By: Nicholas Yun
Under 35 U.S.C. § 101, patentable subject matter covers processes, machines, and compositions of matter, while excluding laws of nature, natural phenomena, and abstract ideas.[1] These judicially recognized exceptions have long guided courts and the U.S. Patent and Trademark Office (“USPTO”) in determining what counts as an invention.[2] As AI technology continues to advance, the line between human and machine creativity has become increasingly difficult to define. This evolution poses complex questions for patent law: whether outputs generated by algorithms can truly be considered inventions, and if such creations fall within the scope of patentable subject matter under § 101.[3]
The Supreme Court’s decisions in Mayo Collaborative Services. v. Prometheus Laboratories, Inc.[4] and Alice Corp. v. CLS Bank International[5] established the traditional two-step test that now governs patent eligibility.[6] First, courts ask whether a claim is directed to a judicial exception (the aforementioned laws of nature, natural phenomena, or abstract idea).[7] And, if so, whether the patent claim applies to that judicial exception in a practical way.[8] In practice, this framework has created uncertainty, especially for inventions related to computer-implemented and software-related inventions.[9]
The uncertainty surrounding § 101 has prompted the U.S. Patent and Trademark Office to provide new guidance on how examiners should evaluate AI-related inventions.[10] In August 2025, USPTO Deputy Commissioner for Patents, Charles Kim, issued a memorandum reminding examiners that claims involving artificial intelligence or computer-implemented technologies should not be categorically rejected under § 101 merely because they rely on algorithms or data processing and that eligibility must be assessed based on whether the claim, viewed as a whole, integrates the exception into a practical application.[11] And following USPTO director John Squire’s reversal of a Patent Trial and Appeal Board § 101 rejection, where he criticized the panel for applying the Alice/Mayo test too rigidly and warned that overbroad rejections under § 101 “jeopardize[e] America’s leadership in this critical emerging technology,” he made clear that “[e]xaminers and panels should not evaluate [AI] claims at such a high level of generality.” [12] Together, the memo and Director Squire’s decision mark a shift in the USPTO’s approach — urging examiners to take a closer, more grounded look at AI-related inventions rather than issuing broad rejections that could stifle emerging innovation.[13] Beyond doctrinal implications, these policy shifts have practical consequences for the business law community.
Recent USPTO leadership actions indicate a desire to modernize how patent law is applied to AI and to ensure that AI inventions are not categorically excluded via § 101.[14] For companies pouring resources into AI research, clear guidance on § 101 isn’t just a legal technicality; it changes how they protect, value, and bring innovation to market.[15] Uncertainty around patent eligibility can influence how companies plan their business strategies, discourage investment, and make it harder to negotiate licensing or collaboration deals that depend on proprietary algorithms and data models. As AI keeps expanding what’s possible in creativity and invention, the patent system needs to keep pace. If the patent system can keep pace, it won’t just support innovation, it’ll help the U.S. stay ahead in shaping the next generation of technology. Ultimately, how the USPTO and courts handle § 101 in the context of artificial intelligence will shape whether the patent system drives innovation forward or holds it back in this new era of technology.
[1] See 35 U.S.C. § 101; see also Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208, 216 (2014) (quoting Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013)).
[2] See, e.g., Manita Rawat, et al., USPTO Issues Memorandum Reminding Examiners Regarding Subject Matter Eligibility Evaluation, Morgan Lewis (Aug. 15, 2025), https://www.morganlewis.com/pubs/2025/08/uspto-issues-memorandum-reminding-examiners-regarding-subject-matter-eligibility-evaluation [https://perma.cc/M5RY-WZXF].
[3] See generally Christina Sperry, Helpful Reminders for Patent Eligibility of AI, Machine Learning, and Other Software-Related Inventions, McCarter & English (Sep. 12, 2025), https://www.mccarter.com/insights/helpful-reminders-for-patent-eligibility-of-ai-machine-learning-and-other-software-related-inventions/ [https://perma.cc/V2LX-3KSK] (discussing how AI and other software-related inventions are often rejected by the USPTO, and the USPTO’s subject matter eligibility test).
[4] 566 U.S. 66 (2012).
[5] 573 U.S. 208 (2014).
[6] See Mayo Collaborative Servs., 566 U.S. at 71; Alice Corp., 573 U.S. at 216.
[7] Sperry, supra note 3.
[8] Id.
[9] Kurt S. Prange, Developments in Patent Subject Matter Eligibility for Software-Related Inventions, in View of Guvera v. Spotify, Womble Bond Dickinson (May 5, 2025), https://www.womblebonddickinson.com/us/insights/articles-and-briefings/developments-patent-subject-matter-eligibility-software-related [https://perma.cc/6KFL-WHZH] (noting that “ever since the U.S. Supreme Court’s Alice decision in 2014, Section 101 has been used to invalidate countless software patents.”).
[10] Memorandum from Charles Kim, Deputy Commissioner for Patents, U.S. Pat. and Trademark Off., Reminders on Evaluating Subject Matter Eligibility of Claims Under 35 U.S.C. 101 (Aug. 4, 2025), https://www.uspto.gov/sites/default/files/documents/memo-101-20250804.pdf [https://perma.cc/2EMY-3U6X]; Daniel Rose & Sid Kapoor, USPTO Director Reverses PTAB § 101 Rejection, Reaffirms Patent Eligibility for AI Innovations, Pierson Ferdinand (Oct. 3, 2025), https://pierferd.com/insights/uspto-director-reverses-ptab-101-rejection-reaffirms-patent-eligibility-for-ai-innovations [https://perma.cc/TXB8-2PTB].
[11] Memorandum from Charles Kim, supra note 10.
[12] Rose & Kapoor, supra note 10.
[13] See e.g., id.
[14] E.g., id.
[15] See generally Diego F. Freire, USPTO Raises Bar for § 101 Rejections in AI Patents, Dykema (Aug. 14, 2025), https://www.dykema.com/news-insights/uspto-raises-bar-for-101-rejections-in-ai-patents.html [https://perma.cc/2V4F-HNYT].
