OFFICE OF THE CHIEF ECONOMIST 

IP DATA HIGHLIGHTS

Number 3, April 2020

Adjusting 

to Alice

USPTO patent examination 

outcomes after Alice Corp. v. 

CLS Bank International
United States Patent and Trademark Office 1 Adjusting to Alice

U.S. Patent and Trademark Office • Office of the Chief Economist 

IP DATA HIGHLIGHTS • Number 3, April 2020

Adjusting to Alice

USPTO patent examination outcomes after 

Alice Corp. v. CLS Bank International

Andrew A. Toole, PhD, Chief Economist, 

and Nicholas A. Pairolero, PhD, Economist1

KEY FINDINGS

1 Any inquiries regarding this publication should be sent to economics@uspto.gov. Supplementary materials for this report are available at 

www.uspto.gov/ip-policy/economic-research/publications/reports.

• The likelihood of receiving a first 

office action with a rejection for 

patent-ineligible subject matter 

increased by 31% in the 18 months 

following the U.S. Supreme Court 

decision in Alice Corp. v. CLS Bank 

International in 33 “Alice-affected” 

technology areas.

• For these technologies, uncertainty 

in patent examination — measured 

as variability in patent subject 

matter eligibility determinations 

across examiners in the first action 

stage of examination — increased 

by 26% in the 18 months following 

the Alice decision.

• One year after the United States 

Patent and Trademark Office issued 

its January 2019 Revised Patent 

Subject Matter Eligibility Guidance 

(2019 PEG), the likelihood of Aliceaffected technologies receiving a 

first office action with a rejection for 

patent-ineligible subject matter had 

decreased by 25%. 

• Uncertainty in patent examination for 

Alice-affected technologies decreased 

by 44% in the 12 months following 

the issuance of the 2019 PEG.
United States Patent and Trademark Office 2 Adjusting to Alice

Introduction

2 Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014).

3 The phrase “patent subject matter eligibility” refers to the types of inventions that are legally eligible for patent protection. See the Manual of Patent 

Examining Procedure for a description of patent subject matter eligibility used at the USPTO (www.uspto.gov/web/offices/pac/mpep/s2106.html).

4 See USPTO (2017) and Hickey (2019).

5 See Dixit and Pindyck (1994); Abel et al. (1996); Bloom, Bond, and Van Reenen (2007); and Czarnitzki and Toole (2011).

6 See Sherry and Teece (2004); Arora, Fosfuri, and Gambardella (2004); and Gans, Hsu, and Stern (2008).

7 The data capture all types of Section 101 rejections, including utility and statutory double patenting. See the Manual of Patent Examining 

Procedure (www.uspto.gov/web/offices/pac/mpep/s2106.html).

8 This metric does not capture the full breadth of patent examination activities leading to a first office action. 

The U.S. patent system involves an interdependent 

and dynamic network of institutions. As one of the 

central institutions in this network, the United States 

Patent and Trademark Office (USPTO) evaluates and 

adjusts to changes that originate in other parts of the 

system. Through those adjustments, the USPTO is 

able to optimize the timeliness and quality of patent 

examination while staying within the legal parameters 

set by other institutions through U.S. statutes, judicial 

rulings, and international treaties.

On June 19, 2014, the U.S. patent system experienced a major change. The U.S. Supreme Court 

reached a unanimous decision in Alice Corp. v. CLS 

Bank International 2 that altered the law on patent 

subject matter eligibility.3 Alice Corp., the patent 

owner, argued that its patent claims directed to a 

computer-implemented financial settlement system 

were valid because they did not fall into the patent-ineligible category of “abstract ideas.” Rejecting the 

patent owner’s arguments, the Court held the claims 

patent ineligible on the basis that generic computer 

implementation does not transform a patent-ineligible 

abstract idea into a patent-eligible invention. In doing 

so, the Court effectively broadened the scope of ineligible subject matter. Moreover, the decision created 

uncertainty in the business and legal communities. 

Ambiguity in the language of the Alice standard and 

in the scope of technologies involving “abstract ideas” 

made it difficult to predict how and where the standard would be applied.4

Although legal changes and subsequent adjustments across the institutions in the patent system 

are not unusual, Alice deserves attention because of 

its potential economic consequences. The primary 

economic function of the patent system is to provide 

an incentive for greater invention and innovation. By 

broadening the scope of subject matter perceived 

as being ineligible, Alice is likely to have differential 

effects across technologies, with some inventions 

that were previously considered to be patent eligible 

no longer qualifying for patent protection. Even more 

importantly, economic theory and evidence show that 

greater uncertainty tends to reduce investments.5

Higher levels of uncertainty may also negatively 

impact previously issued patents by lowering their 

expected value, reducing patent purchases and licensing transactions, and limiting opportunities to obtain 

entrepreneurial financing.6

This report focuses on two USPTO patent examination outcomes and evaluates how these outcomes 

changed in response to the Alice decision and in 

response to two USPTO adjustments made in the form 

of guidance for examiners. The first outcome relates 

to examiner decisions on patent subject matter eligibility. A metric labeled “Percent of first office action 

Section 101 rejections” is used to capture the relative 

change in first office actions that include rejections 

for patent-ineligible subject matter.7 This metric will 

increase when examiners issue relatively more first 

office actions with a rejection for patent-ineligible 

subject matter.8 The second outcome is the degree 

of uncertainty in the patent examination process. A 

metric called “Section 101 first action examination 

uncertainty” is used to capture the variation across 

examiners in the proportion of rejections for patent-ineligible subject matter. Examination uncertainty 

will increase when the percentage of first office 

action rejections for patent-ineligible subject matter 

becomes more uneven across examiners within a 

specific technology. 
United States Patent and Trademark Office 3 Adjusting to Alice

The Alice decision increased USPTO 

subject matter eligibility rejections

The early implementation of Alice led patent examiners to increase rejections based on patent-ineligible 

subject matter relative to all first office action decisions 

in affected technologies. Figure 1 plots the percentage 

of first office action Section 101 rejections for patent 

applications in Alice-affected technologies (solid blue 

line) and in other technologies (dashed blue line) from 

2011 through 2015. The vertical bar (in red) marks the 

date of the Alice decision. Although the percentage of 

Section 101 rejections was always higher for applications in Alice-affected technologies, the upward turn 

in the solid blue line following Alice shows that early 

implementation of this Supreme Court decision led to 

a significant increase in the percentage of Section 101 

rejections in those technologies.9

9 Notice that the increase in first office action Section 101 rejection rates is reflected only in applications in the Alice-affected technologies 

and not in applications in the other technologies. In the empirical analysis, the other technologies are the “control group” that captures 

the influence of all other events besides the Alice decision on USPTO Section 101 rejections.

10 Other first office action examination rejection types (e.g., Sections 102, 103, 112) do not show statistically significant changes after Alice. 

Please refer to the supplementary materials for this report available at www.uspto.gov/ip-policy/economic-research/publications/reports

11 Our results are consistent with the finding in Chien and Wu (2018) that Alice increased the share of office actions that contain a Section 

101 rejection across several of the World Intellectual Property Organization’s technology categories.

Further empirical analysis shows this change was 

statistically significant and large in magnitude.10 For 

Alice-affected technologies, the chances of receiving a first office action rejection with a rejection for 

patent-ineligible subject matter increased by 31% in 

the 18 months following Alice.11

This increase reflects at least two aspects of the Alice

decision. First, expanding the application of the Alice

standard to other technology areas would likely lead 

to more Section 101 rejections. Second, and importantly, professionally trained judges, lawyers, and 

examiners can apply reasonable but different interpretations of the Alice standard. Any interpretation of the 

Alice standard that takes a broader view of patent-ineligible subject matter would lead to an increase in 

Section 101 rejections.

Figure 1: The probability of receiving a first office action with a Section 101 rejection in 

Alice-affected technologies and in other technologies, Sept. 2011 – Dec. 2015. 

Alice Supreme Court Decision

0% 10% 20% 30% 40%

Percentage of first office action 

Section 101 rejections

Sept. 2011

Mar. 2012

Sept. 2012

Mar. 2013

Sept. 2013

Mar. 2014

Sept. 2014

Mar. 2015

Sept. 2015

Alice-affected technologies Other technologies

Note: Patent applications included in this figure are restricted to those filed before June 2014 to 

minimize any influence of applicant drafting and filing decisions in response to Alice. 
United States Patent and Trademark Office 4 Adjusting to Alice

The Alice decision increased uncertainty 

in patent examination

The early implementation of Alice increased uncertainty in the first action stage of patent examination in 

affected technologies (Figure 2). Within Alice-affected 

technologies, a higher degree of variability is observed 

across examiners in first office action rejections for 

patent-ineligible subject matter. For patent applicants 

the examination process for Alice-affected technologies became more unpredictable. Figure 2 plots the 

variability for patent applications in Alice-affected 

technologies and in other technologies. The upward 

turn in the solid blue line following the Alice decision 

shows that another effect of Alice was to increase 

uncertainty related to patent subject matter eligibility 

in those affected technologies. Further empirical analysis shows this change was statistically significant and 

large in magnitude. In those technologies, uncertainty 

12 See USPTO (2017), Hickey (2019), and Taylor (2019).

about patent subject matter eligibility determinations in the first action stage of patent examination 

increased by 26% in the 18 months following Alice. 

The increase in uncertainty seems to reflect the interpretive latitude in the language of the Alice standard, 

which fueled a wide variety of perspectives.12 This 

widening resulted in a higher degree of variability 

in subject matter–related rejection decisions across 

examiners. As will become evident, the USPTO’s 

efforts to clarify the Alice standard have substantially 

offset the uncertainty created by Alice. 

Figure 2: Variation in examiner first office action Section 101 rejection rates 

in Alice-affected technologies and in other technologies, July 2017 – Dec. 2015. 

Alice Supreme Court Decision

.02 .04 .06 .08 .1 .12

Section 101 first action examination uncertainty

July - Dec. 2011

July - Dec. 2012

July - Dec. 2013

July - Dec. 2014

July - Dec. 2015

Alice-affected technologies Other technologies

Note: Patent applications included in this figure are restricted to those filed before June 2014 to 

minimize any influence of applicant drafting and filing decisions in response to the Alice decision.

The increase in uncertainty seems 

to reflect the interpretive latitude in 

the language of the Alice standard. 
United States Patent and Trademark Office 5 Adjusting to Alice

USPTO examiner guidance reversed 

the upward trend in subject matter 

eligibility rejections

One of the ways the USPTO adjusts to major changes 

in the U.S. patent system is to issue examination 

guidance documents. These documents assist examiners by interpreting the law and by setting policy 

guidelines on how to apply legal concepts in the 

examination process. For patent subject matter eligibility related to Alice, the USPTO provided Preliminary 

Examination Instructions on June 25, 2014, and issued 

a more substantive 2014 Interim Guidance on Patent 

Subject Matter Eligibility in December of that year. 

These documents attempted to align patent examination practice with established law. However, the 

Alice-induced increase in first office action Section 

101 rejections persisted until the USPTO’s April 

2018 memorandum titled “Change in Examination 

Procedure Pertaining to Subject Matter Eligibility, 

Recent Subject Matter Eligibility Decision (Berkheimer 

13 Berkheimer v. HP Inc., 881 F.3d 1360 (Fed. Cir. 2018).

14 References to all the USPTO Section 101 guidance documents are available at www.uspto.gov/PatentEligibility.

15 Figure 3 is not a continuation of Figure 1. The figures use two different samples of patent applications and cannot be compared.

v. HP, Inc.)”13 (the Berkheimer memorandum) and the 

USPTO’s subsequent January 2019 Revised Patent 

Subject Matter Eligibility Guidance (2019 PEG).14

Figure 3 shows the recent trend in the percentage 

of first office action Section 101 rejections for patent 

applications in Alice-affected technologies and in other 

technologies from 2017 through 2019. The first vertical 

bar (dashed red line) marks the date of the April 2018 

Berkheimer memorandum and the second vertical 

bar (solid red line) marks the date of the 2019 PEG.15

In early 2017, the percentage of first office actions 

including a Section 101 rejection for Alice-affected 

technologies was trending upward. The Berkheimer 

memorandum changed the direction of this trend. Prior 

to the release of the Berkheimer memorandum, examiners had been instructed to conclude that an element 

(or combination of elements) was a well-understood, 

routine, conventional activity when the examiner could 

readily conclude that the element was widely prevalent 

or in common use in the relevant industry. 

Figure 3: The probability of receiving a first office action with a Section 101 rejection in 

Alice-affected technologies and in other technologies, Jan. 2017 – Jan.2020. 

2019 PEG

Berkheimer

memorandum

0% 10% 20% 30% 40%

Percentage of first office action

Section 101 rejections

Jan. 2017

July 2017

Jan. 2018

July 2018

Jan. 2019

July 2019

Jan. 2020

Alice-affected technologies Other technologies

Note: Patent applications included in this figure are restricted to those filed before January 2019 to 

minimize any influence of applicant drafting and filing decisions in response to the 2019 PEG.
United States Patent and Trademark Office 6 Adjusting to Alice

The examiner, however, was not required to support 

this conclusion with any factual evidence. Following 

the Berkheimer memorandum, the new guidance 

required examiners to make a factual determination as 

to whether claim elements were common and routinely 

used. For Alice-affected technologies, the Berkheimer 

memorandum induced a statistically significant drop in 

the rate of first office action Section 101 rejections.

The 2019 PEG caused a further, and much larger, 

decrease in the percentage of first office action Section 

101 rejections in Alice-affected technologies. One of 

the USPTO’s goals with the 2019 PEG was to clarify 

the legal distinctions between claims directed solely 

to abstract ideas and claims that included abstract 

ideas but integrated those abstract ideas into a practical application. The 2019 PEG synthesized the law, 

and added clarity and structure to the decision-making process when implementing the Alice standard in 

two important ways. First, the guidance clarified that 

abstract ideas are grouped as mathematical concepts, 

certain methods of organizing human activity, and 

mental processes. Second, the guidance explained that 

16 Substantial information and training material related to the 2019 PEG can be accessed on the USPTO website. See www.uspto.gov/

patent/laws-and-regulations/examination-policy/subject-matter-eligibility.

a claim that recites an abstract idea is not “directed to” 

the abstract idea if the claim as a whole integrates the 

abstract idea into a practical application.16

In Figure 3, the impact of the 2019 PEG on the percentage of first office action Section 101 rejections 

is illustrated by the steep drop in the solid blue line 

following the issuance of the 2019 PEG. More sophisticated statistical modeling shows this change was 

statistically significant and large in magnitude. After 

one year, the 2019 PEG reduced the chances of receiving a first office action rejection for patent-ineligible 

subject matter by 25% for Alice-affected technologies.

USPTO examiner guidance decreased 

uncertainty in patent examination

Uncertainty in the first action stage of patent examination started to decrease following the release of 

the Berkheimer memorandum. Like Figure 2, Figure 4 

plots examiner decision-related variability for patent 

applications in Alice-affected technologies and 

in other technologies. The vertical bars mark the

Figure 4: Variation in examiner first office action Section 101 rejection rates in Alice-affected 

technologies and in other technologies, Aug. 2016 – Jan. 2020. 

Berkheimer

memorandum

2019 PEG

.02 .04 .06 .08 .1 .12

Section 101 first action examination uncertainty

Aug. 2016 -

Jan. 2017

Feb. - July

2017

Aug. 2017 -

Jan. 2018

Feb. - July

2018

Aug. 2018 -

Jan. 2019

Feb. - July

2019

Aug. 2019 -

Jan. 2020

Alice-affected technologies Other technologies

Note: The dashed vertical bar is drawn at the beginning of the time interval that contains the April 2018 Berkheimer memorandum, 

which is January 2018 because the variance is calculated over six month periods. Patent applications included in this figure are restricted 

to those filed before January 2019 to minimize any influence of applicant drafting and filing decisions in response to the 2019 PEG.
United States Patent and Trademark Office 7 Adjusting to Alice

publication dates of the April 2018 Berkheimer 

memorandum and the 2019 PEG. For Alice-affected 

technologies, the figure shows that the variability in 

first office action Section 101 rejection rates started 

to decrease after the issuance of the Berkheimer 

memorandum. Although not as steep, a similar drop 

is apparent in the control group of other technologies. 

The memorandum, therefore, appears to have had 

no statistically distinct effect on examination uncertainty in Alice-affected technologies as compared to 

other technologies. 

The 2019 PEG, however, had a much larger, statistically significant effect on examination uncertainty, 

particularly in Alice-affected technologies. 

In Figure 4, the solid blue line shows a notable drop 

following the issuance of the 2019 PEG. After one 

year, the 2019 PEG decreased uncertainty about 

patent subject matter eligibility determinations in the 

first action stage of patent examination by 44% for 

Alice-affected technologies.

The evidence suggests that the 2019 PEG provided 

clarity and structure to the decision-making process, 

thereby reducing the degree of variability observed 

across examiners in subject matter eligibility determinations. For patent applicants, this finding indicates a 

more consistent and predictable examination process. 

The evidence suggests that 

the 2019 PEG provided clarity 

and structure to the decisionmaking process. 
United States Patent and Trademark Office 8 Adjusting to Alice

Appendix: Definitions and measures

17 See www.uspto.gov/web/offices/pac/mpep/mpep-0700.html, particularly Sections 706 and 707.

18 See www.uspto.gov/sites/default/files/documents/ieg-sme_crt_dec.xlsx.

19 The U.S. Patent Classification schema is now dormant and is no longer reported by the USPTO.

To reduce the complexity of disentangling examiner 

and applicant behavior, this report focuses on the first 

decision on patentability made by the examiner, which 

is referred to as the first office action.17 Moreover, to 

minimize any influence of applicant choices about 

whether to file for patent protection, change drafting 

strategies, or make other adjustments in response to 

the Alice decision or the USPTO 2019 PEG, this report 

considers only patent applications filed before the relevant event. For evaluating the effect of Alice, patent 

applications must have been filed with the USPTO 

before June 19, 2014. Similarly, for evaluating the 

effect of the 2019 PEG, patent applications must have 

been filed with the USPTO before January 7, 2019. At 

the time of each of these events, the composition of 

the patent applications under review at the USPTO 

was different. For this reason, it would not be appropriate to compare the sample of applications shown in 

Figure 1 with those in Figure 3. 

To identify Alice-affected technologies, we use information compiled by the USPTO’s Office of Patent Legal 

Administration (OPLA) on patent litigation cases from 

the U.S. Court of Appeals for the Federal Circuit and 

the U.S. Supreme Court that involved patent subject 

matter eligibility.18 OPLA documents the patents in-suit, 

as well as the relevant judicial exception for each case 

reviewed. The United States Patent Classifications 

(USPCs) of the patent applications litigated for 

“abstract ideas” form the set of Alice-affected technologies.19 Our control set of technologies (called “other 

technologies” in our figures) includes all USPCs that 

were never involved in patent litigation for Section 101 

issues according to OPLA’s records. 

The percentage of first office action Section 101 

rejections is computed by dividing the total number 

of first office action decisions containing a Section 101 

rejection by the total number of first office actions and 

then multiplying by 100 for each time period by technology category (Alice-affected technologies or other 

technologies). For example, if there were 1,000 first 

office actions in Alice-affected technologies in April 

2013 and 300 of these first office actions contained 

a rejection for patent subject matter eligibility, the 

percentage of first office action Section 101 rejections 

in April 2013 for Alice-affected technologies would be 

30% (300 divided by 1,000 and multiplied by 100).

Our second patent examination outcome metric, 

called “Section 101 first action examination uncertainty,” captures the variation across examiners in 

the proportion of rejections for patent-ineligible 

subject matter. This metric is calculated using data 

for each examiner within specific technologies at the 

first action stage of patent examination. To compute 

this measure, we calculated the rate of first office 

action rejections for subject matter eligibility for each 

examiner in a USPC technology and for a specified 

time period. That rate is defined as the number of first 

office actions containing a rejection for patent subject 

matter eligibility divided by the overall number of 

first office actions by that examiner in the USPC and 

time period. The variance was computed across those 

examiner rates in each USPC using a half-year time 

periods (January–June; July–December for Alice, and 

Feb.–July; Aug.–Jan. for the Berkheimer memorandum 

and 2019 PEG). The Section 101 first action examination uncertainty metric for each interval of time is an 

average of the variance across the USPCs in the Aliceaffected technologies and likewise, an average of the 

variance across USPCs in the control technologies. 
United States Patent and Trademark Office 9 Adjusting to Alice

References

Abel, A. B., A. K. Dixit, J. C. Eberly, and R. S. Pindyck. 1996. “Options, the Value of Capital, and Investment.”

Quarterly Journal of Economics 111 (3): 753–77. 

Arora, A., A. Fosfuri, and A. Gambardella. 2004. Markets for Technology: The Economics of Innovation and Corporate 

Strategy. Cambridge, MA: Massachusetts Institute of Technology.

Bloom, N., S. Bond, and J. Van Reenen. 2007. “Uncertainty and Investment Dynamics.” Review of Economic 

Studies 74 (2): 391–415.

Chien, C., and J. Wu. 2018. “Decoding Patentable Subject Matter.” Patently-O Patent Law Journal 1.

Czarnitzki, D., and A. A. Toole. 2011. “Patent Protection, Market Uncertainty, and R&D Investment. Review of 

Economics and Statistics 93 (1): 147–59.

Dixit, A. K., and R. S. Pindyck. 1994. Investment under Uncertainty. Princeton, NJ: Princeton University Press.

Frumkin, J., N. A. Pairolero, A. Tesfayesus, and A. A. Toole. 2020. “The Impact of the U.S. Supreme Court Ruling 

in Alice Corp. v. CLS Bank International on Patenting and Uncertainty in U.S. Innovation.” OCE Working Paper, 

Office of the Chief Economist, U.S. Patent and Trademark Office, January.

Gans, J. S., D. H. Hsu, and S. Stern. 2008. “The Impact of Uncertain Intellectual Property Rights on the Market for 

Ideas: Evidence from Patent Grant Delays.” Management Science 54 (5): 982–97.

Hickey, K. J. 2019. “Patent-Eligible Subject Matter Reform in the 116th Congress.” CRS Report R45918, 

Congressional Research Service, September.

Sherry, E. F., and D. J. Teece. 2004. “Royalties, Evolving Patent Rights, and the Value of Innovation.” 

Research Policy 33 (2): 179–91.

Taylor, D.O. 2019. “Patent Eligibility and Investment.” Southern Methodist University Dedman School of Law Legal 

Studies Research Paper No. 414. ssrn.com/abstract=3340937.

U.S. Patent and Trademark Office (USPTO). 2017. Patent Eligible Subject Matter: Report on Views and Recommendations 

from the Public. Alexandria, VA: USPTO. www.uspto.gov/sites/default/files/documents/101-Report_FINAL.pdf.

ACKNOWLEDGMENTS:

We wish to thank Jesse Frumkin and Asrat Tesfayesus for their contributions to the technical working paper 

underlying this report. We also thank Teresa Verigan for excellent graphic design and John Ward for valuable 

work on the text. Others within USPTO who provided thoughtful and helpful comments include Michael W. Kim, 

Patricia Mallari, Mary Critharis, Courtney Stopp, Allan Woodworth, Amy Nelson, Thomas Krause, and other 

colleagues from PTAB, OPIA, CFO, OPLA, and Patent Operations. Finally, we would like to thank Qiang Lu and 

Scott Beliveau of the USPTO Office of the Chief Information Officer, Enterprise Advanced Analytics Branch, for 

providing the data on office actions.

SUPPLEMENTARY MATERIAL:

www.uspto.gov/ip-policy/economic-research/publications/reports
U.S. Patent and Trademark Office 

600 Dulany Street • Alexandria, Virginia, 22314 • www.uspto.gov