White House OSTP Memo and Report on Open Access Direction for Federal Funded Research

On August 25, 2022, the U.S. White House Office of Science and Technology Policy issued a memorandum and a report concerning open access publishing and the results and data of federally funded research.  The memorandum, in part, states:

Building on these important advances, the policy guidance laid out in the 2013 Memorandum can be improved to achieve delivery of federally funded research results and data to all of America. Years of public feedback have indicated that the primary limitation of the 2013 Memorandum is the optional 12-month embargo from public access of any publication resulting from federally funded research. This provision has limited immediate access of federally funded research results to only those able to pay for it or who have privileged access through libraries or other institutions. Financial means and privileged access must never be the pre-requisites to realizing the benefits of federally funded research that the American public deserves.

A federal public access policy consistent with our values of equal opportunity must allow for broad and expeditious sharing of federally funded research—and must allow all Americans to benefit from the returns on our research and development investments without delay. Upholding these core U.S. principles in our public access policy also strengthens our ability to be a critical leader and partner on issues of open science around the world. The U.S. is committed to the ideas that openness in science is fundamental, security is essential, and freedom and integrity are crucial. Improving public access policies across the U.S. government to promote the rapid sharing of federally funded research data with appropriate protections and accountability measures will allow for greater validity of research results and more equitable access to data resources aligned with these ideals. To promote equity and advance the work of restoring the public’s trust in Government science, and to advance American scientific leadership, now is the time to amend federal policy to deliver immediate public access to federally funded research.

The memorandum directs that:

In accordance with the provisions listed in Section 3, Federal agencies should develop new, or update existing, public access plans as soon as possible, and submit them to OSTP and the Office of Management and Budget (OMB) no later than: (1) 180 days after the date of this memorandum for federal agencies with more than $100 million in annual research and development (R&D) expenditures; and (2) 360 days after the date of this memorandum for federal agencies with $100 million or less in annual R&D expenditures. This extended deadline is designed to accommodate a longer lead time for federal agencies who were not subject to the 2013 Memorandum.

There's more in the memo and report -- the memo and report are available, here.  Hat tip to Swaraj Barooah of the Spicy IP Blog. 

CNIPA Touts Patent Commercialization and Finance Activity at Universities

On August 3, 2022, the China National Intellectual Property Administration (CNIPA) published a press release (in English also) titled, “Patent Commercialization Activities at Universities Sky Rocket in Past Decade.”  The press release points to a significant increase in grant rate of patents to Chinese universities as well as licensing activity.  Notably, the press release states that the monetary value went up from 820 million Yuan to over 8.8 billion Yuan.  The press release discusses a patent licensing program amongst Chinese universities and with SMEs that appears to mandate publishing licensing agreements.  Professor Mark Allen Cohen, a distinguished fellow, lecturer and director of the Asia IP Project at UC Berkeley Law, has an excellent post on interpreting China's patent data, here.  The press release states:

Under the circular, to promote stable implementation and efficient operation, CNIPA has convened special sessions to deploy implementation of patent open licensing and has allocated two detailed schemes to its own departments and local IP authorities respectively, with an aim to mobilize over 100 colleges to participate a pilot program and eventually involve over 1,000 patents as of the end of 2022, and endeavour to improve the efficiency of patent commercialization. Currently, 13 provinces have issued accompanying plans for the pilot program, six of which have looped in 77 universities to cull and publish open licenses for 3,375 patents that were pushed to 19,000 micro, small and medium-sized enterprises (SMEs) with matching need, leading to conclusion of 587 licensing agreements.

"Next, CNIPA will publish the recorded information of the concluded patent license agreements and formulate a suggested national standard on patent evaluation, giving instructions on pricing of open licensing and stimulate both the suppliers-universities and research institutes and the buyers -SMEs for a better chance of materializing the innovation findings," added the same principal.

The press release also discusses its commercialization program:

This commercialization program was launched jointly by the Ministry of Finance and CNIPA in March 2021, which inspires commercialization of college-developed patents, educates universities to polish their mechanisms in allocation of IP-generated profits; with support from University IP and technology transfer centers, Industrial IP operation centers intensively announces supplying information of patent related technologies; makes patent/technology connection between universities and state-owned enterprises and SMEs to improves their practical ability in patent commercialization. Furthermore, the Ministry of Finance and CNIPA would aid in building a green channel in the provinces that have implemented this program, about processing related patent transfer, licensing and pledging for SMEs. Patent transfer/licensing involving universities/research institutes happened 27,000 times in 2021, up 33% year-on-year, twice faster than the growth rate of all patent transfer/licensing activities while 24,000 times or 89% out of the 27,000 times were transactions made with SMEs.

California Enforcing the California Consumer Privacy Act: First Settlement

California Attorney General makes announcement of first settlement from enforcement of the California Consumer Privacy Act.  The Press Release states:

California Attorney General Rob Bonta today announced a settlement with Sephora, Inc. (Sephora), resolving allegations that the company violated the California Consumer Privacy Act (CCPA), California’s first-in-the-nation landmark privacy law. After conducting an enforcement sweep of online retailers, the Attorney General alleged that Sephora failed to disclose to consumers that it was selling their personal information, that it failed to process user requests to opt out of sale via user-enabled global privacy controls in violation of the CCPA, and that it did not cure these violations within the 30-day period currently allowed by the CCPA. Today's settlement is part of ongoing efforts by the Attorney General to enforce California's comprehensive consumer privacy law that allows consumers to tell businesses to stop selling their personal information to third parties, including those signaled by the Global Privacy Control (GPC). 

“Technologies like the Global Privacy Control are a game changer for consumers looking to exercise their data privacy rights. But these rights are meaningless if businesses hide how they are using their customer's data and ignore requests to opt-out of its sale,” said Attorney General Bonta. “I hope today’s settlement sends a strong message to businesses that are still failing to comply with California’s consumer privacy law. My office is watching, and we will hold you accountable. It’s been more than two years since the CCPA went into effect, and businesses’ right to avoid liability by curing their CCPA violations after they are caught is expiring. There are no more excuses. Follow the law, do right by consumers, and process opt-out requests made via user-enabled global privacy controls.”

The settlement with Sephora underscores the critical rights that consumers have under CCPA to fight commercial surveillance. Consumers are constantly tracked when they go online. Many online retailers allow third-party companies to install tracking software on their website and in their app so that third parties can monitor consumers as they shop. These third parties track all types of data – in Sephora’s case, the third parties could create profiles about consumers by tracking whether a consumer is using a MacBook or a Dell, the brand of eyeliner or the prenatal vitamins that a consumer puts in their “shopping cart,” and even a consumer's precise location. Retailers like Sephora benefit in kind from these arrangements, which allow them to more effectively target potential customers.

Sephora's arrangement with these companies constituted a sale of consumer information under the CCPA, and it triggered certain basic obligations, such as telling consumers that they are selling their information and allowing consumers to opt-out of the sale of their information. Sephora did neither.  

Today's settlement requires Sephora to pay $1.2 million in penalties and comply with important injunctive terms. Specifically, Sephora must:

• Clarify its online disclosures and privacy policy to include an affirmative representation that it sells data;
• Provide mechanisms for consumers to opt out of the sale of personal information, including via the Global Privacy Control; 
• Conform its service provider agreements to the CCPA’s requirements; and 
• Provide reports to the Attorney General relating to its sale of personal information, the status of its service provider relationships, and its efforts to honor Global Privacy Control. 

As part of his ongoing efforts to enforce CCPA, Attorney General Bonta also sent notices today to a number of businesses alleging non-compliance relating to their failure to process consumer opt-out requests made via user-enabled global privacy controls, like the GPC. A global privacy control allows consumers to opt out of all online sales in one fell swoop by broadcasting a "do not sell" signal across every website they visit, without having to click on an opt-out link each time. Under the CCPA, businesses must treat opt-out requests made by user-enabled global privacy controls the same as requests made by users who have clicked the “Do Not Sell My Personal Information” link. Businesses that received letters today have 30 days to cure the alleged violations or face enforcement action from the Attorney General. The CCPA’s notice and cure provision, which requires businesses to receive notice and opportunity to cure before they can be held accountable by the Attorney General for CCPA violations, will expire on January 1, 2023.

Attorney General Bonta is committed to the robust enforcement of California's groundbreaking data privacy law. Since July 1, 2020, the Attorney General has issued notices to a wide array of businesses alleging noncompliance with the CCPA. Notices to cure have been issued to major corporations in the tech, healthcare, retail, fitness, data brokerage, and telecom industries, among others. New examples of notices to cure are available at oag.ca.gov/ccpa and include:

• An enforcement sweep of businesses operating loyalty programs that offered financial incentives such as discounts, free items, or other rewards, in exchange for personal information without providing consumers with a notice of financial incentive;
• An online advertising business that's privacy disclosures were not understandable to the average consumer and did not include the required information; and
• A data broker whose "Do Not Sell My Personal Information" link worked only on certain browsers and directed consumers to a confusing webpage that required several additional steps to submit CCPA requests.

For more information about the CCPA, visit oag.ca.gov/ccpa. To report a violation of the CCPA to the Attorney General, consumers can submit a complaint online at oag.ca.gov/report. Consumers can also directly notify businesses of potential violations using the Consumer Privacy Tool.

A copy of the complaint is available here. A copy of the settlement is available here.

Free Webinar: "Structuring Funds and Portfolio Companies to Withstand U.S.-China Decoupling Contingencies"

The well-regarded California law firm (international), Morrison & Foerster, has an interesting webinar coming up titled, “Structuring Funds and Portfolio Companies to Withstand U.S.-China Decoupling Contingencies.”  The details are below. 

Morrison & Foerster (Wednesday, September 14: 10:00 am Hong Kong; 7-8 pm PST (minus one day)) (registration here: Webinar Registration - Zoom).

In this timely webinar, our leading corporate, intellectual property, national security, and tax partners will share their insights on how PE/VC investors and their portfolio companies can build resilient structures to withstand this current period of geopolitical instability. Our focus will be on group company structures, cross-border intellectual property development and data flows. Important considerations for planning and executing new rounds of equity financings and exit options within and outside of China will also be discussed. Speakers Thomas Chou – Partner, Co-head of Asia Private Equity Group Matthew Lau – Partner, Tax Ruomu Li – Partner, PE/M&A Chuan Sun – Partner, Technology Transactions B. Chen Zhu – Partner, National Security

Getting More Women Involved in Tech Transfer (and tracking it better)

The Society of Women Engineers has published a review of a recent AUTM (Association of University Technology Managers) study’s findings titled, “’Engaging More Women in Academic Innovation: Findings and Recommendations,’” [which was] published in the National Academy of Inventors Technology and Innovation Journal.”  The review includes a list of the key findings of the study as well as a list of recommendations.  The review notes that the lack of mentorship is problematic.  The review also references a YouTube video created by the National Women’s Business Council concerning the study.  The video is worth taking a look at (about 4 minutes long) and is available, here.  The review is available, here.  Hat tip to Technology Transfer Tactics.  

Bipartisan Letter from U.S. Senators on Drug Patent Thickets

In June, U.S. Senators Leahy (Democrat) and Cornyn (Republican) (and others) sent a letter to the United States Patent and Trademark Office requesting that the USPTO review practices concerning granting “an excessive” amount of patents on pharmaceuticals, such as biologics, that may be driving up drug pricing costs. 

The press release concerning the letter states:

Senators Patrick Leahy (D-VT) and John Cornyn (R-TX) led a bipartisan letter Wednesday asking the U.S. Patent and Trademark Office to address an issue that is a significant cause of soaring drug prices.  Senators Richard Blumenthal (D-CT), Susan Collins (R-ME), Amy Klobuchar (D-MN), and Mike Braun (R-IN) also joined the letter.

The senators explained that drug companies and other large companies sometimes artificially extend the period in which they can charge high prices by filing many patents on nearly the same invention, creating a so-called patent thicket of dozens of patents on a single drug.  Those thickets make any challenge to the patents, or to the drug companies’ pricing of the covered drug, nearly impossible.  Because of the exorbitant cost of taking on each of the patents in these patent thickets, generic manufacturers are impeded from entering the market, hurting competition and raising prices for American consumers.  The secondary patents, which are similar to the originals, often receive less scrutiny from the Patent Office but have an outsized effect on everyday Americans who struggle to afford expensive medication.

Leahy believes the Patent Office has the ability to address this abusive practice, and he is asking the agency to take action to rein in this misuse of the patent system.  The letter requests that the Patent Office look into specific ideas for curbing the abuse and “take regulatory steps to improve patent quality and eliminate large collections of patents on a single invention.”  The Patent Act clearly states an inventor may obtain a single patent for a single invention, not dozens.  The senators believe the Patent Office can and should stop these large companies from undermining the patent system, obstructing appropriate competition, stifling innovation, and hurting Americans, who end up paying for all of this at the pharmacy.

The letter contains several ideas for the USPTO and the public to consider concerning future potential rule-making:

1. Terminal disclaimers, allowed under 37 C.F.R. 1.321(d), allow applicants to receive patents that are obvious variations of each other as long as the expiration dates match. How would eliminating terminal disclaimers, thus prohibiting patents that are obvious variations of each other, affect patent prosecution strategies and patent quality overall?

2. Currently, patents tied together with a terminal disclaimer after an obviousness-type double patent rejection must be separately challenged on validity grounds. However, if these patents are obvious variations of each other, should the filing of a terminal disclaimer be an admission of obviousness? And if so, would these patents, when their validity is challenged after issuance, stand and fall together?

3. Should the USPTO require a second look, by a team of patent quality specialists, before issuing a continuation patent on a first office action, with special emphasis on whether the claims satisfy the written description, enablement, and definiteness requirements of 35 U.S.C. § 112, and whether the claims do not cover the same invention as a related application?

4. Should there be heightened examination requirements for continuation patents, 2 to ensure that minor modifications do not receive second or subsequent patents?

5. The Patent Act requires the USPTO Director to set a “time during the pendency of the [original] application” in which continuation status may be filed. Currently there is no time limit relative to the original application. Can the USPTO implement a rule change that requires any continuation application to be filed within a set time frame of the ultimate parent application? What is the appropriate timeframe after the applicant files an application before the applicant should know what types of inventions the patent will actually cover? Would a benchmark (e.g., within six months of the first office action on the earliest application in a family) be preferable to a specific deadline (e.g., one year after the earliest application in a family)?

6. The USPTO has fee-setting authority and has set fees for filing, search, and examination of applications below the actual costs of carrying out these activities, while maintenance fees for issued patents are above the actual cost. If the up-front fees reflected the actual cost of obtaining a patent, would this increase patent quality by discouraging filing of patents unlikely to succeed? Similarly, if fees for continuation applications were increased above the initial filing fees, would examination be more thorough and would applicants be less likely to use continuations to cover, for example, inventions that are obvious variations of each other?

George Will on the U.S. and China Relationship

George Will, a political conservative commentator and Pulitzer Prize winning journalist in the United States, has authored an Op-Ed in the Washington Post titled, “China’s decline may be looming. Here’s how the U.S. can win, if it so chooses.”  The article provides some sage advice concerning federal spending on basic research as well as immigration policy.  I would add that moving forward in the future will require reexamining cooperation with China.  Additionally, the West’s cybersecurity issues need to be resolved and the United States should continue to work on ensuring that our human capital, all members of our society, reach their full potential.  

Proposed U.S. Inflation Reduction Act Takes on (some) Drug Pricing Issues in United States

U.S. Senator Joe Manchin released a press release concerning the U.S. Senate’s passage of the Inflation Reduction Act of 2022.  Importantly, the Act addresses rising health care costs.  The high cost of healthcare in the United States has been attributed to mostly two factors: 1) high wages for healthcare workers; and 2) the high cost of pharmaceuticals/biologics.  The first factor is unlikely to be addressed by the government.  The Inflation Reduction Act of 2022 takes on the pricing of pharmaceuticals/biologics.  Hopefully, the drug pricing changes will help reduce healthcare costs, but those changes may be offset by rising wages for healthcare workers.  Senator Manchin’s office has released a document outlining the Act’s provisions on drug costs, in part:

The IRA lowers healthcare costs for millions of Americans through policies that protect consumers and hold drug companies accountable. Specifically, the IRA will: • Empower Medicare to negotiate prescription drug prices, beginning with ten of the highest-costing drugs in 2023 and expanding to 20 each year by 2029, saving $100 billion. • Cap Medicare beneficiaries’ out-of-pocket costs at $2,000 per year, with the ability to spread the cost over monthly payments, saving more than a million seniors $1,200 per year.• Extend for three years provisions from the American Rescue Plan (ARP) that improved health care affordability for people who buy insurance on the individual marketplaces. • Penalize drug companies for outrageous price hikes. Drug companies – not consumers – will now be on the hook for drug prices that exceed inflation. Drug companies will lose current incentives to keep costs high by secretly negotiating with insurers and pharmacy benefit managers to ramp up profits at the expense of patients. This prohibition will save Medicare $71 billion. • Provide free vaccines for seniors under Medicare, including COVID vaccines, the shingles vaccine, and other necessary vaccines. • Increase help for low-income seniors, giving all qualifying Medicare beneficiaries the full low-income subsidy under Medicare Part D. The average value of this assistance is around $5,000 per person. • Stabilize Part D premiums in Medicare, ensuring seniors and people with disabilities will never see their premiums increase more than 6% from year to year through 2029. (emphasis added).

Likely Extension of Film and Television Tax Credits in California

California Governor Newsom is backing extending tax credits for films and television shows in California.  Governor Newsom is touting California’s commitment to reproductive rights as the attraction (in addition to the credits) for businesses to operate in California.  The press release states, in part:

SACRAMENTO – Together with Senator Anthony Portantino (D-La Cañada Flintridge) and the California Film Commission, Governor Gavin Newsom today announced his support for SB 485, which would invest $1.65 billion in the state’s Film & Television Tax Credit Program to extend it for an additional five years, through 2030. This program allocates $330 million per year in tax credits for the industry.
 
This announcement comes as hundreds of showrunners demand that production companies implement protocols to protect pregnant employees in states where abortion is outlawed.
 
“As other states roll back people’s rights, California will continue to protect fundamental freedoms for all and welcome businesses that stand up for their employees,” said Governor Newsom. “Extending this program will help ensure California’s world-renowned entertainment industry continues to drive economic growth with good jobs and a diverse, inclusive workforce.”
 
The state’s Film & Television Tax Credit Program has been shown to generate $24 in economic activity for every $1 invested – spurring tens of billions of dollars in economic output, helping create over 110,000 jobs, and bringing shows and films to California. Extending the Film & Television Tax Credit Program will help the state’s ongoing efforts to retain its status as the world’s film and TV production capital, a status long earned due to its superior crews, talent, infrastructure, weather, locations, and a host of other attributes that lead to business and creative success.
 
In response to today’s announcement by Governor Newsom, California Film Commission Executive Director Colleen Bell stated that the Commission stands ready to help all projects – including those that reject states where fundamental rights are under assault – make the most of all that California has to offer.  
 
“The Governor’s actions today speak to the values held by so many people across the film and TV production industry,” she said. “More than ever, California offers the best value and the best values.” 
 
Bell also noted that the creative community has unique influence and therefore, unique responsibility. “Working in and supporting a state that violates basic freedoms is antithetical to the industry’s core values,” she added. “It’s also bad business.” 
 
“California is the entertainment capital of the world and it is exciting and appropriate for the state to invest in keeping and expanding its impact. The economic benefit from extending the Film and Television Tax Credit Program creates thousands of jobs for talented crafts people and generates significant revenue for our budget. I am grateful to Governor Newsom for his unwavering support and leadership for enhancing this historic industry – which is unique to California. Talent and industry need certainty to compete with other states and the tax credit program extension does just that,” said Senator Anthony Portantino, author of SB 485.
 

Revenue boost for automotive industry from cellular connectivity outweighs SEP licensing costs

The automotive industry is being revolutionized by continuous cloud connectivity, autonomous driving technologies, drive train electrification and shared mobility. These transformations are being facilitated in part by the standardized cellular technologies now commonly implemented in “connected vehicles” or “CVs”. The proportion of vehicles shipped worldwide with cellular connectivity embedded is forecast to rise from 46% in 2020 to 76% in 2026.1

The commercial ecosystem for CVs has significantly matured since I last wrote about it here nearly two years ago. The benefits, incremental revenues and costs now associated with the adoption of cellular technologies in vehicles are being reflected in major commercial actions by industry players and in financial markets. Incremental product revenues at a vehicle’s point of sale together with ongoing monetization opportunities in value-added services and cost savings will parallel what has been achieved in smartphones, where substantial profits are reaped beyond initial product sales and recurring network operator service fees in the app ecosystem. The value of automotive connectivity is created through improved safety features, enhanced navigation, driver assistance and automation, vehicle and driver monitoring (e.g., to adjust insurance premiums), reduced maintenance costs, in-vehicle entertainment services and over-the-air software updates for various systems.

Although the portion of new car selling prices and aftermarket service fees attributable to cellular connectivity was estimated to be $54 billion in 2020, total patent royalties paid by automotive OEMs to license the cellular standard-essential patents (SEPs) upon which those capabilities depend was and remains considerably less than 1% of that figure. And that low percentage royalty yield will reduce—despite increasing total royalties as more OEMs are licensed—because that CV market value is expected to grow faster to $166 billion or more by 2025.2

SEP licensing fees are modest in comparison to product costs and with thousands of dollars in revenues and cost savings anticipated from connectivity services over a car’s typical lifespan of 14 years.3 Indeed, SEP licensing fees are a small proportion of an estimated average cost of $700 per vehicle for OEMs on telematics and infotainment systems, which are marked-up significantly when sold to consumers as bundled features or optional extras in finished goods car prices.4 Examples of additional ongoing revenues to OEMs include £141 ($176) per year after an initial free period, excluding mobile operator service charges, to subscribe to the Audi Connect Infotainment package in the UK. “Remote Services” cost an additional £37. In the Eurozone, Volkswagen charges €75 ($80) per year to extend its We Connect basic subscription and €145 for its “Plus” service. OEMs can receive $30 or more per year from insurance companies for policy holders that opt-in to provide their driving behavior data.

The value that SEPs confer on a CV has been a topic of much discussion, but consensus on how much the automotive industry should pay to license the 4G, 3G and 2G SEPs that underpin connectivity-based solutions has recently emerged. A substantial majority of these SEPs are licensed by the Avanci patent platform for a one-time payment of $15 per 4G CV (or, from 1 September 2022, $20 per 4G CV). With more than 40 automotive brands under license including BMW, Ford, General Motors, Mercedes-Benz and Volkswagen, Avanci licenses around 45% of CV shipments. This is unsurprising given that the platform is providing the “one-stop shop” with transparent and predictable pricing that many implementers and government authorities have demanded.

Automotive is now the most significant segment in IoT SEP licensing, with licensing revenues in the low hundreds of millions of dollars—paid to SEP owners mostly multilaterally through Avanci, but also bilaterally to companies including Nokia and Qualcomm. 

Cellular technology development is a huge, risky and costly endeavor including large numbers of R&D staff and many companies. For example, Ericsson, Nokia and Qualcomm each invest around $5bn apiece annually on R&D which is mostly in cellular. Other companies collectively invest billions more. Smartphones generate virtually all of the return on this R&D investment, which totals around $15 billion in SEP licensing revenues annually. 

While CVs valuably exploit various cellular technologies, including prime 4G LTE capabilities such as eMBB for streaming video, cellular technologies developed specifically for vehicles are also a major focus for standards setting organization 3GPP and the many companies that contribute patented technologies to its standards. Cellular Vehicle-to-Everything (C-V2X) technologies include many features that can improve safety on the road and help enable or enhance Advanced Driver-Assistance Systems (ADAS) and Automated Driving Systems (ADS). WiseHarbor analysis of 3GPP Radio Access Network Working Group contributions reveals that a significant 5% of these are for C-V2X among many innovations.

Consumers often pay more than $1,000 for a new smartphone, plus more per month in network operator service fees, because of the value they obtain from the many free and other services these devices also enable them to obtain including search, navigation, and social media. CV pricing likewise reflects value downstream—regardless of whether all that value is captured by the OEM itself. Yet CVs generate less than one fiftieth of the cellular SEP licensing fees from mobile phones. This is despite OEMs already collecting substantially more than half of their total annual revenues of $2.7 trillion in 2021 from CV sales. In comparison, total mobile phone sales revenues are around $500 million annually. Even if every CV produced over the next five years is licensed—including those expected to include 5G— the proportion of licensing revenues from cars is still unlikely to exceed one tenth that from smartphones.  

With increasing adoption and value of connectivity in vehicles, there is consensus with acceptance now that the modest SEP royalty charges being widely paid are fair and reasonable. Manufacturers and users of CVs are deriving enormous value from cellular technologies including those developed specifically for automotive use.

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1 WiseHarbor estimates based on various industry sources.

2 Markets and Markets estimated the global connected car services market to be worth $54 billion in 2020 with growth to reach $166 billion by 2025. Other industry analyst firms forecast a larger market (e.g. see endnote 3). “Less than 1%” is based on WiseHarbor’s estimate for cellular SEP licensing revenues on CV sales. Total annual car sales revenues were forecast by Statista to be in the range of $2.7-3.0 trillion.

3 Other CV market value estimates also include ongoing services revenues and operational cost savings. Allied Market Research valued the global connected car market —”offering comfort, convenience, performance, safety, and security along with powerful network technology”—at $63.03 billion in 2019, and projected it to grow at a CAGR of 17.1% to reach $225.16 billion by 2027.  McKinsey & Company estimates connectivity could deliver up to $310 in revenue and $180 in cost savings per car per year, on average, in 2030. There are around 1.4 billion cars on the road worldwide.

4 WiseHarbor estimates this figure using various sources focusing on component and manufacturing costs with car sales volumes rising from 73 million in 2020 to 95 million in 2026 and with the proportion of vehicles connected expected to rise from 46% to 76% in that period.

Senator Tillis' New Proposed Patent Eligible Subject Matter Legislation

Senator Thom Tillis has been busy.  He has proposed a new act to clarify patent eligibility doctrine in the United States.  This is definitely a relatively broad vision of patent eligibility.  Some work on the pricing side of pharmaceuticals/biologics would be helpful if this gets passed.  I am wondering if this may get tacked on to another piece of legislation—the timing is interesting.  The Press Release states:

U.S. Senator Thom Tillis (R-NC) introduced the Patent Eligibility Restoration Act of 2022, legislation that will restore patent eligibility to important inventions across many fields, while also resolving legitimate concerns over the patenting of mere ideas, the mere discovery of what already exists in nature, and social and cultural content that everyone agrees is beyond the scope of the patent system. This bill affirms the basic principle that the patent system is central to promoting technology-based innovation. 

“I have long said that clear, strong, and predictable patent rights are imperative to enable investments in the broad array of innovative technologies that are critical to the economic and global competitiveness of the United States, and to its national security,” said Senator Tillis. “Unfortunately, our current Supreme Court’s patent eligibility jurisprudence is undermining American innovation and allowing foreign adversaries like China to overtake us in key technology innovations. This legislation, which is the product of almost four years of consensus driven stakeholder conversations from all interested parties, maintains the existing statutory categories of eligible subject matter, which have worked well for over two centuries, and addresses concerns regarding inappropriate eligibility constraints by enumerating a specific but extensive list of excluded subject matter. I look forward to continuing to work with all interested stakeholders on this important matter. Passing patent eligibility reform remains one of my top legislative priorities during my second term.”

Background:

Unfortunately, due to a series of Supreme Court decisions, patent eligibility law in the United States has become confused, constricted, and unclear in recent years. This has led to inconsistent case decisions, uncertainty in innovation and investment communities, and unpredictable business outcomes. This has resulted in a wide range of well-documented negative impacts.

As of 2021, all 12 judges of the United States Court of Appeals for the Federal Circuit have lamented the state of the law. Witnesses and stakeholders from a wide array of industries, fields, interest groups, and academia have testified and submitted comments confirming the uncertainty and detailing the detrimental effects of patent eligibility confusion in the United States. And there is now widespread bipartisan agreement in Congress and across all recent Administrations that reforms are necessary to restore the United States to a position of global strength and leadership in key areas of technology and innovation, such as medical diagnostics, biotechnology, personalized medicine, artificial intelligence, 5G, and blockchain.

The proposed legislation states, in part:

SEC. 2. PATENT ELIGIBILITY. (a) IN GENERAL.—Chapter 10 of title 35, United 8 States Code, is amended— (1) in section 100— (A) in subsection (b), by striking ‘‘includes a new use of a known process’’ and inserting ‘‘includes a use, application, or method of manufacture of a known or naturally-occurring process’’; and (B) by adding at the end the following: ‘‘(k) The term ‘useful’ means, with respect to an invention or discovery, that the invention or discovery has a specific and practical utility from the perspective of a person of ordinary skill in the art to which the invention or discovery pertains.’’;

and (2) by amending section 101 to read as follows: ‘‘§ 101. Patent eligibility ‘‘(a) IN GENERAL.—Whoever invents or discovers any useful process, machine, manufacture, or composition of matter, or any useful improvement thereof, may obtain a patent therefor, subject only to the exclusions in sub section (b) and to the further conditions and requirements of this title.

‘‘(b) ELIGIBILITY EXCLUSIONS.— ‘‘(1) IN GENERAL.—Subject to paragraph (2), a person may not obtain a patent for any of the following, if claimed as such: ‘‘(A) A mathematical formula, apart from a useful invention or discovery. ‘‘(B) A process that— ‘‘(i) is a non-technological economic, financial, business, social, cultural, or artistic process; ‘‘(ii) is a mental process performed solely in the human mind; or ‘‘(iii) occurs in nature wholly independent of, and prior to, any human activity. ‘‘(C) An unmodified human gene, as that gene exists in the human body. ‘‘(D) An unmodified natural material, as that material exists in nature.  ‘‘(2) CONDITIONS.— ‘‘(A) CERTAIN PROCESSES.—Notwithstanding paragraph (1)(B)(i), a person may obtain a patent for a claimed invention that is a process described in such provision if that process is embodied in a machine or manufacture, unless that machine or manufacture is recited in a patent claim without integrating, beyond merely storing and executing, the steps of the process that the machine or manufacture perform. ‘‘(B) HUMAN GENES AND NATURAL MATERIALS.—For the purposes of subparagraphs (C) and (D) of paragraph (1), a human gene or natural material that is isolated, purified, enriched, or otherwise altered by human activity, or that is otherwise employed in a useful invention or discovery, shall not be considered to be unmodified.  

‘‘(c) ELIGIBILITY.—  ‘‘(1) IN GENERAL.—In determining whether, under this section, a claimed invention is eligible for a patent, eligibility shall be determined—  ‘‘(A) by considering the claimed invention as a whole and without discounting or disregarding any claim element; and ‘‘(B) without regard to— ‘‘(i) the manner in which the claimed invention was made; ‘‘(ii) whether a claim element is known, conventional, routine, or naturally occurring;  ‘‘(iii) the state of the applicable art, as of the date on which the claimed invention is invented; or ‘‘(iv) any other consideration in section 102, 103, or 112.  

‘‘(2) INFRINGEMENT ACTION.— ‘‘(A) IN GENERAL.—In an action brought for infringement under this title, the court, at any time, may determine whether an invention or discovery that is a subject of the action is eligible for a patent under this section, including on motion of a party when there are no genuine issues of material fact. ‘‘(B) LIMITED DISCOVERY.—With respect to a determination described in subparagraph (A), the court may consider limited discovery relevant only to the eligibility described in that subparagraph before ruling on a motion described in that subparagraph.’’.

Senators Tillis and Leahy Propose to Improve U.S. Patent Quality

Senators Tillis, a Republican, and Leahy, a Democrat, have introduced legislation in Congress designed to improve patent quality at the USPTO.  The bipartisan nature of the legislation, hopefully, means it will be quickly adopted. [I am an optimist.] Senator Tillis’ press release states:

This legislation would evaluate prior and current initiatives and pilot programs relating to the quality of patents. It would evaluate the need for greater clarity in terms of what constitutes patent quality, the setting of patent quality metrics, and how the quality of work product performed by patent examiners is measured within the office. The bill would evaluate the need for recording examiner interviews via audio files or automated transcriptions, how the assignment of patent applications to examiners is undertaken, and the creation of a group that looks at real-world circumstances and uses that information to perform targeted review of certain patent applications. Furthermore, the bill would also study any evidence of fraud in the patent application process and suggest avenues to address such fraud.  

“If the United States is going to continue to be the world’s leading innovation economy, then we have to first make sure our patent system is strong and instills confidence,” said Senator Tillis. “We only have strong patents when those patents are of the highest quality and meet all the requirements of patentability. I’m proud to introduce this measure with my good friend Senator Leahy to improve the quality of patent examinations and ensure that the USPTO issues strong patents. This legislation is a step further in continuing our work to strengthen our intellectual property rights.” 

“I am proud to cosponsor this commonsense legislation with Ranking Member Tillis,” said Senator Leahy. “This bill follows up on our hearing last year on patent quality, which put a spotlight on the fact that many U.S. patents represent brilliant inventions and drive our economy.  Unfortunately though, some are issued by mistake and can cause great expense for unsuspecting Americans and small businesses.  I look forward to advancing legislative solutions that will help make sure that the patents that are issued are valid and to continuing my work supporting American creators and innovators.” 

Background:

For decades there has not been a major change to the time afforded to patent examiners for the examination of patent application, yet the nature of the technology from which these patent applications are derived and the complexity of this technology have only increased. In addition, the proliferation of prior art, which patent examiners must search for and review in order to make patentability determinations, has only increased and it has done so at a rapid pace. This complexity can and does lead to the necessity for patent examiners to raise more complex prior art rejections. And because of this patent examiners must be afforded the necessary amount of time so as to generate quality work products. 

This bill would require that not later than 1 year after the date of enactment of this Act the Comptroller General of the U.S. submit to the Senate Committee on the Judiciary and House the Committee on the Judiciary a report detailing this evaluation on patent examination improvement. Not later than 1 year after the date on which the Comptroller General of the U.S. submits their report the USPTO Director shall develop guidance for patent examiners focused on patent examination improvement. Finally, not later than 2 years after the date of enactment of this Act the USPTO Director, after soliciting public comment, shall submit to Congress a report that includes how the Office will improve the technical training of patent examiners with respect to emerging areas of technology, the status of office IT systems, a 5-year IT modernization plan, an accounting of the use by the office of advanced data science analytics and a 5-year modernization plan regarding advanced data science analytics, and finally how the result of the application of advanced data science analytics can be regularly shared with the public.

Japan's METI Releases Guidelines on Negotiating SEP Licenses

On March 31, 2022, the Japanese Ministry of Economy, Trade and Industry (METI) released guidelines concerning the negotiation of SEP licenses.  The METI description states:

In recent years, disputes have arisen worldwide on licensing Standard Essential Patents (SEPs) due to the widespread use of standards and the complication of technologies required for such standards. In particular, as the Fourth Industrial Revolution progresses in which many products will be computerized and processing data will create new added-value, SEP licensing among different industries, especially those in which Japan has strengths (e.g., automobiles, construction machinery and factories), is expected to expand in the future. Therefore, it is crucial for Japan to consider measures to resolve such disputes efficiently.

In light of this situation, the Competition Enhancement Office and the Intellectual Property Policy Office of Ministry of Economy, Trade and Industry (METI) held the “Study Group on Licensing Environment of Standard Essential Patents” (hereinafter referred to as “the Study Group”). The Study Group, comprised of representatives from industry and experts on intellectual property and competition law, has discussed the measures preferable for Japan. Considering problems faced by SEP holders and implementers caused by low predictability and transparency due to the absence of clear rules on the SEP licensing negotiations as well as international trends, METI indicated that “the Japanese government will promptly consider and externally disseminate the rules on good faith negotiations that should be complied with by both SEP holders and implementers” in the interim report of the Study Group published in July 2021, so that good faith negotiations between the parties may encourage early settlements and avoidance of unnecessary disputes, leading to the development of Japanese industries.

Following this policy, METI asked domestic and foreign companies, etc., about their opinions on actions at each of the main steps of SEP licensing negotiations, and METI also asked opinions on the same contents on the website. The Study Group discussed good faith negotiations with reference to these opinions. METI then established the “Good Faith Negotiation Guidelines for Standard Essential Patent Licenses” (hereinafter referred to as “the Guidelines”), considering the results of the discussions. METI also published a report that indicates the process of discussions to establish the Guidelines in the Study Group. 

The Guidelines are the norms of good faith negotiations provided by the Japanese government to be followed by SEP holders and implementers involved in SEP licensing negotiations, including Japanese patents, to realize an appropriate licensing environment through improvement of transparency and predictability of the negotiations. The Guidelines are not legally binding and do not guarantee that, even if followed, negotiations can be judged to be in good faith in each individual case as there are no clear global rules for SEP licensing negotiations. However, METI expects that various parties related to SEP licensing negotiations, such as those in the negotiations and the judiciary, utilize the Guidelines, because METI established the Guidelines considering opinions of domestic and foreign companies, etc., industries and experts on intellectual property and competition law in Japan. METI will also utilize the Guidelines to realize an appropriate licensing environment of SEPs.

The Guidelines are available, here.  The Report is available, here (in Japanese).  A document summarizing the differences between the Guidelines and the JPO document on negotiating concerning SEPs is available, here.