Senate Subcommittee on Intellectual Property Holds Hearings on Proposed Revisions to 35 U.S.C. § 101

By Michael Borella --

On June 4, 5, and 11, the Senate Subcommittee on Intellectual Property held hearings on its recent proposal to revise 35 U.S.C. § 101, and in particular the current draft bill to do so.  Chairman Tillis and Ranking Member Coons (with an occasional third senator in the room) heard testimony from 45 individuals representing a broad swathe of patent expertise including industry executives and groups, inventors, a former Federal Circuit judge, former U.S. Patent and Trademark Office officials, and law professors.  Notably absent were representatives of high-tech companies, though a software industry association representing many of these organizations sent an envoy.

The motivation behind the bill and these hearings was the widespread understanding that a series of Supreme Court decisions in the last decade (most recently Alice Corp. v. CLS Bank Int'l) had "made a hash" of patent eligibility.  The intent behind the draft bill was to offer clarity with regard to what technologies and scientific discoveries are eligible for patenting.

To that end, the draft bill effectively abrogates the Supreme Court's § 101 test, eliminates judicial exceptions to eligibility, draws a strict line between the inquiries of §§ 101, 102, 103, and 112, and would result in virtually any invention that "provides specific and practical utility in any field of technology through human intervention" being eligible.  The draft bill also changes § 112(f) in a fashion that appears to codify the holding of Williamson v. Citrix Online, LLC regarding the interpretation of functional claim language.

Needless to say, the seven-plus hours of hearings brought forth several kernels of disagreement between those who favor the wording of the draft bill, those who believe that § 101 is working just fine as it is, and those somewhere in the middle.  Rather than provide a blow-by-blow analysis, a summary of highlights (admittedly incomplete) follows:

• The majority of witnesses agreed that § 101 is currently in a state of crisis and that the Alice test is too hard for patent examiners, judges, attorneys, and innovators to apply consistently or cogently in practice.

• A number of witnesses noted that the current state of the law has reduced the number of lawsuits from bad actors (e.g., non-practicing entities) who engage in licensing campaigns by aggressively asserting patents with overly-broad, vague claims. Since these patents can be invalidated under § 101 on the pleadings in many cases, the cost of being a patent defendant has dramatically decreased.

• Several witnesses also raised the issue that the U.S. could lose its leadership positions in artificial intelligence, quantum computing, diagnostic methods, and genetics if inventions in these fields were not eligible in this country while being more easily patentable in Europe and China.

• Concern was raised about the patenting of human genes in their natural state, which was eventually shot down by Senator Tillis.  He and Senator Coons made it clear that doing so was not a goal of the legislation.

• Opinions were provided from parties on both sides of the endless debate regarding the effects of patents on drug prices, presenting studies that support their diametrically opposed positions.

• The general consensus was that diagnostic methods were virtually unpatentable under today's law and that this was having a deleterious impact on that industry.

• The "practical utility" language of the draft bill was criticized as still being too vague in practice and an invitation for the judiciary to re-apply the Alice test in a slightly different form.

• The Senators and the witnesses discussed whether the bill could encourage the courts to be able to accelerate the adjudication of patents that seem to lack merit on their face, but how to do this remained undecided.  It was pointed out that Congress telling the district courts how to manage their dockets could be a separation of powers violation.

• The changes to § 112(f), which effectively require more detailed disclosure to support functional claim language, were generally viewed positively but with some trepidation.  Some were of the opinion that the changes do not go far enough to prevent vague claim language from appearing in patents, while others were concerned about how making § 112(f) any more strict would impact the length and complexity of specifications for computer-implemented inventions.

• One proposal briefly discussed was to allow § 101 challenges in the USPTO's Inter-Partes Review (IPR) proceedings.  This would address at least some of the apprehension over the cost of defending a patent suit.

• The best line of the hearings came from Robert Armitage, an intellectual property consultant, who made an analogy between to solving the problem of "bad patents" with the current § 101 and solving the housing crisis with the bubonic plague.

• Senators Tillis and Coons are knowledgeable about the issues at hand and were engaged throughout.

So where is the legislation going to go from here?  The Senators seemed swayed by the end of the third day that they had perhaps gone too far in eliminating the judicial exceptions, and indicated that they would introduce some version thereof back into the next iteration of the bill.  Senator Coons also supported a stronger experimental use and research exception to provide a safe harbor for basic research.

Additionally, there seems to be consensus that § 112, rather than § 101, should be used to address claim breadth.  How this will make its way into the bill is unclear, though it appears that functional claim language will attain disfavored nation status.

A wildcard is how the Senators will attempt to handle the issue of abusive litigation.  They repeatedly asked the witnesses to suggest ways of tamping down on lawsuits brought with subpar patents without using § 101, but there were few concrete suggestions.

The Senators aim to provide a revised bill this summer.  Assuming no other revisions from the Subcommittee, this bill would have to survive review of the full Senate and also be passed by the House of Representatives.  Given the earnestness with which Senators Tillis and Coons are addressing this issue, there is a reasonable chance that the bill will move forward quickly.  Or, viewing the matter a tad more cynically, this is one of the few issues with bipartisan support in our current Congress.  Thus, it may be a way for that body to show at least some legislative accomplishments.  In any event, stay tuned.

Comments

[Skeptical]

As to (the Trojan Horse effect of):

"The intent behind the draft bill was to offer clarity with regard to what technologies and scientific discoveries are eligible for patenting"

More than one witness made it clearly a point that the US Sovereign choice of Useful Arts is NOT LIMITED to the subset of "technological arts" (a la the EPO).

This is NOT a semantic point, and very much needs to be maintained, given the fact that the nature of innovation cannot be known a priori (and as witness the innovation within business methods by Deming et al).

[Skeptical]

"A wildcard is how the Senators will attempt to handle the issue of abusive litigation."

Agreed - and a more than a little disappointed that there were no solid suggestions for this aspect of the problem.

The first thing that I would emphasize in ANY approach would be to separate what is a Civil Procedure problem from the unfortunate rhetoric (spin/propaganda) against strong patent rights that is so evidently (and so self-serving) comes from those that fear DISRUPTIVE innovation (yes, I am talking about at least in part Askeladden's representative).

The second thing to do would be to emphasize that ANY "bad actor" controls can be applied regardless of whether or not an underlying "item" happens to be a patent item or not.

The third thing to do would be to emphasize that ANY "real world" quality control program needs to actually enable change in the examination process itself (and NOT some "band-aid," horse has already left the barn, Post-grant mechanism with zero tie back to actual examination).

[Skeptical]

Lastly, I did NOT get the impression of:

"The changes to § 112(f), which effectively require more detailed disclosure to support functional claim language, were generally viewed positively but with some trepidation"

I got the opposite take-away that the proposed changes to § 112(f) are not workable as is, and that THIS is an area that needs much more work.

[Greg DeLassus]

"[T]he U.S. could lose its leadership positions in artificial intelligence, quantum computing, diagnostic methods, and genetics if inventions in these fields were not eligible in this country while being more easily patentable in Europe and China."

One hears this argument all the time, but it makes no logical sense. The U.S. patent system does not uniquely incentivize U.S. industry. Inventors in Europe and China depend just as much on the incentives that the U.S. patent system provides as do inventors in the U.S.

If the EP allows patents on a given technology but the U.S. does not, that will not lead to a decline in U.S. R&D relative to EP R&D on that tech field. It will simply lead to a general, worldwide decline on R&D in that tech field. The relative position of the U.S. in that declining tech field, however, will be determined by U.S. tax law and immigration policy much more than by U.S. patent law.

"Concern was raised about the patenting of human genes in their natural state, which was eventually shot down by Senator Tillis. He and Senator Coons made it clear that doing so was not a goal of the legislation."

One has to feel for Sen. Tillis, who is tasked with the unenviable task of shooting down a dumb argument that is being made with a loud megaphone. U.S. law pre-Myriad did not allow patents on genes in their natural states. U.S. law after Myriad does not allow patents on genes in their natural states. Even if this bill text is enacted into statute as-is, it will not allow patents on genes in their natural states. The argument is as silly as it is tedious.

"The changes to § 112(f)... were generally viewed positively..."

Hm, can you cite to a specific instance of such expressed positivity? I happen to support these §112(f) revisions, but I do not recall hearing much support for them from the witnesses.

"One proposal briefly discussed was to allow §101 challenges in the USPTO's Inter-Partes Review (IPR) proceedings."

This seems like a goofy way of dealing with the problem that the opponents of these §101 revisions purport to fear. If we expand IPRs to include §101, then effectively the only thing that sets PGRs apart from IPRs is the ability to adjudicate §112.

Is there a reason why we should have one platform for assessing §112 with a 9-month time limit (except for "non-technological" inventions involving "business methods," in which case the time limit is lifted, but only for patents that have been asserted in litigation)? To ask the question is to answer it. If we are going to allow §101 in IPRs, we should just cut to the chase and collapse IPRs & PGRs together. Create a forum not limited by time, but restricted to patents that have actually been asserted, where the PTAB can reconsider the propriety of a granted claim in view of *any* grounds of invalidity. Bob Armitage has been advocating this idea for a few years now, and I think it a good idea.

[Greg DeLassus]

"Some were... concerned about how making § 112(f) any more strict would impact the length and complexity of specifications for computer-implemented inventions."

I have seen this concern expressed, but this is a very weak objection. Most of those who read this blog are familiar with the pharma patent world, and know from experience that sometimes it takes 150, 200, or even 500+ pages to write an application that adequately supports the claims. All other things being equal, shorter is better than longer, but all other things are rarely equal. If longer software patent specifications are the price we must pay for enhanced clarity of claim scope, the good being purchased is worth the cost.

[Skeptical]

Mr. DeLassus is employing the "hey, wear my glasses, they work for me" LACK of critical thinking.

Maybe you should avoid commenting on things you clearly do not understand, Mr. DeLassus.

[Paul F. Morgan]

Re: "They repeatedly asked the witnesses to suggest ways of tamping down on lawsuits brought with subpar patents without using § 101, but there were few concrete suggestions."
One such suggestion that has been made by patent litigators but ignored is to require Markman hearings early-on in patent litigation to dispose of the many asserted patents not infringed by any rational reading of the asserted claims on the accused products, well before huge discovery and trial preparation expenses.
I was also surprised by the lack of references to IPRs.

[JPosner]

Greg-- Right now I barely have to work. I describe function of the software, include some boiler plate paragraph on what a computer is, a couple flow charts showing empty squares, and thats it. Sounds like you want me to actually have to think and draft 400+ pages describing various representative algorithms in order to get broad functional claims. Do you know how much work that would take me? Please stay in your lane.

[Calvin]

Mr. DeLassus, thank you for your comment on collapsing PGRs and IPRs. That makes a lot of sense. I also often wonder about why we are told that patent policy and rules must be technology neutral when clearly the computer-related and pharma/biotech-related fields have very different dynamics and needs. Does anyone else understand why it would necessarily be a bad idea to have, for example, less or shorter patent protection for computer-related ideas than for pharma?

[Greg DeLassus]

"Do you know how much work that would take me? Please stay in your lane."

;-)

[Greg DeLassus]

"[W]hy [would it] necessarily be a bad idea to have, for example, less or shorter patent protection for computer-related ideas than for pharma?"

I cannot say that it would *necessarily* be a bad idea, but here are three reasons why I would not favor an explicit statutory distinction between "pharma patent law" and "computer patent law."

1) Boundary drawing. There is no clean line separating "pharma" tech from "computer" tech. The intersection between these two is, in fact, a hot area of research and commercialization right now. If we are to have two explicitly separate bodies of law to govern "pharma" patents and "computer" patents, then there will have to be a lot of cases developing the indices by which we discern one from the other. My bet is that those cases will be messy, and the (putative) boundaries will be confused and confusing. Patent law works best when it is predictable and transparent in its effects ex ante. Encouraging the law to move in a direction that is confusing and arbitrary in its application defeats the point of patents, which exist to incentivize investment.

2) Political Economy. Right now, the pharma innovators and the computer innovators are on the same page vis-a-vis patent law. X cannot throw Y under the bus without running the risk that Z might turn around and throw X under the bus. If we create different patent law rules for different industries, that shifts the political economy. Now X can more easily throw Y under the bus without X having to worry about being thrown under the bus in turn. This could very easily lead to a race-to-the-bottom dynamic in the system as a whole.

3) The Future is Unpredictable. Right now the felt needs of the pharma industry vis-a-vis patent law are different from the felt needs of the computer industry, but that has not always been the case, and may not be so in five (or ten, or twenty) years. Meanwhile, new industries will emerge, and whether you draft the statute with only three categories in the law (pharma, computer, mechanical) or four (pharma, computer, mechanical, material science) or five (pharma, computer, mechanical, materials, ag tech), etc, the new industry will have to be shoehorned into one of those existing categories until the next statutory revision (which come only rarely). This creates both a really messy instance of the boundary drawing problems mentioned in pt. 1 above, but also a substandard incentive structure for this (likely exciting) new industry.