Back in March, I reported on the breadth of comments the USPTO received in response to its new Guidance on patent subject matter eligibility. Now, Congress has taken up the issue with a proposed draft of a new bipartisan, bicameral bill, and the Subcommittee on Intellectual Property (under the Senate’s Committee on the Judiciary) recently completed three days of hearings. Sen. Thom Tillis has already stated that based on the testimony, he realizes revisions will need to be crafted to address issues with the new definition of “utility,” to reconsider the proposed amendment to § 112(f), to consider an appropriate enhancement of exemptions for experimental use and research, and to clarify that the legislation is not intended to promote patenting of human genes.
The range of commentary from the hearing’s 45 witnesses largely matched that provided in response to the USPTO Guidance. In addition, however, the witnesses collectively provided a breadth and depth of thinking that should be extremely helpful as the subcommittee considers what to do next. Provided below is a summary of the written testimony that each witness brought to the hearings. Though the summary is somewhat lengthy, reviewing the various perspectives really helps one understand why the balancing of interests involved in this fundamental issue of patent law is so important. I also hope that the summary below may be a useful shortcut for stakeholders to find testimony relevant to issues they may want to focus on.
Before presenting the summaries, it seems warranted to note one sentiment shared by most of the witnesses: their appreciation that the subcommittee invited so many voices to be heard. Only a few witnesses found that the group invited to testify was either skewed or otherwise too limited. Given that, my summary below only indicates those who saw problems with the group that was invited to testify.
Part I: June 4 Testimony
In the first day of the hearings, the subcommittee heard from former Federal Circuit Chief Judge Paul Michel, two former USPTO directors and a number of academics, think-tank specialists and other experts.
Judge Michel proved to be a strong proponent of the draft, stating that, “recent changes to patent case law have produced unending chaos.” He painted himself both as a patent judge and “as one completely unhindered by any economic affiliations or interests,” asserting that this allowed him to “be as objective as humanly possible.” Judge Michel stated that “the courts alone created this problem,” and expressed concern that if he could not follow what he characterized as the unclear and inconsistent case law, how could patent examiners, trial judges, inventors and investors predict outcomes. Michel argued that “national innovation policy — of which patent eligibility is an integral part — should not be made by the Supreme Court. It should be made by Congress.” After detailing the Supreme Court jurisprudence from Bilski to Alice and Mayo, he repeated that: “The Constitution empowers Congress to secure exclusive rights in inventions and discoveries to their creators…. Nothing I see in Article III empowers the court to contravene the statutory scheme or to make economic and innovation policy for your huge, diverse and complex nation.”
Judge Michel concluded his testimony with two recommendations for the draft: one to delete its reference to “in any field of technology” and the other to delete the alteration proposed to § 112(f).
Former USPTO Director Q. Todd Dickinson followed, asserting that he too was unbiased with “clients on many sides of the question presented by this hearing.” He too referenced the recent Supreme Court decisions (Bilski, Alice, Mayo, Myriad) and said that he has joined the call of major neutral stakeholder organizations and judges of the Court of Appeals for the Federal Circuit for legislative reform, saying that hope has faded that, for example, “the CAFC and the USPTO would be able to interpret and clarify Alice.” One paragraph of Director Dickinson’s testimony is particularly pointed:
“You will undoubtedly hear from organizations which prefer the status quo. Most of them will likely say that the Supreme Court’s recent jurisprudence, particularly the Alice/Mayo framework, is a positive thing. The ambiguity, difficulty in interpretation, and challenges to consistent application by the USPTO and the courts, have led to a significant increase in patent invalidation, and a significant difficulty in getting patents in a variety of technologies through the USPTO. These entities apparently feel that this is a positive thing, in the sense that it gives them what several have referred to as ‘a new tool’ to invalidate patents which they believe may interfere with business models. This is cynical and short-sighted.”
He likewise addressed the troll problem, saying that, “we can consider other solutions, targeted more specifically at the problem, rather than using the expensive elephant gun of invalidation under section 101.”
He walked through an extensive and detailed background of statutory and case law history from the 1793 Patent Act to the present, providing contextual history at the same time (e.g., discussing the dot-com boom and the rise of patent assertion entities). He concluded that while the recent USPTO Guidance is “an excellent step in the right direction of providing clarification and direction, this Guidance obviously has its limitations. Specifically, the USPTO is still interpreting a flawed and confusing jurisprudence and analytic frameworks.”
Director Dickinson finished his remarks with his explanation for why he believes now is the right time to address this question via legislative action, as well as his own views on specific provisions in the draft that warrant close attention (including, like Judge Michel, concern about the word “technology,” stating that, “It would be important to clarify the metes and bounds of this important word perhaps in the legislative history, if not the statute.”)
Former USPTO Director David Kappos, now a partner of Cravath, Swaine & Moore, came next. He did not mince words:
“Our current patent eligibility law truly is a mess. The Supreme Court, Federal Circuit, district courts, and USPTO are all spinning their wheels on decisions that are irreconcilable, incoherent, and against our national interest.”
Director Kappos pointed to U.S. competitiveness with respect to China and Europe, as well as the risk of undermining investment in technologies critical to national security such as artificial intelligence and quantum computing, as important drivers for addressing the “irreconcilable mess of 101.” Unlike Judge Michel, he suggested that § 112 did warrant further strengthening to protect against assertion of vague or overbroad patents.
After Director Kappos came the first testimony critical of the draft legislation, from Charles Duan, director of technology and innovation policy at the R Street Institute, an organization that “engages in policy research and educational outreach to promote free markets as well as limited yet effective government.” Duan, who was previously a patent attorney with Knobbe, Martens, Olson & Bear, stated he was “strongly concerned about the direction of the present legislative effort.” He brought forward two lines of concern, substantive and procedural, and asserted that “the draft legislation would do harm to economic and social interests of great importance to the American people.” While he acknowledged concerns with patenting software, he left the details on that issue for the Electronic Frontier Foundation to address (see below). His focus was on access to medicines and scientific research.
On the process side, Duan asserted that the draft legislation was the result of “five closed-door roundtables with a hand-picked list of invitees weighted toward patent professionals and industry.” He said that “the present effort – one born of an incomplete stakeholder process and one that would throw out two centuries of law, including legal results strongly supported by American consumers and American researchers – is not the right approach.”
Turning to the substance, he foresaw negative impacts on cost, quality and availability of American healthcare. He warned that the draft legislation would lead to “the practice of ‘evergreening,’ in which a drug company obtains a patent on a minor modification to a known drug compound, often years after the initial patent application on the drug was filed.” He further argued that patents on natural laws and products would reduce development of lifesaving tests and treatments. A third problem he asserted is that patents on genes and diagnostics would prevent patients from obtaining second opinions.
More generally, Duan argued that research scientists view patents as detrimental to their work, and pointed particularly to negative impacts from gene patents. He concluded by returning to his process complaint – that many concerned stakeholders have not been included in the Congressional discussions regarding the legislation.
Next heard was Professor Jeffrey Lefstin of the University of California, Hastings College of the Law. He primarily wanted to draw attention to a slightly different issue. He argued that the Supreme Court decisions, and particularly Mayo, have lost track of the longstanding protection Congress has provided not only for patents on inventions, but on discoveries as well. He argued that the Supreme Court has misread history in a manner that “rests only on an intuitive judgment that some patents may pre-empt more progress than they will promote.” While his testimony did somewhat support the draft legislation, it primarily warned that whatever is done, attention should be paid to stopping the courts from continuing to ignore patents on discoveries.
Following Professor Lefstin was Robert Armitage, an IP consultant. Armitage’s testimony was highly detailed, weighing in at 47 heavily footnoted pages summarized by the assertion that: “The state of patent eligibility law in the United States is tragically bad.” He characterized the draft legislation as having “enormous merit” but nonetheless offered “a set of clarifying modifications.” He asserted that “the definition of the limitations on patenting would ideally be addressed through legal principles that are transparent, objective, predictable, and simple in their application.” (emphasis original.) And he identified the three “essential principles” of such limits as tangibility, proportionality and inventiveness, each of which he espoused in considerable detail.
SMU Dedman School of Law Professor David Taylor provided an even more detailed treatment — some 72 pages worth — likewise bemoaning the current two-part eligibility test as “gobbledygook.” He suggested that “four basic principles should guide any legislative effort to correct patent eligibility law: broad eligibility, clarity, constraint on judicial intervention, and flexibility.” Based on those principles, he stated, “While I support the thrust of the proposal in its current form — it certainly improves eligibility law over where it stands today — I do have some concerns and suggestions.” His support of the proposal was primarily in its elimination of the current two-part test, and his concerns had to do with defining what is “practical” and what is a “field of technology,” as well as with potential unintended consequences of changing the law of functional claiming. He provided detailed treatment of these issues, which Congress may end up finding quite helpful in striking stakeholder balances in these portions of the draft bill.
Sherry Knowles of Knowles Intellectual Property Strategies (formerly of GlaxoSmithKline) began her testimony with the following message:
“What is at stake in this focus on patent eligibility in the United States is not just righting the ship on patent eligible subject matter, it is sending a clear message to the Supreme Court that it must not, and can never, alter the sense and meaning of federal legislation through judicial exceptions to federal statutes and/or conscious disregard for their literal wording and meaning. Congress has the sole right to create federal legislation under the U.S. Constitution, and the American people have the right to demand that it be applied as written.”
Her comments went on to assert a constitutional basis for broad patent protection:
“Opponents argue that if isolated natural products are patent eligible subject matter (as required by statute), then other companies or universities cannot enter that market until the patent expires. This is absolutely true. And the Constitution itself, going back to 1787, embeds this principle as the core means to motivate inventions and discoveries. Our founding fathers knew that our country’s success depends on the ability to promote the progress of science and the useful arts by securing for limited time the exclusive right to discoveries. If opponents disagree with this, they will have to amend the constitution. Absent that, this framework stays as the highest law of our land.”
In addition to discussing the current case law, based on her law review article, “Unconstitutional Application of 35 U.S.C. 101 by the U.S. Supreme Court” (included in full with her written testimony), she urged support for the draft bill not only based on the legal analysis, but also on her assertion that R&D on isolated natural products as medicines declined “after Myriad and will continue to stall until Myriad is abrogated.” She concluded in a highly personal manner stating that, as a breast cancer survivor saved by a nature-based antibiotic, “If Mayo/Myriad had been the law years ago, I would not be giving testimony to the subcommittee because I almost certainly would have died.”
Alex Moss of the Electronic Frontier Foundation followed with a very different outlook. She focused on the fact that § 101 has “remained virtually intact since the Patent Act of 1793” and that any changes to the section “should come with a heavy burden” to ensure that the limits provided by current § 101 are not undermined. In a portion of her testimony headed as, “Section 101’s Protections are Crucial for Ensuring the Patent System Promotes More Innovation than It Deters,” she asserted:
“The state of patent-eligibility is better than ever for software startups, small businesses, technology developers, and end users — or at least better than it has been since the 1990s when the Federal Circuit gave a green light to patents on basic business methods implemented on generic computers in its State Street Bank and Trust. v. Signature Financial Management decision. That led to a glut of broad software patents and a dearth of prior art — i.e., material that can be used to invalidate patents under other sections of the Patent Act (specifically, §§ 102 and 103), which typically consist of printed publications, including issued patents and patent applications.”
She asserted that, “the Alice decision has only boosted our nation’s global lead in the software and information, communications, and telecommunications (‘ICT’) industries.” In contrast, she warned that the current draft would benefit patent trolls and large patent holders while harming small businesses, technology developers and users. As a first example, she pointed to U.S. Army veteran Justus Decher, who after having his own heart bypass surgery was inspired to design a medical monitoring system. He was threatened by a patent troll, but the patent was found ineligible by a court based on Alice.
A second example is that of Ruth Taylor, a professional photographer who too was threatened by a patent holder. In this case, EFF stepped in to provide pro bono representation and the patent owner dropped the lawsuit a few days before EFF’s Alice-based motion to dismiss.
In addition to urging that Congress reconsider patentability of software, which Moss said was “a uniquely bad fit for patent protection,” she suggested that Congress further consider allowing technology users and consumers to stay suits during parallel litigation, provide automatic fee-shifting against plaintiffs for objectively baseless suits, require transparency in litigation regarding a patent’s ownership, assignment, and licensing documents, require underlying assignment agreements to be recorded in the PTO, and “make methods of organizing human activity ineligible for patent protection.”
Professor Mark Lemley of Stanford Law School agreed with the other academics that, “the law of patentable subject matter is a mess.” However, he cautioned that Congress should not do something that would merely end up creating more uncertainty. He found that the draft bill “offers some promising approaches, but also presents some risks depending on how courts interpret the bill.” He observed that “the current 101 rules are bad for life sciences but might be good for software innovation,” arguing that in contrast to life sciences, patents are much less central to innovation in the software industry. That, coupled with suits by patent trolls, have resulted in a situation in which Alice (along with the availability of IPRs) has beneficially allowed defendants to “weed out weak patent claims more quickly and cheaply than before.”
That said, he observed that the Federal Circuit’s application of the law has been “inconsistent and uncertain.” His concern with the proposed solution was largely in its breadth, which does not focus on the identified problems. “A narrower bill focused on those issues would likely have a broader consensus behind it, would not eliminate two hundred years of legal doctrine, and would not risk encouraging patent abuse.” In one particular area, he pointed to a 2012 paper he wrote urging limits on functional claiming.
Michael Rosen, adjunct fellow of the American Enterprise Institute, categorized three main elements as being central: clarity/certainty, compartmentalization and preemption. He was of the position that ever since Mayo/Alice, “it is not exaggeration to say that patent practice has been thrown into tumult.” He rhetorically questioned whether the benefits of purging bad patent claims from the system have outweighed the costs of doing so. He characterized the specific defined categories of exclusion in an early version of the draft bill as “a good start,” though he would add “natural phenomena” to the list as well as provide concrete but non-limiting examples for each category to help with interpretation. Regarding compartmentalization, he suggested ensuring that 102, 103 and 112 inquiries “remain independent of eligibility.” On preemption, he urged rejection “of only those claims the would preempt every use of an abstract idea, natural law, or natural phenomenon” (emphasis original). As a parting thought, he cited the 12th century philosopher Maimonides who “cautioned against veering too far in any direction… but instead embrace moderation” in order to “adopt a middle way that ensures balance in our patent system.”
Professor Paul Gugliuzza of Boston University School of Law strongly defended the “Supreme Court’s reinvigoration of the patent-eligible subject matter requirement.” While he admitted that the requirement is imperfect, he said that it “plays a crucial role in reducing litigation costs by giving courts a mechanism to quickly dismiss infringement claims that plainly lack merit.” He attached his detailed Texas Law Review article as his basis for asserting: “I see the primary benefit of an invigorated eligibility doctrine in how it affects the process of patent litigation.” (emphasis original.)
Professor Joshua Sarnoff of DePaul University College of Law made nine distinct points, at least seven of which militated against the draft bill. In his view, current uncertainty does not justify eliminating “existing protection for the public domain of scientific, natural, and fundamental discoveries.” He asserts that:
“Propertizing this public domain with utility patents is: (a ) bad utilitarian innovation policy; (b) likely unconstitutional; (c) contrary to the human right of access to science and its applications; (d) immoral, by taking away the public’s rights and requiring the public to unjustly enrich patent applicants; and (e) a religious sin against God.”
In any event, he argues that the proposals do not address the “root causes of the doctrinal uncertainty.” Further, they would not harmonize U.S. law with that of other countries. They would “increase uncertainty in and costs of the patent system” and expand it to “aesthetic and other forms of non-technological creativity.” In his view, the new legislation would be unconstitutional as well. Finally, attempts at clearly defining the new terms in the draft bill “will prove at least as difficult as addressing directly the requisite kind of eligible creativity through Section 101’s eligible novelty doctrine.”
The two additional points he made were that current judicial treatment of ineligible novel discoveries is good innovation and moral policy, and that if Congress nonetheless proceeds, it should “provide as much clarity as humanly possible,” protect the public domain, expressly prohibit consideration of preemption outside of § 112 and explicitly abrogate judicial precedents inconsistent with the new language.
The U.S. Chamber of Commerce, represented by Patrick Kilbride, presented its International IP Index, highlighting notes from 2014 to the present and drawing the following observation:
“While the U.S. maintains the highest-rated overall IP system in the world as measured by the Index, it is not perfect. Restrictive patentability standards, excessive litigation burdens, and legal uncertainty regarding the durability of rights, have dampened the economic incentive for long-term, capital-intensive, and high-risk research and development in cutting-edge sectors.”
Professor Adam Mossoff of Scalia Law School, the final witness on this first day, argued that the Alice–Mayo framework “is undermining the longstanding comparative advantage by the U.S. in the world in securing reliable and effective patent rights for all innovators” and that it “has called into question the longstanding U.S. claim to a ‘gold standard’ patent system as compared to the rest of the world.” He presented detailed data regarding PTO allowance rates under the Alice–Mayoframework and concluded:
“These high rates of rejections of patent applications are not merely a departure from historical U.S. practices. They also signal that the U.S. has closed its patent system as compared to China and Europe.”
Citing the Bilski Blog summary of comments submitted to the USPTO on its new eligibility guidelines, he emphasized that “Director Iancu lacks the legal authority to change the fundamental cause of the problem: the Alice–Mayo framework created by the U.S. Supreme Court,” and that some comments argued that the guidelines are contrary to law.
Professor Mossoff observed that what Congress is looking to do here with § 101 is similar to what it did in the 1952 Patent Act with § 103, when Supreme Court case law had begun to call for a “flash of creative genius,” a standard that proved “an insuperable hurdle for inventors to overcome.”
Part II: June 5 Testimony
The American Intellectual Property Law Association’s President-Elect Barbara Fiacco provided AIPLA’s testimony. She reported that “AIPLA conceptually supports” the draft bill, but has some concerns with parts of it. She characterized the bill as “a serious and impressive step toward untangling the Gordian Knot that the Supreme Court’s patent eligibility decisions have become” and in particular praised the bill for “adher[ing] to the hallmarks of the 1952 Patent Act, a framework that has nurtured an unprecedented wave of innovation by American industry over the past 57 years.” The areas of concern mainly had to do with the definition of terms, specifically “useful,” “in any field of technology” and “through human intervention.” Each, she asserted, needed further consideration with respect to unintended consequences and flexibility. She raised similar concerns with the proposed amendment to § 112.
The ABA’s testimony was delivered by Scott Partridge, immediate past chair of the ABA Section of Intellectual Property Law. He characterized the draft bill as “a simple and elegant solution to the current unworkable and detrimental state of section 101 jurisprudence.” He characterized the admonition that 101 be “construed in favor of eligibility” as a “key provision” of the draft.
The Intellectual Property Owners Association, via its President Henry Hadad (of Bristol-Myers Squibb), noted its support of the effort to clarify § 101, even though it has not yet taken an official position on the May 22 proposed legislative text. He provided examples of cases demonstrating the uncertainty that now exists in this area, adding that, “the Supreme Court seems unlikely to reconsider this issue anytime soon.” Regarding the specific changes proposed to §§ 100 and 112, he said that IPO will continue to study those elements.
David Jones, executive director of the High Tech Inventors Alliance (identifying in a footnote its members as including Adobe, Amazon, Cisco, Dell, Google, Intel, Oracle and Salesforce ), expressed a starkly different viewpoint regarding amendment of § 101 to overrule the Supreme Court’s eligibility test. “We oppose such an amendment and firmly believe that both the court’s historical precedents and the traditional limitations on statutory subject matter should be retained.” He disputed that the current framework is unworkable, excessively unpredictable or harmful to U.S. innovation. “To the contrary, the current test has improved patent clarity, has decreased spurious litigation, and has furthered the patent system’s core purpose of promoting technological innovation.” HTIA urged that any legislative approach “should be narrowly-tailored to specific, demonstrated problems” and lodged “strong objections to making wholesale changes to section 101 that would abandon traditional limitations on statutory subject matter and fundamentally alter not just the legal test for determining eligibility but also the broad underlying principles that are used to define what types of subject matter may be patented.” HTIA’s “most fundamental objections” were summarized under the following headings:
“First, the draft would effectively erase existing barriers to patenting non-technological subject matter by overruling the current eligibility test and abrogating the judicial prohibition against patenting abstract ideas.”
“Second, no compelling case has been presented for making statutory changes of this magnitude or abrogating the entirety of the case law relating to such a fundamental and longstanding doctrine.”
“Third, the draft bill fails to include changes to sections 103 and 112 that are necessary to address the problems and gaps in the law that would result from the proposed amendments to section 101.”
Jones provided a detailed discussion of the HTIA position on each of these points, followed by feedback on the proposed statutory definition of “useful,” removal of the word “new” in § 101, the proposed amendment to § 112(f) (which was well-received) and additional provisions.
Stephanie Martz provided testimony on behalf of United for Patent Reform, a coalition of American businesses. “Collectively, our members represent over 80 million U.S. employees, a figure that accounts for nearly two-thirds of private sector jobs in the U.S.” UFPR expressed concern that “the proposal would reopen the floodgates for abusive litigation by non-practicing entities … and discourage job creation without incentivizing innovation.” She detailed the prevalence of NPEs and their impact on businesses, as well as explaining that:
“Insofar as the situation has improved in the past three years, it is due partly to the AIA. However, the decrease in NPE litigation rates is also due in very large part to the Alice decision.”
She stated that the proposed legislation would lead to uncertainty and litigation — the opposite of its stated goal. She asserted that: “No clear and concrete evidence of harm that could justify the complete upending of decades of settled law has been offered, only anecdotal complaints.”
US Inventor Inc., an organization of “13,000 citizen activists,” was represented by Paul Morinville. He said: “Today, patents are useless to the very entities the patent system was created to help … inventors and patent-based startups” (ellipses original). He argued that changes over the past 15 years “have virtually all gone on the direction of harming small inventors and startups making our patents undefendable.” An initial concern he expressed was with how little opportunity inventors themselves had to explain their positions:
“Of the changes made in the last 15 years, three are the most violent to the rights of inventors and startups: The America Invents Act created the Patent Trial and Appeal Board , which invalidates 84% of challenged patents; eBay v MercExchange effectively eliminated injunctive relief; and the subject of this hearing, Alice v CLS Bank let loose a demon called the “abstract idea” that has no definition and is invalidating 67% of challenged patents.
“But many multinational corporations are testifying as themselves and testifying through proxies of their lobbying organizations… US Inventor represents inventors inventing technology to compete with these big tech monopolies, yet we combined have only one voice and only five minutes of oral testimony for all of us. The big tech monopoly has more than 100 minutes via direct and proxy testimony before this subcommittee, at least 20 times that of US inventors’ five minutes.”
He bemoaned pejorative terms such as “patent troll” and “bad patents” as being used in furtherance of “false political narratives” and went into some detail regarding each. He contrasted the situation in the U.S. with that in China, which he said is continuing to strengthen its patent system.
The US Inventor position regarding the proposed new legislation is that it “does little to improve the crashed patent system. Instead, it passes the confusion created under 101 to 100 and 112 leaving the patent system in disarray.” This testimony concluded by asserting: “What an embarrassment. China is laughing.”
Philip Johnson appeared next in his capacity as chair of the Steering Committee for 21st Century Patent Reform (“21C”), a coalition of manufacturers including 3M, Bristol-Myers Squibb, Eli Lilly, General Electric, Johnson & Johnson, Procter & Gamble and United Technologies. He said that 21C is strongly supportive of steps based on the proposed legislation, with a caveat that the 112(f) amendment proposal “is not necessarily part of the solution to our current patent eligibility problem” but deserves further study as a “patentability” provision (all emphasis original). In addition to detailing the “Traditional Role of Section 101” and the “Origin of the Current Patent Eligibility Problem,” this testimony walked through the proposed statutory language and contrasted the 21C position with that given by other witnesses. For example:
“A practical effect of these clarifications will be to ensure that naturally occurring materials and compositions as they exist in nature, including human genes, will remain patent ineligible. In particular, and in contrast to the assertions of the ACLU and others, the proposal would not ‘authorize patenting products and laws of nature, abstract ideas, and other general fields of knowledge,’ nor would it ‘permit patenting of human genes and naturally-occurring associations between genes and diseases.’ These would remain patent ineligible because they are not ‘inventions or discoveries,’ did not result from ‘ human intervention,’ and do not have ‘ specific and practical utility in any field of technology.’”
William Jenks testified on behalf of the Internet Association, described as “the unified voice of the internet economy, representing the interests of America’s leading internet companies and their global community of users.” The IA position was straightforward: “Here, the proposed change to patent-eligibility law is unnecessary and will likely do more harm than good.” After detailing its view of why there is no crisis in the law in this area, Jenks warned that the proposed changes to § 101 would both bring uncertainty and render eligible claims such as those in Alice and Bilski. He also stated that § 112 could be made more clear simply by stating that it is “intended to apply to all functional claim limitations, not just those functional limitations devoid of structure.”
The Software and Information Industry Association, via Christopher Mohr, asserted that its membership both relies on patents and depends on the ability to operate “free from improper assertions of exclusive rights.” In SIIA’s view, Alice was “a natural and beneficial evolution of the patent law that helpfully illuminates the bounds of patentable subject matter for computer-implemented inventions.” Accordingly, the SIIA testimony opposed the draft legislation. Mohr stated that no need has been shown for such a sweeping change and that the proposal’s “simplicity of language belies the complexities and harms that await when its language is applied.” While SIIA noted appreciation at the clarifying changes proposed for § 112(f) it said that the language essentially only codified existing case law and “is insufficient to overcome SIIA’s concerns that the discussion draft’s approach will lead to recurrence of overbroad business method patents that plagued the patent system and the courts before the Alice decision came down.”
The Innovation Alliance, another coalition of technology companies with members including Dolby Laboratories and Qualcomm, provided its testimony via Jeff Birchak. He, too, reviewed the current Alice/Mayo framework, which he said “has led to uncertainty, unpredictability and hindered innovation.” He cited two aspects as “particularly problematic”: claim dissection and conflation of subject matter eligibility with inventiveness. The Innovation Alliance found the draft bill to be “a major positive step toward sensible reform” with respect to § 101 but did express a “note of caution” regarding potential unintended consequences that might be caused by the breadth of the proposed amendment to § 112(f). The specific concern was that wide application of § 112(f) would mean that “an accused infringer only needs to make a minor change from the structure described in the specification to not infringe.”
The Association for Accessible Medicines, the “leading trade association for manufacturers and distributors of FDA-approved generic and biosimilar prescription medicines, was represented by its general counsel Jeffrey Francer. AAM said that it is “deeply concerned” that the proposed legislation would result in higher drug prices and stifle innovation. AAM also expressed constitutional concerns, saying that the proposed legislation “substantially removes material from the public domain” by allowing a patent “on a DNA primer that is an exact copy of the gene” as it “exists in nature.” AAM expressed a second constitutional concern that any proposed retroactive application of the new legislation with respect to finally adjudicated, invalid patents would violate the separation of powers. This testimony also detailed why AAM believes that § 101 is “critical” in facilitating pharmaceutical competition. AAM echoed many of the previously expressed concerns about the proposed statutory language, but added that the language provides a “double presumption” of validity (i.e., the new “construed in favor of eligibility” language on top of the existing § 282 language saying that claims “shall be presumed valid”). This double presumption would “potentially create significant confusion about the precise showing required to invalidate a patent under section 101.”
Hans Sauer of the Biotechnology Innovation Organization urged that “uncertainty, drift, and creep in the law of substantive patentability — such as under § 101 of the Patent Act — is highly relevant to the biotech business model.” He said that: “The past nine years have seen an unprecedented expansion of common-law exceptions to patentability.” As a result, “businesses must rationally assume that patents that are validly issued today can ‘become’ invalid over time, because creative new applications of judicial exceptions may lurk only an appellate decision or two in the future.” BIO argued that “nothing could be worse for innovation” and highlighted two areas in particular as calling for protection: (1) preparations of naturally occurring or naturally-derived substances; and (2) methods of using drugs and other substances for therapy, diagnosis or prophylaxis. Sauer warned the subcommittee to be cautious in considering “sweeping statements” and “fears” that have been raised that are “unfounded and difficult to understand given the current state of the legislative working draft.” BIO’s testimony concluded with the following:
“Two points should be made about opposition to this bipartisan effort. First, reform to section 101 should not be scuttled because some view the current state of the law as an expedient means to defend against infringement cases. Favoring quick means to invalidate broad swaths of patents ignores the collateral damage and unintended consequences of current jurisprudence. Second, the proposed legislation and whichever final form it takes should not be an invitation to relitigate the merits or demerits of the Supreme Court cases that gave rise to current systemic problems. To the extent that various groups have valid and substantiated concerns about the legislation, they should be invited to participate in the process with constructive proposals.”
The Pharmaceutical Research and Manufacturers of America likewise supported the legislation, beginning with a section entitled: “The Importance of Providing Patent Protection to Foster Continued Medical Innovation.” Natalie Derzko, who provided the testimony, urged that “the scope of Section 101 is intended to be broad and to encompass a wide range of inventions,” citing Thomas Jefferson’s observation that “ingenuity should receive a liberal encouragement” as well as various Supreme Court decisions. She asserted that “the proposed legislation is a promising avenue for course-correcting patent subject matter eligibility in the United States,” emphasizing that it maintains the current statutory categories, guards against future judicial intervention and codifies, via the “useful” definition, the current utility standard that “has long served a gatekeeping function.” PhRMA further supported the “technology neutrality” of the proposal as well as its “human intervention” component.
The Association of American Universities, represented by Rick Brandon, said that “American research universities have a front row seat to the incentives provided by our patent system.” AAU expressed concern that: “In the past several years, we have seen the incentive system break down in the case of medical diagnostic technologies due to the uncertainty around the patent eligibility of these technologies,” and accordingly indicated its support for the draft legislation. That said, Brandon noted some concerns about the terms used in the draft, such as what is meant by “specific and practical,” “field of technology” and “through human intervention.” Still focusing on specific phrases, AAU proposed a number of subtle edits, such as changing “limitation” to “element” in § 101 to better track the term used in § 112, and questioned other terms, such as whether the language “whoever invents or discovers” might warrant attention given that assignees are permitted to file and obtain patents. Raising such questions at this juncture seems a helpful step in minimizing the likelihood of unintended consequences that may result both from changing current statutory language and retaining language that may no longer be as appropriate as it was when originally drafted.
Kate Ruane provided testimony on behalf of the American Civil Liberties Union. She said that the effect of the proposed legislation “will be to greatly expand what can be patented, opening the door to a world in which private parties could claim 20-year monopolies on, for example, human genes, associations between genes and diseases, naturally occurring associations or processes, or common abstract practices, like hedging risk, through clever drafting by patent lawyers.”
As with AAM’s testimony, the ACLU testimony said that this expansion “would also trigger constitutional questions.” Ruane addressed a range of issues in her testimony, from reduced access to information about genetic risks to concerns that impacted groups have not been invited to testify, listing such groups as including the American Medical Association and AARP. A significant portion of Ruane’s testimony focused on ACLU’s concern that the draft legislation would allow patenting of human genes and the implications of that, but it also addressed other products of nature, abstract ideas and “areas of general knowledge.” It advocated that attention be given to “what should properly remain in the public commons for all to study and use,” urging that §§ 102, 103, and 112 were insufficient to address this issue. A full section of the testimony was devoted to explaining why the ACLU believes that the draft bill would harm innovation. The testimony continued with a related and detailed discussion urging that both the patent clause in Article I of the Constitution as well as the First Amendment limit Congress’s power to award patents, and finally by noting that “important groups of stakeholders are missing from the groups invited to testify.”
Part III: June 11 Testimony
Manny Schecter provided testimony on behalf of IBM. While IBM noted that the current judicially imposed limits “mitigate concerns some have about infringement assertions based on poor quality patents,” IBM asserted that “application of a vague and unpredictable eligibility standard is not the correct way to address this problem.” Schecter said that “the draft bill text accomplishes the key objectives of patent eligibility reform, including the primary goals of improving clarity and predictability in the law.” He explained IBM’s position about why the “abstract ideas” test is “inherently ambiguous” saying that “the identification of an ‘abstract idea’ is itself too abstract.” After detailing why IBM believes that a lack of strong and predictable patent protection undermines innovation, he emphasized the “vital role” of Congress (rather than the courts) to set eligibility requirements and urged that issues with patent quality are best addressed by improvements to disclosure requirements, such as the proposed amendment to § 112. IBM’s support of the draft focused on its approach to starting anew, avoiding parsing and commingling (toward the goals of eliminating subjectiveness and improving clarity), and taking a balanced approach.
Laurie Self provided testimony on behalf of Qualcomm, which she began by presenting a history of Qualcomm and then explaining the importance of “strong, predictable patent rights” to Qualcomm’s business. She presented the specific example of 5G wireless technologies. “Qualcomm’s difficulty obtaining certain 5G patents under section 101 illustrates our concerns with the state of the law.” She cited one example in which Qualcomm determined not to pursue an application further after several rounds of 101-related prosecution. “Reliance on 5G networks for mission-critical services, autonomous vehicles, remote surgeries, military operations and countless other applications depends on technology that minimizes the risk of error in transmission of 5G signals. Yet on multiple occasions, section 101 jurisprudence has unreasonably delayed or defeated the grant of a patent on these essential features of 5G.” She extended the importance of this issue from 5G to national security. After detailing the current state of the law, she addressed the proposed legislative reform to § 101, stating, “we fully support those efforts.” Like other witnesses as summarized above, she was not as supportive of the proposed § 112 changes, and like those others, focused on unintended consequences.
Nokia’s testimony was presented via Byron Holz. Nokia presented itself as having interests both as a patent licensor and a patent licensee and stated:
“No patent system is perfect, and Nokia has seen its share of improper patent assertions directed against it. On balance, however, Nokia believes that recent changes in U.S. patent law — including in the area of subject matter eligibility — have tipped the scales too much against the interests of patent owners.”
Holz acknowledged that so much attention had been given to the proposals relating to § 101 already that he would focus on § 112. He presented statistics showing that patent applicants had, due to “additional risks placed upon section 112(f) claims,” dramatically declined in using means-plus-function claims (citing a drop from one-quarter of all claims in 2001 to barely over 5% in 2012). He argued that “software innovation is often functional in nature,” and expressed concern that the existing challenges to software-related claims would be exacerbated by the proposed expanded application of § 112(f). He argued that U.S. law in this area “is atypical among the world’s major patent systems, suggesting that application of section 112(f) is not needed to address concerns about overly broad claims.” He closed by repeating Nokia’s support for the § 101 reform.
Kimberly Chotkowski of InterDigital, which she characterized as “quite possibly, the only remaining for-profit research firm in the U.S. developing advanced technology for wireless communications,” contrasted InterDigital with firms that do R&D in support of their existing product lines. Her testimony began with the statement that: “The current state of the U.S. patent system does not accurately reflect the purpose and meaning of Article 1, Section 8, Clause 8 of the U.S. Constitution with respect to ‘discoveries.’”
She argued that the current confusion “has driven InterDigital to consider other jurisdictions and means of protection and enforcement for valuable technologies that are at risk under the current 35 USC § 101 analysis. This is not by choice but by necessity as other nations’ goals of technical supremacy in software and 5G, for example, continue marching ahead.”
She explained that, in general, the proposed § 101 amendments “will allow InterDigital to continue investing and developing advanced technologies, not only bringing jobs and investment to Delaware and the rest of our U.S. operations, but also helping this great nation maintain its technical dominance.” On the specific amendments in the proposed legislation, she (like others as noted above) questioned whether terms such as “useful” and “specific and practical” might warrant attention and disfavored the proposed change to § 112. But InterDigital suggested other subtle changes to the statutory language that prior witnesses had not. For example, Chotkowski explained that by changing “may obtain a patent” to “shall be entitled to a patent,” the addition of proposed § 101(b) might be obviated.
Sean Reilly of the Clearing House Payments Company, a former patent examiner, presented testimony that began under the heading, “The Interest of the Financial Services Industry with Respect to Section 101.” He explained that this interest includes both robust protection as well as “ensuring that low quality patents do not issue or are not otherwise available for use in abusive litigation.” He cautioned that amendment to § 101 risks undoing progress recently made with respect to lawsuits based on “dubious patents” and high dollar settlements resulting from the high cost of litigation. He urged a holistic approach to patent reform that keeps in mind “the overall balance of the patent system.” One suggestion was for “separate statutory provisions regarding abstract claims amendable to motion practice early in litigation and available as grounds of invalidity in post-grant reviews.” He also cautioned that § 112 is “an inadequate alternative to section 101 for dealing with abstract claims.”
Laurie Hill testified on behalf of Genentech, stating that “none of the work that Genentech has done and continues to do would be possible without strong patent protection.” Hill explained in some detail the investments needed for breakthroughs as well as the inevitable failures that are “part of the process” to argue that patents are needed to justify such investments. She characterized current § 101 law as a “barrier” that has taken “relatively unobjectionable” judicially created rejections and expanded them “in a manner that lacks clarity and consistency.” She emphasized the urgency of the situation, stating that “now is the time for Congress to correct Section 101.” She emphasized Genentech’s support of several key elements of the draft while stating that “we are continuing to review” the § 112 amendment. She also stated: “We would like to emphasize that Genentech does not and is not interested in patenting an individual’s genes,” asserting that the human genome is already in the public domain and no longer eligible for patent.
In a lengthy section entitled “The Future of Medicine Brings the Science Closer to Nature,” she provided numerous examples of advances that “are deliberately closer to nature or that harness natural processes such as the body’s own immune response to treat or prevent disease.” She lamented that, “unfortunately, under the current Section 101 regime, such medicines may not be patent-eligible subject matter.”
Hill’s final example was under the heading, “The Future of Medicine Utilizes Artificial Intelligence.” Again, she argued that in this area there are “patent eligibility challenges under the judge-made exceptions.” Her testimony concluded by recognizing the number of issues and stakeholders to be considered, but asserting that action on section 101 “is absolutely vital to the future of medicine.”
Invitae, the genetic testing company, provided testimony via its CEO Sean George. George indicated at the start that he would be sharing “why we believe the proposed changes you are considering will unintentionally stifle innovation and harm patient care.” His focus was on three issues: (1) how the “golden age of precision medicine” has been “ushered in” by Myriad/Alice/Mayo; (2) how the threat of patents in this area extends beyond simply patents on the genes themselves; and (3) any legislative approach should preserve “what is currently beneficial to innovators, instead of indiscriminately sweeping away 150 years of case law.” He supported these three points with numerous statistics as well as specific examples, saying, “We present the above as clear evidence of a ‘vigorous and real-time’ debate, hardly screaming out for immediate legislative intervention.”
Gonzalo Merino of Regeneron had a sharply different view, stating that: “The inability to obtain patent protection will disincentivize investment and collaboration, and limit the sharing of scientific information to the detriment of patients and the scientific community.” Merino stressed that he was not talking about patenting genes, but instead “ground-breaking discoveries from our analysis of genetic data and the application of such for the benefit of patients.” He urged that the time for action is now, lest the U.S. lose “its position as the global leader in biotech innovation.” His final point was that “advances in genetics are as reliant on innovation in biotech as in hi-tech,” and he expressed a belief that the proposed legislation addresses both.
Cleveland Clinic Innovations, represented by its Executive Director Peter O’Neill, used its litigation against True Health Diagnostics as a case study for why attention to this issue is so important. He related that one of its patents was issued in 2007, survived two reexamination challenges (most recently in 2011), but then found invalid in district court under Alice/Mayo in 2015, with unsuccessful attempts to change the result in the Federal Circuit and Supreme Court. In 2016, the USPTO provided updated guidance in this area, and Cleveland Clinic returned to the USPTO and in 2017 obtained additional patents on related laboratory methods. They again sued True Health Diagnostics, he recounted, but again the patents were found ineligible under § 101, both at the district court and on appeal. He stated the uncertainty illustrated by this example “has a very meaningful impact on our ability to develop and bring new advances to the market for use with patients and consumers.” While this testimony did not take a definite position on the draft legislation (indeed it urged that “the committee should move with caution), it suggested the following three points: (1) give greater standing to guidance from the USPTO (“A patent issued by USPTO should represent the approval of the federal government that a product meets the standards of the federal statute, not the beginning of a protracted legal battle.”); (2) clarify the eligibility of life science and diagnostic products for Section 101 patents; and (3) protect the ability of genetic researchers to continue their work.
David Spetzler of Caris Life Sciences also focused on the current uncertainty as deterring “the substantial investment necessary to develop new healthcare technologies.” He too told the story of his organization, in this instance to underscore why Caris supports the proposed legislation.
“We and others cannot continue to invest such time and resources into advancing personalized medicine, thereby improving patient outcomes and reducing healthcare costs, if we are unable to recoup our investments because others copy our innovations. Under the current state of the law, competitors, both domestic and foreign, have been emboldened to copy our innovations, disregard patents and then challenge the validity of those patents in court.”
He also directly addressed the concerns about “gene patents” by stating that “there are better ways to deal with one company’s unpopular business practices than imposing limitations on patentable subject matter.”
Michael Blankstein of Scientific Games was generally supportive of the draft, saying that: “The bill would support good patents on breakthrough computer-implemented games but weed out bad patents on mere computerization of well-known business practices.” That said, Blankstein cautioned against use of the term “technology” in the draft bill, instead suggesting “a more open-ended approach that is industry neutral.” Without suggesting specific replacement language, he said “SG believes any invention that provides practical and specific utility through human intervention should be eligible, regardless of industry or purpose.”
Novartis provided its testimony via Corey Salsberg. Like some of the other witnesses, he expressed general support for the draft bill in concept, while suggesting that some aspects might call for “further refinement” and noting that “we are still assessing the proposed amendments to Section 112(f). He used specific examples of Novartis claims that ran afoul of § 101 to support his statement that the judicially created exceptions “have become so untethered from their sensible origins that we no longer know what they mean.” He worried about both the vagueness of the existing framework as well as what he called “ineligibility creep” as ongoing problems, stating that, “the potential consequences of this trajectory are alarming.” As some of the other witnesses had done, he included testimony disagreeing with the notion that the legislation “would enable the patenting of genes in the body, other laws and products of nature, basic mental processes, or ‘the facts of life.’”
Cyborg Inc., a company that develops data compression algorithms, said via its CEO Nicolas Dupont that, “unfortunately, the existing system fails to address our needs adequately, leaving us and countless other small businesses feeling vulnerable and unprotected.” He detailed three main points: (1) rejection at the PTO, not only due to the cost implications for a small company, but also the “publication of the rejected patent application for general public consumption); (2) fear of rejection leading to abandoning the patent system in favor of trade secrets (an approach that allows a foreign entity to file their own patents without fear that the Cyborg innovation will be citable prior art); and (3) general lack of confidence in the system. He cited Cyborg’s decision to pull out of the wireless telecommunications sector as a specific example of how these issues play out. In addition to generally supporting the proposed legislation, he proposed “adding software as a statutory category alongside the current list of process, machine, manufacture, and composition of matter.”
Robert DeBerardine, Johnson & Johnson’s chief IP counsel, strongly supported the proposed reform, quoting USPTO and judicial opinions to conclude that “the time for legislative intervention is clearly at hand.” His testimony focused on the importance of predictability and, more generally, patents. The company-specific examples he used were primarily taken from the pharmaceutical side of the Johnson & Johnson business; he walked through the details of the R&D and regulatory phases and explained that “upon expiration of the patent term, today’s innovative drugs become the generic drugs of tomorrow.”
Attorney John Vandenberg provided detailed comments supporting the following specific recommendations for any legislative reform efforts:
- “Do not erase centuries of common law on this complex issue. Patenting the types of ideas the courts today consider ‘abstract’ will harm innovation, especially so when they are useful and innovative ideas.”
- “Ask selected witnesses to submit language overturning Mayo, but not Alice or Myriad — even if they disagree with that approach. This will not be easy, but such a targeted question to this diverse group of experts might lead to a workable legislative solution that spurs innovation in personalized medicine, for example, without harming innovation in other areas.”
- “Remember that some big U.S. patent holders are in China, and could use U.S. patents on useful and innovative mathematical algorithms, mental processes, and desired results, etc. — that they cannot patent today under Alice — to harm U.S. businesses and innovation.”
- “Amend Sec. 112(f) as proposed, namely to remove unnecessary and confusing language, but make that amendment prospective only.”
- “Also add to Sec. 112(f) this sentence: ‘The Director shall identify each such claim element in the record of the patent.’ This will promote both patent clarity and also fairness to inventors.”
In addition, and not necessarily tied to the recommendations, he provided several pages of specific comments on a dozen portions of language in the proposed language in the bill, disagreeing with the majority and providing his reasons on each point. He did endorse the proposed amendment to § 112(f), providing significant detail regarding so-called “hollow” claims that recite “a function or result without a particular way of accomplishing the function or result,” in comparison with what he called a “how” claim that expressly includes such limitations in the claim or discloses them elsewhere in the patent. He discussed how courts have had difficulty with this area and said that the proposed amendment would “induce patent drafters to expressly recite in the claims, where feasible, how the claim-related function or result is accomplished, leading to greater certainty as to scope and more innovation.”
This summary of the 45 witnesses who appeared in three days of hearings this month is indeed lengthy, but to those who have reviewed this broad set of perspectives it gives good insight into the significant balancing that is required whenever IP legislation is proposed, and also highlights the difficulty in asserting what the “right” answer is on these points. An additional, perhaps more important, takeaway is that these numerous divergent viewpoints show how important it is for there to be widespread study and discussion of the issues to help both advocates and lawmakers narrow in on a workable balance.
