USIJ to Supremes: Set Boundaries on 101 Jurisprudence to Save U.S. Innovation

By La'Cee Conley
February 9, 2021

“This is not the proper functioning of a rule of law, it is more akin to a casino than to a United States court, and the longer-term impact will be to diminish one of our country’s most important attributes, our world-class innovation environment.”- USIJ amicus brief

The Alliance of U.S. Startups & Inventors for Jobs has filed an amicus brief supporting American Axle & Manufacturing, Inc.’s petition for certiorari with the U.S. Supreme Court, claiming that many feel that “the U.S. patent system appears to be on life support”

The Petition

https://depositphotos.com/109449130/stock-photo-blue-101-sign.htmlAmerican Axle & Manufacturing, Inc. petitioned the High Court on December 28, 2020, asking it to review the Federal Circuit’s July 31, 2020 modified judgment and October 2019 panel opinion in the closely-watched Section 101 patent eligibility case involving driveshaft automotive technology. In that decision, a split (2-1) Federal Circuit panel, in affirming the district court’s holding, found the claims in question—directed to an industrial process for manufacturing an improved driveshaft for an automobile—ineligible for patenting as merely invoking a natural law, and “nothing more” because the claims  “invoked the equation, F = kx (Hooke’s Law).”  American Axle, 967 F.3d at 1304.

The questions American Axle is asking the Supreme Court to consider are:

  1. What is the appropriate standard for determining whether a patent claim is “directed to” a patent-ineligible concept under step 1 of the Court’s two-step framework for determining whether an invention is eligible for patenting under 35 U.S.C. § 101?
  2. Is patent eligibility (at each step of the Court’s two-step framework) a question of law for the court based on the scope of the claims or a question of fact for the jury based on the state of art at the time of the patent?

The petition argues, in a reference to a quote from Judge Moore, that the CAFC is “bitterly divided” on Section 101 law and that “the entire patent system is desperate for the Court’s guidance and has cried for its help.”

USIJ Brings the Startup Perspective

USIJ filed its brief on January 29, and generally argues:

  1. The panel majority decision fails to comply with eligibility precedents established by the Court and Federal Rule of Civil Procedure Rule 56 (Rule 56); and
  2. Investments in technology startups in American has been declining for more than a decade.

Specifically, the USIJ notes that:

From the standpoint of many entrepreneurs, inventors and investors that comprise the Invention Community, the U.S. patent system appears to be on life support. Legal protection for inventions and discoveries that once was a defining characteristic of U.S. industrial policy has become increasingly irrelevant, no longer providing adequate safety and incentives to investors otherwise willing to make high risk commitments of time and capital or to visionary inventors who would leave secure jobs to pursue breakthrough technologies and challenge entrenched incumbents.

Further, there is a shift in activity between entrepreneurs and investors, says the brief. “Such activity has shifted away from the inventions needed for strategically critical technologies…toward investments such as entertainment, apparel, social media and the like, which either do not depend on patents at all or do not consider enforceable patents to be essential to their businesses.”

Notably, startups, small companies and individual inventors have been responsible historically for many of America’s most important breakthrough inventions. These entities need patent protection far more than the large corporate incumbents that own vast portfolios of patents, and yet it is the former group that is most severely affected by “the systematic weakening of patent protection that we have witnessed over the last few years.”

The Courts Divided

“The instant case, however, is but the tip of an iceberg in terms of judicial frustration with the guidance provided by this Court,” continues the brief.

USIJ highlights that “although there has been more than one contributor to the growing perception within the Invention Community that patents no longer are relevant to protecting long-term commitments of time and capital, this Court’s current jurisprudence on patent eligibility, as implemented by the Federal Circuit and some of the district courts, stands at or near the top of that list.”

Consistency in precedent is necessary to provide reliable judgments to avoid the harmful effects unpredictability and confusion as to eligible subject matter have on the economy, the patent system as a whole, and to inventors, business entities, investors, innovators attempting design around solutions, and other interested parties who need to understand what is, and is not, patentable. USIJ argues that a number of the Federal Circuit’s eligibility rulings, in particular, have been driven by an apparent belief that the appellate court was merely implementing rulings by the Supreme Court. Instead, USIJ believes that “the Federal Circuit is unduly cautious in a number of such rulings, certainly in the instant case, and as a result has expanded the categories of inventions that no longer are eligible for patent protection well beyond what was prescribed or even envisioned by this Court.” In sum, the panel majority opinion in this case appears to have been rendered in a search for “outcome-oriented theories around which to find ineligibility that otherwise would not exist.”

Worse than its dangerous and unnecessary expansion of what was intended as a “narrow exception” to the statutory language of Section 101, the Federal Circuit is “hopelessly divided as to a proper interpretation of this Court’s rulings in Mayo Collaborative Services, et.al v. Prometheus Laboratories, Inc., 132 S.Ct. 1289 (2012) and Alice Corp. v. CLS Bank, 573 U.S. 208; 134 S.Ct. 2347 (2015), among others.” As further evidenced by the fact that half of the active Federal Circuit judges dissented from the denial of rehearing en banc in American Axle, it is clear the Federal Circuit is divided as to how to apply Supreme Court Section 101 jurisprudence. Other case law shows this divide as well. For example, in TecSEC, Inc. v. Adobe Inc., and in Illumina, Inc. v. Ariosa Diagnostics, Inc., both 2020 cases, the Federal circuit found that an encryption method that improves network security and a process separating fetal DNA from maternal DNA were both patent eligible. In contrast, in Electronic Communication Technologies, LLC v. Shopperschoice.com, the Federal Circuit found that software directed to advance notification of a delivery was not eligible for patent protection.

The disparity of views among the various judges of the Federal Circuit also means that outcomes on eligibility often are “dependent on the specific panel of judges assigned to a case, with disastrous uncertainty facing litigants on both sides,” says the brief. Litigants dealing with Section 101 in the Federal Circuit will know with any accuracy what the outcome is likely to be only when they see which judges will make up their panel.

“This is not the proper functioning of a rule of law, it is more akin to a casino than to a United States court, and the longer-term impact will be to diminish one of our country’s most important attributes, our world-class innovation environment.”

The Decline of The Innovation Investment Economy

“The weakening of patent protection in the United States since 2004 has led to a corresponding decline in the willingness of entrepreneurs and inventors to rely on patents as the foundation for making investments,” says USIJ.

USIJ conducted a study to show the decline of the innovation investment economy since 2004. In this study, USIJ discovered that “declines can be seen in drug discovery, medical devices, operating systems, core networking technology, etc.” At the same time, “investments in consumer apparel, hotels, social media and similar market segments increased substantially.” This trend suggests that American innovation is moving away from startups introducing “breakthrough” technology and toward more investment in entertainment, social media, and the like.

The USIJ points to semiconductor technology, for example,  and argues that it would “rank high on almost any list of the most critical technologies for cybersecurity, artificial intelligence, national defense and virtually every other economic activity that depends on computational progress.” However, “investment in startups likely to develop real breakthrough inventions in that field of technology has all but vanished.”

Although it may be years before the long-term implications of this shift away from critical technologies becomes fully apparent, the trend line is “readily visible” today. As such, the brief urges the court to grant a writ of certiorari in American Axle.

The Chicago Patent Attorneys and the New York Bar Association also recently filed amicus briefs supporting the petitioner.

On the same day USIJ filed its brief, the Court also requested a brief in opposition be filed by the Respondent, due by March 1, 2021. The fact that the Court has called for a Brief in Opposition means that at least one Justice or law clerk for a Justice thinks the Petition is worthy of further review and should be included on the Court’s “discuss list,” said the NYIPLA, whose brief in support of American Axle is detailed here.

 

The Author

La'Cee Conley

La'Cee Conley is an experienced international intellectual property attorney and owner of Conley Consulting & Portfolio Advisors. After earning Bachelor degrees in physical chemistry and in neuroscience, she earned her Juris Doctor and Master of Law at Drake University, specializing in international intellectual property and international law. She completed her Master of Business Administration at Iowa State University. She currently specializes in patents, trademarks, and copyrights around the world relating to chemical, nanochemical, small molecule, biological, neurological, pharmaceutical, oil & gas, and general mechanical applications.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 5 Comments comments. Join the discussion.

  1. Anon February 9, 2021 3:35 pm

    The article (and brief) would have been helped with direct quotes from leading members of all three branches of the Federal Government (and not merely reflected the fractured CAFC) pointing out the Gordian Knot of irreconcilable conflicting opinions in the eligibility jurisprudence.

  2. Pro Say February 9, 2021 3:35 pm

    A tour-de-force brief it is.

    Fingers crossed.

    Prayers made.

  3. Jason Lee February 10, 2021 8:53 am

    They KIlled patent rights in 2011 when the brought in the AIA Act and the PTAB on top of the Alice/Mayao/EBAY and TC Heartland rulings. WE Need to stop beating around the bush and call it for what it is. BIG TECH has bought and paid for the rules of law to favor their patent theft so they do NOT have to pay for patent licenses. Thats the very root problem we are living in. While SCOTUS and Congress play hot potato in passing new laws to bring back protection from patent pirates like FAANG who now have major monopolies and run America like their personal ATMs. We are now living in a fully run Corporatocracy and the ones with opposing views are being silenced by Big Tech and Big Pharma from having a voice. Major reset needs to happen, power must be brought back to the small inventor and theft of IPs must be protected and licensing fee’s must be paid. ITs time!

  4. Karl Denninghoff February 22, 2021 12:06 am

    Even the US Chamber of Commerce International IP index (http://www.theglobalipcenter.com/wp-content/uploads/2017/02/GIPC_IP_Index_2017_Report.pdf), which predictably gives the US the highest overall patent score–of course, nevertheless felt compelled to admit recent US patent environment decline and gave the US third-world scores for categories of “patentability requirements” and “patent opposition” of 75% and 50% respectively, whereas by comparison both the UK and Germany get 100% scores. Whatever SCOTUS may do with Axel, it is unlikely to fix the present absurd circumstance that is based in part on multiple attempts by SCOTUS itself to create better patent law than congress managed to do; Alice could aptly be called the Alice-in-wonderland ruling. Of more use to American inventors, especially individuals and small entities, is a simple prescription of what to do given that the US has patently gone down a ridiculous rabbit hole. First, an individual inventor and most small entities should NOT EVER allocate resources based on a presumption that a invention can become, via a US patent, into a direct economic asset (there are indirect reasons for large entities to get patents); while exceptions exist, any data mining AI program could quickly establish on its own that the most predictive indicator that US patent claims will be invalidated is that they would otherwise have economic value; and this can be shown to be true even within sets of claims from the same patent applications and sets of related aplications. Esoteric discussion of reasons for this fact, and especially discussion around effectively undefinable judicially imposed notions like abstract ideas and inventive concepts–which are a problem but everyone knows are not the whole of the problem (see e.g. the previous comment), is entirely beside the point; it is a fact and useful discussion for inventors is what an American inventor might do about it. A prescription: if you are smart enough to be an individual inventor, consider doing your inventing in the UK or perhaps Germany or Japan if you know the language and you can swing it; Ireland is also a possibility and has significant tax advantages as a secondary benefit. If not, then if you must because it has some initial cost advantages, file a US provisional, then before the year is out make a PCT patent application, and then get your patent in the UK, Germany, and perhaps Japan. You might find it advantageous to designate the UK for examination of your PCT application since in the UK an eventual US national stage application is not assumed. When the 30 month PCT time period is about to expire you can, if you wish perhaps as a patriotic optimist, check to see if the US still has its head in the rabbit hole and if you feel there is improvement consider filing for a US patent, but in any case get your economically valuable European patents. If you already have US patents, and especially if they have a pre-AIA priority date, then if possible consider keeping them alive with continuations and hope for the best–after all, POTUS might e.g. actually fix something in an Axel review. Even if they do not in public concur with this opinion, most US IP law firms can help you do any combination of these things and explain them in detail.

  5. Karl Denninghoff February 23, 2021 12:45 pm

    An expanded post to replace the previous one, with some typos cleaned up:

    Even the US Chamber of Commerce International IP index (http://www.theglobalipcenter.com/wp-content/uploads/2017/02/GIPC_IP_Index_2017_Report.pdf), which gives the US the highest overall patent score–of course, nevertheless felt compelled to admit significant US patent environment decline and gave the US third-world scores for categories of “patentability requirements” and “patent opposition” of 75% and 50% respectively, whereas by comparison both the UK and Germany get 100% scores. Whatever SCOTUS may do with Axel, it is unlikely to fix the present absurd circumstance that is based in part on multiple failed attempts by SCOTUS itself to create better patent law than congress managed to do; Alice could aptly be called the Alice-in-wonderland ruling. Of more use to American inventors, especially individuals and small entities, is a simple prescription of what to do given that the US has patently gone down a ridiculous rabbit hole. First, an individual inventor and most small entities should NOT EVER allocate resources based on a presumption that a US patent can transform an invention into a direct economic asset (there are indirect reasons for large entities to get patents); while exceptions exist, any data mining AI program could quickly establish on its own that the most predictive indicator that US patent claims will be invalidated is that they would otherwise have economic value; and this can be shown to be true even within sets of claims from the same patent applications and sets of related applications. Esoteric discussion of reasons for this fact, and especially discussion around effectively undefinable judicially imposed notions like abstract ideas and inventive concepts–which are a problem but everyone knows are not the whole of the problem (see the previous comment), is entirely beside the point; it is a fact and useful discussion for inventors is what an American inventor might do about it.

    A prescription: if you are smart enough to be an individual inventor, consider doing your inventing in the UK or perhaps Germany or Japan if you know the language and you can swing it; Ireland is also a good choice and has significant tax advantages as a secondary benefit. If not, then if you must because it has some initial cost advantages, file a US provisional, then before the year is out make a PCT patent application, and then get your patent in the UK, Germany, perhaps across the whole EU, and perhaps Japan. You might find it advantageous to designate the UK for examination of your PCT application since in the UK an eventual US national stage application is not assumed. When the 30-month PCT time period is about to expire you can, if you wish perhaps as a patriotic optimist, check to see if the US still has its head in the rabbit hole and if you feel there is improvement consider filing for a US patent; but in any case, get your economically valuable European patents. If you already have US patents, and especially if they have a pre-AIA priority date, then consider keeping them alive with continuations and hope for the best–after all, SCOTUS might e.g. actually fix something in an Axel review.

    Even if they do not in public concur with this opinion, most US IP law firms can help you do any combination of these things and explain them in detail.

    A business minded inventor would have even more reason to be physically in e.g. Europe. Moreover, until companies with exclusionary patents of economic significance are able, from an EU economic base in part protected by their patents, to project economic power and eat the lunch of US based “BIG TECH” players mentioned in the previous post, which project economic and political power around the world, it may not be possible for the US to have an epiphany and alleviate this critical flaw. This epiphany could eventually occur in part as a downstream result of creative Americans finding things to do that the US economy reliably rewards, most notably of which do not involve inventiveness, technological advancement, or for that matter any kind of wealth creation. However, it would be accelerated if such Americans would nevertheless create wealth, which after all aids the human condition wherever it occurs, but do it in another country where the creator of such wealth is more appreciated. The situation is so bad that foreign countries could rightfully accuse the US of third-world style disregard for IP rights using legal mumbo-jumbo free statistical evidence, but the greatest damage is to the US and is self-inflicted; so, could there even be a far-sighted and benevolent competitor that would take the hit for casting such pearls, and in any case could a competitor’s political pressure overcome the “BIG TECH” stranglehold? Thus ironically, moving brain cells and inventiveness to the EU or somewhere else and thereby building economic pressure could do the American people in general a favor; and the benefits of such an epiphany extend well beyond economics. For example, hopefully this farce will not continue until the US comes under technological attacks that we are not only unprepared for but that we do not even understand—the power of “BIG TECH” and SCOTUS for that matter will be meaningless in the face of that—and at least one of those two couldn’t care less.

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