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.’’.

A Very Large Patent Infringement Verdict: Over US $2.1 billion

In news that has raced across general as well as patent specific news, a Texas jury has awarded VLSI Technology over US $2.1 billion for patent infringement (two patents)--the defendant is Intel.  Of course, this will be subject to post trial motions as well as appeals. We'll have to wait and see if it sticks.  However, I am sure it has other patent holders licking their lips with the prospect of big payouts from Texas juries (this will make a nice addition to that PowerPoint presentation).  

John Huntsman and the Commission on the Theft of American IP's New Update

In an interesting development, John Huntsman, Jr. is being considered by the Trump Administration for the position of ambassador to Russia.  Mr. Huntsman was the previous U.S. ambassador to China (Obama Administration) and Singapore (G.H. Bush Administration), and was a credible candidate for the U.S. Presidency in 2012.  Importantly, Mr. Huntsman is also the co-chair for the Commission on the Theft of American Intellectual Property.  In 2013, the Commission released its first Report on the Theft of American Intellectual Property.  Recently, on February 27, 2017, the Commission released an Update to the IP Commission Report of 2013.  The new Update states:

Since 2013, at the release of the IP Commission Report, U.S. policy mechanisms have been markedly enhanced but gone largely unused. We estimate that the annual cost to the U.S. economy continues to exceed $225 billion in counterfeit goods, pirated software, and theft of trade secrets and could be as high as $600 billion.1 It is important to note that both the low- and high-end figures do not incorporate the full cost of patent infringement—an area sorely in need of greater research. We have found no evidence that casts doubt on the estimate provided by the Office of the Director of National Intelligence in November 2015 that economic espionage through hacking costs $400 billion per year.2 At this rate, the United States has suffered over $1.2 trillion in economic damage since the publication of the original IP Commission Report more than three years ago.

The Update notes that since the publication of the first Report that several recommendations were adopted by Congress and the Obama Administration including enactment of the Defend Trade Secrets Act, the 2015 National Defense Authorization Act , The National Cybersecurity Protection Act of 2014, The Federal Information Security Modernization Act of 2014, The Cybersecurity Workforce Assessment Act of 2014, and The Cybersecurity Enhancement Act of 2014. The Update continues to focus on China as a source of trade secret theft, but notes that cyberattacks from China have decreased.  The Update does hedge and note that this may be hard to measure.  In discussing China’s efforts to protect intellectual property, the Update also states:

To realize those reforms, China’s State Council issued a new action plan in 2016. Building on a 2015 policy document outlining goals to develop a stricter IPR regime, the action plan, titled “Opinion of the State Council on Accelerating the Construction of Intellectual Property Powers for China as an Intellectual Property Strong Country under the New Situation—Division of Tasks,” duplicates standing policy but also lists several priorities for reform of the IPR regime.50 According to analysis by Mark Cohen, a long-standing expert on China’s IP environment, the document suggests that China is making a greater effort to raise the damages a victim can sue for in Chinese courts.51 The action plan also stresses international cooperation and the placement of more IP officials overseas to protect Chinese companies. It goes on to encourage the study of China’s IP-intensive industries and the use of fiscal policy to promote their development.52 Taken as a whole, the plan appears to be more geared toward fostering stronger IP-intensive industries at home than developing the rule of law.

The Update notes that the recent United States Trade Representative’s 301 Report on China states that there are several areas of concern in China’s protection of intellectual property that require attention according to industry, such as the participation of foreign firms in standard setting in China.  Curiously, the Update then points to some potential fields in which it is alleged that state owned enterprises in China may be engaging in theft.  The Update provides two examples of possible issues; however, they both are not concretely closely tied to theft of trade secrets.  More information would be helpful.  The Update also points to state subsidization of industry and underbidding as two potential problems that help Chinese industry to the detriment of U.S. companies.  The Update concludes with a call to the Trump Administration to tackle the theft of intellectual property early in the Administration, and provides a list of recommendations that have not been adopted by the U.S. government.  For additional discussion of IP enforcement in China, please see here, here and here. 

Lexology Publishes Patent Damages Rules in 16 Jurisdictions

Lexology has recently published an article titled, "The Calculation of Patent Infringement Damages Awards in 15+ Jurisdictions." The article answers two questions for each jurisdiction: "How are damages calculated" and "Are punitive damages available?"  The jurisdictions include: the United Kingdom, Pakistan, China, Denmark, Ecuador, Finland, France, Greece, India, Israel, Italy, Japan, Malaysia, Netherlands, Romania and Turkey.  Notably, the answers for each jurisdiction appear to have been prepared by firms from each respective jurisdiction.  Interestingly, in Greece and Romania, one can obtain "moral damages." And, most jurisdictions do not allow for "punitive damages" for patent infringement.  It would be interesting to learn if there are any criminal penalties for patent infringement in the various jurisdictions--or a movement toward adding criminal penalties. 

Public Universities Bringing More Patent Suits and May Be Immune to IPRs

A recent Technology Transfer Tactics article by Jesse Schwartz published on February 22, 2017 states that universities are bringing more intellectual property suits, particularly patent infringement actions, against large companies.  Notably, the article points to the University of Minnesota infringement suit against Gilead Life Sciences and states:

Litigation like the UM lawsuit indicates that universities are warming up to the idea that fighting for their patent rights is worth the effort and expense, says Joshua H. Haffner, JD, an attorney with Haffner Law in Los Angeles. The UM case continues a trend of schools stepping up and demanding payment for use of their patents, he notes. Carnegie Mellon University settled a patent infringement case with Marvell Technology Group for $750 million in 2016, and later that year a jury ordered Apple to pay the University of Wisconsin more than $234 million for using its microchip technology in iPhones and iPads without permission. In 2015, a jury awarded Boston University more than $13 million from three companies that infringed on its patent for blue light emitting diodes (LEDs).

“This trend is continuing because they’re making money off the cases,” Haffner says. “Patent infringement cases can be very profitable, and with every win by a university others are looking at that and saying maybe they could reap the same rewards. There are other principles at play, like protecting the inventors and the principle of ownership, but really if the invention is not making money those principles tend to fall by the wayside.”

Interestingly, the Patent Trial and Appeal Board (PTAB) recently decided the Covidien v. University of Florida Research Foundation (UFRF) matter.  In that matter, the PTAB analogized inter partes review proceedings (IPRs) to litigation and decided that public (state) universities have 11^th Amendment immunity against IPRs.  Basically, this means that parties cannot bring IPRs against public universities to challenge their patents.  Notably, this immunity may be waived by the public university.  Interestingly, UFRF brought an action in state court for breach of a license agreement.  Covidien counterclaimed for a declaratory judgment of noninfringement and then filed IPRs at the United States Patent and Trademark Office challenging UFRF’s patents.  Covidien then removed the action to federal court; however, the federal district court sent the action back to state court because of UFRF’s 11^th Amendment immunity.  That decision is pending resolution at the U.S. Court of Appeals for the Federal Circuit (Federal Circuit). 

Interestingly, the PTAB states:

Petitioner additionally argues that “immunizing patents owned by alleged state entities from IPR proceedings would have harmful and far-reaching consequences.” Opp. 15–17. Here, Petitioner’s arguments are three-fold. One, invalid patents would stand simply because they are assigned to a state entity. Two, a patent owned by a monetization foundation affiliated with a state university would be insulated from the inter partes review process. Three, determining whether an entity is entitled to sovereign immunity is a fact-intensive inquiry that the Patent Office is not designed to adjudicate.

With respect to the first two arguments, we are cognizant of the fact that applying an Eleventh Amendment immunity to inter partes review, absent waiver by the state entity4, precludes the institution of inter partes review against a state entity entitled to Eleventh Amendment immunity. This, indeed, is precisely the point of the Eleventh Amendment, which is the preservation of the dignity afforded to sovereign states. “The preeminent purpose of state sovereign immunity is to accord States the dignity that is consistent with their status as sovereign entities.” FMC, 535 U.S. at 760 (citing In re Ayers, 123 U.S. 443, 505 (1887)). When sovereign immunity conflicts with legislation, Congress may abrogate sovereign immunity if it has unequivocally expressed its intent to abrogate the immunity and has acted pursuant to a valid exercise of power. Seminole Tribe, 517 U.S. at 55. Petitioner does not point to, and we do not find there is, an unequivocal, express intent by Congress in the AIA to abrogate immunity for the purposes of inter partes review.  

[Footnote 4 states: Because there is no related federal district court patent infringement (or declaratory judgment of validity) case brought by Patent Owner, we do not decide here whether the existence of such a case would effect a waiver of sovereign immunity.]

Further, we are not persuaded that an application of sovereign immunity to inter partes review will do violence to the patent system. The Supreme Court in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank, 527 U.S. 627 (1999) held that Congress does not have authority to abrogate Eleventh Amendment immunity with respect to patent infringement by the States, for “Congress identified no pattern of patent infringement by the States, let alone a pattern of constitutional violations.” Id. at 640. Based on the record before us, there is no evidence that the harm to the patent system, described by the Petitioner, will come to pass, let alone exists as a basis to divest States of sovereign immunity.

Finally, we are not persuaded that our tribunal cannot perform the fact-finding duties that Petitioner alleges would be required to determine whether an entity is entitled to sovereign immunity. Our rules and procedures provide for discovery and motion practice which, at a minimum, would provide the parties an opportunity to present arguments and supporting evidence pertaining to sovereign immunity.  

The Federal Circuit decision on this issue will be interesting, particularly if public universities continue to bring more litigation matters involving patents.  However, if there is a pending federal patent infringement claim brought by the university, I believe the PTAB (and Federal Circuit) will find a waiver of sovereign immunity.  The monetization firm argument is interesting.  [Hat tip to the Goodwin Keeping Tabs on the PTAB Alert for the lead to the case.]

Huawei ruling: bad news for SEPs?

From our friend Colm Ahern (Elzaburu, Madrid) comes the following hot-off-the-press comment on today's decision of the Court of Justice of the European Union in Case C-170/13 Huawei v ZTE [noted on the IPKat here].

Standard Essential Patents Lose Ground

The judgment in in Huawei v ZTE (C‑170/13) which was published today largely confirms the Advocate General’s Opinion. It amounts to a significant departure from the very strict conditions laid down by the German Bundesgerichtshof (BGH) in the Orange Book case regarding standard essential patents (SEPs) and antitrust law. It also vindicates the Commission’s position, which has been openly critical of Orange Book.

The Court effectively rejects the rules established by the BGH in the Orange Book case whereby the seeking of a cessation injunction by a patent holder with a dominant position, would only constitute abuse of that position if the alleged infringer had made an unconditional and binding licence offer which could not be limited to cases where patent infringement had been proven. By contrast the Court places the burden on the patent holder to first send a notice letter setting out not only the alleged infringement. Failure to do so before seeking a cessation injunction and removal of infringing products would constitute abuse of dominant position. If the alleged infringer expresses willingness to negotiate, then the patent holder must offer licence terms offer under FRAND conditions specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated. The alleged infringer could then respond with a counter-offer setting out alternative terms. If this offer is rejected the alleged infringer could provide a bank guarantee or place the amounts necessary on deposit. The patent holder could only avoid the charge of abuse if the counter-offer were held not to be serious and to constitute a mere delaying tactic. The alleged infringer could also reserve the right to later challenge both patent validity and the existence of infringement.

The rights held by owners of SEP patents under the “Orange Book Standard” have been significantly curtailed as a result of this judgment.

Thanks, Colm!

BSA Software Piracy Bounty -- Would It Work for Patent Infringement Generally?

A couple of years ago, I wrote about the Business Software Alliance's bounty system.  Essentially, you may be entitled to a reward if you turn in a software pirate, e.g., your employer.  The amount of the bounty depends on the ultimate settlement.  Today, I was listening to the radio and there was a great advertisement about BSA's program.  The advertisement stated that you could have an awesome vacation--just turn in a pirate!  For some entertaining ads, see the BSA Facebook page.  (they have a lot of likes!)  How successful are they?  TorrentFreak reports that BSA in Czechoslovakia gets about "30 leads a month."  BSA's website notes that in 2012 it "investigated over 15,000 piracy reports around the world."  Are there any other reports on the success of BSA's program or similar programs?  BSA has offered this program for quite a few years, so I imagine it must be somewhat successful in nabbing pirates and bringing in funds.  Although I guess success could be judged based on general deterrence and education grounds.

I wonder if a similar system would work for patent infringement generally.  For sure, one of the reasons the IP system has worked relatively well in the past is the large amount of "leakage" allowed by the IP system.  Indeed, there are rumors (and at least one report) of potential patent infringement occurring because researchers often ignore patents.  Moreover, it can be hard to detect infringement.  So, why not patent infringement bounties (or other copyright type bounties)?  My guess is that this has been tried before or at least proposed.  Vacation is after all vacation.

Here is a blurb from the BSA Facebook page along with a photo:

"A little extra cash can help get you to where you want to be. If you know a company using unlicensed business software, file a report today to be eligible for a cash reward and go on that much needed vacation. http://bit.ly/1kfgb3H"

Chief Judge Rader Upholds $345 million Jury Verdict for Patent Infringement

On May 1, 2013, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued an opinion in Versata Software Inc. v. SAP America Inc. affirming a jury verdict of infringement and damages by SAP for $345 million.  Chief Judge Rader authored the opinion.  The award includes $260 million for lost profits and $85 million for reasonable royalties for infringement of Versata Software’s claims covering its “hierarchical pricing engine” software.  The opinion is here.