A bit over a month ago, I published the second post of this multi-post series and outlined the traditional patentable subject matter arena. Here I will discuss the recent revival of the patentable subject matter debate, starting with the courts.
Uncertainty Caused by the Courts
Within the past five years there has been four United States Supreme Court cases and at least four sets of guidelines promulgated by the United States Patent and Trade Office (“USPTO”) concerning patentable subject matter.
In a 2010 case, Bilski v. Kappos, the Supreme Court reviewed the patentability of a method of buying and selling commodities so to protect against (hedge) the risk of price fluctuations. The debate centered around two claims: independent Claim 1 which described the method of hedging, and dependent Claim 4 which reduced the concepts of Claim 1 to a mathematical formula. The Court concluded that the claimed method attempted to claim an unpatentable subject matter – an abstract idea – and therefore, the claimed business method was unpatentable. In reaching its decision the Court failed to explain why the hedging method was an abstract
idea, and in disagreeing with the United States Court of Appeals for the Federal Circuit’s (“Federal Circuit”) exclusive use of a machine-or-transformation test the Court failed to provide a definitive test for determining what constitutes patentable subject matter.
In a 2012 case, Mayo Collaborative Services v. Prometheus Labs., Inc., the Supreme Court reviewed the patentability of a method claim for administering a drug, determining patient’s response, and changing the drug treatment based on the patient’s response. The Court again rejected the Federal Circuit’s exclusive use of the traditional machine or transformation. The Court first found that the claimed method heavily
relied upon laws of nature. The Court then reviewed the claimed method to determine whether the claimed process included “additional features that provide[d] practical assurance[s] that the [claimed] process [wa]s more than a drafting effort designed to monopolize the law of nature itself. That is, the Court asked if the claimed processes “transformed those unpatentable natural laws into patent eligible application of those laws.” The Court held the “steps add[ed] nothing of significance to the natural laws themselves,” and therefore, the claimed method was unpatentable.
In a 2013 case, Ass’n for Molecular Pathology v. Myraid Genetics, Inc., the Supreme Court reviewed the patentability of an isolated DNA segment and its complementary DNA (cDNA). Myraid identified the precise location and sequence of the BRCA1 and BRCA2 genes. This was a huge medical breakthrough, as mutations in the sequence at either location can greatly increase a woman’s risk for breast and ovarian cancer. In the instance of the DNA coding claim, the court determined “whether the act of isolating DNA . . . is an inventive act that entitles the individual who first isolates it to a patent.” Because Myraid’s claims did not address any potential chemical changes or other results from the act of isolating the DNA, but rather, focused solely on the genetic information itself – that is, the sequence of the adenine (A), guanine (G), thymine (T), and cytosine (C) nucleotides – the Court held that these claims were unpatentable.
The Court reasoned that the patent system was designed to be used to promote innovation
not discovery, regardless of how impressive and important any discovery may be. Nonetheless, the Court held that scientific alteration of the genetic code may be considered patentable. However, the Court failed to provide or suggest any categorizing tests. Bewilderment persisted when the court distinguished Myraid’s claims characterizing the isolated DNA code and Myraid’s claims characterizing the cDNA. The Court recognized that the creation of the cDNA sequence “result[ed] in an exons-only molecule that is not naturally occurring.” Following from such, the Court held that cDNA was not to be considered a product of nature, although dictated by nature, and was patent eligible.
In a 2014 case, Alice Corp. v. CLS Bank Int’l, the Supreme Court reviewed the patentability of a “computer-implemented scheme for mitigating ‘settlement risk’ . . . by using a third-party intermediary.” Applying the two part test set-forth in Mayo to abstract ideas, the Court considered first defined the subject matter of the questioned claims and held that the claims were drawn to the patent-ineligible abstract idea of intermediate settlement, which is an essential “building block of the modern economy.” Secondly, the Court examined each element of the questioned claim “to determine whether it contain[ed] an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application,” and ensure that “‘the claim is more than a drafting effort designed to monopolize the abstract idea.’” The Court unanimously held that the claims provided for nothing more than applying an abstract idea using an “unspecified, generic computer.” The Court concluded that such does not add significantly more so to “transform an abstract idea into a patent-eligible invention.” However, the Court again failed to provide guidance for determining what constitutes an abstract idea.
In each of the recent cases, the Supreme Court expressed “a concern that patent law not inhibit further discovery by improperly tying up the future use of laws of nature.” The patent system was originally implemented as a means to “promote the Progress of Science and useful Arts.” However, at the same time that the patent system works to incentivize innovation (largely in part because of granted monopoly rights), there is a risk that patent grants may disproportionately tie-up use of the process, machine, manufacture, or composition of matter and impede further innovation. For instance, in Myraid the Court believed that Myraid’s DNA coding claim, if valid, would have given Myraid “the exclusive right to isolate an individual’s BRCA1 and BRCA2 genes.” Thus, the Court generally views the patent system as a two-edged sword. On the one hand, the patent system prompts innovation by providing a means in which to obtain a return on investment through the granting of monopoly rights. On the other hand, the patent system impedes innovation by eliminating the flow of information and generally raising the price of innovation and business.
The Court erred in utilizing this rationale in any and all fashions. The Court had the ability and option to craft opinions reaching similar conclusions without bewildering the patent system for whole industries, namely the biotechnology and software industries. The Court failed to obtain a through and diverse understanding of the various ways the patent system incentivizes innovation. In fearing the second edge of the sword, the Court crafted opinions that have resulted in wide-spread confusion and uncertainty, which necessarily affects the effectiveness and stability of the patent system’s incentivizing scheme.
The confusion and uncertainty is exacerbated by the USPTO’s interpretation of the recent Supreme Court cases – by the agency dedicated to implementing and monitoring the patent system. The USPTO has released a number of documents attempting to provide guidance on the topic of patentable subject matter. The USPTO has released at least one specific interim guidance document after each of the principal Supreme Court cases. The last of these guidance documents was the July 2015 Update: Subject Matter Eligibility. The USPTO has attempted with each publication to provide greater clarity by defining, principally through examples, the understood scope of patentable subject matter. The recent USPTO update is an improvement, but there are many areas that need further clarification and developments. Notably, the recent update is criticized for too broadly interpreting the case law and for failing to provide a “clear methodology for identifying abstract ideas.” Moreover, with the promulgation of each new guidance document, the biotechnology industry as a whole has observed an increase in claim rejections.
The USPTO with each update has taken steps to respond to and follow the example of the Federal Circuit and its interpretation and application of the recent Supreme Court cases. However, the Federal Circuit continues itself to experience difficulties interpreting and applying the perplexing binding precedence. For instances, the Supreme Court twice rejected the Federal Circuit’s interpretation in Mayo and its predecessors. Furthermore, the Federal Circuit’s recent holding in Ariosa Diagnostics, Inc. v. Sequenom, Inc. has received significant criticism. The Federal Circuit considered the patentability of “certain methods using cffDNA.” The method at issue in Ariosa provided a revolutionary means of diagnosing prenatal fetal DNA, which minimized, if not eliminated, risks associated with the traditional methods. Nonetheless, the Federal Circuit held that the method “begins and ends with a natural phenomenon.” As such, the cffDNA method claims were held invalid for attempting to claim unpatentable subject matter.
The Federal Circuit reached its conclusion despite the Supreme Court’s acknowledgement in Ass’n for Molecular Pathology v. Myraid Genetics, Inc. that Myraid could certainly claim application of its knowledge of the isolated BRCA 1 and BRCA 2 genes even though it could not claim the genes itself. Similarly, in Diamond v. Diehr, the Supreme Court held that “a new combination of steps in a process may be patentable even though all the constituents of the combinations were well known and in common use before the combination was made.”
The Honorable Richard Linn, in a lively concurrence to Arisoa, explained the impressive advantages of the disputed invention. The “invention” received high praises in the industry, it was a first of its kind invention, and the industry seemingly taught away from
the disputed invention as doctors previously discarded the maternal plasma. In accordance with the Supreme Court’s precedence, Sequenom should have been able to obtain a patent on the application of its knowledge of the cffDNA and the application may include known constituents. The Federal Circuit fails to acknowledge all of the Supreme Court’s precedence and holds simply that because the patent claims “begins and ends with a naturally occurring phenomenon,” the claims are ineligible. Judge Linn recognizes the limited scope of the Federal Circuit’s review: “[b]ut for the sweeping language in the Supreme Court’s Mayo opinion, [there is] no reason, in policy or statute, why this breakthrough invention should be deemed patent ineligible.” The Federal Circuit erred in reading Mayo singularly, and resultantly, forcing a conclusion that is in clear opposition to the totality of the Supreme Court’s precedence. The Federal Circuit recently denied a request for an en banc review of the Ariosa.
Furthering the uncertainty is the USPTO’s lack of substantive rulemaking authority. The lack of substantive rulemaking authority significantly impacts how the agency defines patentable subject matter. The Federal has repeatedly held that the Patent Act of 1952 provides the USPTO only procedural rulemaking authority. Substantive rulemaking allows agencies to legislate through the rulemaking process. Rules promulgated by the substantive rulemaking process have the force and effect of law. Conversely, procedural rulemaking provides agencies only the ability to implement regulatory standards. Agencies having only procedural rulemaking have the singular ability to set forth the mode in which it will complete its proscribed functions. Because the USPTO has only procedural rulemaking authority the courts, specifically, the federal circuit plays an infinitely greater role in interpreting and applying patent statutes. The USPTO has no choice but to aggravate the erroneous interpretations of the federal circuit, driven by the court’s misinterpretation and understanding of the rationales of the patent systems, until the point in time that the Supreme Court provides specific guidance – an event unlikely in review of the Court’s precedence. In the meantime, uncertainty increases and the patent system is undermined.
Uncertainty Caused by Legislative Reforms
The patentable subject matter debate is not the only factor afflicting the patent system and not the only cause of growing uncertainty. The Leahy-Smith American Invents Act (AIA), enacted September 16, 2011, provided the “most significant reform of the Patent Act since 1952.” The AIA introduced an array of inexpensive ways to challenge a patent’s validity. For instance, the AIA established an inter partes review system comprising a trial-like proceeding before a newly established Patent Trial and Appeals Board. Since establishment of the inter partes review system, “approximately [sixty-six] percent of cumulative claims have been invalidated and [thirteen] percent have been cancelled by the patent owner.” The processes introduced by the AIA have rapidly shaken the confidence of the system – there is no longer confidence that once a patent issues it is valid. These sentiments and the resulting environment represent a critical problem and reflect negatively on the system’s ability to incentivize innovation. “If a property right can easily be taken away, nobody will risk investing in it.”
Furthermore, the Court has recently held that the narrower reasonable certainty standard should be applied in definiteness determinations. This is in direct opposition to the traditional “not amenable to construction or was insolubly ambiguous” standard applied by the Federal Circuit. Moreover, the Supreme Court’s holdings in both Octane Fitness, LLC v. Icons Health & Fitness, Inc. and Highmark Inc. v. Allcare Health Mgmt. Sys. “provide for more expansive authority to the district courts, and effectively urge them to more liberally award fees in cases where the patent or infringement claims, or both, are weak.”
Both Congress, through enactment of the AIA and subsequent legislation, and the Supreme Court, through its patentable case law, are significantly affecting the shape of the traditional patent system, creating uncertainty by way of unfamiliarity. The growing uncertainty in so many areas of the patent system challenges the fundamental goal of the patent system. The uncertainty undermines the effects of the patent system as a principal means of incentivizing innovation.