One of the longest running features on IPWatchdog is our annual “wishes” article. Each year we invite industry insiders to make patent and/or intellectual property related wishes for the new year.
As with our recently published annual reflection on the biggest moments in IP, Alice v. CLS Bank dominates the wishes we received. But we did receive a wide range of wishes, from patent eligibility reform, to demand letter reform, to greater transparency at the USPTO, to the creation of a large scale, viable patent licensing marketplace, to greater cybersecurity awareness in the wake of the North Korea hack of Sony.
For my wishes, I would love to see patent eligibility reform in Congress that would overrule Mayo, Myriad and Alice. I would also love to see meaningful copyright reforms and/or real Internet industry cooperation that recognizes the important rights of content creators, both large and small. I would also like to see federal trade secret legislation, which is critically important given the erosion of patent rights over the last several years. Until Congress realizes just how damaging the Supreme Court has been over the last decade more innovators will need to rely on trade secret protection, and having one regime rather than 51 regimes (i.e., 50 states plus the District of Columbia) makes no sense given the national and international scope of business in today’s global economy.
Without further ado… I present the patent and IP wishes of our industry insiders for 2015.
Chief Judge Paul Michel (ret.)
United States Court of Appeals for the Federal Circuit
1. A Supreme Court Sabbatical on Section 101 Eligibility Cases. Having tied itself into tight nots with its own dicta, ancient and recent, the Court cannot correct the chaos it created with Mayo and Alice. Some other institution will have to do the job. The CAFC is best equipped, but may be too timid after being unanimously reversed and scorned so often in 2014. Congress has the power and responsibility, but may be too indebted to a dozen big IT companies in Silicon Valley. The PTO could also help with better guidelines, unless, for the same reason, the Administration will not let it.
2. Congressional Refocus onto the Biggest Problems–uncertainty of validity and remedies and unaffordability of enforcement(except by the super rich)– and Off of “Trolls.” NPEs are a second- order problem well on the way to solution under recent Judicial Conference, lower court and Supreme Court actions. Faster, surer, cheaper enforcement is what America needs for immediate economic growth and job creation, not to mention long-term global competitiveness. We depend on our innovation economy, even as some manufacturing reshores here. Stronger, more certain remedies for proven infringement would also help. Why doesn’t Congress address these prime needs instead of adding cost, delay, complexity, and uncertainty in its ineffective rush to be seen as doing something -anything- about “trolls”, a greatly exaggerated threat?
3. PTO Revision of PTAB Regulations and Procedures for A.I.A. Reviews. Presently, they appear unduly and unnecessarily to disadvantage and burden owners, upending the presumption of validity and the requirement of clear and convincing evidence, always impeding claim amendment, virtually always barring live testimony, denying nearly all discovery, applying Broadest Reasonable Construction instead of correct construction under Phillips, etc. When issued, they appeared appropriate, but now we have ample actual experience how they work in practice. Time to adjust them, based on patent community input.
4. PTO Examiner Attention to Construing Claims before Ruling on Patentability. Logically, how can one determine whether a claim is obvious in light of the prior art without first determining the scope of the claim?
5. Improved Coverage of Patent Issues by Major News Media. It appears to me that the Congress, and even the Supreme Court, are more strongly influenced by repeated press statements echoing special interest pleading than by the factual record before them and the advice of experts. The best patent system on earth and a prime engine of our prosperity is being weakened and may soon be gutted by ill-considered legislation, largely because of ill-informed media accounts. But more accurate and balanced coverage could help save what is good about the patent system and even cause it to be improved and strengthened.
The beginning of a new year is pregnant with possibilities. For a patent community roiled by confusing decisions on patent subject matter eligibility over the past few years, I wish we could find a way to ensure that our policies and laws continue to promote economic growth and stimulate job creation. We are aware that the time tested standards we employed for years — before the recent decisions in Myriad, Prometheus and Alice — helped to develop industries in the biotechnological and software sectors that now lead the world. Maybe this year, we can more skillfully handle perceived problems in patent subject matter eligibility by focusing on clearly bounded claims and more rigorous analyses of written description, enablement and obviousness sections of the statute. This approach would not put billion dollar industries at risk from the unforeseen consequences of a limited subject matter eligibility standard.
On patent reform, I wish we could stop focusing on trolls. I don’t even know who they are any more, and I don’t subscribe to the philosophy that plaintiff is synonymous with troll. Instead, we should start focusing on eradicating clearly abusive litigation techniques by anyone. Secondary markets enable inventors who don’t want to manufacture to sell their patents and reap the benefit of their efforts. The sale of their patents often allows them to return to what they do best—inventing. That represents an important bargain with our inventive community. But what we must not tolerate are vague undocumented demand letters, threats of frivolous litigation, and other abusive practices that burden burgeoning businesses. It is also critical that any legislative initiative on patent reform be carefully drafted to take into account evolving court decisions and revised patent office rules that alter the landscape for all who participate in the United States patent system.
We in the patent community are a diverse group with often divergent interests. But we can all agree that clear and consistent guidance from the courts, the legislature, and the USPTO would benefit all of us and the patent system as we begin this compelling new year. I wish for nothing less.
Gene, I wish that like a genie you had the power to grant me three patent wishes for 2015. If you granted me these wishes they would be (1) the Supreme Court would refrain from granting certiorari petitions for patent matters for at least a year to permit the reconstituted Federal Circuit the opportunity to do the job it was created to in providing greater uniformity and certainty in interpreting our patent laws. The judicial activism by the Supreme Court has done major harm in upsetting expectations in how patent law operates in the U.S. Right now settled expectations of what authorities thought the patent law meant have been severely altered by the Supreme Court in the last 10 years resulting in chaos and uncertainty in guiding business decisions creating a de facto anti-patent government policy. Wish (2) is for Congress to act swiftly to legislatively overrule current Supreme Court law on subject matter eligibility. The current state of the interpretation of section 101, I believe, serves to curb rather than promote the progress of the useful arts by stifling the protection of innovation in the software and life sciences fields that are as useful arts as any of the technological arts. Congress should act quickly and decisively to correct this problem without revisions to section 101 adding a long list of excluded subject matter. Wish (3) is to ensure that the USPTO is given access to all the user fees it collects without the imposition of sequestrations, continuing resolutions or fee diversions. While a revolving fund has been established the USPTO remains dependent on the appropriations process to set the level of its annual spending despite what it is authorized to spend.
Creator of LexisNexis PatentAdvisor
My wish for 2015 is for patent applicants to gain greater clarity around the USPTO’s processing of applications affected by the Alice v. CLS Bank ruling. As has been widely observed elsewhere, the Alice decision’s overhaul of what comprises unpatentable “abstract subject matter” has made it much more difficult for would-be patents on software and business methods to receive allowances.
The week before Christmas, the USPTO issued its 2014 Interim Guidance on Patent Subject Matter Eligibility. Examiners had been relying for several months on preliminary guidance issued in the immediate wake of the ruling. Signs were mounting that the preliminary guidance was inadequate. As patent attorneys Kate Gaudry and Tom Franklin recently noted, one result of the preliminary guidance was that the USPTO had “essentially stopped issuing patents in business-method art units.” Prosecuting patents in these areas always has been a challenge, but the data suggest that the preliminary examination guidelines made the process more difficult still.
When we used LexisNexis PatentAdvisor to examine the relevant data, the picture that emerged was troubling. We found that applications assigned to the art units under Tech Class 705, Automated Business Methods, had received Section 101 (patentability) rejections since the Alice ruling at a rate approaching 100 percent, confirming Gaudry and Franklin’s assessment. I hope the slew of rejections was merely a symptom of the examiner corps trying to manage its backlog while it waited for more final post-Alice examination guidelines, and not a sign that our IP law now regards business methods as prima facie unpatentable.
I hope 2015 will have some big leaps for all of us on several fronts:
1. Emergence of a viable patent licensing marketplace. Patent Properties (led by Jay Walker) has been beta testing their platform to enable companies to get access to low-price licenses to patents, and conversely providing an easy channel for companies to license their patents. It is a very unique platform and idea, and I believe its success would be very helpful for the patent industry in general to foster more transactions and valuation.
2. Bridging the gap between R&D and IP. The pace of innovation is accelerating and unfortunately the laws have not evolved as quickly. Although the bar to prove willful infringement is higher since the Seagate case, it has not gone far enough to enable R&D to have greater access to supporting the patent system. Small portions of inventors are not allowed to look at any patents for fear of willful infringement. This is counterproductive to the original intent of the patent system – to foster the spread of knowledge and ideas, and to respect other’s IP. With the barriers placed in front of R&D by Intellectual Property, it is no coincidence the IP process discourages many inventors, especially given the inability to leverage data that should be available to them. My wish is the courts (or legislation) to make the barrier for willful infringement even higher, sending a clear message that R&D should be benefiting from the patent system as was originally intended.
3. USPTO technology investment. There have been previous wishes for the USPTO to not have their budgets taken away, but I especially hope for some of the advances this would mean. Specifically, following through on their promise to make more data available (e.g. PAIR APIs), taking more responsibility for patent ownership and clean title issues (assignments are a mess with up to 20% of patents having chain of title issues – clearly something the government needs to provide more certainty on), and leveraging more advanced technologies to improve their research and prosecution.
My three wishes for 2015 for the world of patents and innovation:
Wish #1: As we look to the future, policy-makers and business leaders remember that America became the world’s innovative powerhouse not by accident but by careful design. The first patent law passed in April 1790 with the intention of democratizing access to invention and inviting everyone’s participation. In a uniquely democratic way, the Founders sought to unleash the thinking power of all Americans, advance our collective knowledge and hasten economic progress. Patent fees were set to a level any ordinary citizen could afford, less than 5 percent of the rate of Britain, and the absence of a “working requirement” ensured that invention could be owned by anyone – not just the economic elite with ready access to capital. By 1885, the U.S. per capita patenting rate was quadruple that of Britain. As we add costs to our innovation system, we restrict the benefits of patent ownership to the few and invite global competitors to surpass American economic leadership.
Wish #2: The discussion about patents becomes more about how we move American innovation into the economy and create commercial and social value…and less about abuses in the patent system. Don’t get me wrong. Abuses are real and they matter. But the unspoken reality is that America’s innovation eco-system faces a far greater problem than abusive patent litigation. Today, only “home run” patents owned by deep pocketed parties can afford the high costs of our threat-based licensing system. The rest – 95 percent of all patented discoveries – are stuck on the commercial sidelines, unable to help 3rd party companies improve products and services, improve competitiveness and create jobs. This is not to say that all 95 percent of patented discoveries have economic value in the right hands, but the number has to be much bigger than 5%. We need to do a much better job of converting the intellectual value of Americas 2+ million patents into commercial and social value if America hopes to remain a leader in the global economy for the long-term.
Wish #3: More American companies understand that just as everyone needed a web strategy back in the late 90s, and that those that were slow to this recognition paid a significant competitive price, today every company, large and small, spanning every sector, needs an innovation strategy. Notice, I didn’t say a “patent” strategy. The challenge goes well beyond patents, although it includes patents. To stay competitive and meet the demand for continuous product improvement, every company must be able to answer certain foundational questions: (1) What relevant 3rd party technologies and technologists are available to help improve our products, services and business practices?; (2) What technologies are our competitors, around the corner and across the globe, investing in that may show up in future products, services or business practices?; and, (3) What technologies are we using that might inadvertently trespass on someone else’s property rights? In today’s tech-dominated global economy, every company needs to understand the risks and opportunities inside America’s patent database.
I have two items on my wish list. The first would be for the Senate to confirm Michelle Lee as the USPTO Director quickly after it reconvenes. Patent reform is on the agenda and the patent user community needs the voice of a confirmed USPTO Director to be involved and to have a significant voice in the process. Without Senate confirmation, Deputy Director Lee will not be as effective an advocate on the patent reform issues. Right or wrong, Washington takes titles seriously when listening to different points of view. I also think that Michelle has done a good job as Acting Director and has treated the USPTO employees well. If the Senate is interested in promoting U.S. innovation, confirming the nominee for USPTO Director seems a good first step.
With respect to patent reform, I would urge the Senate to be creative and not re-introduce the same legislation that was passed by the House and considered in the last Senate. Some of the provisions are no longer needed in light the Supreme Court decisions and the effectiveness of the USPTO America Invents Act post-grant proceedings. With respect to new items, Congress should consider enacting a patent box regime in the United States. Simply stated, a patent box tax regime provides a lower tax rate on corporate income from the exploitation goods manufactured in the U.S. based on a patent issued by the USPTO than for other income. A patent box tax regime that provides a tax incentive for domestically manufactured patented products can provide additional value for patent holders, encourage growth of the domestic manufacturing industry and create more middle-class jobs. China and several European countries have patent box regimes. See B. Knight & G. Maragani, It is Time for the United States to Implement a Patent Box Regime to Encourage Domestic Manufacturing, 19 Stanford Journal of Law, Business & Finance p. 39 (Fall 2013).
What if 2015 heralded a new realm of sanity for IP practitioners? I dream of a genie-class apparatus capable of granting more than three wishes per user cycle. With the aid of said device, we might see a world where false distinctions between software and hardware would be eliminated from the patent eligibility conversation. The USPTO would hire and assign patent examiners to applications because they actually qualify as persons of ordinary skill in the art at the time of invention. Small businesses and independent inventors would be recognized for the value they bring to society and their respective industries. The media and general public would come to appreciate the economics of non-practicing entities and celebrate innovators of all shapes and sizes without scare tactics and name-calling. Lobbyists would be called out for hypocritical practices and their funds redirected to support innovation. Patent laws would be reformed to pave the way for new technology and business paradigms. Inventors would be encouraged to break the invisible bonds of existing ways of thinking and being.
Senior IP Counsel at GE
A member of the IAM Strategy 300 (2009, 2011, 2012 & 2013)
My wish for 2015 is that the “mess” of patent subject matter eligibility for software (and computer-implemented) inventions is cleaned up by Congress or an en banc CAFC.
No matter what side of the software patentability debate you favor, we can all agree that the State Street, Bilski, CLS Bank and Bancorp journey of decisions has left us all wanting for more. That is, a clear, repeatable test to determine when exactly a software (or computer-implemented) claim is patentable versus being simply an abstract idea “free to all men and reserved exclusively to none,” Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948), does not exist. This is perhaps why former Chief Judge Rader has called the CAFC en banc decision in CLS Bank “the greatest failure of my judicial career.” The May 10, 2013, fragmented, 125-page decision failed to provide the patent bar and the lower courts adequate guidance on the patentability of software.
This failure was not rectified by the Supreme Court in their June 19, 2014, unanimous Alice decision. The Alice Court’s utilization of the Mayo two-step framework for distinguishing patents that claim laws of nature, natural phenomena and abstract ideas from those that claim patent-eligible applications of those concepts – while seeming sound on its face – is turning out to be intellectually disingenuous in practice. This is because the application of the framework clearly involves considerations of novelty and obviousness under 35 U.S.C. Sections 102 and 103, respectively, rather than what should be a 35 U.S.C. Section 101 threshold determination. Even a now deleted portion of the MPEP was more intellectually honest when it fashioned what is today’s Alice 101 inquiry as an obviousness consideration: “merely using a computer to automate a known process does not by itself impart nonobviousness to the invention.” MPEP § 2106 (8th ed., Rev. 4)).
It seems to me that the post-Alice 101 test is something nothing more than a “how cool is it?” test, and is no more objective (nor predictable) than the legendary “I know it when I see it” test. See Jacobellis v. Ohio, 378 U.S. 184, 197 (1964) (Stewart, J. concurring) (describing his threshold test for obscenity). So we are left with a 101 landscape where for every DDR Holdings v. Hotels.com and U.S. Bancorp v. Solutran decision upholding patent eligibility, there is a Ultramercial v. Hulu or Buysafe v. Google decision where patent eligibility is denied.
This mess has resulted in the USPTO issuing a 58-page, second set of Interim Guidelines on Patent Subject Matter Eligibility, dated December 16, 2014 – the period for comments ending 74 days after New Year’s Day! While admirable, these guidelines do not have the force or effect of law. Congress should take action to clarify Section 101 (and thus clarify and reconcile Mayo, Alice and Myriad). In the alternative, the CAFC should step up – hopefully with an en banc decision with a clear majority opinion. The CAFC was created in 1982 to bring about uniformity, and thus predictability, to U.S. patent law:
“Prior to enactment of the Federal Courts Improvement Act of 1982 … there was considerable variation in the [circuit] courts’ interpretation of the patent law. Because some circuits were seen as favoring the patent infringer and others as favoring the patentee, these variations led to forum shopping and intense litigation over the choice of forum. More detrimental than the battles over the forum, however, was that the different interpretations of patent law discouraged innovation and made business planning difficult and investment uncertain. Because the validity of a patent could depend entirely on the circuit in which it was litigated, the value of the patent was impossible to gauge. The need for uniformity in patent law thus led to the most important jurisdictional provision in the Act-the grant of exclusive jurisdiction over appeals from the district courts in section 1338 patent cases to the Federal Circuit.”
E. Sward & R. Page, 33 Am. U. L. Rev. 385 at 387-88 (1984) (citations omitted).
Let’s hope 33 years later it achieves its purpose with respect to software (and computer-implemented) inventions as it has in other technological fields of endeavor!
I would hope that the Office and the Courts can manage to reopen channels to “open water” for patentable subject matter. The Section 101 debate has been much like the Mississippi delta – a powerful but ever-changing landscape. The Alice decision was the equivalent of Hurricane Katrina, disrupting the normal channels in the delta. Eventually deeper channels will be formed that provide more navigable paths to open water, but the longer that process takes the less relevant the U.S. patent system will become to incentivizing investment in new innovations in fields like software, artificial intelligence, and biotechnology. In view of the importance of this issue to the American economy, it may be time for Congress to step in and create a clearer and deeper path through the delta of patentable subject matter.
The six month period since the U.S. Supreme Court issued its decision in Alice Corp. v. CLS Bank has been one of great uncertainty for patent applicants and practitioners. The USPTO’s revised guidelines on patent-eligibility, just released in mid-December, reflect what appears to be a more limited and reasonable interpretation of Alice, under which it should be extremely difficult for most claims to be rejected as patent-ineligible. My wish for 2015 is that the USPTO’s guidelines be interpreted and applied consistently by the USPTO Examining Corps, so that the heavy lifting in patentability determinations can be relegated to the novelty and nonobviousness requirements, where it belongs. If my wish were to come true we would be able to return to a more rational system in which true innovations, whether or not they are implementable using computer technology, could receive the protection they deserve, and the valuable time of innovators, patent practitioners, and patent examiners would not be wasted arguing about form over substance.
I wish that the Supreme Court finally comes to the realization that they just don’t know much about patents and shouldn’t be ruling on them. I also wish that the new members of Congress realize that intellectual property rights form one of the fundamental bases for our system of government, that intellectual property needs as much protection as other forms of property, and that it is wrong for the government to prevent certain kinds of companies from owning, buying, selling, or licensing any kind of property including intellectual property while allowing others to do so. I hope that the big US high tech companies that pushed for “patent reform,” and that are now seeing their patent portfolio values drop significantly, will team up with universities, individual inventors, entrepreneurs, and pharmaceutical companies to repeal the America Invents Act.
I wish that the US government will wake up to the war that foreign countries and terrorist groups are waging in cyberspace and start taking preventive and punitive action. Until now, these entities are “only” stealing our IP and using it to compete against US companies with little or no development costs. When one of them hacks into a nuclear plant or a missile site, we will regret having simply wagged our fingers and tongues at so-called “cyber-vandals.”