From trolls to abstract ideas, narratives about how well the U.S. patent system is functioning have led to system reforms that have created many unintended consequences. A critique of the narrative being told by the U.S. Supreme Court in recent years was offered at the International IP Commercialization Council (IIPCC) event on May 8th in the U.S. Capitol by Jeffrey Lefstin, associate academic dean and professor of law at the University of California (UC) Hastings.
“The Supreme Court has told us, and told itself, a particular story — a story based in history to justify its current regime,” Lefstin said near the top of his presentation, which was titled Invention and Discovery: A Fable of History. “But when one starts to inquire into that history, you find the story is quite different than the court has led us to believe.” According to Lefstin, this story and its diversion from a factual basis in history began with the Supreme Court’s 2012 decision in Mayo v. Prometheus, the case which established the current legal concept that a further inventive step was required in order to transform a fundamental principle or law of nature into patent-eligible subject matter. “In particular, what the Court has made clear is that if one has made a scientific discovery, one needs something more than known, routine, or conventional activity in order to transform that into a patent-eligible invention,” Lefstin said.
Although the inventive step principle has been applied by lower courts in various ways, the U.S. Court of Appeals for the Federal Circuit’s (Fed. Cir.) 2015 decision in Ariosa v. Sequenom was a good example of the impact of the Supreme Court’s Mayo ruling. In that case, a patent claiming a noninvasive method for testing certain fetal conditions by testing the mother’s blood was invalidated because the amplification of DNA from the mother’s bloodstream was well known at the time of invention and the fetal test was thus a patent-ineligible natural phenomenon. “I think it would not be an exaggeration to say that this mode of analysis is, step one, assume away from the inventor’s discovery and then, step two, ask if the inventor has invented anything else,” Lefstin said.
Helping to set the stage for the current patent narrative being promoted by the Supreme Court was that court’s 2010 decision in Bilski v. Kappos. In this case, the court established its ability to interpret 35 U.S.C. Section 101 on patent-eligible subject matter without input from Congress, and that such an interpretation was consistent with 150 years of historical jurisprudence. One issue with SCOTUS’ interpretation of Section 101 is that it doesn’t properly extend patent-eligibility to discoveries rather than inventions, which Lefstin argued Section 101 explicitly protects. “I think it’s fair to say the Supreme Court regards this as mere surplus verbiage,” Lefstin said. Congress, however, found this language important and Lefstin points to the 1930 enactment of the Plant Patent Act as proof. During passage of this legislation, Congress had to wrestle with questions surrounding the patent-eligibility of discoveries on inventions that “might involve nothing more than the inventor discovering a new mutant plant or sprout on a cultivated plant, propagating that with conventional techniques, and patenting that as an invention,” Lefstin said. Congress decided to fold the language of plant patents into the language of utility patents, creating strong protection for patent discoveries.
The 1952 Patent Act, and specifically Section 100(b) of that act, provides a definition for “process” which encompasses new uses of known processes, machines, manufacture, composition of matter or material. “This was to address certain doubts that had arisen about whether a new use of an existing process or use of an existing material could be protected as a new process,” Lefstin said. He cited commentary on the 1952 act by P.J. Federico, at that time a high-ranking U.S. Patent Office official involved in the drafting of that legislation, whose commentary made clear the point that claims cannot be rejected as ineligible simply because it recites conventionals steps. “Frankly, it is difficult for me to imagine any language more contrary to what the Supreme Court has done in Mayo and the Federal Circuit in Ariosa than Federico’s perspective on the language that he had drafted,” Lefstin said. “So much for the statute.”
Lefstin also rebuffed another foundational element of the Supreme Court’s narrative on Mayo, specifically the idea that the court relied on 150 years of historical precedence going back to English court precedent arising from infringement suits surrounding patents covering a hot-blast method for smelting iron developed by Scottish inventor James Beaumont Neilson. Justice Stephen Breyer’s opinion in Mayo cited the need for unconventional steps to turn a law of nature into patent-eligible subject matter. “The great irony of the treatment of the hot blast cases in Mayo is that when you go back and look at the case, it’s precisely 180 degrees from reality,” Lefstin said, noting that the hot blast patent cases were enablement cases in which both the patent owner and the court noted that Neilson’s heating apparatus was well known, routine and conventional. Although the hot blast cases did serve as the foundation of patent-eligible subject matter, the Supreme Court misconstrued the “dividing line” between patentable and unpatentable subject matter set forth from those cases, namely whether the inventor had made a practical, not inventive, application of the discovery.
Lefstin’s presentation was followed by further discussion on the negative impacts from changes to patent eligibility doctrine in the U.S., a conversation offered by Adam Mossoff, professor of law at George Mason University’s Antonin Scalia Law School. Mossoff noted that the U.S. has long had what others have referred to as a “gold standard patent system,” which refers to the country’s traditional policy of providing stable and effective patent rights for innovations which aren’t patentable in other jurisdictions. “So where other countries have faltered or have decided not to provide protections to new innovators, the United States has stepped forward and said, no, we will do so,” Mossoff said.
Even where other countries have denied patent-eligibility to processes, the U.S. has considered processes to be patent-eligible going back to the nation’s first Patent Act. Mossoff further noted that the first patent issued by the U.S. protected a method for making potash. Today, improved processes have made huge impacts on the biotech and software industries, two industrial revolutions which Mossoff said “go hand in hand.” Yet changes to the patent eligibility doctrine in recent years have “resulted in the widespread destruction of innovation” in these sectors.
Mossoff cited a series of statistics reported by Bilski Blog to support this viewpoint. In the federal court system, the overall rate of invalidation under Section 101 challenges was 67 percent as of March 2017; at the Fed. Cir. alone, that rate jumps up to 90 percent of patents deemed invalid when challenged as an abstract idea or a law of nature. “If any statistician looked at this, they would say this is a system out of whack,” Mossoff said.
More troubling statistics on patent invalidity extend from administrative trials at the Patent Trial and Appeal Board (PTAB). Covered business method (CBM) review proceedings reaching a final written decision on Section 101 invalidity challenges resulted in a 97.8 percentage rate of invalidity findings. This is made more significant by PTAB’s broad interpretation of business method patents to encompass other processes which have typically been patent-eligible in the U.S. Mossoff would later list an array of subject matter deemed unpatentable by PTAB including ultrasound machines, methods for diagnosing ovarian cancer, diagnostic methods for prostate cancer, breast cancer treatments, scanning thermometers and processes for operating an oil rig.
“Now, what you have, therefore, is this weird convergence of a test from the Supreme Court that is, ‘I know it when I see it,’” Mossoff said. “We can have no sense of what this means,” he added, calling the test “indeterminate.” Yet Mossoff said it was clear to see that this indeterminate test was killing large amounts of both patents and innovation in the U.S. This further echoed the day’s overall theme that uncertainty surrounding IP protection in the United States was harming venture capital investment in research & development.
Mossoff also added to the conversation about America’s patent system faltering when compared to patent offices in other jurisdictions. He had collected a list of about 1,400 patent applications where applications were filed in the U.S., China and the European Union (EU); in each of those cases, both China and the EU granted a patent whereas the USPTO issued office actions or rejections on grounds of patent ineligibility. High rates of abandonment followed such office actions issued by the USPTO.
“This is really significant. This is what we meant in our paper, turning gold to lead,” Mossoff said, referencing a paper on the U.S. patent eligibility doctrine which he co-authored and was published in March. Changes to this doctrine have caused R&D funding and investment to leave the United States and enter jurisdictions like China and the EU. “For the first time we are shutting our doors to this cutting edge innovation and the rest of the world… are saying, ‘Come here,’” Mossoff said. “‘Bring your inventions here. We will provide you with the property right protections.’ And as the result, that is where the licensing will occur. That is where the manufacturing will occur. That is where the economic activity will occur. As a result of that, that is where you will see the job growth and the economic growth in their innovation economies.”