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One of the main disputes following Myriad was over what effect the decision would have on investments within the biotech industry. Although some argued that Myriad would open up the industry to greater collaboration,190 others saw Myriad as a harbinger of the downfall of American biotechs.191

Several studies have tried to get a handle on what impact Myriad actually had on the biotech industry. In “Patent Eligibility and Investment,” Professor David O. Taylor surveyed 475 venture capital and investment firms to find out.192 Taylor found that investors were generally less willing to invest in biotechs that did not have patent protection covering their most important products.193 He further found that almost 40 percent of investors who were aware of the Supreme Court’s decisions in Myriad, Mayo, and Alice believed that the decisions had negative effects on the firm’s existing investments; additionally, approximately 33 percent of firms indicated that these decisions caused them to shift investments away from impacted industries—especially biotechs and pharmaceutical companies.194 As a whole, the study indicated a general hesitancy of investment firms to back biotechs following Myriad.195

Opponents of gene patents maintain that trade secret law adequately incentivizes genetic research.330 However, trade secret law actually exacerbates the more pressing issues of genetic research for two reasons. First, trade secret protections are unstable, as they only exist so long as the underlying information is kept secret.331 It is unlikely that investors would feel more confident investing in intellectual properties like trade secrets that could disappear at any moment—especially when compared to patents that carry a set, guaranteed term of protection.332 Second, the nature of trade secrets actively discourages the dissemination of research, as trade secret protections are predicated on keeping information secret.333 Unlike patents, which explicitly require the disclosure of discoveries, trade secret law incentivizes researchers to prevent others from learning about their discoveries for as long as possible.334 Collectively, trade secret law is a poor fit for genetic research, as it would fail either to provide economic stability or to encourage the sharing of genetic discoveries. The lack of trade secret protections as a viable alternative adds to the argument that patent law is the best available solution for human genetic technologies.

//DH

Like the introduction of computers, biotechnology is a tool with the potential to revolutionize multiple economic sectors. Biotechnology—the application of living organisms in science or engineering—already solves problems today, like improved cancer treatment, agricultural sustainability, and novel types of materials. The United States can do more to integrate biotechnology across the domestic economy so that Americans are reaping the economic and security benefits that biotechnology can offer. Failing to meet this moment will have far-reaching consequences, especially because we have a strategic competitor that seeks to control critical supply chains and dominate key elements of the biotechnology industry.

Proponents of gene patent eligibility have raised several concerns that argue for the ability to patent genes. Chief among them are fears that the lack of gene patentability is (1) eroding America’s place in the world market for biotech innovation and (2) on balance, harming access to healthcare.229

Those who support the ability to patent genes are troubled by the shift in capital investment away from the biotech industry.230 Studies like Professor Taylor’s have caused them to raise the alarm over the United States’s place as a global leader in biotech.231 Their basic argument is that, if genes cannot be patented, investment firms will be less willing to invest in biotechs working on gene-based technologies since such investments will be riskier.232 This lack of investment, in their view, will lead to an overall dampening effect on the industry.233 Meanwhile, other countries, such as the EU, Japan, and China, continue to uphold the validity of gene patents.234 Investment firms will thus be motivated to shift resources abroad.235 The United States has enjoyed a place of prominence in the biotech industry for the last half century.236 Some attribute this in part to the United States’s liberal grant of gene patent rights pre-Myriad that spurred the creation of some of the United States’s major biotechs.237 Proponents argue that, if the Court’s ban on gene patents is not overcome soon, the United States will lose its position in the global biotech marketplace and that, if this were to happen, it might never be able to catch back up to other countries.238

2. a. In your opinion, how has the current state of unpredictability surrounding Section 101 hampered research, development and innovation, particularly in critical industries like life sciences, diagnostics, and artificial intelligence?

21C’s Answer to Question #2a:

Others have suggested creating a special statutory regime for gene patents akin to what has been done for computer chips within copyright law.343 However, this proposal would likely run into many of the same issues that plagued the computer chips legislation. Specifically, critics point out that copyright law was too slow to adapt to computer chip technology and was ultimately a poor fit.344 This shortcoming seems almost certain to also apply to the complex and rapidly developing field of human genetics. Further, whatever regime Congress could manage to craft may then immediately be open to challenges as the specifics of this new field of law are fleshed out, likely requiring years of litigation and uncertainty before a semblance of stability emerges for gene patents.

The first of these is to focus on a narrow solution that is targeted specifically and exclusively at any areas of technology for which the current jurisprudence has created significant and empirically demonstrable impediments to obtaining patent protection to the extent that such impediments can be shown to have resulted in clearly insufficient levels of R&D investment. Ideally, the solution to such a problem would be to create a new form of sui generis intellectual property that would be available only for innovations in the identified fields of technology, thereby minimizing the risk of harming existing incentives or imposing substantial unnecessary costs or business uncertainty with respect to areas of technology that cannot be shown to have been harmed by the current jurisprudence. As noted above, the relevant data from the ten-plus years since the principal Supreme Court decisions at issue in this debate suggest that there are no widespread problems. But, to the extent that it can be shown that these decisions created gaps in protection for narrow classes of technology, a targeted, sui generis solution should be adequate to fill them and restore appropriate incentives to innovate while minimizing the risk to the interests of most stakeholders as well as the risk of negative unintended consequences more generally. Importantly, this type of sui generis protection could be modeled after patent protection, with the main difference being that subject matter eligibility would extend only to the specific, narrowly-defined categories shown to have been harmed. Such a targeted solution could provide intellectual property rights that would be equivalent to patent protection without creating unnecessary challenges with respect to the broader areas of technology for which current eligibility law appears to be working well.

Turning to Mr. Jones’s approaches, I understand alternative (1) to be a backward-looking approach that would only attempt to remedy harm after it had occurred. I do not understand how such an approach could promote investment in innovation. Once R&D investment has not occurred in a given area of technology, it will be too late to incentivize innovation in that space. The fallacy of this approach is underscored by the fact that the technologies addressed by PERA can be patented in other countries. Thus, even today innovators in other countries are still incentivized to invest in R&D, and publish and patent their inventions in these areas, leaving U.S. innovators out in the cold.

Furthermore, it seems likely that alternative (1) ultimately would create additional unpredictability and inconsistency. It already is difficult to pin down which industries would qualify as “areas of technology for which the current jurisprudence has created significant and empirically demonstrable impediments,” and this difficulty will be exacerbated as lines between various “areas of technology” continue to blur. For example, methods of treatment are still eligible for patenting under the current judicial exceptions, but as the industry continues to shift towards reliance on big data, artificial intelligence, and personalization, there is a risk that certain types of treatments will be deemed ineligible under the “abstract idea” or “natural phenomenon” paradigms. If this occurs, there could be a divide across the health care industry, with some treatment modalities eligible for patenting and some that would experience “significant and empirically demonstrable impediments” and not be brought to market due to lack of availability of patent protection.

8. Mr. Jones’s testimony included proposed alternative approaches to addressing concerns with the state of Section 101. He proposed the two possible alternative approaches: (1) “[] a narrow solution that is targeted specifically and exclusively at any areas of technology for which the current jurisprudence has created significant and empirically demonstrable impediments to obtaining patent protection to the extent that such impediments can be shown to have resulted in clearly insufficient levels of R&D investment.”; (2) “a broader legislative solution that tethers patentability to its underlying policy purpose by explicitly limiting the availability of patent protection to only those inventions that embody an advance in technology.” What are your views on these proposals as compared to the approach of PERA?

Mr. Johnson’s Answer to Question #8

8. Mr. Jones’s testimony included proposed alternative approaches to addressing concerns with the state of Section 101. He proposed the two possible alternative approaches: (1) “[] a narrow solution that is targeted specifically and exclusively at any areas of technology for which the current jurisprudence has created significant and empirically demonstrable impediments to obtaining patent protection to the extent that such impediments can be shown to have resulted in clearly insufficient levels of R&D investment.”; (2) “a broader legislative solution that tethers patentability to its underlying policy purpose by explicitly limiting the availability of patent protection to only those inventions that embody an advance in technology.” What are your views on these proposals?

RESPONSE TO QUESTION 8: Mr. Jones’s proposals would not solve the problems created by the Supreme Court’s patent eligibility jurisprudence, but rather would put America even further behind in global technological leadership. The first proposal would necessarily make the United States lag behind other countries—it calls for patent eligibility to expand based on already-proven success. Given the delay between breakthrough ideas and proof of commercial success, by the time a new technology is empirically proven to be “worthy” of patent protection under Mr. Jones’s proposal, it would presumably already be produced somewhere else. Alternatively, companies might have already turned to trade secret protection in these new areas, and there would not necessarily be any need for them to embrace patent protection even if it subsequently became available. Under this scenario, the public would lose the benefit of patent disclosures, impeding further research and development and leading to silos of advances in technology. This model of innovation also tends to favor bigger, more established companies that can use their internal silos of knowledge, to the disadvantage of startups and small businesses—normally the primary drivers of disruptive innovation in our economy.

5. Mr. Jones’s testimony included proposed alternative approaches to addressing concerns with the state of Section 101. He proposed the two possible alternative approaches: (1) “[] a narrow solution that is targeted specifically and exclusively at any areas of technology for which the current jurisprudence has created significant and empirically demonstrable impediments to obtaining patent protection to the extent that such impediments can be shown to have resulted in clearly insufficient levels of R&D investment.”; (2) “a broader legislative solution that tethers patentability to its underlying policy purpose by explicitly limiting the availability of patent protection to only those inventions that embody an advance in technology.” What are your views on these proposals as compared to the approach of PERA?

In my view, neither of the solutions that the High Technology Inventors Alliance proposes would do any more than continue the status quo, except for the “narrow solutions” to specific rulings. This in turn would mean that each time a district court judge finds a bizarre theory on which to posit ineligibility, those of us interested in a rational and protective legal system would have to come back to Congress. The key value of PERA is that it restores clarity surrounding Congressional intent as to what is eligible for patent coverage, leaving to the courts and Patent Office the traditional comparison of an invention with the prior art and determination of adequacy of claims and disclosure.

6. Mr. Jones’s testimony included proposed alternative approaches to addressing concerns with the state of Section 101. He proposed the two possible alternative approaches: (1) “[] a narrow solution that is targeted specifically and exclusively at any areas of technology for which the current jurisprudence has created significant and empirically demonstrable impediments to obtaining patent protection to the extent that such impediments can be shown to have resulted in clearly insufficient levels of R&D investment.”; (2) “a broader legislative solution that tethers patentability to its underlying policy purpose by explicitly limiting the availability of patent protection to only those inventions that embody an advance in technology.” What are your views on these proposals as compared to the approach of PERA?

These two proposals by Mr. Jones are not proper solutions to the quagmire in patent eligibility doctrine produced by the Supreme Court, especially as compared to PERA.

Notwithstanding the agreement among the Justices on the governing legal standard that resulted in unanimous decisions in Mayo and Alice, the Mayo/Alice framework spawned significant confusion and debate regarding the limits of patent eligibility and the analysis for making such determinations. Although the "chorus of criticism" has been far from uniform, it has been loud and continues to this day.73 Moreover, it finds support in academia, industry, private practice, and Congress.74 The focus of the criticism is on the Supreme Court's refusal to offer more guidance on what constitutes an "abstract idea"75 and what many have labeled as a difficult and unpredictable analysis.76 Even some judges on the Federal Circuit the court uniquely tasked with bringing uniformity and clarity to patent law waved a white flag: "[I]t [is] near impossible to know with any certainty whether the invention is or is not patent eligible.... [T]his [is an] incoherent body of doctrine."77 Yet, the Supreme Court has not accepted the pleas to wade back into these murky waters. For example, the Supreme Court last year refused a petition for certiorari involving a case that invalidated a patent under § 101, which badly fractured the Federal Circuit into a 6-6 vote regarding ineligibility and prompted a slew of opinions on the state of patent eligibility law.78 On appeal, the U.S. Solicitor General responded to the Supreme Court's invitation to file a brief and argued that the Federal Circuit's decision "reflects substantial uncertainty about the proper application of Section 101, and this case is a suitable vehicle for providing greater clarity," such that the petition for cert should be granted.79 In what appears to be a first, the Supreme Court denied a petition for a writ of certiorari involving a patent case when the Solicitor General has recommended taking the case,80 refusing to revisit its Alice test.81 More recently, the Solicitor [*13] General again recommended that the Supreme Court grant cert in two separate cases involving patent eligibility, deeming them to be "suitable vehicles for providing much-needed clarification in this area."82 The Supreme Court again rejected the Solicitor's recommendations and denied cert in both cases.83

At the outset, I disagree with Mr. Jones’s position that the U.S. Patent Office and courts are applying the “judicial exceptions” to Section 101 in a predictable manner. The only predictability in the life sciences space is that diagnostic methods as such are not eligible for patenting, but certainty in what cannot be patented does not incentivize innovation. The contrasts provided by the formulation and device cases cited above are just two examples of ongoing, problematic uncertainty.

I also disagree that any consistency in how the U.S. Patent Office applies Section 101 should weigh against the need for legislative reform. The U.S. Patent Office has issued guidelines for examiners to follow, but those guidelines are not binding on (or followed by) the courts, and always lag behind the most recent court decisions. As I noted in my written testimony, the U.S. Patent Office 2016 Patent Eligibility Guidance was inconsistent with the Federal Circuit’s 2015 decision in Sequenom, because it took until later in 2016 for the Federal Circuit decision to become final (e.g., the Supreme Court did not deny certiorari in Sequenom until June 2016, after the USPTO’s May 2016 guidance was promulgated). The years that pass between a district court’s expansive application of a “judicial exception” and a final determination of whether that holding will stand represent years of uncertainty not only for the parties to the litigation, but to all innovators and competitors potentially impacted by a similar decision.

The Alice-Mayo inquiry is one of many recent changes to the U.S. patent system that has called into question the longstanding U.S. claim to a “gold standard” patent system as compared to the rest of the world.5 As a result of the Alice-Mayo inquiry, the USPTO has denied patent applications or courts have invalidated issued patents in cutting-edge discoveries in medical care, such as treatments for breast cancer, diabetes, and strokes, among others.6 The USPTO appears to have corrected course in adopting its 2019 patent eligibility guidelines,7 but these patent examination guidelines are not a panacea. These regulatory guidelines can be easily repealed by a future USPTO director, and they have had no sway with the courts in reviewing the patents issued by the USPTO. Courts continue to apply the Alice-Mayo inquiry to invalidate patents on classic industrial technologies, such as an invention on a new method of manufacturing automobile axles,8 and, in another notorious case, the courts applied the Alice-Mayo inquiry to conclude that the invention of a new remote-controlled garage door opener is an unpatentable abstract idea.9

The task for reform falls on Congress in ensuring the laws it enacts are properly interpreted and applied by the courts and by the USPTO. The Supreme Court created the Alice-Mayo inquiry and the resulting legal quagmire and negative impact on the innovation economy, and it has denied numerous writ of certiorari petitions over the past decade asking it to revisit or reverse its new legal inquiry for patent eligibility assessments under § 101. The UPSTO is unable to fix this problem given that it is only an administrative agency in the Executive Branch that is legally bound to obey the decisions of the Supreme Court and Court of Appeals for the Federal Circuit. Thus, it falls on Congress to achieve the necessary reform of § 101 to return the U.S. patent system back to its original constitutional function in “promoting the Progress . . . of the useful Arts.”15

RESPONSE TO QUESTION 3: Congress needs to legislate today to ensure that the U.S. does not fall behind in the world’s leadership of innovation. The guidance that the USPTO put in place while I was Director has helped provide more certainty and clarity for examiners and patent applicants, but it necessarily had to operate within the bounds of the Supreme Court and Federal Circuit’s case law.7 It is ultimately this case law that needs to be addressed, and in my opinion, fixed, by Congress through legislation such as PERA. In addition, the courts are not bound by USPTO guidance, and legislation is the only way to reverse the confusion caused by these decisions.

The USPTO examines approximately 650,000 patent applications a year. Therefore, it is imperative for the Office to have predictable and consistent analytical frameworks for examination. The state of Section 101 jurisprudence created much confusion, consternation and unpredictability in examination. As a result, the USPTO has tried to alleviate this problem to the extent possible. For example, in 2019, the USPTO issued the Revised Patent Subject Matter Eligibility Guidance that synthesized the caselaw and clarified what types of inventions courts have excluded from Section 101 under the Supreme Court’s Mayo/Alice framework.38 Among other things, the guidance clarified that ineligible “abstract ideas” under the Supreme Court’s precedent can be grouped as mathematical concepts, certain methods of organizing human activity, and mental processes. The guidance also explained that a patent claim that contains an element from an excluded category does not destroy patentability if the claim, as a whole, integrates that element into a practical application.

This guidance has been a tremendous success. As the USPTO Chief Economist explained, the 2019 guidance “caused a further, and much larger, decrease in the percentage of first office action Section 101 rejections” than previous USPTO efforts.39 Indeed, the likelihood of “receiving a first office action with a rejection for patent-ineligible subject matter . . . decreased by 25%.”40 Further, “[u]ncertainty in patent examination for [] affected technologies decreased by 44% in the 12 months following the issuance” of the guidance.41 This helped reverse the 31% increase in the likelihood of receiving a rejection and the 26% increase in uncertainty that followed the Supreme Court’s decision in Alice. Simply put, the data showed that this guidance had a positive impact on Section 101 analysis at the USPTO, to the public’s benefit. Since then, much of these materials has been adopted in the USPTO’s Manual of Patent Examination Procedure.42

The revised Sachs-Kappos dataset further corrected for false positives of applications that were rejected under § 101 but for reasons other than the judicially created Alice-Mayo inquiry in assessing the patent eligibility of an invention or discovery. The revised dataset confirms that 1,310 applications were abandoned following either initial or final rejections under the Alice-Mayo inquiry for lack of patent eligible subject matter, and yet had issued patent family members in either China or Europe. Even accounting for the correction (1,310 versus the originally reported 1,694), the number of patent applications that fell victim to the Alice-Mayo inquiry, while being granted in foreign jurisdictions, is significant. It calls into question the “gold standard” status of the U.S. patent system as a driver of next-stage innovation. Even after the USPTO adopted the 2019 patent eligibility guidelines, which has had a positive effect on the examination of patent applications under the Alice-Mayo inquiry,79 innovators know that a patent will still be challenged in the courts, where they face the same uncertainty or even high probability of invalidation.

Another important finding in the 2019 revised Sachs-Kappos dataset is the stark overlap in legal grounds of rejection in the 1,310 applications that confirms an oft-repeated point that the AliceMayo inquiry conflates different patentability requirements in the different provisions of the Patent Act. Coding for different types of rejections in §§ 101, 102, 103 and 112 confirmed that the “inventive step” inquiry in step two of the Alice-Mayo inquiry blends the nonobviousness inquiry under § 103 with the patent eligibility inquiry under § 101. The largest single overlap in legal grounds for rejection was between §§ 101 and 103, with 379 (29%) of the total 1,310 applications. If the rejection(s) combined §§ 101, 103 and 112, the percentage jumps to over 50%, confirming that nonobviousness and overbreadth are being conflated with patent eligibility in significant numbers. This data reinforces the importance of the provisions in PERA that prohibit courts from conflating the separate patentability assessments under the different provisions of the Patent Act.

The U.S. Patent & Trademark Office Pilot Program on deferred patent eligibility consideration (“pilot program”) is one possible response to the indeterminacy and restrictive scope of patent eligibility created by the Supreme Court in its Mayo-Alice inquiry, but the pilot program is neither a preferred nor complete solution. This is the case for at least several reasons.

First, in questions of law like the Mayo-Alice inquiry, courts are not required to follow the USPTO’s guidelines or decisions resulting therefrom; in fact, the Court of Appeals for the Federal Circuit has explicitly rejected arguments by patent owners that it should defer to the patent-eligibility rules created by the USPTO, stating “we are not bound by [the USPTO’s] guidance.”5 Thus, when the USPTO grants a patent under the deferred program, district courts and the Federal Circuit will continue to apply de novo the patent-eligibility requirement in § 101, as construed by the Supreme Court in the Mayo-Alice inquiry.