Patent-Eligible Subject Matter Reform in the 116th Congress

Summary

The statutory definition of patent-eligible subject matter under Section 101 of the Patent Act has remained essentially unchanged for over two centuries. As a result, the scope of patentable subject matter—that is, the types of inventions that may be patented—has largely been left to the federal courts to develop through “common law”-like adjudication. In the 20th century, the U.S. Supreme Court established that three main types of discoveries are categorically patent-ineligible: laws of nature, natural phenomena, and abstract ideas.

Recent Supreme Court decisions have broadened the scope of these three judicial exceptions to patent-eligible subject matter. Over a five-year period, the Supreme Court rejected, as ineligible, patents on a business method for hedging price-fluctuation risk; a method for calibrating the dosage of a particular drug; isolated human DNA segments; and a method of mitigating settlement risk in financial transactions using a computer. These cases established a new two-step test, known as the Alice/Mayo framework, for determining whether a patent claims ineligible subject matter.

The first step of the Alice/Mayo test addresses whether the patent claims are “directed to” a law of nature, natural phenomenon, or abstract idea. If not, the invention is patentable. If the claims are directed to one of the ineligible categories, then the second step of the analysis asks whether the patent claims have an “inventive concept.” To have an inventive concept, the patent claim must contain elements that transform the nature of the claim into a patent-eligible application of the ineligible concept, so that the claim amounts, in practice, to something “significantly more” than a patent on the ineligible concept itself. If the invention fails the second step of Alice/Mayo, then it is patent-ineligible.

The Supreme Court’s decisions have been widely recognized to effect a significant change in the scope of patentable subject matter, restricting the sorts of inventions that are patentable in the United States. The Alice/Mayo test has been the subject of criticism, with some stakeholders arguing that the Alice/Mayo framework is vague and unpredictable, unduly restricts the scope of patentable subject matter, reduces incentives to invest and innovate, and harms American industry’s competitiveness. In particular, the Alice/Mayo test has created uncertainty in the computer technology and biotechnology industries as to whether innovations in medical diagnostics, personalized medicine, methods of treatment, computer software, and artificial intelligence are patent-eligible.

As a result, some patent law stakeholders, including academics, bar associations, industry representatives, judges, and former Patent and Trademark Office (PTO) officials, have called for the Supreme Court or Congress to act to change the law of patentable subject matter. However, other stakeholders defend the legal status quo, arguing that the Alice/Mayo framework provides an important tool for combating unmeritorious patent litigation, or that the revitalized limits on patentable subject matter have important benefits for innovation.

Recently, there have been several substantial administrative and legislative efforts to clarify or reform patent-eligible subject matter law. In January 2019, the PTO issued revised guidance to its patent examiners with the aim of clarifying and improving predictability in how PTO patent examiners make Section 101 determinations. In April and May of 2019, a bipartisan and bicameral group of Members released draft legislative proposals that would abrogate the Alice/Mayo framework and transform the law of Section 101 and related provisions of the Patent Act. Following a series of hearings in June 2019, many expect a bill to reform Section 101 to be introduced this fall.

These proposed changes could have significant effects as to the types of technologies that are patentable. The availability of patent rights, in turn, affects incentives to invest and innovate in particular fields, as well as consumer costs and public access to technological innovation. Understanding the legal background and context can aid Congress as it debates the legal and practical effects that legislative Section 101 reforms would have if enacted.