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The Challenge of Patent Eligibility: Through Alice’s Looking Glass and Facing a Myriad of Changes

By Harley Blosser and Jason Schmidt, Sandberg Phoenix

Consider this scenario: Your company believes it has developed a highly valuable, novel invention, one not remotely obvious in view of what was previously known in your field. Your company’s CEO and CSO ask you to seek patent protection and believe the application should sail right through to become an early issued patent. Unfortunately, as your company’s in house counsel, you need to tell them – at least under current patent guidance, maybe not so fast.

Prior to 2014, inventors and patent agents did not blink an eye when they heard the words “Section 101,” the patent code section governing patent eligibility, but now, at least in many patent fields, they close their eyes tightly and pray. The Supreme Court’s 2014 decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l¹ and earlier 2013 decision in Association for Molecular Pathology v. Myriad Genetics², Inc forever changed the landscape of the types of inventions an inventor can protect, but exactly how is not well-defined. This Article aims to describe some of the new challenges inventors now face regarding patent-eligibility for inventions, when trying to protect their intellectual property.

For an invention to be eligible for a patent, it must first fit itself into a category of things that are patentable under 35 U.S.C. § 101 – or in other words, the invention must be “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” While it has long been known that there is an implicit exception to § 101 that makes laws of nature, natural phenomena, and abstract ideas ineligible to receive a patent, the Supreme Court ruling in Alice and decisions which followed in its wake, set a new bar for proving patent subject matter eligibility. Alice, especially for ones tied to an abstract idea now requires a much higher standard and one with much less predictability. It does so by requiring that an invention contain an inventive concept that transforms the abstract idea into a practical patent-eligible application. This is in addition to other patent statutes which already required the invention to be novel (§102) and non-obvious (§103) over any pre-existing products or other combination of “prior” art.

The Supreme Court’s decision in Myriad had a similar impact on patent eligibility in the realm of natural phenomena such as related to biological products or processes. In Myriad, the court held that although the researchers had isolated and purified a segment of DNA, the fact the DNA is theoretically naturally occurring makes it patent ineligible, per se, where the creation of synthetic DNA would be patent eligible. (Although, under an electron microscope, both segments of DNA would appear identical in practice.) 

These new standards, under Alice for abstract ideas, and Myriad for natural phenomena, provides unique hurdles for applicants which is especially high in the context of computer and software inventions or processes, or biological process-based discoveries and applications. With the ever-changing inter-dynamic between humans and technology, the United States Patent and Trademark Office (USPTO) was handed the difficult task of providing guidelines for determining what deserves a patent and what is simply a byproduct of using, e.g., computers to complete tasks. When determining whether a new advancement in computer-based technology is patent eligible, the inventor in the typical computer/software context, must somehow convince the USPTO, for example, that the invention improves the function of the computer instead of merely using a computer as a tool to improve upon an abstract idea. Courts have recently extended this doctrine to improvements in software interface as well.

Alice’s higher standard is a good thing, in one way, because it combats non-performing entities (NPEs), colloquially known as “patent trolls” through its implicit preemption analysis. Almost all inventions involve abstract ideas, natural phenomena, or laws of nature, and in Alice, the Supreme Court affirmed that it is the concern of widespread preemption that excludes patents in these categories. Patent trolls can acquire struggling companies’ patents and attempt to utilize them to make money off potential infringers by threatening legal action. In the patent world, infringement suits can routinely involve multi-million dollar amounts in controversy and can be quite risky. An overbroad, highly preemptive patent can be a patent troll’s personal goldmine because of the number of companies they could potentially allege are violating the broad patent. Alice’s requirement that an invention have an inventive concept that transforms an abstract idea inherently narrows the scope of what is patent eligible, but also what future inventions the given patent could prevent.

However, as now formulated, Alice has been inefficient and stunts inventorship. After Alice, many more patents receive initial and final rejections under § 101 than ever before. Today, many patents are focused on software and computer developments, and the test for whether they are merely using computers as a tool is difficult to apply and seemingly unpredictable. Many would also argue that there should not be such an unpredictable test being applied to something that is so vitally important for the life of many companies. Furthermore, issues at the patent office are most likely to impact smaller companies and startups who cannot afford endless filing fees or costly litigation.  

Like the changes to what inventions are patent eligible in the computer/software/internet fields wrought by Alice, the Myriad decision and its progeny has often made a profound impact on the types of inventions that inventors can pursue in the bio arena.  However, while software/internet requires much less startup capital, a new drug or therapeutic regimen has been estimated to typically cost in excess of $1 Billion to go from mere attractive lab concept to FDA approved therapeutic. Associated diagnostics can also be very expensive. In addition to the heavy investments needed, “trade secret” protection is usually not a viable alternative given the extensive disclosure requirements involved. Thus, the Pharmaceutical industry has been much more pre-disposed to support a very solid bulwark of patents to support their key products than the software field where new products may come and go quickly. Moreover, the absence (or even heightened uncertainty) as to ultimate patent protection for a multi-million-dollar investment in a potential therapeutic can severely diminish the incentives for even beginning the road to developing life-saving drugs and diagnostics that, when once marketed, can be readily copied. And under our current “Hatch-Waxman” system promoting generic copies, any potential avenue to invalidating a patent may invite litigation.

Myriad’s holding may be a good thing for the progression of scientific research. If an inventor held a patent for a naturally occurring segment of  DNA, then they have the power to make it extremely  cost prohibitive to use in other studies, tests, and treatments, effectively giving the inventor a monopoly on its use. This could make it nearly impossible for other entities, particularly smaller companies, who cannot front extremely large research costs, to use the  patented compounds for further research. This would inevitably slow the progression of scientific discovery. 

Unfortunately, at a minimum, Alice, Myriad and their progeny’s holdings make it more difficult for inventors and their companies to know if they will get compensated for their work, disincentivizing the inherent risk associated with R and D expenditures. Patents give companies and inventors the ability to pour large amounts of money into research and  product development with the peace of mind that if t hey can develop a commercial product, they may get a significant return on their investment. Large corporations and small startups alike thus become less able to justify the high research and testing costs they must incur for an invention that may turn out not to be patent eligible. 

Given the increased uncertainty of whether something is patent eligible, it is essential that innovative companies protect themselves by going into future projects with the knowledge that they have a new, heightened, standard to meet, in general, but especially if they fall in or near the software (abstract ideas) or bio (dealing with natural phenomenon) arenas. Innovative companies need to begin review of such considerations with their patent attorneys and inventors in the early stages of product development to insulate themselves from problems with Section 101 or to discuss alternative measures to protect their creations.

The U.S. Patent Office has urgently sought for the Supreme Court to revisit the patent eligibility issue to provide greater clarity. However, to date, the Supreme Court has turned a blind eye to these solicitations. However, stay tuned for future developments on this front, given its current status as a point of major contention. 

The most important takeaway from this Article is that while there may be good intentions behind heightened patent subject matter eligibility standards under 35 U.S.C. § 101, they require innovative companies to make fundamental changes to their plans and practices. They may endure a multitude of consequences and uncertainties directly related to their livelihood, requiring them and their inventors to work closely with their in house and intellectual property counsel at an early stage to ensure they keep patent eligibility considerations centered throughout the process.

¹ Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. 208 (2014).

² Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013).