Analysis: USPTO's section 101 guidance puts onus on Congress

The question of what is and isn’t patentable is fundamental to the running of a functional IP system. So fundamental that, looking back on the past decade in US patent law, it’s remarkable the extent to which this has been contested and shrouded in uncertainty.

In 2012 and 2014, the US Supreme Court threw a proverbial grenade into the US patent system with its rulings in Mayo v Prometheus Laboratories and Alice v CLS Bank. Those cases dealt with a part of US patent law known as section 101, which states that “laws of nature, natural phenomena, and abstract ideas” are not eligible for patent protection.

“In applying the section 101 exception, this court must distinguish patents that claim the ‘building blocks’ of human ingenuity, which are ineligible for patent protection, from those that integrate the building blocks into something more,”  wrote Justice Clarence Thomas on behalf of the Supreme Court majority in Alice.

How do you distinguish the building blocks, like maths, physics, and chemistry, from an invention that uses them to create “something more”? Without wanting to oversimplify the issue, the US patent system has tied itself in knots the past decade trying to answer this question.

Drawing the line between the building blocks of physics and natural laws, and the “inventive step” required under US patent law has become more of an art than a science. That’s where the potential for inconsistency and cloudy thinking lies.

The USPTO steps in

A new report from the US Patent and Trademark Office (USPTO) illustrates the damage caused in the wake of Alice/Mayo, but also points to a way out of the quagmire. The report, published last month, assesses the impact of the USPTO’s  January 2019 patent-eligibility guidance and a subsequent update the following October.

The January 2019 document (2019 PEG) offered new guidance advising USPTO examiners on how to interpret the law of what is and isn’t patentable. It contained 46 examples of patent applications that would either be approved or rejected under section 101. The intention, as USPTO director  Andrei Iancu told WIPR last November, was to get the “right result in a more consistent manner”.

The statistics tell us that 2019 PEG achieved exactly that. In the 18 months following Alice, the likelihood of an “Alice-affected technology” being rejected as ineligible for a patent under section 101 increased by 31%. Many inventions that previously were patentable suddenly weren’t.

Perhaps even worse, the unpredictability of what decision you were going to get from the USPTO increased dramatically as well. In the same time period, the “variability” in examiner’s patent-eligibility decisions increased by 26%. It was harder than ever to understand what could be protected by a patent.

After the release of 2019 PEG, the rate of section 101 rejections at the USPTO fell sharply by 10%. After almost 18 months, rejections have balanced out at just under 20%, considerably lower than in the period following Alice.

Linda Thayer, patent expert and partner at  Finnegan in Boston, says the figures reflect what practitioners experienced themselves in the period following 2019 PEG. And for patent lawyers like her, it’s a welcome change.

“We sunk into a morass of uncertainty post-Alice, and it’s only in the past few years that we’ve been able to claw ourselves out,” Thayer says.

2019 PEG has injected certainty into the patent application process. Now, Thayer says, it’s common for attorneys to draft patent applications in line with the 46 examples contained in the document so they have something to compare it to during examination.

Congress holds the key

So can we close the book on the Alice era of patent confusion? Not quite—2019 PEG tells us with greater certainty what the USPTO is going to do when you file a patent application, but it isn’t binding on courts.

Appeals from USPTO decisions, and from patent infringement litigation, end up at the US Court of Appeals for the Federal Circuit, which does not have to follow the USPTO’s guidance on how to interpret Alice and section 101.

Ultimately, there are only two institutions which can provide absolute certainty on patent eligibility: the Supreme Court, and Congress.

The Supreme Court appears to have  no intention of revisiting the issue, consistently refusing to review cases dealing with patent-eligibility. Its refusal to do so is “pretty shocking”, says Dan Rose, senior counsel at  Foley & Lardner, and an attorney specialising in software patents.

“The Supreme Court would rather leave it to the Federal Circuit, because they have judges who have scientific and technical backgrounds, or wait for Congress to take action,” Rose argues.

In effect, whatever way the Federal Circuit rules on patent eligibility cases is final, because the Supreme Court simply isn’t interested in hearing appeals on the issue. But the Federal Circuit still has to grapple with Alice, which is where the uncertainty stems from in the first place.

That only leaves lawmakers with the power to settle the question. “The next step would be for Congress to codify some of the guidance that the USPTO is operating under,” says Thayer, a move Rose agrees would “absolutely make sense”. But in an election year, the chances of it happening any time soon are slim.

There have been legislative efforts to reform section 101, most notably in the form of a bill put forward last May by US senators including Thom Tillis and Chris Coons. But this has since stalled, and an imminent push to get any legislation over the line this year seems unlikely.

Then, of course, there’s the question of along what lines should the patent law be rewritten, and who would benefit. In Thayer’s view, the competing interests are mostly sectoral. “Big Pharma wants a loosening of section 101,” she says, because diagnostic methods were one of the biggest victims of Alice.

Big tech companies on the other hand, are happier with the status quo because it means fewer patents to be later used against them in infringement actions over their new products.

In Thayer’s view, concerns over malicious infringement actions is partly what led to the Alice mess in the first place. “Courts tried to use section 101 as a brake on troll litigation when that isn’t really it’s correct purpose,” she says.

In her view, “we should return to the intent of section 101, which is for it to be a coarse filter” on what is and isn’t patentable.

That’s the direction the USPTO is going in with its own guidance, and it could be a model for Congress to follow.

Beyond what’s been achieved already, there probably isn’t much more the USPTO can do. And with the Supreme Court unwilling to revisit the issue, that puts the ball for a final decision on section 101 firmly in Congress’ court.

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