Sharpening Our Patent Spurs

Two major patent issues of our time, Section 101 of the Patent Act and AIA post-grant procedures, raise serious economic concerns that should be assessed and fixed if necessary. Furthermore, in shaping present and future policy, the patent system as a whole should be embraced for its ability to spur innovation and economic growth.

With respect to present law, the Supreme Court has long held that “abstract ideas” cannot be patented under Section 101. Ironically, the latest Supreme Court standard for what constitutes an abstract idea has been received as abstract in itself. See Alice v. CLS Bank, 134 S. Ct. 2347 (2014) (issuing two-part test: (1) determine whether the claims are directed to a patent-ineligible concept; and (2) determine whether the claim’s elements, considered both individually and as an ordered combination, transform the nature of the claims into a patent-eligible application.). Time will tell whether this standard becomes more refined by the lower courts. Nonetheless, present and doubtless future uncertainty leaves innovators like software developers scratching their collective heads regarding how to protect their inventions and not fall through the Section 101 trap door during prosecution or thereafter.

Also concerning present law, in its recent ruling in Cuozzo Speed Techs., LLC v. Lee, 2016 U.S. LEXIS 3917 (2016), the Supreme Court blessed an AIA post-grant process that can invalidate patent claims based on their “broadest reasonable interpretation” rather than in accordance with their proper legal interpretation under well-developed claim construction jurisprudence. See Markman v. Westview Instruments, Inc., 517 US 370 (1996). This causes serious concern to patent owners whose rights, obtained from the PTO at significant time and expense, are later revoked by the PTO at an indeterminate time down the road through an administrative process that uses scales arguably tipped in favor of challengers.

While the courts wrestle with these matters, policymakers should be closely monitoring their economic effects and should be prepared to act on these issues and proactively shape other policy to embrace the patent system to promote innovation and drive economic growth.

To illustrate potential chilling economic effects of the current law, we should stand in the shoes of a small innovative company (“Company X”). For Company X, the decision on how to protect its core technology is a critical one. With limited resources, every dollar spent must be spent wisely. Under the current law, Company X would be less apt to expend resources on patent protection that (1) may not make it through the patent office because of 101 concerns or (2) if granted, will for the life of the patent carry a greater risk of invalidation in a later administrative proceeding.

Such uncertainty will deter Company X from obtaining rightful patent protection in the first place, and tend to cause it to maintain its innovations as trade secrets, depriving the public of the knowledge of the invention. Furthermore, to the extent that Company X’s technology can be reverse-engineered or is disclosed to the public because it did not invest in a patent, competitors will be more likely to simply copy the invention, leaving Company X to be trampled on by its large competitors.

Such results would not be a healthy state of affairs for Company X, the patent system, innovation, or the economy.

The way forward is to ensure more certainty in the patent system by addressing these issues head on and proactively shaping the future of the patent system by providing more and better incentives for innovation in every high-tech field. Any approach should embrace the virtues of our patent system and focus on the fundamentals of incentivizing innovation and protecting resulting technologies to foster economic growth.

Specifically, with respect to Section 101, Congress should revisit the language to confirm its utility in the present age. Some have called for its outright removal, which would effectively eliminate the long and winding Section 101 jurisprudence. Other ideas include broadening the statute’s language to account for software and biotech innovations clearly “under the sun [and] made by man” but nonetheless skewered by the courts as unpatentable. This effort would bring the law more in line with today’s technological age and allow judgment on validity and allowability to be more directly rendered under Sections 102 (novelty) and 103 (non-obviousness).

With respect to the new AIA procedures, they represent such a sea change in the patent law that their actual effect on the economy cannot be precisely known and should therefore be closely monitored. Seeing as these procedures were enacted largely to improve patent “quality” and rid the system of “bad” patents, it would be a shame to allow the system to operate unmonitored and unchanged while it risks throwing the baby out with the bathwater.

Overall, the patent system should once again be carefully looked at and its incentives fully embraced and strengthened. Its spurs should be vigorously sharpened to drive innovation and economic growth, allowing the U.S. to maintain its position as the world leader in those areas.

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