17 April 2017

New USPTO Data Set Reveals Recent Trends in Software and Business Method Patent Grants and Filings

New DataThe US Patent and Trademarks Office (USPTO) has released a new public patent data service, which it calls the Patent Examination Data System (PEDS).  PEDS is intended to replace the PAIR Bulk Data (PBD) service, and has a very similar interface for filtering, viewing and downloading bulk US patent data, as well as an application programming interface (API) for live access.  Although PEDS is still under development, is missing some data fields that are present in PBD, and currently provides fewer filtering options than PBD, it is already ahead in a number of important respects. 

Firstly, where I have previously noted that the PBD set was incomplete in relation to patents granted in 2016, this problem seems to have been resolved in PEDS.  Secondly, PEDS includes the ‘transaction history’ for each application in the data set.  Readers familiar with the USPTO’s Patent Application Information Retrieval (PAIR) online system will be aware that the PAIR interface includes a ‘Transaction History’ tab that displays a list of all actions and events that have taken place on the file, along with their corresponding dates.  This information is now included in PEDS.  The USPTO has indicated that, in future, PEDS may include enhancements to search additional fields, additional data from tabs in Public PAIR, and the Image File Wrapper (IFW).

The availability of this new, and more complete, data set has enabled me to revisit the analysis of software and business method patents that I reported back in January, with the benefit of more than a year of additional data.  As a result, I have been able to observe how the trends in patent grants have progressed since the end of 2015.  In short, there has been no further change.  The rate of grant of patents assigned to software Art Units within the USPTO continues to track – and even slightly exceed – the overall rate of grants across all technologies, while business method patent grants remain in the doldrums, flat-lining at the rate to which they fell shortly after the US Supreme Court’s Alice decision in June 2014.

The additional data has also enabled me to look at trends in filing behaviour, which may be indicative of how applicants have responded to Alice and the USPTO’s subsequent changes in examination practice and guidance as applied to software and business method patent applications.  Interestingly, this data indicates that the rate of applicants filing for patents in relation to ‘business method’ inventions has been in steady decline since June 2014, but that there has been an equally steady increase in the rate of filing of applications for software inventions.

‘Business Method’ and ‘Software’ Definitions

As in my earlier analysis, I have identified the technology field of the invention claimed in each granted patent according to the USPTO Art Unit to which it was assigned for examination.  ‘Business method’ (‘BM’) applications are those assigned to any of the following Art Units:
  1. 3621-3629: Electronic Commerce;
  2. 3680-3689: Business Methods; and
  3. 3690-3699: Business Methods – Finance.
‘Software’ (‘SW’) patents are those assigned to any of the following Art Units:
  1. 2120-2129: Miscellaneous Computer Applications;
  2. 2140-2149 and 2170-2179: Graphical User Interface and Document Processing;
  3. 2150-2169: Data Bases & File Management; and
  4. 2190-2199: Interprocess Communication & Software Development.
As I have noted in my previous article, there are other Art Units that also encompass significant computer-implemented technologies (e.g. video and audio coding, encryption, and so forth), but I consider the above four groups to be representative of the most clearly ‘software-based’ inventions.

Finally, data obtained for ‘all technologies’ uses the complete available dataset over the relevant period, covering grant of all patents by the USPTO, including BM and SW patents as defined above.

Patent Grants, 2012-2017

The chart below shows the relative number of patents issued by the USPTO each month between January 2012 and February 2017.  As before, I have taken the ‘baseline’ as the 2007 monthly averages to enable direct comparison with my earlier results.  In absolute terms, in January 2012 there were 24,021 patents granted in total, of which 1012 were from SW Art Units, and 428 were from BM Art Units.
Patent Grants
As was the case prior to 2016, the effect of the Supreme Court’s Alice decision was to kill about 75% of all BM patent applications stone dead.  During 2016 and the first two months of 2017 there has been no sign of any recovery, with BM patent grants remaining at around 25% their pre-Alice numbers.  This comes despite a number of updates to USPTO examination guidelines and memoranda responsive to favourable decisions on BM patents from the US Court of Appeal for the Federal Circuit (CAFC).

Software patent grants, however, continue to track the rates at which patents are issued by the USPTO across all fields of technology.  I therefore feel confident in reiterating my earlier comments that ‘software patents’ in general are not in trouble.  There is no evidence that the mere fact that computer software is used to implement an invention – even where the invention relates wholly to computer technology, such as in user interfaces, document processing, databases, and so forth – is a barrier to patent eligibility in the US.

Patent Applications, 2012-2016

The chart below shows the relative rates of filing of patent applications between January 2012 and December 2016, including only those applications that have been assigned to an Art Unit for examination.  Once again, for consistency, the baseline is the 2007 monthly averages for patent filings.  For a comparison of absolute number, in January 2012 there were 28,138 applications filed, of which 1296 were assigned to SW Art Units and 769 to BM Art Units.  It is necessary to exclude applications that have not yet been initially reviewed and assigned to an Art Unit because without this data I have no way of knowing to which field of technology a new application relates.
Patent Filings
There are a few points to note about this chart.
  1. The apparent decline in applications from mid-2015 onwards is not real, and simply reflects the fact that many applications filed in this period may not yet be published and/or assigned to an Art Unit.
  2. The ‘spike’ in applications in early 2013 is due to the commencement on of the substantive provisions of the America Invents Act (AIA) on 16 March 2013.  The AIA replaced the former ‘first-to-invent’ priority rule with a ‘first-inventor-to-file’ system for every application/patent filed on or after this date.  Many applicants clearly wished to take advantage of their final opportunity to file under the old system.
  3. The smaller peak in applications exactly one year later is also an AIA artefact.  The critical date for determining which law applies is the ‘effective’ filing date, which is the date of filing an earlier application in the event that priority is claimed from that application.  Many of the applications filed in March 2014 would therefore have claimed priority from provisional applications filed a year earlier, ahead of the AIA changes.  Provisional applications are not reflected in the above chart because they are not examined, and therefore never assigned to any Art Unit.
Most significantly, for present purposes, it does appear that in recent times the rate of filing of BM applications has deviated consistently downwards from the rates for SW applications and those directed to all technologies combined.

Downward Trend in BM Applications

In order to observe this more clearly, I ‘normalised’ the filing data for SW and BM patents by dividing by the corresponding values for all technologies.  Under this normalisation, if the rates of filing of SW and/or BM applications simply follow the trend of total filings, their normalised values would be ‘1’.  As the chart below shows, while this was roughly the case up until at least 2013 (subject to random fluctuations) it has very clearly ceased to be true more recently.
Normalised Filings
While BM applications remained steady, or perhaps slightly increased, prior to the Alice decision in June 2014, since then they look to have been in consistent decline.  It appears, therefore, that applicant behaviour has been affected by Alice and the subsequent high rejection rates by the USPTO.  Certainly, the ratio of applications filed that are subsequently assigned to BM Art Units has been decreasing, and is now barely half what it was in early 2015.

On the other hand, SW applications appear to have been ascendant over the same period.  While I do not (yet) know the reason for this, I am inclined to think that the apparent correlation between falling BM application numbers, and rising SW application numbers is not coincidental.

Why Are SW Filings on the Rise?

One reasonable hypothesis is that in the wake of Alice applicants have tended to emphasise ‘technical’ aspects of computer implementation in applications that might previously have focussed more on a BM invention.  Such applications would be more likely to be assigned to SW Art Units, since they would appear, on their face, to be directed to software technology rather than business processes.  However, under the closer scrutiny of full examination, the computer-implementation aspects of such applications might prove to be insufficiently substantial to overcome the subject matter hurdle set by Alice and subsequent CAFC decisions. 

If this is so, then we might expect to see the rejection rate of applications increase within the SW Art Units.  However, this would not necessarily result in a reduction in the numbers of patents issued from the Art Units, assuming they are still receiving and examining anticipated numbers of eligible SW patent applications.  This, along with the fact that most applications filed after June 2016 are either still awaiting examination, or have only recently begun to receive Office Actions on the merits, means that these potential effects of changes applicant behaviour would not yet be visible in the patent grant rates shown above.  Further, and more detailed, analysis will be required.

Conclusion – Software Patents Still Not Dead!

With more than an additional year of data now available for me to include in my analysis, it remains clear that while Alice severely curtailed the grant of US patents directed to business processes in fields such as e-commerce and finance, software patents generally – i.e. patents directed to computer-implemented inventions with technical merit – are largely unaffected.  As I have said before, and doubtless will have cause to say again, reports of the death of ‘software patents’ have been greatly exaggerated!

It is also interesting, though unsurprising, that filing data clearly indicates changes in applicant behaviour and strategy following Alice.  Whether this means that fewer ‘business process’ applications are now being filed, or that applicants are increasingly dressing up their business method inventions in technical garb, is as yet unclear.  I expect the reality is that it is a combination of both of these factors.

Fortunately, the USPTO’s new PEDS data set provides new opportunities to investigate this question, not only because it is more complete and up-to-date, but also because it includes ‘transaction history’ data that can be used to track the generation of Office Actions and applicant responses.


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