Six Years After Alice: 61.8% of U.S. Patents Issued in 2019 Were ‘Software-Related’—up 21.6% from 2018

As an update to my posts from 2017 and 2019, it has now been more than six years since the U.S. Supreme Court’s 2014 Alice Corp. v. CLS Bank decision. Still, the IP bar awaits a clear and reliable test to determine when exactly a software (or computer-implemented) claim is patentable versus being simply an abstract idea “free to all men and reserved exclusively to none.”

The USPTO’s Section 101 guidelines interpreting Alice—and the accompanying 46 examples—have not cleared the confusion, and Alice continues to distract the USPTO, courts, and practitioners from focusing properly on Sections 102 (novelty) and 103 (obviousness). The net effects still being increased cost, lower patent quality, lower patent portfolio valuations, wasted patent reform lobbying dollars, and, in many instances, the denial of patent protection for worthwhile software inventions.

Meanwhile, in the real world, which is experiencing the Fourth Industrial Revolution, the importance of software continues to be undeniable:

• The United States is the largest tech market in the world, representing 32% of the total or approximately $1.7 trillion of estimated IT spend, for 2020 [CompTIA].
• In 2019, the global M&A activity in the Software & Internet Services space reached US$206 billion, representing over 3,656 deals [IMAA].
• The employment of software developers is projected to grow 21 percent from 2018 to 2028, much faster than the average for all occupations [U.S. Bureau of Labor Statistics].

• Application software developer was the most in-demand job for 2019, with an annual median salary of US$101,790 and a growth outlook of 31% through 2024 [CNBC].
• In 2018, there were 79,598 Bachelor’s degrees, 46,468 Master’s degrees, and 2,017 Ph.D.’s awarded in the U.S. in computer and information sciences [National Center of Educational Statistics].
• The IoT market is on pace to grow to over US$3 trillion annually by 2026; and by 2025, there will be more than 64 billion IoT devices, up from about 10 billion in 2018 [Business Insider].
• By 2025, 60% of enterprises will deploy code to production at least once per day (up from about 3% today); and by 2023, 30% of the Forbes Global 2000 will be deriving at least 20% of their digital revenue from digital developer ecosystems’ use of their digital services and apps [IDC].

Given these latest facts, I once again sought to determine what percentage of USPTO-issued utility patents are “software-related”? To define what patents are “software-related,” I utilized the same methodology employed by the United States Government Accountability Office in a 2013 report to Congress. That report relied on certain United States Patent Classification (USPC) classes and subclasses of applications most likely to include software-related claims as selected by expert advisors to the USPTO. Now, with the assistance of IP services firm Clairvolex (and after converting data from the USPC system to the Cooperative Patent Classification (CPC) system), the data set was updated. The results? In 2019, 61.8% of issued U.S utility patents were “software-related” (up 21.64% from 2018)!

In sum, the lack of legal clarity surrounding software patents remains counterproductive to the IoT age in which we live.

This post reflects my current personal views and should not be necessarily attributed to my current or former employers, or their respective clients or customers.