Alice Challenges Succeed Most Often in Financial Services Litigation

RPX data on patent eligibility reveal that parties filing Alice motions prevail far more often in litigation targeting certain industries—especially Financial Services, which saw a marked increase in NPE litigation in Q1 2021.

A breakdown of invalidation rates by market sector (specifically, by the RPX market sector assigned to the litigation in which the patents were asserted and then challenged under Alice) shows that subject matter eligibility challenges succeed most often against patents asserted in Financial Services suits, in which 79% of asserted patents adjudicated under Alice have had all challenged claims invalidated. Other sectors with high invalidation rates include Automotive (72%), Biotech and Pharma (70%), and Semiconductors (69%). Sectors with the lowest invalidation rates include Medical (33%), Networking (38%), and Industrial (45%).

Alice Invalidation Rates by Market Sector

RPX assigns all patent infringement cases a market sector based on a manual review of the accused products, defendants, and asserted patents. Some percentages add up to more than 100%, as patent claims occasionally see multiple Alice rulings with different outcomes. (For example, a claim may be found not invalid in one case and invalid in another.)

Despite the high Alice success rate seen in Financial Services cases in particular, limitations placed on early eligibility challenges by the Federal Circuit mean that this pathway toward invalidation is now much narrower for such defendants. In February 2018, the Federal Circuit ruled in Berkheimer and Aatrix that factual disputes may preclude the resolution of an Alice motion, causing early district court Alice invalidations to drop significantly—from 65% before Berkheimer to 45% since.

Moreover, Financial Services defendants seeking to raise Alice defenses recently lost a key avenue for doing so before the Patent Trial and Appeal Board (PTAB) with the recent end of the covered business method (CBM) review program. Providing petitioners with a wider range of challenges than its inter partes review (IPR) counterpart, including challenges to the eligibility of a patent’s subject matter, CBM review became available in September 2012 as a result of the 2011 passage of the America Invents Act, sunsetting this past September after eight years. To have qualified for CBM review, challenged claims must have related to the practice, administration, or management of a financial product or service and must not have recited a “technological invention”.

See RPX’s first-quarter review for more on patent eligibility and market sector trends—including the aforementioned uptick in Financial Services litigation from NPEs.