Background
The new leadership at the United States Patent & Trademark Office (USPTO) has been working aggressively to restore balance to a patent system where emerging technologies, including artificial intelligence (AI), have faced an uphill battle overcoming rejections during patent prosecution and invalidation at the Patent Trial and Appeal Board (PTAB) and in federal court. This alert examines the USPTO’s efforts to reduce claims rejections and invalidations based on subject matter eligibility (SME) and return the focus of patentability to the traditional standards of novelty, obviousness, and adequate disclosure.
The Judicial Muddle of Subject Matter Eligibility
Title 35 U.S.C. Sections 102, 103, and 112 define, respectively, the core elements of inventiveness: novelty, obviousness, and adequate disclosure. The language of Section 101 relates to the broad subject matter of invention:
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
Over the years, and particularly over the past score of years, courts have interpreted the seemingly straightforward language of Section 101 to provide implicit judicial exceptions to patentability, including (1) abstract ideas, (2) laws of nature, and (3) natural phenomena. The consequences of this judge-made law have been far-reaching.
Judge Pauline Newman, dissenting in CLS Bank Int'l v. Alice Corp. Pty, argued that these judicial exceptions are unnecessary.1 According to Judge Newman:
Section 101 is not the appropriate vehicle for determining whether a particular technical advance is patentable; that determination is made in accordance with the rigorous legal criteria of patentability. Contrary to the diverse protocols offered by my colleagues, it is not necessary, or appropriate, to decide whether subject matter is patentable in order to decide whether it is eligible to be considered for patentability.
Irrespective of one’s views on Judge Newman’s pointed dissent, there is no doubt that the courts have failed to provide clear guidance on patentability under Section 101 and that this failure has impeded whole fields of human invention, including business methods, medical diagnostics, computer technology, and, significantly, AI. Action is long overdue on remediating Section 101 jurisprudence.
A New Sheriff in Town
John A. Squires was sworn into office as the new director of the USPTO on September 23, 2025. On his first full day on the job, he signed the first two patents of his tenure: one directed to distributed ledger technologies and another to medical diagnostics—both areas frequently scrutinized for patent eligibility.2 At the accompanying signing ceremony, he explained: “I wanted to send a clear message with the first two patents issued on my watch: the U.S. Patent Office is open for business, especially for the technologies of tomorrow.”
Squires dialed up the heat with the issuance of the precedential Ex Parte Desjardins Appeals Review Panel decision.3 The decision overturned the PTAB’s sua sponte claims rejections based on Step 2A (prong two of the subject matter eligibility framework set forth in the Manual of Patent Examining Procedures (MPEP)).4 Referencing Enfish LLC v. Microsoft Corp. as “among the Federal Circuit’s leading cases on the eligibility of technological improvements,” the panel rejected the PTAB’s view that the elements of the disputed claims failed to integrate the judicial exception into a practical application.5 Notably, the panel opined:
Under a charitable view, the overbroad reasoning of the original panel below is perhaps understandable given the confusing nature of existing § 101 jurisprudence, but troubling, because this case highlights what is at stake. Categorically excluding AI innovations from patent protection in the United States jeopardizes America's leadership in this critical emerging technology.
Importantly, the panel did not overturn the PTAB’s obviousness claims rejections under Section 103, noting:
This case demonstrates that §§ 102, 103, and 112 are the traditional and appropriate tools to limit patent protection to its proper scope. These statutory provisions should be the focus of examination. [Emphasis added.]
In a memo on December 4, 2025, Squires reminded applicants and practitioners of the availability of Subject Matter Eligibility Declarations (SMEDs) under Rule 132 and outlined best practices for submitting them.6 In a related memo on SMEDs to the Patent Examining Corps, Squires cautioned examiners to heed the warning of Desjardins against “overbroad Section 101 rejections because ‘[c]ategorically excluding AI innovations from patent protection in the United States jeopardized America’s leadership in [ ] critical emerging technolog[ies].’”7
No time has been wasted in integrating the lessons of Desjardins into a revised ninth edition of the MPEP. In a memo to the Patent Examining Corps dated December 5, 2025, Deputy Director Charles Kim provided notice that, effective immediately, the MPEP is revised to include reference to Desjardins and reiterated the importance of Enfish as “among the Federal Circuit’s leading cases on the eligibility of technological improvements.”8
Good News for Inventors and Other Stakeholders in Emerging Technology Areas
For stakeholders in emerging technology areas, including AI, the good news is that Director Squires’s efforts to tame the beast of Section 101 rejections appear to be succeeding. The PTAB has already doubled its rate of reversing Section 101 rejections.9 With the new guidance now incorporated into the MPEP, examiners are likely to follow suit with a reduction in SME rejections and focus more on rejections based on the traditional criteria of anticipation, obviousness, clarity, and enablement.
Practical Takeaways for Patent Prosecution
- Strategic drafting of applications is crucial.
- AI and software innovations are patent-eligible when they show a clear technical improvement in how computer systems or machine-learning models function.
- AI claims should be clearly directed to a practical application that improves technology to avoid rejection as merely an algorithm on a generic computer.
- AI claims should be supported by data that demonstrates measurable improvements in performance, efficiency, or capability.
- Patent prosecutors, when facing AI rejections, have a potentially effective tool in SMEDs to overcome these rejections.
Longer Term Considerations
Over the longer term, caution is warranted. While the new USPTO leadership can change examination guidelines and exercise executive control over Article I judges at the PTAB (and may even have a modicum of persuasive authority over judges in the federal court system), it has no constitutional authority over Article III judges. On the other hand, even in the short term, the USPTO must tread carefully within the boundaries set by Section 101 jurisprudence, regardless of whether it is confusing (as many have noted) or misguided (as articulated by Judge Newman’s dissent in CLS Bank v. Alice). While executive agencies such as the USPTO can shift policy rapidly to reflect changing priorities, policy can, and generally does shift with each new administration, fostering uncertainty and inhibiting investments helping to drive innovation.
To preserve current and future American leadership in AI and other high-technology areas on the line, the best long-term solution is for Congress to provide statutory clarity in the face of the muddle of Section 101 jurisprudence. A few individuals continue to make efforts to provide this clarity at the legislative level; but, so far, these efforts have failed. Inventors, other stakeholders, and the American public need to apply pressure on their legislators to support sensible patent reform legislation. That is a topic for another day.
If you have any questions regarding the content of this alert, please contact Bill Braunlin, Special Counsel, at wbraunlin@barclaydamon.com, or another member of the firm’s Patents & Prosecution Practice Area.
1CLS Bank Int'l v. Alice Corp. Pty, 717 F.3d 1269 (Fed. Cir. 2013).
2USPTO Director John A. Squires issues first patents of tenure. Press release 25-11 from the USPTO, issued September 24, 2025.
3PTAB designates as precedential an Appeals Review Panel decision | USPTO; see also Ex Parte Desjardins, Appeal No. 2024-000567 (PTAB September 26, 2025, Appeals Review Panel Decision) (precedential).
4See the framework as set forth in MPEP §§ 2106.06(d)(1) and 2106.05(a).
5Enfish LLC v. Microsoft Corp. 822 F.3d 1327, 1339 (Fed.. Cir. 2016).
6John A. Squires, “Best Practices for Submission of Rule 132 Subject Matter Eligibility Declarations (SMEDs).” Memo dated December 4, 2025, to All Patent Applicants and Patent Practitioners.
7John A. Squires, “Subject Matter Eligibility Declarations.” Memo to patent Examining Corps dated December 4, 2025 (referencing Ex Parte Desjardins).
8Charles Kim, “Advance notice of change to the MPEP in light of Ex Parte Desjardins.” Memo to the Patent Examining Corps dated December 5, 2025.
9Dennis Crouch, “PTAB double section 101 reversal rate under Director Squires.” PatentlyO blog, January 2, 2026.