Experts Warn Congress: Proposed Changes to Patent Law Would Thwart Innovation

It should be clear now that messing around with Section 101 of the Patent Act is a bad idea. A Senate subcommittee has just finished hearing testimony about a bill that would wreak havoc on the patent system. Dozens of witnesses have testified, including EFF Staff Attorney Alex Moss. Alex’s testimony [PDF] emphasized EFF’s success in protecting individuals and small businesses from threats of meritless patent litigation, thanks to Section 101.

Section 101 is one the most powerful tools patent law provides for defending against patents that never should have been issued in the first place. We’ve written many times about small businesses that were saved because the patents being used to sue them were thrown out under Section 101, especially following the Supreme Court’s Alice v. CLS Bank decision. Now, the Senate IP subcommittee is currently considering a proposal that will eviscerate Section 101, opening the door to more stupid patents, more aggressive patent licensing demands, and more litigation threats from patent trolls.

Three days of testimony has made it clear that we’re far from alone in seeing the problems in this bill. Patents that would fail today’s Section 101 aren’t necessary to promote innovation. We’ve written about how the proposal, by Senators Thom Tillis and Chris Coons, would create a field day for patent trolls with abstract software patents. Here, we’ll take a look at a few of the other potential effects of the proposal, none of them good.

Private Companies Could Patent Human Genes

The ACLU, together with 169 other civil rights, medical, and scientific groups, has sent a letter to the Senate Judiciary Committee explaining that the draft bill would open the door to patents on human genes.

The bill sponsors have said they don’t intend to allow for patents on the human genome. But as currently written, the draft bill would do just that. The bill explicitly overrules recent Supreme Court rulings that prevent patents on things that occur in nature, like cells in the human body. Those protections were made explicit in the 2013 Myriad decision, which held that Section 101 bars patents on genes as they occur in the human body. A Utah company called Myriad Genetics had monopolized tests on the BRCA1 and BRCA2 genes, which can be used to determine a person’s likelihood of developing breast or ovarian cancer. Myriad said that because its scientists had identified and isolated the genes from the rest of the human genome, it had invented something that warranted a patent. The Supreme Court disagreed, holding that DNA is a product of nature and “is not patent eligible merely because it has been isolated.”

Once Myriad couldn’t enforce its patents, competitors offering diagnostic screening for breast and ovarian cancer could, and did, enter the market immediately, charging just a fraction of what Myriad’s test cost. Myriad’s patent did not claim to invent any of the technology actually used to perform the DNA analysis or isolation, which was available before and apart from Myriad’s gene patents.

It’s just one example of how Section 101 protects innovation and enhances access to medicine, by prohibiting monopolies on things no person could have invented.

Alice Versus the Patent Trolls

Starting around the late 1990s, the Federal Circuit opened the door to broad patenting of software. 

“The problem of patent trolls grew to epic proportions,” Stanford Law Professor Mark Lemley told the Senate subcommittee last week. “One of the things that brought it under control was the Alice case and Section 101.”

A representative of the National Retail Federation (NRF) explained how, before Alice, small Main Street businesses were subject to constant litigation brought by “non-practicing entities,” also known as patent trolls. Patent trolls are not a thing of the past—even after Alice, the majority of patent lawsuits continue to be filed by non-practicing entities.

“Our members are a target-rich environment for those with loose patent claims,” NRF’s Stephanie Martz told the subcommittee.

She went on to give examples of patents that were rightfully invalidated under Section 101, like a patent for posting nutrition information and picture menus online, which was used to sue Whataburger, Dairy Queen, and other chain restaurants—more than 60 cases in all. A patent for an online shopping cart was used to sue candy shops and 1-800-Flowers. And a patent for online maps showing properties in a particular area was used to sue Realtors and homeowners [PDF], leading to decades of litigation.

The Alice decision didn’t end such cases, but it did make it much easier to fight back. As Martz explained, since Alice, the cost of litigation has gone down between 40 and 45 percent.

The sponsors of the draft litigation have made it clear they intend to overturn Alice. That will take us back to a time not so long ago, when small businesses had to pay unjustified licensing fees to patent trolls, or face the possibility of multimillion-dollar legal bills to fight off wrongly issued patents. 

More Litigation, Less Research

The High Tech Inventors Alliance (HTIA), a group of large technology companies, also spoke against the current draft proposal.

The proposal “would allow patenting of business methods, fundamental scientific principles, and mathematical equations, as long as they were performed on a computer,” said David Jones, representing HTIA. “A more stringent test is needed, and perhaps even required by the Constitution.”

Jones also cited recent research showing that the availability of business method patents actually lowered R&D among firms that sought those patents. After Alice limited their availability, the same companies that had been seeking those patents stopped doing so, and increased their research and development budgets.

The current legal test for patents is not arbitrary or harmful to innovation, Jones argued. On the contrary, the Alice-Mayo framework “has improved patent clarity and decreased spurious litigation.”

EFF’s Alex Moss also disagreed that the current case law was “a mess” or “confusing.” Rather than throw out decades of case law, she urged Congress to look to history to consider changes that could actually point the patent system towards promoting progress. 

“In the 19th century, when patent owners wanted to get a term extension, they would come to Congress and bring their accounting papers, and say—look how much we invested,” Moss explained. “I’d like to see that practical element, to make sure our patent system is promoting innovation—which is its job under the Constitution—and not just a proliferation of patents.”

At the conclusion of testimony, Sen. Tillis has said that he and Sen. Coons will take these testimonies into account as they work towards a bill that could be introduced as early as next month. We hope the Senators will begin to consider proposals that could improve the patent system, rather than open the door to the worst kinds of patents. In the meantime, please tell your members of Congress that the proposed bill is not the right solution. 

TAKE ACTION

TELL CONGRESS WE DON’T NEED MORE BAD PATENTS

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Author: Joe Mullin

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