The U.S. patent system is based upon a quid pro quo balance that incentivizes innovation via a time-limited patent exclusivity, while encouraging the dissemination of new ideas for public benefit and use upon expiration of the patented innovation. However, for some innovative technologies, such as personalized medicine, diagnostics, and artificial intelligence (AI), case law developed within the past decade has made obtaining patent protection increasingly difficult. This has led to a lack of clarity and incentive for some innovators to develop technologies that may not be eligible for patent protection.1
In an attempt to restore the balance of the patent system and provide clarity to innovators in these technologies, U.S. Senators Thom Tillis (R-NC) and Chris Coons (D-DE) have introduced the Patent Eligibility Restoration Act of 2023 (PERA).2 The PERA has been referred to the Senate Judiciary Subcommittee on Intellectual Property, who recently held a hearing featuring witnesses largely in favor of patent eligibility reformation.3 As discussed further below, passing of the PERA would reverse current patent eligibility case law and replace it with a framework for determining whether an invention is eligible for patent protection.
Current Patent Eligibility Jurisprudence
The requirement for patent eligible subject matter is set forth in Section 101 of the Patent Act (Section 101). This section provides four statutory categories that are eligible for patenting: process, machine, manufacture, and composition of matter. Although not enumerated in the statute, the U.S. Supreme Court has held that these statutory categories contain an implicit exception for laws of nature, natural phenomena, and abstract ideas, referred to as “judicial exceptions.”
To determine whether or not an invention is eligible based on the judicial exceptions, the Court set forth a two-step framework in Alice Corp. Pty. Ltd. v. CLS Bank Int’l (2014) (Alice two-step framework). The first step requires determining whether or not the claimed invention is directed to one of the “judicial exceptions.” If the answer is no, the claimed invention is patent eligible. If the answer is yes, the second step requires determining whether or not the elements of the claimed invention “transform the nature of the claim” into a patent-eligible application. Step two is described by the Court as a “search for an ‘inventive concept’” to ensure the claimed invention is significantly more than a patent on the judicial exception itself. Claimed inventions that do not satisfy the second step are deemed patent-ineligible.4
The application of the Alice two-step framework has led to confusion among innovators, patent attorneys, and the courts. The uncertainty in determining patent eligible subject matter has prompted judges from the United States Court of the Appeals for the Federal Circuit (the appellate court with jurisdiction over patent matters) to explicitly request guidance with respect to the meaning of Section 101.5 The United States Patent and Trademark Office (USPTO) has similarly acknowledged the lack of consistency, clarity, and the effect of the current framework on emerging innovations in the United States:
we need clear intellectual property laws that incentivize innovation, especially in key and emerging technology areas and from small to medium-sized enterprises, protect that innovation, and bring that innovation to impact including by incentivizing and protecting investment. This is critical for job creation, opportunity, economic prosperity and U.S. competitiveness. It is also necessary to incentivize our brightest minds and greatest companies to solve world problems.6
The USPTO Report to Congress also summarized comments from innovators and patent practitioners who expressed concern that the current framework “mak[es] patents less available and rights less predictable, inhibits investment in new technologies and companies.” Start-up, small, and medium-sized companies indicated that the current framework “undermines innovation by decreasing the availability of private risk capital and works to concentrate markets in the hands of a few large, well-resourced incumbents.” Proponents of the current framework argue that it enhances access to present medical technologies and reduces litigation.
The overall theme of the USPTO Report to Congress was that “stakeholders generally agreed that the law on patent eligibility needs to be clear, predictable, and consistently applied.”7
Patent Eligibility Restoration Act of 2023
In view of the confusion and inconsistencies in applying the Alice two-step framework, U.S. Senators Tillis and Coons introduced the Patent Eligibility Restoration Act of 2023 (PERA). The PERA aims to incentivize innovation and provide clarity for innovative companies, while addressing concerns over the patenting of ideas and the discovery of what already exists in nature. The approach is to eliminate judicial exceptions, and instead provide a specific list of subject matter that is not patentable. The PERA would amend Section 101 as follows:
(a) In General.—Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject only to the exclusions in subsection (b) and to the further conditions and requirements of this title.
The term “useful” means that an invention or discovery has a specific and practical utility from the perspective of a person of ordinary skill in the art to which the invention or discovery pertains.
The exceptions to patent eligibility in subsection (b) are:
- “[a] mathematical formula that is not part of a claimed invention in a category described in subsection (a)”;
- “a process that is substantially economic, financial, business, social, cultural, or artistic, even though not less than 1 step in the process refers to a machine or manufacture” unless “the process cannot practically be performed without the use of a machine or manufacture”;
- “[a] process that— ‘(i) is a mental process performed solely in the human mind’; or ‘(ii) occurs in nature wholly independent of, and prior to, any human activity’”;
- “[an] unmodified human gene, as that gene exists in the human body”; and
- “[an] unmodified natural material, as that material exists in nature.”
With respect to (B), the PERA clarifies that adding a nonessential reference to a computer by merely stating the use of a computer shall not confer eligibility. The PERA further clarifies that any process described in (B) shall be eligible if the process cannot practically be performed without the use of a machine (including a computer) or manufacture.
With respect to exceptions (D) and (E), the PERA clarifies that “a human gene or natural material shall not be considered to be unmodified” and thus not an enumerated exception to eligibility, if the human gene or natural material is “isolated, purified, enriched, or otherwise altered by human activity” or “otherwise employed in a useful invention or discovery.”
The PERA also provides guidance as to how to evaluate a claimed invention for eligibility, stating that the claimed invention should be considered “as a whole and without discounting or disregarding any claim element” and without regard to: 1) “the manner in which the claimed invention was made;” 2) “whether a claim element is known, conventional, routine, or naturally occurring;” 3) “the state of the applicable art, as of the date on which the claimed invention is invented;” or 4) “any other consideration in [the other sections of the Patent Act:] section 102, 103, or 112.” Thus, the PERA not only replaces the current judicial exceptions for those enumerated in the bill, but also eliminates the search for an “inventive concept” in the second step of the Alice two-step framework. The “inventive concept” requirement is considered by many to conflate two separate requirements of the Patent Act: Section 101 (patent eligibility) and Section 103 (obviousness).
Patent Strategies for Innovators
Supporters of the PERA argue that this bill brings much needed clarity to Section 101 that will instill the confidence innovators need to invest in areas such as medical diagnostics, personalized medicine, AI, and computing.8 The PERA would also more closely align patent eligibility requirements in the U.S. with those standards adopted by many non-U.S. countries/jurisdictions for examining biotechnology inventions.
If the PERA is passed, diagnostic inventions will likely be afforded a significantly broadened scope of patent eligibility. For example, diagnostic methods that involve laboratory measurements will likely be patent-eligible, as such methods do not encompass a mental process performed solely in the human mind (exception (b)(C) in the PERA). Accordingly, in order to encompass patent-eligible subject matter, diagnostic claims would no longer require additional claim elements to satisfy step two of Alice, e.g., recite a combination of nonabstract steps that is not well-understood, routine, and conventional, such as administering therapeutic or prophylactic treatments, which can pose issues for proving patent infringement.
If passed, the PERA is also expected to have a significant impact on inventions relating to software, algorithms, business methods, and generally any computer-related or computer-implemented inventions, which are generally subject to heightened eligibility review under the current Section 101. Companies developing AI/machine learning (ML)-based inventions should consider that even if legislation were to be passed that grants a broader scope of eligibility under Section 101, AI/ML-based inventions are still subject to laws that require an inventor to be a person. Accordingly, an AI/ML-based invention that meets eligibility under Section 101, as well as the requirements under Sections 102, 103, and 112, may not be patentable if the AI/ML-based invention was generated by an AI model without a person providing substantial involvement or inventive contributions in the discovery process. While Section 101 eligibility and inventorship considerations have traditionally been two separate inquires, it is foreseeable that these issues may have intersecting roles to play in clarifying patentability of AI/ML-based inventions, which comes at a crucial time as AI/ML technologies and their applications grow exponentially. AI/ML innovators in various fields (including technology and life sciences) are advised to work with patent counsel to monitor Section 101 legislation and inventorship guidance, and to modify their patent strategies accordingly for optimal success in obtaining patents.
Although this bill is still pending in the Senate, companies should consider the PERA, and any amendments to the PERA, when evaluating their current patent portfolio, future innovations, and patent application filings. With respect to pending patent applications, companies who face current rejections under Section 101 (for example, medical diagnostic claims) may consider slowing examination and at least maintaining a pending U.S. patent application should this bill pass into law. Similarly, companies that may face a potential challenge on patent eligibility may consider delaying litigation or selecting a venue with a longer disposition time. Companies should also consider the impact this law may have on their freedom to operate strategies, since passage of this law (if passed in its current form) would likely lead to a significant number of inventions found eligible, and a corresponding increase in number of third-party patents in the fields that companies operate. With respect to future patent application filings, companies are advised to work closely with patent counsel to anticipate future modifications to Section 101, and to structure patent application filings (and claims) in anticipation of possible Section 101 modifications, e.g., by ensuring that inventions do not fall under any of the exceptions to patent eligibility as enumerated under the PERA, or current case law.
For more information on patent strategy with respect to patent eligible subject matter, or any related patent matter, please contact any member of the firm’s patents and innovations practice.
[1] 2022 USPTO Report to Congress: Study by “Patent eligible subject matter: Public views on the current jurisprudence in the United States.”
[2] https://www.congress.gov/bill/118th-congress/senate-bill/2140/text.
[3] https://www.judiciary.senate.gov/committee-activity/hearings/the-patent-eligibility-restoration-act_restoring-clarity-certainty-and-predictability-to-the-us-patent-system.
[4] Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 573 U.S. 208 (2014).
[5] https://crsreports.congress.gov/product/pdf/LSB/LSB10344/5.
[6] 2022 USPTO Report to Congress: Study by “Patent eligible subject matter: Public views on the current jurisprudence in the United States.”
[7] Id.
[8] https://www.judiciary.senate.gov/committee-activity/hearings/the-patent-eligibility-restoration-act_restoring-clarity-certainty-and-predictability-to-the-us-patent-system.
