Week 6: Patents and Policy

patents and policy

Week 6: Patents and Policy

“Patentable Subject Matter … Natural Phenomena Subject Matter Limitation … Abstract Ideas Subject Matter Limitation … Patent Policy”
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  • Week 6: Patents and Policy > Patentable Subject Matter > The Subject Matter Requirement
  • Week 6: Patents and Policy > Natural Phenomena Subject Matter Limitation > Natural Phenomena Restriction on Subject Matter
  • Week 6: Patents and Policy > Natural Phenomena Subject Matter Limitation > Limitations on Naturally Occurring Subject Matter
  • Week 6: Patents and Policy > Abstract Ideas Subject Matter Limitation > Abstract Ideas Subject Matter Limitation
  • Week 6: Patents and Policy > Abstract Ideas Subject Matter Limitation > Limitations on Business Method Patents
  • Week 6: Patents and Policy > Abstract Ideas Subject Matter Limitation > The Alice case
  • Week 6: Patents and Policy > Patent Policy > Ongoing Questions about Subject Matter Limitations

Week 6: Patents and Policy > Patentable Subject Matter > The Subject Matter Requirement 

  • There is a requirement in the patent law that all inventions be useful.
  • Basically the patentee has to assert some real-world use for his or her invention in order to get a patent.
  • There’s not a lot of testing, no confirmation of that by the Patent Office.
  • Other than that, you can really claim any use you want for your invention and overcome the utility requirement.
  • The more important and the more stringent requirement and the one we’re going to talk about in this lecture is found in the words “process, machine, manufacture, or composition of matter.
  • This is the list of subject matters for which patents are allowed.
  • Over time, over about 150 years, the Supreme Court in particular has developed a set of categories of subject matter limitations based on this language.
  • So what it has done is taken the language of Section 101 and its precursor sections over the years and divided that really into three different limitations on what can’t be patented.
  • You can’t patent the concept of gravity or the concept of relativity.
  • What comes up more often are the categories of natural phenomena which is typically found in living organisms, whether those are patentable or not, and then naturally occurring products.
  • The cases we’ll be looking at there relate to primarily DNA patents, genetic material and so forth.
  • The third category of subject matter limitations and the third area in which you can’t get a patent is known as the abstract ideas category.
  • The question there in that category is, how far do these mathematical algorithm exceptions to the patent statute go? Can computer software, for example, be patented, because really what computer software is is just an algorithmic set of instructions, often using math for a general purpose computer.
  • Business models, which have undergone a lot of patenting in recent decades, is another area in which abstract ideas exception comes to bear, as we’ll find out when we talk about that in more detail.
  • So the other thing I want to flag for you right at the outset is that if you read the terms of the Section 101 statute, in particular the list of categories in which you are allowed to patent, a process, a machine, a manufacture, or a composition of matter, that is an extraordinarily broad set of categories in which you can patent.
  • What this means is there isn’t clear support in the statutory language itself for the limits on subject matter that we just covered, those three categories of limitation.
  • This particular part of the patent law is a clear and unambiguous area where the courts, in particular the Supreme Court, has decided that what it’s going to do is exert its authority to engage in policy-making, a balancing between various competing interests surrounding a set of policies, and weigh in on that in a way that looks very much like legislative action or administrative rule-making.
  • That is interesting because not only is this an area where there’s not a lot of clear statutory justification for it, but the other standards for validity, the ones that do have textual support in the statute, typically operate on an invention-by-invention basis.
  • So if I have a patent for a new Frisbee, for example, that’s going to be tested as to whether it’s novel on the basis of that invention itself.
  • I’m going to ask the question, is it new? Is it non-obvious? Have I fully described it? And the answers will depend on the individual invention that I’ve made, whether my Frisbee is good enough, whether it’s new enough, non-obvious enough, and whether I’ve described it fully.
  • It just means that there’s no patents available for them and the incentive effects of the patent system are not available.
  • So by design, the way the courts have set these categories and these restrictions up are to be very flexible and adaptable.
  • So any rules, any policies, any attempts to sort of carve out what is and isn’t allowed is going to be very difficult to make stick as technologies change.
  • For that reason, this is probably the area of patent law where the courts, in particular the Supreme Court, has struggled more than any other to develop clear, concise, consistent rules.
  • Flexible and adaptable can also in many cases mean unclear and uncertain and subject to lots of controversy.

Week 6: Patents and Policy > Natural Phenomena Subject Matter Limitation > Natural Phenomena Restriction on Subject Matter

  • So the key case here and the seminal case is from 1980, and it’s the Diamond versus Chakrabarty case.
  • This has applications across a number of different fields, but in particular one of the key applications for this bacterial organism was that it would effectively eat petroleum, eat oil.
  • The first category was the process of producing the bacterial organism.
  • The bacterial organism itself was patented.
  • So the patent examiner here allowed Claims 1 and 2, the categories of 1 and 2.
  • The process of creating the organism and the process of using it were both found to be patentable at the outset.
  • The examiner rejected Claim number 3 under the grounds that Claim 3 was directed to a living organism.
  • The examiner and the Patent Office, as it went through the appeals process, determined that in its view, living things were simply not patentable, that there was no patentability for living things.
  • So the first question to ask yourself and to note here is that because Chakrabarty was able to easily get Claims 1 and Claims 2, the process of producing it and the method of using it, he was already going to get a fair amount of protection for the underlying invention.
  • Again, that doesn’t necessarily protect him from people who want to use the organism for something else.
  • He invented something that was brand new and the patent system should acknowledge that and allow him get the patent for Claim 3, which would allow him to get coverage, to get protection over the bacterial organism no matter how it was made or how it was used.
  • A bacterial organism clearly falls within the composition of matter category.
  • Chakrabarty argues to the Supreme Court and says, my invention is a composition of matter.
  • Yet the examiner rejected the claim on the grounds that the natural phenomena exception that had been in the law for several decades prevented patenting of anything that was living.
  • So what the Supreme Court does in Chakrabarty is creates a distinction between on the one hand naturally occurring organisms, and on the other hand non-naturally occurring organisms, man-made organisms.
  • The court says those latter categories, the man-made, the entirely new categories, are patentable, whereas the naturally occurring organisms are unpatentable.
  • Why shouldn’t the result be the same under the patent law? And this is an ongoing puzzle in the categories of exclusion for subject matter, which is why we decided as a court, as a society, that we think discoveries are not patentable, whereas inventions are.
  • One is we want to encourage people to create new knowledge and not merely exploit or compile pre-existing knowledge so that wherever possible we want to put incentives in place in the patent system that are going to encourage people to on the margin invest in new technologies, new products, entirely new subject matter, rather than finding old subject matter and maybe coming up with new uses, for example, but nonetheless finding old subject matter.
  • The other reason I think that we have this distinction in the law is that we fear that even though we may think that many of these discoveries in these areas, that these discoveries of naturally occurring products are new, that they are indeed novel under for example Section 102 or non-obvious under Section 103, it might be that there are particular areas of technology, and biology might be one of them, where we just aren’t sure.
  • So we use these categorical subject matter exclusions to sort of help us in this area, to make sure that we’re getting the right benefit for society in exchange for the patent grant.

Week 6: Patents and Policy > Natural Phenomena Subject Matter Limitation > Limitations on Naturally Occurring Subject Matter 

  • The claim in that case was to, what was described as an isolated and purified version of that naturally occurring product.
  • The Court, in Parke-Davis, finds this particular patent claim to be patentable.
  • The reasoning here was that it was not a natural phenomena, and not subject to the restriction that you can’t patent it because it was isolated and purified.
  • Because you would not find isolated and purified versions of insulin in the wild, the only way you would do that would be by extracting it, isolating it, and purifying it through some sort of process.
  • With the Parke-Davis holding, which is that isolated and purified versions of things, even things that are natural, are as far as the law is concerned, non-natural, man-made, and patentable.
  • Because as long as you claim it as an isolated and purified version, a version that you’ve extracted, or that you’ve chemically treated, or that you changed in some minor trivial way, then you have something that is, under Parke-Davis and Chakrabarty, a new thing, a man-made thing, and patentable.
  • So this is really the foundation of patenting in much of the biological industry and much of the biotech industry.
  • So the biotech industry during this very time period, where patenting in this area becomes easy, you can patent almost anything in this area during this time frame.
  • At the same time, there’s a lot of backlash, a lot of criticism, that what we are doing by allowing all of these patents is patenting nature.
  • Not only patenting nature, but over-patenting nature.
  • All of these things are being patented, propertized, which, ultimately, can lead to less innovation if it’s too hard for people later on to determine who owns the rights, or to get a license, or to get permission, or to pay the fees, or whatever it is.
  • By the early 2010s there’s tens of thousands of patents, in particular, on segments of human DNA.
  • Patenting of genetic patent material had become so routine by this time that in many cases you could get computers to simulate, and, of course, identify the different targets, the genetic targets you were looking for.
  • Then the computers would be tasks to, in some cases, write the actual patent applications, because they were so routine, so wrote to patent an isolated and purified version of these materials.
  • So that’s how the genetic patenting boom occurs is the combination of Chakrabarty, Parke-Davis, which says that isolated and purified, even natural products, even living products, even parts of organisms are patentable under the patent law.
  • So what happens here is that Myriad, a for-profit company, obtains a patent on two particular genes, known as the BRCA1 and BRCA2 genes.
  • Obviously, wanted these patents for this very reason.
  • Because Myriad’s business model is, and was, to sell testing.
  • Now because of the patent, of course, what the patent does is it gives Myriad market power over these particular genes.
  • Since, at this time, these genes were the ones that were, particularly, found by scientific research to be associated with cancer, by having the patent, Myriad was able to be the sole provider of testing for screening for these genes.
  • The numbers seem to vary some, but there were arguments made that instead of about $200 or $250 to get such a test, Myriad could sell them, and would often sell them for up to $2,000.
  • Now Myriad responded by saying, if people had a demonstrated need, they would lower the price, and so forth, But it was definitely the case that the cost was much higher and the testing was much less available than would have been the case if the patent had not been granted at all.
  • So what AMP- Association of Molecular Pathologies- along with a number of other academic public interests and individual physicians, got together and they sued Myriad for a declaratory judgment that the patent claims that Myriad was asserting, that they had in this patent, was invalid.
  • That these claims to the BRCA1 and BRCA2 genes were unpatentable because they were natural phenomena, as that term has been understood in the patent law, and invalid entirely and unavailable to Myriad for patenting.
  • What the law requires is that you claim an isolated and purified version of whatever it is the naturally occurring product is.
  • An isolated DNA coding, which has the amino acid sequence and then a sequence drawn there, typical of BRCA1.
  • So what Myriad says is that these isolated DNA components- because in the labs you essentially break the chemical bonds at the ends of the genetic sequence and pull the sequence of interest itself out of the broader genome.
  • That’s an isolated and purified version of a naturally occurring good under Chakrabarty and Parke-Davis, that’s patentable.
  • So the Supreme Court uses this distinction to find that the patent’s claims, that most of the claims are invalid.
  • What the Court says is that Myriad’s invention here for the isolated DNA sequences are really different, very different than Chakrabarty’s.
  • Here, the Court says the Myriad inventions, the DNA sequences of the BRCA1 and BRCA2 genes, they don’t do anything other than simply code for what it does in the body.
  • That’s why Myriad wants it, right? The reason Myriad wants the patent on these particular genes is not because they have different characteristics from what occurs in the body.
  • That’s why they’re valuable to Myriad. And the Court says that’s the very reason that these patent claims are not allowable under the law is that they are not different than what are found in nature.
  • If what occurs is then your reduced form cDNA occurs naturally anyway, that then you’re likely to be invalid for exactly the same reasons that the Court found, the isolated DNA of Myriad’s invalid as well.
  • Now, clearly, the Parke-Davis isolated and purified distinction is not enough after the Myriad case.
  • If there’s anything that the Myriad case actually did, it was cast serious doubt on the Parke-Davis distinction between isolated and purified and non-isolated and purified.
  • So even if I take different kinds of DNA and mix them together in sort of a hybrid, that appears under the Myriad case to also not be patentable because then, the question would be whether this mixture creates what is described as distinct characteristics, something different, such as what the Chakrabarty innovation was, where you created an organism that was very different than what had come before.
  • Because one of the key things about the Myriad case was that the difference between the cDNA and the isolated DNA was functionally zero.
  • So one of the things to ask yourself, and going forward I think one of the questions that the courts struggle with, and are going to continue to struggle with, isn’t the rule of Myriad just a form of novelty? If the real test is whether something is truly man-made or not man-made, that sounds a lot like the basic novelty inquiry into whether something is new or not new.
  • This is the trouble that the courts are going to have going forward, is where does the Section 101 inquiry, this inquiry into subject matter limitations stop, and then, the analysis of the individual patent claim under novelty, not obvious, and so forth start?

Week 6: Patents and Policy > Abstract Ideas Subject Matter Limitation > Abstract Ideas Subject Matter Limitation

  • In the ’70s, the Supreme Court was particularly active in this area of abstract ideas, in cases titled Gottschalk versus Benson, and Diamond versus Diehr.
  • The Diamond versus Diehr case in 1980 was, in some senses, a real turning point in the jurisprudence of this area.
  • So this claim not only included this mathematical equation, but also included a number of pieces of hardware as part of the analysis, including a thermocouple- basically a thermometer- in the system to determine when the rubber was cured and the product could be taken out of the mold and used.
  • They don’t take another case involving the abstract ideas limitation of subject matter until the Bilski case in 2013.
  • So in the in re Alappat case, the technology was an oscilloscope that used anti-aliasing algorithms in order to smoothly display a curve on the screen of an oscilloscope.
  • How do you smooth a curve to make it pleasing to an eye using the turning on and off of pixels on a screen? The court says that was patentable because, just like the Diamond versus Diehr case, it was an application of a machine that used a algorithm at its core.
  • The court expands that when it moves on to a couple of cases in the late 90s. One is State Street Bank, and the other is the AT&T versus Excel case.
  • Both of these cases, these were pure software inventions.
  • The State Street Bank case was a way of accounting for mutual fund profits and losses, using what was described as a particular accounting system- a hub and spoke accounting system.
  • Again because, although it’s abstract in some sense, it was applied to a particular area, had a real concrete and tangible result.
  • In the Bilski case, the Supreme Court re-enters the field of the abstract ideas area, and finds patent claims un-patentable.
  • Then in the Alice case- more recently, just last summer, summer 2014- the Supreme Court revisits the area yet again, and finds another set of patent claims un-patentable.
  • During- from the mid ’80s or so all the way through about 2010, 2011, you saw a great expansion of the areas in which you could patent, and essentially the elimination- to most extent- of the restrictions on patentability for abstract ideas.
  • Now we’re in a new phase where the pendulum has swung back again to something more akin to the ’70s and ’80s. And the question is, whether it’s going to go all the way back to those Gottschalk versus Benson years, or whether it’s going to stop somewhere short of that.

Week 6: Patents and Policy > Abstract Ideas Subject Matter Limitation > Limitations on Business Method Patents

  • So the Supreme Court seeing that the Federal Circuit was having trouble dealing with this, and wanting to get back, I assume, into the area of patent law, and in particular the subject matter restrictions abstract ideas, takes the case to answer the question of whether or not the Bilski claims are patentable, and even more importantly, whether or not the Federal Circuit has it right in terms of the machine or transformation requirement being the way that you test for abstract ideas.
  • What happened at the Supreme Court was basically that the court fractured itself and was unable to make meaningful conclusions.
  • Many of the court also agreed that although Bilski’s claims were unpatentable, the way the Federal Circuit had analyzed them by requiring the machine or transformation test as the sole criteria for patentability in this area, that that was incorrect.
  • So those two holdings, that it’s unpatentable and that the machine or transformation test is not the exclusive test, had a majority of the Supreme Court and therefore are legally binding precedent.
  • The only other statement in the case that’s legally binding precedent is this idea that business methods are not categorically excluded from patentability, because one of the arguments that the patent office had made, and indeed many people who had filed briefs with the Supreme Court in this case had made, was that business methods themselves were unpatentable, that there was something different about methods of doing business that should be unpatentable, that they were somehow different from other types of algorithms and they should be categorically excluded from patentability.
  • What the Supreme Court does say, and has five votes for this statement, is that they are not in fact categorically excluded, although the language of Bilski at the Supreme Court in their opinion makes pretty clear that they don’t think there are a lot of patentable subject matter and business methods, but that nonetheless, it’s not a category that’s entirely excluded.
  • He had a long opinion where he described the history of the patent system and how methods of doing business had never been accepted as patentable inventions throughout the 200-year, 220-year history of the patent system, and therefore, because they’d only emerged recently as something that people were patenting, they should be excluded.
  • One, the court says that hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any Introductory Finance class.
  • I mean, when you say something is a fundamental economic practice and long prevalent, taught in any introductory economic class, that is a statement that suggests that what the court was thinking about is that what Bilski was doing was not truly new.
  • The second reason the court thought that the Bilski claims were unpatentable is that allowing patents on risk hedging would preempt the use of this approach in all fields and would effectively grant a monopoly over an abstract idea.
  • Again, going back to sort of the basic underlying quid pro quo of the patent system, the idea of the patent system is that society is giving you the right to have this patent, this right to exclude people in the marketplace, in exchange for society getting in return something from you, that thing usually being your disclosure, your efforts to commercialize your invention, and so forth.
  • After Bilski, because, although they had declared the claims unpatentable, the Supreme Court did not tell us anything about how to analyze these claims, and indeed were unable to even muster a majority for any clear statements about why these particular claims would be unpatentable.
  • Many courts and the PTO relied heavily on the machine or transformation test, even though the Bilski opinion in the Supreme Court actually said not to use that test, at least not to use it exclusively.
  • I think the fact that everybody was still using the machine or transformation test for a while- not everybody, but many cases- I think speaks a lot to how poorly the Supreme Court did at analyzing and explaining the reason that the Bilski claims were unpatentable.
  • Therefore there was no way for the courts and the PTO to address what many people were criticizing as an over breadth of patenting, an overabundance of patenting in the software area, because Bilski simply didn’t provide any tools to do so.
  • So those two things, that everybody was still using machine or transformation, or many people were, and that it really didn’t address some of the particularly controversial and challenging patents, that being software, and to some extent business methods, meant that the post-Bilski era was it was not particularly good in terms of determining what was and was not patentable.

Week 6: Patents and Policy > Abstract Ideas Subject Matter Limitation > The Alice case

  • So for this time, what the Court manages to do in Alice is, for the first time, really grapple with and try to reconcile and describe in its own terms how to distinguish among all of the cases that it’s done with respect to abstract ideas.
  • You may argue that it’s not a particularly coherent line between whether or not a computer is enough versus a thermocouple.
  • Again, they are both pretty generic hardware components that can be used for a variety of things.
  • It’s a little bit hard to see how introducing a thermometer into an otherwise unpatentable invention somehow converts it into patentability, in the same way that inserting a computer into an otherwise unpatentable algorithm somehow doesn’t render that patentable.
  • The Court seems to believe that the introduction of the thermometer in Diehr, the thermocouple, was enough to be inventive, to bring this into the realm of something more, something bigger, something better than simply a well known addition, as had happened in the other cases.
  • So does this mean that all software-based patent claims are invalid? In the aftermath of Alice, a lot of people are arguing that most software patents may well be invalid.
  • I think that’s relatively unclear at this point.
  • It’s going to take a decade or more to sort this out.
  • Software methods that are either new- for example, doing something that is not a fundamental economic practice, as in Alice and Bilski- will be patentable because they don’t even enter into step 1.
  • Second, even if they do something that the Court views is not new, is not innovative enough, then we still have the step 2 analysis of whether or not there’s an inventive application of something into the claims.
  • We don’t really know at all at this point what that something more will be.
  • Again, the only example we have out of 40 years of Supreme Court jurisprudence on this issue is the one thermocouple from the Diehr case as being the something more that meets the test for Alice step 2.
  • So it seems clear that there are things out there that will meet Alice step 2.
  • It might well be that the standard is not particularly high.
  • Because again, as I noted, thermocouples are nothing novel.
  • They weren’t even in the early 1980s when the Diamond versus Diehr case was argued.
  • So it can’t be that the standard is tremendously high.
  • It just has to be something that the courts believe are an inventive application of what would otherwise be a relatively straightforward mechanical addition to an unpatentable algorithm.

Week 6: Patents and Policy > Patent Policy > Ongoing Questions about Subject Matter Limitations

  • Find an analogy to something that the court has evaluated in prior cases and determined to have been an abstract idea.
  • Maybe going forward we need to think about step one as really just sort of a heightened novelty requirement for particular subject matter areas, for areas where there are methods, algorithms, intangible or less tangible inventions.
  • The lower courts and the PTO will be sorting through exactly the details, what falls within step one and if so, how much it takes to get outside of the exclusion going forward.
  • The ones that pertain to biological material, to natural products, to living things, and the ones that pertain to algorithmic conventions, abstract ideas, mathematical algorithms, methods, seem to have coalesced around a couple of ideas that the Supreme Court is mostly concerned with.
  • I think in the areas of biology, and to some extent in the areas of methods and algorithms, the court has serious concerns about whether these types of inventions are really new, notwithstanding whether they might technically meet section 102, 103, and so forth analyses.
  • The court seems to believe that there are particular areas of technology, maybe bio is one, maybe algorithms or methods is another, where we are likely to end up with patents that are simply too powerful for what the society gets in return.
  • The interesting thing about Alice is that the court seems to be there to be refining its approach to Section 101 and allowing that there might be categories or certain kinds of inventions that, although they fall within the lack of newness analysis, are nonetheless patentable because they do more.
  • I think it’s important to recognize that what the court is trying to do is fundamentally get at these questions, these major policy questions about what we do and don’t want to patent in our system.
  • If that’s the case though, in particular about newness, if that’s really what the concern is, how might these concerns be better and more coherently and more predictably be addressed on invention by invention basis? That instead of saying that an entire category of subject matter is off limits, would we be better off to just say each invention is analyzed on its own terms? And you have to meet novelty, you have to meet non-obviousness.
  • Instead of having this categorical subject matter restriction, that then requires us to argue about the boundaries of the subject matter, isn’t it better to maybe just go through and go invention by invention? This is something we’re going to be arguing about for a long time.
  • The other question is, is the court the right place to be doing this sort of policy analysis? I mean, above all, what Section 101 with the subject matter limitations are all about are these fundamental questions about what we want patented and what we don’t want patented.
  • You might argue that the Supreme Court, being a court with relatively limited access to testimony and forced to evaluate cases that come up to it rather than create its own record, is perhaps not the right body to be doing this sort of policy analysis.
  • That the type of delicate balancing that’s required between the public and the society, and the society and the inventor, is something that just has to be done by the courts.
  • That the courts are the only ones who are able to step back and to consider all of the factors involved.
  • If by setting up these frameworks, vague and difficult to apply though they are, what the Supreme Court has done is established a way for us as a society to determine what we do one patented and what we don’t.

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