpredictable, sometimes invalidating truly meritorious inventions on a subjective idea of “abstractness.” There have been calls for reform: numerous inventors, industry groups, and even federal judges have urged either the Supreme Court or Congress to clarify (or roll back) the Alice test. The Supreme Court, for its part, has declined to hear dozens of certiorari petitions since 2014 that sought further clarification on § 101 honigman.com. Notably, the Court refused to take cases like Sequenom v. Ariosa (2015) involving a prenatal diagnostic test, and American Axle v. Neapco (2020) involving an industrial process patent – both seen as opportunities to revisit the boundaries of eligibility.)

Even recommendations by the U.S. Solicitor General to take a case have been passed over honigman.com, leaving Alice firmly in place. This has prompted legislative discussion: for example, in 2019 a bipartisan group of senators proposed an outline to reform § 101 (essentially abrogating Alice/Mayo), and in 2023 the “Patent Eligibility Restoration Act” was introduced in Congress honigman.com.

So far, no legislative fix has been passed, and Alice remains the law. Many experts feel that, at this point, the lower courts have “slowly and methodically” developed a workable common-law around Alice honigman.com, and that a sweeping change could create chaos.

Thus, the debate continues, but any change to the status quo will have to carefully balance encouraging innovation in fields like software and biotechnology with preventing monopolies on abstract ideas or natural laws. Post-Alice Developments: Lower Courts and Patent Practice In the years since 2014, lower courts – especially the Court of Appeals for the Federal Circuit (which handles patent appeals) – have applied Alice in hundreds of cases, fleshing out what it means for a software or business method to be “abstract” or to contain an “inventive concept.” Broadly, most challenged patents have been found ineligible, but courts have also identified certain types of software innovations that do survive the Alice test. Below we highlight major follow-up cases, legal trends, and shifts in how such patents are treated: Rampant Invalidation of Abstract Patents (2014–2015): In the immediate wake of Alice, the Federal Circuit and district courts invalidated numerous patents for lacking patentable subject matter. For example, in Ultramercial, Inc. v. Hulu, LLC, a case involving an Internet advertising method, the Federal Circuit had initially (pre-Alice) found the invention potentially patentable, but after Alice the court reversed course and held the concept of using ads as currency to be an unpatentable abstract idea implemented on the Internet en.wikipedia.org.

Likewise, in buySAFE, Inc. v. Google, Inc. (Fed. Cir. 2014), a computer-mediated escrow service (not unlike Alice’s) was ruled ineligible as just an abstract idea of guaranteeing a transaction.

And Content Extraction v. Wells Fargo (Fed. Cir. 2014) deemed a document scanning and data-recognition software to be abstract, even though it used scanners – the essence (collecting and recognizing data) was an idea that humans could perform manually en.wikipedia.org.

During this period, courts had little trouble spotting “abstract ideas” in broad software claims and routinely invalidated patents that lacked specifics. A Federal Circuit judge famously remarked that “few software patents have survived” the Alice analysis, largely because many claims were written in “purely functional language”—claiming a desired result without a concrete implementation en.wikipedia.org.

In other words, patents that merely described what outcome to achieve, rather than how to achieve it technologically, were doomed by Alice en.wikipedia.org. First Signs of Eligibility – DDR Holdings (2014): One of the first post-Alice cases to uphold a software patent was DDR Holdings, LLC v. Hotels.com in late 2014.

There, the Federal Circuit distinguished the invention from a mere abstract idea. The patent addressed the specific problem of a website losing visitors when clicking an ad (by generating a hybrid webpage on the host website to keep the visitor engaged). The court found this “Internet-centric” solution was rooted in computer technology and did not simply apply a conventional business practice on the Internet. DDR Holdings thus survived the Alice test – a significant example that not all software patents were dead on arrival en.wikipedia.org.

The case suggested that an invention solving a technical problem unique to the online world could be eligible, even if it also had a business flavor. Emphasis on “Technical Improvements” – Enfish and its Progeny: In 2016, the Federal Circuit decided a series of cases that clarified how a software patent can be eligible by improving computer technology itself. In Enfish, LLC v. Microsoft Corp. (Fed. Cir. 2016), the court upheld claims to a new type of database table (a self-referential data model). Rather than abstractly organizing data, the Enfish claims were directed to a specific improvement in how computers store and retrieve data, resulting in faster and more efficient functioning. The court ruled that such an improvement in computer capabilities is not an abstract idea at all (so Step 1 of Alice ends the inquiry in the patentee’s favor) en.wikipedia.org.

This was a pivotal decision: it introduced the notion that if software is “focused on a specific improvement to computer functionality,” it is patent-eligible at step en.wikipedia.org.

Following Enfish, other cases echoed the theme: McRO, Inc. v. Bandai Namco Games (Fed. Cir. 2016) upheld a patent on automated 3D animation techniques (lip-sync for characters). The court found the claim was not directed to an abstract idea like “animating faces” in general, but to a specific set of rules that achieved realistic synchronization in a way that improved the animation process.

This was a technological improvement (automation of a previously human task in a specific, rule-based manner) rather than just an abstract goal, so it passed Step 1. Thales Visionix Inc. v. USA (Fed. Cir. 2017) found a motion-tracking system (using sensors in a novel way to track an object relative to a moving platform) was patent-eligible because it improved the accuracy of inertial tracking – a tangible technical improvement, not a bare formula or idea.

Visual Memory LLC v. NVIDIA Corp. (Fed. Cir. 2017) upheld a computer memory system that was programmable for different processors, as it provided an improved computer memory architecture (again, a hardware/software technical improvement rather than an abstract economic concept).

Finjan, Inc. v. Blue Coat Systems (Fed. Cir. 2018) – involving computer security – ruled that a method for virus scanning that generated a security profile of software was not abstract. It was a concrete, new approach to malware protection (a “behavior-based” scan) and was tied to computer technology improvements in security.

These cases collectively signaled that software patents are alive and well when they claim specific solutions to technological problems (improving speed, efficiency, security, functionality of a computer or network, etc.). On the other hand, if software is just used as a tool to implement an abstract business strategy or organize human activity, Alice will likely render it ineligible.

Inventive Concept and Combinations – BASCOM (2016): In BASCOM Global Internet v. ATamp;T (Fed. Cir. 2016), the Federal Circuit provided guidance on Alice Step 2 (inventive concept).

The case involved Internet content filtering at a specific network location. The court agreed that filtering internet content is an abstract idea (Step 1), but it found that the particular arrangement of conventional components – installing the filter on a remote ISP server and allowing individualized filtering for users – was a non-conventional and inventive combination of elements. Even though the building blocks were known, the ordered combination was unique. BASCOM did not outright declare the patent valid, but it vacated the dismissal and indicated the claims contained an arguable inventive concept.

This illustrated that, at Step 2, courts will consider whether the ordered combination of steps is unconventional, even if each step alone is generic. (However, such findings are relatively rare; more often, if Step 1 fails, Step 2 fails because no inventive concept is present. BASCOM was an example where Step 2 had teeth.)

Further Refinements and the Role of Facts – Berkheimer (2018) and Aatrix (2018): A significant development a few years post-Alice was the Federal Circuit recognizing that patent eligibility can sometimes involve underlying factual questions. In Berkheimer v. HP Inc. (Fed. Cir. 2018), the court held that whether something is “well-understood, routine, and conventional” (the language used at Step 2 to assess if additional elements are merely generic) is a question of fact. Thus, a summary judgment of invalidity was improper for certain claims because the patentee had submitted evidence that the invention was not conventional.

The Berkheimer decision was considered “perhaps the most consequential development in patent eligibility since Alice” jdsupra.com, as it “tempered” the Alice test by imposing a procedural check: a court cannot simply declare something conventional at Step 2 without evidence, if the patentee contests it jdsupra.com.

Similarly, in Aatrix Software v. Green Shades (Fed. Cir. 2018), the court allowed the patent owner to amend its complaint to add factual allegations that its software invention improved computer functionality – reinforcing that factual record can matter in § 101 analysis at the pleadings stage.

These rulings have made it harder (though still not uncommon) for defendants to win § 101 invalidations on a bare motion to dismiss, at least when the patentee has plausible arguments that its claims contain an inventive technical improvement. In response, the USPTO updated its examination procedures, instructing examiners that any rejection for conventionality must be supported by factual evidence or official notice.

Still, it’s worth noting that Berkheimer and Aatrix did not change the basic Alice test – they only clarified how to apply it when facts are in dispute. The majority of software patent cases are decided as a matter of law under Alice if the claims themselves plainly lack an inventive concept.

Ongoing High-Profile Cases and Trends: The Federal Circuit has continued to apply Alice in various contexts, sometimes grudgingly. In areas like financial technology, most patents have been invalidated unless tied to a specific technical improvement.

For instance, Versata v. SAP (Fed. Cir. 2015) invalidated a complex pricing method patent (in a Covered Business Method review) because “using organizational and product group hierarchies to determine a price is an abstract idea” and using a computer to do so was just conventional automation en.wikipedia.org.

Many insurance, banking, and trading-related patents have met similar fates. Even some seemingly sophisticated software has been struck down: e.g., Electric Power Group v. Alstom (Fed. Cir. 2016) found real-time power grid monitoring and analysis software to be an abstract idea of collecting and analyzing data; SAP America v. InvestPic (Fed. Cir. 2018) invalidated a patent on statistical analysis of financial data as merely mathematics + generic computing. In contrast, where inventors can demonstrate a specific technique that improves computer operations or hardware, they fare better.

Notably, even nearly a decade later, the line between abstract and concrete can be hazy, and the Federal Circuit’s decisions sometimes conflict. Judges have penned concurrences and dissents seeking clearer rules. For example, in Intel v. Qualcomm (Fed. Cir. 2021), Judge Kathleen O’Malley lamented the state of § 101 law, and in other cases judges have called the Alice/Mayo test anything from “useful” to a “hot mess.”

Despite these tensions, a few core trends can be distilled from post-Alice case law: Business methods (like methods of marketing, finance, organizing human activity) are almost always considered abstract unless they improve a technological process. A generic invocation of the Internet or computers won’t save them.

Thus, pure business method patents have become exceedingly hard to obtain or litigate successfully. Software inventions that solve a technical problem in computing or networking (improving processing speed, memory usage, network functionality, user interfaces, security, etc.) have a good chance of being deemed patent-eligible. The claim must be specific about the technical solution; functional or result-oriented claiming will be viewed as abstract. In short, specificity and technical detail are key.

Courts have been wary of patents that essentially recite data manipulation or analysis without more. If the innovation lies in insight (an equation, an algorithm, a method of analyzing information), it’s likely abstract unless tied to a new application or device. (Alice itself was basically a data handling idea; more recent cases like Ciphertec or Simio have similarly nixed data-processing claims.)

There is a subtle shift in some recent cases where courts look at the claims as a whole and ask: what practical impact do they have? If the claims merely describe a goal or outcome (even a useful one) and rely on generic technology to achieve it, Alice will kill them. If they recite a concrete way to achieve a solution, they stand a better chance.