The Patent Eligibility Restoration Act: Innovative or Trollish?

The Senate held a hearing this week about a bill to restore software and biotech to subject matter eligibility

In 2022, Senators Chris Coons and Thom Tillis introduced the Patent Eligibility Restoration Act, or PERA. It is a patent eligibility law that would, in essence, restore the ability of inventors to patent software and biotech inventions under the patent system. Under Mayo Collaborative Services v. Prometheus Laboratories, Inc. (2012), Association for Molecular Pathology v. Myriad Genetics, Inc. (2013), and Alice Corp. v. CLS Bank International (2014), the United States Supreme Court knocked out entire categories of subject matter eligibility, arguing that they were abstract ideas. The results have been, undoubtedly, controversial.

They have been so controversial, in fact, that there is now bipartisan legislation to reverse these rulings. Certainly, courts at every level, from district courts to the Federal Circuit, have struggled to make sense of how exactly to draw the line between a useful invention or useful process that is subject matter eligible or not, and these line of cases have been criticized as adding ambiguity to patent eligibility jurisprudence, to the point where at this week’s Senate hearing on the matter, all eight witnesses agreed that something like PERA was needed. So this week on Nonobvious, we are going to cover how we got here and some of the pros and cons of this new legislation

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What If We Could Patent Ideas Again?

The origins of judicially imposed exceptions to patent eligibility date back to English law, though not specifically pre-Revolutionary law. The most notable such case is Neilson v. Harford (1841) 151 ER 1266, which involved the invention of a particularly important process for the time: a hot blast tool for manufacturing iron. It was a breakthrough for the time because before James Beaumont Neilson’s invention, it was believed that colder air was better for manufacturing iron, so inventors developed more and more intense methods of creating colder blasts. The dispute related to the argument that Neilson’s patent did not describe the vessel at all; he tried to claim the general concept that hot air should be used for the blast. A lawsuit ensued.

Although the Neilson court actually sided with the inventor, holding that he could patent the use of the chamber with hot air, American courts have (perhaps erroneously) relied on this case to repeatedly hold that inventors cannot patent abstract ideas, laws of nature, or natural phenomena—what the Alice court called the “building blocks of human ingenuity”—starting with O’Reilly v. Morse (1857) and, later, Parker v. Flook (1978). The Court adopted the position of Baron Alderson, who argued that “the case must be considered as if, the principle being well known, the plaintiff had first invented a mode of applying it by a mechanical apparatus.” The problem is that Alderson was a barrister, not a judge, and his reasoning did not appear in the Neilson court’s reasoning. Ironically, the better case for American courts to rely on would have been Hornblower v. Boulton (1795), which invalidated a patent as “mere principles only, for which no such letters patent could by law be granted.” Although this is confusing, patent law is the pure domain of Congress, so it can change whatever it wants by legislation.

Nonetheless, there is today general agreement that scientific phenomena cannot be patented. Prior to Myriad, for example, scientists would race to patent unmodified human genes. The Roberts Court has also more generally viewed some types of patents, like software patents, with skepticism. In the oral arguments for eBay v. MercExchange (2006), Chief Justice Roberts sarcastically noted “it’s not like [MercExchange] invented the internal combustion engine or anything” as one of the reasons an injunction should not have been granted. And few would argue that Albert Einstein should have been able to patent e=mc2. That said, the effects have been quite mixed, particularly in biotech. While the cost of new tests have gone down, post-Myriad development of new molecular tests went down—one study found that half of tech transfer offices stopped development of such tests.

The problem is that these ideas have proven incredibly difficult to follow in practice. As Michael Borella put it, “what is an abstract idea?” USPTO’s post-Alice guidance is almost too vague to follow, and although there are Federal Circuit precedents like McRO Inc. v. Bandai Games America (Fed. Cir. 2017), one really has to squint to see the difference between those claims. The impact on software, though, is much smaller than biotech. Software patents are often useless by the time they are even issued and can be easy to work around—for example, Google has an artificial intelligence patent for the transformer, but it cannot assert it against OpenAI because GPTs do not use both encoders and decoders. In biotech, however, the line between a natural phenomenon and an invention is quite thin, especially since so many new therapies involve the unnatural introduction or production of natural substances. This turns it into somewhat of an unpredictable drafting exercise. Ariosa Diagnostics v. Sequenom (2015) invalidated the patent for a potentially game-changing fetal test, while nearly a decade later, a nearly identical patent was upheld in Illumina, Inc. v. Ariosa Diagnostics, Inc. (2023). The claims are comically similar, and the research supporting these inventions can cost over a billion dollars and save lives.

The most probable change to PERA will be expanding the idea of prior art. While some software patents, like the Amazon patent, have been extremely controversial, arguably the biggest problem was not the subject matter but whether it was obvious; even at the time, it was criticized on preemption grounds, and the EPO ultimately invalidated Amazon’s patent for obviousness. Even the greatest critic of PERA, Richard Blaylock of Pillsbury, Winthrop, Shaw Pittman LLP, did not argue for eliminating PERA—rather, he argued to include natural and abstract things as prior art for all applications. (This was controversial; Andrei Iancu, the previous head of USPTO, argued that this would “basically eliminat[e] the patent system”; it is also unclear how this would be different than now, when the universe of knowledge counts as prior art.) And outside of this hearing, groups like the Electronic Frontier Foundation have criticized PERA as risking the revival of patent trolls, who have been on the wane since T.C. Heartland, though others like the Center for Strategic and International Studies have debated this point. Ultimately, Judge Paul Michel, formerly of the Federal Circuit, has said it well: although some carve-outs may be wise, if there are too many they will essentially kill the bill.

What is clear, according to research by George Mason University Professor Adam Mossof, is that a high percentage of Alice/Mayo rejected patents in the United States were granted in the EU and China. While there should be some lowering of the eligibility bar, perhaps it might be better for PERA to attempt to better define the difference between an abstract idea and a useful invention. Though this is a devilishly difficult task, it might be worth at least gesturing in that direction rather than just putting in the Congressional record that the Senate intends to cover “anything invented by man under the sun,” leaving their new standard entirely up to the Courts. PERA, as it is written, would expand patenting in new areas like (potentially) AI, but biotech has a bigger need for patent eligibility relief and faces much less risk from any potential boons to patent trolls.

Weekly Novelties

• NIST opened up its comment period for regulatory changes to march-in rights (USPTO)

• Speaking of march-in rights, a group of academics sent a letter to the Biden Administration criticizing its new potential efforts to expand march-in rights for pharmaceuticals (IP Watchdog)

• Nokia and Oppo signed a cross-licensing agreement for several key 5G patents; this has been a hot area for litigation like 3G and 4G before it (GSM Arena)

• While self-driving cars are mostly known for legal battles over regulation with cities, we can now add patent litigation to the list: Samsara (market cap: $17 billion) sued Motive (last valuation: $3 billion) (Bloomberg)

• Consensus is gathering around some sort of legislation to fight pharmaceutical patent thickets; there are many proposals floating around right now and none of them have major support, but energy seems to be gathering around some sort of proposal, eventually (Axios)

• China’s People’s Supreme Court helped clarify that a legitimate patent assertion can sometimes help avoid a monopoly finding even if it results in more than 50% market share (IAM)