Senate Judiciary Subcommittee on IP Wraps Up Hearings on § 101 Draft Bill

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A newly-revived Senate Judiciary Subcommittee on Intellectual Property recently concluded a series of hearings regarding a legislative proposal to significantly alter § 101 of the Patent Act. The draft bill, introduced by Senators Thom Tillis (R-NC) and Chris Coons (D-DE) and Representatives Doug Collins (R-GA-9), Hank Johnson (D-GA-4), and Steve Stivers (R-OH-15), would abrogate the Supreme Court’s decisions in Alice, Mayo, and Myriad by explicitly closing judicially-created exceptions to patentable subject matter and directing courts to construe the provisions of § 101 in favor of patentability. The extent of these proposed changes prompted the subcommittee to hold a series of hearings to solicit feedback from a broad range of stakeholders on June 4, 5, and 11. Each day of hearings consisted of three panels of five witnesses each, for a total of 45 witnesses.

Below is a summary of the arguments for and against the changes proposed in the draft bill.

In Favor

Many of the witnesses who favored the draft bill tended to do so for practical reasons. One of the most common of these arguments was that the current state of § 101 jurisprudence has led to an erosion of patent rights in the software and life sciences industries in the United States while patent rights abroad continue to strengthen. Henry Hadad, President of the Intellectual Property Owners Association (IPO) expressed concern about the risk this poses to America’s competitiveness in the global economy, especially as both China and the European Union (EU) have taken a more expansive view of patent eligible subject matter. Barbara Fiacco, President-Elect of the American Intellectual Property Law Association (AIPLA) echoed these sentiments, stating that the current regime has “driven industry to foreign jurisdictions that are more welcoming to their innovations.”

Besides handicapping the global competitiveness of the US’s software and life sciences industries, many witnesses also cited the significant financial strain the current framework is taking on small businesses. Paul Morinville, President of U.S. Inventor, explained that the current framework reduces the value of patents and that this reduction in value is particularly detrimental to startups who often use their patents as collateral for investment. These effects are also not limited to the software industry. Sherry Knowles, Principal at Knowles Intellectual Property Strategies, argued that reduced investment in the life sciences industry can even put lives at risk, as it hinders researchers’ ability to develop future life-saving drugs.

While each witness had his or her own reasons for supporting the draft bill, they were all in agreement that the current patent eligibility framework is simply a confusing mess. Nowhere was this sentiment more evident than in the testimony of The Honorable Paul R. Michel, former Chief Judge of the Court of Appeals for the Federal Circuit (CAFC), who argued that the Supreme Court’s definitions of patent-ineligible subject matter (i.e., abstract ideas, laws of nature, and natural phenomena) are inherently vague, which renders unpredictable the outcome of any particular case. The Honorable Q. Todd Dickinson and The Honorable David J. Kappos, both former Directors of the United States Patent and Trademark Office (USPTO), agreed, characterizing the Court’s decisions as “incoherent,” “irreconcilable,” and “ambiguous.”

Opposed

On the other side of the issue, many witnesses expressed grave concerns that closing the judicial exceptions for laws of nature and natural phenomena could lead to the patenting of human genes. Chief among them was Kate Ruane, Senior Legislative Counsel at the American Civil Liberties Union (ACLU), which represented the plaintiffs in Myriad. Ruane argued the Court was correct in Myriad in its holding that products of nature are one of the basic tools of human ingenuity and cannot be tied up for the exclusive use of one entity. Allowing patents on human genes, she claimed, could harm patient welfare by limiting access to and reducing the quality of potentially life-saving genetic testing.

Several witnesses praised Alice for giving courts an easy way to invalidate bad patent claims quickly. Paul R. Gugliuzza, Professor of Law at Boston University School of Law, reminded the subcommittee of the proliferation of vague and overly broad business methods patents the USPTO issued in the late 1990s and early 2000s and the patent troll phenomenon these patents created. Alice, he argued, allows courts to dispose of weak patent claims early in the litigation process because patent eligibility is a question of law rather than fact, meaning that it can often be resolved before the costly discovery process begins. Stephanie Martz, on behalf of United for Patent Reform, made similar arguments, stating that Alice is a powerful tool that small businesses can use against patent trolls to knock out weak patent claims before trial, thereby reducing the costs of litigation.

Many witnesses were also opposed to the draft bill on more philosophical grounds, urging the subcommittee to exercise caution before sweeping away 150 years of judicial precedent. Sean George, CEO of Invitae Corp., argued that the current judicial framework is “working as intended” and cautioned the subcommittee to take a more prudent and conservative approach to reform instead of “indiscriminately” abrogating unanimous Supreme Court decisions. William G. Jenks, of behalf of the Internet Association, characterized the draft bill more as a “reset” of patent law rather than a reform and argued that abrogating case law will deprive the courts of valuable judicial president on which to rely when interpreting the new statute. Christopher Mohr, General Counsel of the Software and Information Industry Association, also expressed concerns about the draft bill’s scope, characterizing it as “radical” and “aggressive.”

At the conclusion of the hearings, Senator Tillis stated that he was “convinced that we need further refinements,” particularly with respect to ensuring that “true abstractions” do not pass the test and cannot be weaponized against small businesses. However, he also emphasized the need to act quickly, stating that the subcommittee would be able to review the record, make necessary changes, and introduce a final bill after Congress’s upcoming July 4 recess. Fish & Richardson will monitor the ongoing developments in this area and will provide an update upon the release of the final bill.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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