What’s Going On with Patentable Subject Matter?



Practice Areas

John M. Conley
Robinson Bradshaw Publication
Aug. 5, 2019

What’s the status of patentable subject matter? The short answer is: it’s a bigger mess than ever. If you ask the judges of the Federal Circuit (the national patent appeals court), it’s all but hopeless. Things have gotten so bad that we’re seeing that rarest of political phenomena, bipartisan Congressional action.

Patentable subject matter (often called patent eligibility) is the first hurdle an invention must clear on the road to patentability. Section 101 of the Patent Act provides, “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” In other words, if an invention falls into one of the enumerated categories—processes (or methods), machines, manufactures or compositions of matter—it will be patent-eligible if it meets the other criteria specified by the Act. The most important of those are novelty, utility and nonobviousness; the inventor also has to meet demanding standards pertaining to the description of the invention and the drafting of claims.

For most of the history of patents in the United States, just about everything passed the subject matter test. The courts created three major exceptions: you couldn’t patent products of nature (sometimes called natural phenomena), such as minerals or naturally occurring plants; laws of nature, like the law of gravity; or abstract ideas, like simple methods of doing business. The courts have repeatedly emphasized that these exceptions are narrow. For example, whereas natural laws are patent-ineligible, inventions that apply natural laws may be patentable. Consequently, these exceptions were rarely invoked by the courts or the Patent Office (the USPTO) to invalidate patents. The work of winnowing out bad patents was usually left to the doctrines of novelty (section 102) and nonobviousness (103). (Section 101 also requires utility, but that’s easy to satisfy in almost all cases.)

The Supreme Court Wades In

This all began to change in 2012 when the Supreme Court decided the first of three subject matter cases, Mayo v. Prometheus. The Court held that Prometheus’ patent on a method for adjusting the dose of an autoimmune drug amounted to nothing more than a claim on the natural law correlating the drug’s metabolite level in the body with the proper dose. Next came AMP v. Myriad Genetics (2013), where the Court held that genes that are merely isolated from the body are not patentable subject matter because they’re products of nature. The third case in the trilogy was Alice Corp. v. CLS Bank, in which the Court invalidated a patent on a method for using a computer system as an intermediary to monitor the performance of the parties to a financial exchange transaction. The Court found that the concept of a third-party intermediary is an abstract idea and simply implementing that idea on a generic computer doesn’t elevate it to patentable subject matter.

Reaction in the Federal Circuit

The Myriad decision has proven to be the least controversial of the three. The case invalidated patents only on isolated gDNA (natural genomic DNA), and patents on synthesized cDNA and methods of using DNA for drug testing were left untouched. In any event, most single-gene patents, whether in gDNA or cDNA form, were already subject to obviousness attacks under a 2009 Federal Circuit decision called In re Kubin.

The effects of Mayo and Alice, by contrast, have continued to reverberate. In Mayo, the Supreme Court found that the patent claims begin with a law of nature (the correlation between metabolite levels and efficacy/toxicity) and then “simply tell doctors to gather data from which they may draw an inference in light of the correlation.” The further steps, in the Court’s view, add nothing beyond “well understood, routine, conventional activity.” In theory, a specific application of a law of nature could add inventive steps that go beyond conventional activity, but the Court provided no clue as to what such steps might look like. Since Mayo, the Federal Circuit has struggled to find many medical inventions—especially in the diagnostic realm—that satisfy its test.

The Federal Circuit’s difficulty is epitomized by its 2015 holding in Ariosa v. Sequenom. Sequenom’s patent claimed a novel method of determining paternity before birth. The method involves identifying and testing cell-free fetal DNA (cffDNA) in a maternal serum or plasma sample, which permits noninvasive sampling of fetal DNA. In invalidating the patent on subject matter grounds, the court found that the problem is that the method “begins and ends with a natural phenomenon”—cffDNA. From that point, the method fails to add a sufficient inventive concept, since it “amounts to a general instruction to doctors to apply routine, conventional techniques when seeking to detect cffDNA”—exactly how the Supreme Court characterized the method in Mayo.

But is that true? In a separate opinion concurring in the result, one judge observed that before this invention, “no one was amplifying and detecting paternally-inherited cffDNA using the plasma or serum of pregnant mothers,” whereas the Mayo method claimed “the very steps doctors were already doing.” But even this judge conceded that “the sweeping language” of Mayo required rejection of the Sequenom method. In fact, all three judges who decided the case acknowledged the value of the invention but said, in effect, “we’re sorry, but Mayo made us do it.”

Medical diagnosis method patents have continued to fail both in the Federal Circuit and the lower courts. The most important of these cases is discussed below. Patents on methods of medical treatment, however, have fared somewhat better. Perhaps the most significant of these cases is Vanda Pharmaceuticals v. West-Ward Pharmaceuticals, decided by the Federal Circuit in April 2018. The patent in that case claimed a method of treating schizophrenia patients with a drug called iloperidone. The key background facts are that the drug is metabolized by a particular enzyme, that the drug can cause dangerous heart arrhythmias in people with lower-than-normal activity levels of that enzyme, and that those activity levels are determined by a gene that codes for the enzyme. The method specifies genetic testing of the patient to determine if he or she is a “poor metabolizer” of the drug and, if so, a reduction in the dosage below the usual recommended level.

On the one hand, this patent resembles the one in Mayo in that it says, in essence: test a biomarker and then adjust the dose of a drug in response to the test results. On the other hand, the procedure is a lot more complicated and entirely novel. In a 2-1 split decision, the Federal Circuit thought that the differences from Mayo outweighed the similarities and upheld the patent. The majority found that, in contrast to Mayo, this patent was not “directed to” the underlying law of nature (here, the gene-enzyme-arrhythmia relationship) but rather to a novel method of treatment that built on the law of nature. The dissenter saw it the other way, concluding that the patent claimed “no more than an optimization of an existing treatment of schizophrenia, just as the claims in Mayo concerned ‘optimizing therapeutic efficacy’ of thiopurine drugs.” The fact that both approaches are logical and defensible highlights the uncertain state of the law and the consequent difficulty of predicting future outcomes.

Following Alice, business and other software-based method patents have also been struck down regularly, with some ill-defined exceptions. For example, in a 2-1 decision in Visual Memory v. Nvidia (August 2017), the Federal Circuit reversed a lower court’s finding of invalidity in an infringement case. The patent claimed a “computer memory system connectable to a processor,” which rearranges “memory hierarchy” according to the speed of the memory components. In the majority’s view, the patent was not directed to the “abstract idea of categorical data storage,” for which computers are “invoked merely as a tool,” but rather to “an improved computer memory system” that brings about “specific improvement in computer capabilities.” The dissenting judge wrote that the “claims are directed to the abstract idea of categorical data storage” and add no inventive concepts.

But then in March 2019, in ChargePoint v. SemaConnect, the court invalidated a patent on an apparatus (a “machine,” in section 101 language; a product claim)—not a method—that allows a remote server to control whether electricity is flowing over a network to electric car charging stations. According to the patent, the invention solves the tangible problem of a lack of efficient communication networks for charging stations. But the court ignored the characterization of the invention as a machine and found that it doesn’t really solve a “technical” (probably synonymous with tangible or mechanical) problem; rather, it really claims—and in fact preempts—the abstract idea of networked charging stations. So it’s directed to an abstract idea and fails to add the inventive concept required—but not defined—by Alice.

How can these cases be reconciled? They can’t, in my view. Visual Memory suggests that you can avoid the abstract idea barrier if your invention solves a “technical” problem or improves the process of computing itself. But then in ChargePoint, the Federal Circuit ignored the apparently tangible, technical contribution of the invention and decided that it was really nothing more than a claim to the abstract idea itself. When the court will tilt in which direction is a mystery to me.

Nonetheless, if I’m forced to summarize the current state of the law, it looks something like this:

Widespread Panic: Athena v. Mayo

This judicial angst has come to a head in the Federal Circuit’s treatment of another medical diagnostic test in Athena Diagnostics v. Mayo. In February 2019, in yet another 2-1 ruling (all those split decisions are themselves evidence of the uncertain state of the law), the Federal Circuit invalidated Athena’s patent on a new method of diagnosing myasthenia gravis (MG), a serious neuromuscular disease. (As in the earlier Supreme Court case, Mayo was once again the successful patent challenger.) Most MG patients can be diagnosed by testing for the presence of a particular antibody. But 20 percent of those with the disease don’t have that antibody. The inventors discovered that those patients have different antibodies that attack a specific protein, and the patent covers a method of diagnosing the disease by detecting those antibodies.

The majority held that the patent was directed to the natural correlation (a natural law) between the presence of the antibodies and the disease—the inventors’ only innovation, in the majority’s view—and that the testing techniques it specified were well known. The majority wrote, “[w]e cannot hold that performing standard techniques in a standard way to observe a newly discovered natural law provides an inventive concept.” Accordingly, the case was indistinguishable from, and thus governed by, Mayo. In a strikingly apologetic footnote, the two majority judges noted that they saw value in allowing patents like these, but Mayo foreclosed that result. Judge Pauline Newman, the senior member of the Federal Circuit, strongly dissented, arguing that the majority had gone too far in reading Mayo as barring almost all diagnostic patents.

Then, on July 3, 2019, all judicial hell broke loose. The judges of the Federal Circuit voted 7-5 to deny rehearing en banc of the February decision. (En banc rehearing means that all the judges of a federal appeals court rehear and re-decide a case after the original decision by the customary three-judge panel.) The order denying rehearing was accompanied by 86 pages of opinions by various judges, none of which has any legal force. Judge Alan Lourie, who wrote the majority opinion in the February Athena decision, wrote that he’d prefer that only natural laws themselves—E=mc², for example—be unpatentable, not diagnostic tests that use or detect them. But he thought rehearing would be a waste of time because the Federal Circuit is forced by the Supreme Court’s Mayo decision to reject such patents. Judge Kimberly Moore, by contrast, wrote that she does not believe Mayo compels such a result. Other members of the court were all over the lot on the question of how much freedom to operate the Supreme Court has left them.

Despite this disarray, there were two points of general agreement: first, that many valuable inventions are being denied patent protection; and second, that the Supreme Court or Congress has to do something to clarify the law.

At this point, there is no evidence that the Supreme Court is likely to do anything. The Court has turned down many cases that might have given it a chance to clarify its decisions, particularly what it means for a patent to be “directed to” a forbidden category or what an additional “inventive concept” means in the real world. There is no reason to believe that it will take such cases in the future. Even if it did, it would probably take several cases for the Court to dig itself out of the Mayo-Alice hole. In fact, I sometimes wonder if the justices, looking down at the befuddled patent lawyers from their Olympian perch, are even aware of the mayhem that their sweeping yet imprecise decisions have wrought.

USPTO Director Andrei Iancu is more sanguine. His agency issued new guidelines for patent examiners in January 2019, which he says are “working really well.” The newest guidelines and the accompanying examples of inventions that do or don’t meet the Supreme Court’s standards are certainly an upgrade in terms of clarity and level of detail. But the USPTO can only try to follow the case law, and its patentability decisions are subject to review by the courts without deference. So the new guidelines may be making the examination process smoother and somewhat more predictable, but the USPTO simply lacks the legal authority to solve the underlying problem.

A Congressional Solution?

That gets us back to Congress, where much of the current action is. Throughout 2019, Senators Thom Tillis (R-NC) and Chris Coons (D-DE) have been preparing an amendment to the Patent Act intended to sort out the chaos surrounding patentable subject matter. The most significant provisions in the current draft bill are the following:

The provisions of section 101 [the current subject matter provision, which remains] shall be construed in favor of eligibility.

No implicit or other judicially created exceptions to subject matter eligibility, including “abstract ideas,” “laws of nature,” or “natural phenomena,” shall be used to determine patent eligibility under section 101, and all cases establishing or interpreting those exceptions to eligibility are hereby abrogated.

In other words, the three judicially created exceptions to statutory subject matter, which have a pedigree going back more than 100 years, would be summarily abolished. Congress has the power to do this, since these exceptions are based on judicial interpretations of the language of the Patent Act and are not mandated by the Constitution.

The reaction to the proposed bill—expressed in June 2019 hearings and in numerous public statements—has varied widely across the spectrum of constituents. Most of the reactions from the for-profit sector seem to be grounded in economic self-interest. For example, a representative of IBM—one of the largest IT patent holders—attacked the ChargePoint decision while testifying in favor of the bill, and a witness from Genentech raised the specter of China and the EU, whose patent laws may now be more favorable to biotech, draining investment from the United States. Big Pharma representatives expressed similar sentiments. On the other hand, a witness from a smaller company that Myriad had once sued argued that U.S. biotech was enjoying a “renaissance” since the Supreme Court cases cleared out the “patent thicket.”

Reactions from the nonprofit sector have largely followed established philosophical and ideological lines. The American Civil Liberties Union and the Association for Molecular Pathology, the primary sponsors of the Myriad gene patent challenge, seem to be suggesting that the bill would reignite the gene patent wars, which is far-fetched, in my view. The Electronic Frontier Foundation, which generally promotes a free and open cyberworld, has prophesied a “disaster for innovation” if the bill becomes law and IT patents proliferate. Taking a more balanced approach, the Association of American Universities, in an email to its members, has noted that “universities are both generators of new early-stage technologies and healthcare providers that are major purchasers of pharmaceuticals and biotechnology products”—that is, both patent producers and patent consumers. The AAU’s conclusion is that “the approach reflected in the draft [bill] is a positive one,” preferable to the current state of confusion.

My reaction to the Coons-Tillis bill is, on balance, negative. As an academic observer and lawyer who has represented parties on both sides of the patent divide, my biggest fear is the law of unintended consequences. The senators’ presumption seems to be that their abrogation of the longstanding judicial exceptions to statutory subject will take us back to a Golden Age (before the Supreme Court got involved) when just about everything passed section 101 and the novelty and nonobviousness rules did the work of weeding out “bad” patents.

But those rules didn’t always do the job. Look how we got into this mess in the first place. To me, the idea of patenting merely isolated genomic DNA is absurd, akin to patenting a mineral taken out of the ground. The Prometheus patent was at least as bad: as I tell my students, it amounted to “measure a simple biomarker, and then don’t commit malpractice.” But both of these patents slipped through the novelty and nonobviousness nets. The USPTO allowed both, and the Federal Circuit upheld them—in the case of the Prometheus patent, twice. The patent in Alice, which I think is a financial version of the Prometheus patent, was rejected by the Federal Circuit. The Supreme Court may have created a mess, but I think it clearly got the correct result in all three cases. What would the biotech and financial worlds look like if rudimentary processes like those in Mayo and Alice were routinely patentable?

And by the way, contrary to the doomsday narrative, the U.S. biotech industry has by any measure continued to prosper since Myriad and Mayo. The same is true of IT after Alice. In fact, there’s a strong argument to be made that the wild swings in the availability of protection for IT under both patent and copyright law have had absolutely no effect on the industry—but that’s a long story for another post.

The critics of the status quo have two things right: some significant and patent-worthy inventions are being denied protection and it has become very hard to predict what’s patentable. Ariosa and ChargePoint, for example, seem wrong to me from legal, economic and policy perspectives. And the Federal Circuit is right to decry the current subject matter chaos.

What’s the Best Approach?

Is the Coons-Tillis bill the right fix? In a sentence, it brushes aside more than 100 years of judicial precedent. Until the Supreme Court’s recent foray into section 101, that precedent had worked pretty well in a vast majority of cases. Coons-Tillis is a response to a few cases in which it didn’t—but at what cost? Remember that the judicial exceptions, now muddled by the Supreme Court, have arisen from cases in which the courts have interpreted the language of the current section 101. If the bill passes, the courts will have new language to interpret. Coons and Tillis probably assume that their new language is unambiguous and thus will require no interpretation, but that ignores history all across the law. Will the courts, for example, try to resurrect the newly forbidden law of nature doctrine simply by giving it a new name? In the end, will a new body of statutory interpretation be any better than the old one? Once again, beware the law of unintended consequences.

There is a mess, though, and someone needs to clean it up. The most straightforward response would be for the Supreme Court to recognize that it caused the problem, so it should fix it. But as I said earlier, we probably shouldn’t hold our collective breath waiting for that to happen.

So why not the Federal Circuit? That court bears at least as much of the blame for the current mess. It passed on two opportunities to reject that dubious Prometheus patent under established law, opening the door for the Supreme Court to stumble in. Many of the judges believe that their hands are tied by Mayo and Alice, but is that really true? The problem with those cases is their vagueness and imprecision—hardly the stuff of secure bondage. The Federal Circuit might do what lower courts have always done in every area of the law: interpret the Supreme Court’s vague language on a case-by-case basis. The Supreme Court didn’t tell us, for example, what “inventive concept” means. Why doesn’t the Federal Circuit step in and start developing a more concrete definition, one fact pattern at a time? If the Supreme Court didn’t like where the Federal Circuit was going, it could review another case and attempt to clarify the definition, which would be a step in the right direction.

The statutory subject matter dilemma is a problem created by courts, so my preferred solution is for the courts to fix it. The Supreme Court apparently won’t. The Federal Circuit has considerably more freedom of action than some of its members think. So keep at it: the worst that can happen is that you’ll get reversed by the Supreme Court. And that would mean the Supreme Court will have told us something more, which is the ultimate solution.

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