Thursday, 15 February 2018

Federal Circuit Pushes Back on U.S. Supreme Court’s Alice Decision on Procedure

In a pair of interesting software-related cases, the U.S. Court of Appeals for the Federal Circuit appears to push back on one of the supposed goals of the U.S. Supreme Court’s Alice v. CLS Bank International decision.  In Alice, the U.S. Supreme Court clarified and restated the Mayo Collaborative Services v. Prometheus decision’s test concerning patent eligible subject matter.  In doing so, the Supreme Court started a new era of U.S. patent law which made patent eligible subject matter a very important inquiry with respect to the patentability of inventions, particulary those in the software space—although Alice’s impact is felt in other technological areas.  Since Alice issued, the U.S. Court of Appeals for the Federal Circuit has clarified the Alice test and notably provided guidance to patent lawyers on how to “avoid” or “comply” with Alice. 

Importantly, one of the purported benefits of Alice was to allow for the early dismissal of claims based on patent eligible subject matter.  An alleged infringer could conceivably quickly raise patent eligible subject matter and get a claim dismissed on either a 12(b)(6) motion for failure to state a claim or a motion for summary judgment.  In additional push-back to Alice, the Federal Circuit in Berkheimer v. HP (February 8, 2018) has recently held that even after claim construction a motion for summary judgment on patent eligible subject matter may be improper because of genuine issues of material fact.  While this is standard law concerning motions for summary judgment, the case provides a blueprint for how genuine issues of material fact can be created with patent eligible subject matter.  Because of this possibility of creating that genuine issue of material fact, patentees will have additional settlement leverage to realistically threaten a case through trial—a costly endeavor.  What will the effect of this case be on Alice’s attempt to curb so-called patent troll litigation? 
In another recent case, the Federal Circuit in Aatrix Software v. Green Shades Software (February 14, 2018) remanded a case because the district court did not allow the patentee to amend its complaint to survive a 12(b)(6) motion on claim construction.  While the Federal Circuit was careful to note that a complaint can be dismissed on a 12(b)(6) motion to dismiss, this case cautions district court judges to carefully consider motions to amend complaints. 

It will be interesting to see if the Federal Circuit’s decisions about the procedural challenge of patents based on patent eligible subject matter in the courts will have an impact on the analysis in the pending Oil States case before the U.S. Supreme Court. 

Monday, 5 February 2018

Exposing Children to Innovation More Likely to Lead to Innovation than Financial Incentives?

In a fascinating article titled, Who Becomes an Inventor in America? The Importance of Exposure toInnovation, economists Alexander M. Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, and John Van Reenen, argue that exposing children to innovation may be more likely to lead to innovation than financial incentives such as reducing tax rates.  The authors provocatively ask whether we are “losing Einsteins.”  

Dywer Gunn’s explanation of the article appears in The NBER’s Digest and states:

Children who grow up in particularly innovative geographic areas, or who are exposed to inventors via family connections, are more likely to become inventors.

American inventors are disproportionately likely to be white men who grew up in financially successful families. In Who Becomes an Inventor in America? The Importance of Exposure to Innovation (NBER Working Paper No. 24062), Alexander M. Bell, Raj Chetty, Xavier Jaravel, Neviana Petkova, and John Van Reenen find that children from families in the top 1 percent of the income distribution are 10 times more likely to become inventors than those from families in the bottom 50 percent, and that over 80 percent of 40-year-old inventors are male.

The study examines three possible explanations for the demographic disparities: differences in genetic ability, differences in career preferences, and differences in the financial or human capital constraints faced by different demographic groups.

The researchers find that neither innate ability nor financial constraints fully explains the disparities. Using data from the New York City public schools, they find that while third grade math test scores are predictive of the probability of securing a patent as a young adult, test score differences explain "less than one-third of the gap in innovation between children from high- vs. low-income families." Among students who score well on third grade math tests, students from low-income families are significantly less likely to become inventors than their wealthier peers. While the explanatory power of test scores grows over time, the researchers estimate that only 5.7 percent of the demographic gap in who becomes an inventor can be explained by differences in ability at birth. And they find financial constraints faced during childhood likewise do not explain the gap, as students from low- and high-income families who attend colleges with large numbers of inventors become inventors at similar rates.

Instead, the researchers point to a powerful causal exposure effect. Using nationwide data on where an individual grew up and patent awards in early adulthood, they find that children who grow up in particularly innovative geographic areas, or who are exposed to inventors via family connections, are more likely to become inventors. This finding applies even among technology categories. Among people living in Boston, those who grew up in Silicon Valley are especially likely to patent in computers, while those who grew up in Minneapolis — which has many medical device manufacturers — are especially likely to patent in medical devices. Moreover, children whose parents hold patents in a particular subclass, such as amplifiers, are more likely to obtain a patent in that same subclass than in another. There is also a strong gender-specific exposure effect: women are more likely to patent in a technology class if they were exposed as children to female inventors who held patents in that same type of technology.

The researchers estimate that if young girls were exposed to female inventors at the same rate as young boys are currently exposed to male inventors, the gender gap in invention rates would be halved. More broadly, if women, minorities, and children from low-income families were to invent at the same rate as white men from high-income (top 20 percent) families, the rate of innovation in America would quadruple.

I wonder if other countries have started offering innovation classes to children at a young age.  In the United States, there has been quite a bit of innovation in the primary and secondary school systems for several reasons, including the growing popularity of home schooling and charter schools as alternatives to the public school system.  I do know that there are field specific charter schools in California.  For example, there is one in Sacramento that is focused on the arts, relatively broadly defined.  There is also one focused on law.  And, even our public school system in Sacramento has a School of Engineering and Sciences.  [Hat Tip to Professor Paul Caron's TaxProf Blog.]