By T.J. Cole
If you are involved in the software industry or have clients who are, you are very likely aware of the problem: in mid-2014, the U.S. Supreme Court issued its decision in Alice Corp. v. CLS Bank International, 573 U.S. 208, 134 S. Ct. 2347 (2014), and suddenly an entire industry that depends on innovation was left wondering whether the fruits of its research and development spending could be protected with patents. The Alice decision dealt with a section of the U.S. patent law (35 U.S.C. § 101) that defines what types of things are eligible for patent protection. Patent eligibility defines whether an invention can be protected by a patent, regardless of the usual questions of whether the invention is novel and nonobvious in view of prior inventions. Patent eligibility is therefore the gatekeeper to the patent application process. If your invention is not patent-eligible, then it is irrelevant how new and different it is — it simply is not the kind of thing that patents were made to protect.
I have followed the aftermath of the Alice decision closely. From enthusiastic startups to multinational companies, clients are concerned they will not be able to patent innovations that have resulted from the investment of significant sums of R&D. Without a patent, there is nothing to prevent their competitors from riding on their coattails. This obviously puts the party who funded the R&D at a significant disadvantage in the marketplace vis-à-vis the freeloader.
So what went wrong in the Alice decision, and why are so many people — patent attorneys and technical innovators alike — concerned? The problem originates with the fact that the current version of § 101, passed in 1952 (and well before the rise of the software industry) is only a single sentence: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” Other than listing the four broad categories, § 101 doesn’t really define the boundary lines between inventions that are patent-eligible and those that are not.
Over the intervening decades, the U.S. Supreme Court has put some flesh on the bones as it struggled to apply the 1950s patent law to emerging and ever more nuanced forms of innovation, particularly in the software and biotechnology arenas. Supreme Court precedent provides three exceptions to these enumerated categories of patent-eligible subject matter: laws of nature, physical phenomena and abstract ideas. It’s this last exception that was dealt with in Alice and is causing so much distress.
The invention at issue in Alice involved a computerized scheme for mitigating settlement risk. The court found that this invention was not patent-eligible as it was an abstract idea, and abstract ideas must have additional elements capable of rendering them significantly more than the abstract ideas themselves in order to be patent-eligible. According to the court, the mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.
Beyond that, the court did not provide much guidance on what might qualify as “significantly more” than an abstract idea. As a result, patent examiners at the U.S. Patent and Trademark Office (USPTO) have been rejecting patent applications under § 101, and issued patents have been found to be invalid under § 101 during litigation in the federal courts and during post-issuance proceedings before the USPTO, all at an alarming rate. It seems to many observers that, absent clear guidance from the Supreme Court, these tribunals are erring on the side of caution. The law of patent eligibility is simply too vague at this point to offer meaningful guidance to inventors, software companies, patent examiners and judges.
All along, my advice to clients has been to stay the course, with the view that Congress will fix the problem. When it often takes three to five years to secure a patent, you don’t want to empty your patent application pipeline if you think the law will change in the near term. And now it is looking increasingly likely that Congress will step in and bring order to the current chaos. Congress has the power to pass legislation (subject to Constitutional limits) to make their desires clear when they don’t agree with the way the current laws are being interpreted by the courts.
This is just what Congress is teeing up to do. In February, the Senate Judiciary Intellectual Property Subcommittee was reinstated after being dissolved in 2007. This subcommittee is led by Sen. Thom Tillis (R-N.C.) and Sen. Chris Coons (D-Del). The subcommittee invited industry stakeholders such as Apple, Google, IBM and Amazon, as well as trade groups representing intellectual property owners, to closed-door hearings on Capitol Hill in December, February and March to discuss how to rewrite § 101 to address their concerns over the current state of the patent eligibility question.
An analogous subcommittee on the House side, led by Rep. Hank Johnson (D-Ga.), is planning a series of hearings in the coming months, and Rep. Johnson said he would work with his Senate counterparts on legislation. Rep. Doug Collins (R-Ga.), the ranking member of the House Judiciary Committee, also attended the senators’ roundtable in February, where he voiced his interest in bipartisan legislative action on Section 101, according to published reports.
Sen. Tillis and Sen. Coons have scheduled a fourth closed-door meeting with industry representatives for Wednesday, where they will present a skeletal outline for legislation to revamp § 101. I must say that it has been interesting watching our legislative branch gear up to do what they were designed to do: act as a check on the judicial branch and try to pass legislation that provides more clarity when they believe the courts are not arriving at the desired conclusions when interpreting the current law. Let’s hope that, for the sake of American innovation, they get it right.•
• T.J. Cole is a partner at Ice Miller LLP and an adjunct professor at Indiana University Robert H. McKinney School of Law. Opinions expressed are those of the author.