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4. How does the current state of the law impact smaller innovators and academic research?

RESPONSE TO QUESTION 4: The current state of the law hurts small innovators in at least two ways: first, it impedes their ability to attract capital investment. Venture capitalists and others are more likely to feel comfortable investing in research-intensive startups and small businesses that have patents to secure their rights. If patent protection is unavailable or uncertain in specific areas of technology, it will be harder for those startups and small businesses to receive funding.11 If those businesses start disappearing from the U.S. or never get started in the first place, or are started in other countries with stronger patent systems, America’s role as a global technology leader will suffer. Second, small innovators who lack access to robust, reliable patent protection will be less able to defend themselves against competitors, especially large, established competitors, who might copy successful products. Also, because the established competitor did not have to incur the research and development costs to create that successful product, it will be easier for them to undercut the smaller innovator on price. Even if the smaller innovator has a patent, if it is in a technological area falling within the uncertainty created by the Supreme Court’s line of § 101 cases, the established company can bet that it will have at least a reasonable chance of invalidating the patent if it is sued for infringement, possibly quite early in the litigation without that company incurring many litigation expenses.

Patentable subject matter doctrine is legally flawed in two main ways. First, the doctrine has blended with the novelty and nonobviousness doctrines. Indeed, the Supreme Court and Federal Circuit explicitly admit this.145 This doctrinal overlap is duplicative, conflates questions of law and questions of fact, and alters the standard that is statutorily required to analyze eligibility, novelty, and nonobviousness. Second, the case law is conflicting including on the issue of whether novelty and nonobviousness are permissible to consider at the subject matter stage. These conflicting assertions make it challenging for the Federal Circuit or a district court to discern the appropriate legal standard.

1. Patentable Subject Matter Has Impermissibly Become an Amalgamation of Other Doctrines

The world is experiencing a fourth industrial revolution (4IR) in which a wave of new and transformative technologies is being developed, including artificial intelligence (AI), additive manufacturing, quantum information technology, hypersonic missiles, biotechnology, and directed energy.4 While these technologies are expected to have profound implications for societies and economies, most are dual use and will also affect national security, including nuclear strategic stability.

According to an emerging conventional wisdom, new technology may upset nuclear strategic stability by calling into question the survivability of nuclear forces.5 The solution, according to some analysts, is for nuclear- armed states to eschew military applications of at least some of these technologies and lead an international effort to control their spread.6 But these studies too often consider new technology and nuclear strategy in the abstract without adequately considering the prevailing geopolitical context into which these new technologies have been introduced.

//DH

A new Cold War is upon us. Unlike the prior one between the democratic West and the Soviet Union, this time the U.S. and its allies do not have the advantage of superior technology with which to counter its adversary’s advantages.

A foreign policy with democracy support at its core also positions the United States to compete with its chief adversaries, namely China. The Chinese Communist Party and the Kremlin alike understand that other countries’ political systems affect their national security and have, therefore, been widely promoting their authoritarian model. The CCP is working to create a world safe for the communist party—one composed of authoritarian regimes—by exporting surveillance technology, autocratic governance practices, and other repression modalities. The CCP trains political parties in the global south to promote authoritarian solutions to governance challenges, coopting journalists and investments in the media sector to shape reporting on these issues.

The exporting of authoritarianism is neither limited to nor led exclusively by China. Two of the United States’ most significant allies—Saudi Arabia and the United Arab Emirates (UAE)—are the leading wielders and exporters of digital authoritarianism in the Middle East, collaborating with China, Russia, and Israel to access surveillance tools such as NSO Group’s Pegasus spyware to target people and governments across the globe. The UAE also takes top honors as one of the world’s leading money launderers, feeding the destabilizing behavior of Iran’s Islamic Revolutionary Guard Corps, enabling Russian autocrats to evade sanctions over the war in Ukraine, and being “grey listed” by the Financial Action Task Force for enabling foreign terrorist financing.

//DH

China has recognized the role of civilian research and commercial sectors in boosting military and defense capabilities. Through its strategy of military-civil fusion, China aims to ensure that it will have the most technologically advanced military in the world. The execution of this strategy includes China’s acquisition of, and heavy subsidies for, its own tech sector for state purposes. Critically for the United States, it also involves China attempting to harness global commercial capabilities through intellectual property (IP) theft and strategic adversarial investment in its private sector. This threatens the United States and allied leadership in bleeding-edge technologies.

And third, a series of Supreme Court decisions between 2010 and 2014 greatly decreased the scope of patent-eligible subject matter. The decisions established a two-step test for determining patent-eligible inventions known as the Alice/Mayo test, which restricts patents related to laws of nature, natural phenomena, and abstract ideas. Under the restrictions of Alice/Mayo, many once-patentable inventions became patent ineligible, resulting in the nullification of hundreds of patents. Through 2020, 60 percent of patents challenged under the Alice/Mayo framework were invalidated.

Ultimately, the key issue with these three changes is the increased uncertainty they inject into the U.S. patent system. The increased risk of a successful retrospective patent eligibility challenge at the PTAB, for instance, introduces significant uncertainty for start-ups and other small actors who rely on IP to attract financing. Moreover, critics of Alice/Mayo assert that the test is vague and unpredictable, which hampers start-ups, reduces investment, and ultimately undermines innovation. Kimberly A. Moore, chief judge of the U.S. Court of Appeals for the Federal Circuit, expressed that Federal Circuit judges were “at a loss” in how to apply the current patent eligibility provisions, while some IP legal professionals claim that they are unable to provide clear guidance to businesses due to Alice/Mayo.

These and other similar studies and articles demonstrate that: (1) unreliable patent protection depresses investment in R&D in key areas, including those that generate economic growth, lead to important innovations, and enable the U.S. to compete with China; (2) those investments have declined in the U.S. due to constricted and unreliable patent protection; and (3) patent filings in areas affected by Section 101 have dropped in the U.S. while increasing in China. Together, these points demonstrate that Section 101 is causing the U.S. to lose ground, decreasing R&D investment incentives in industries critical to America’s strategic and public interests.

China, meanwhile, is following an opposite trajectory. With a historically weak IP system for biopharmaceuticals and software, no foreign innovators in these fields placed major R&D operations or invested in significant R&D activity in China. That changed when the Chinese government began strengthening its biopharmaceutical and software IP laws over the last decade. Today, as China’s patent laws begin to rival—and, in the case of patent eligibility, surpass—U.S. patent laws, we have seen an explosion of R&D investment and innovation in China, including massive investments by foreign investors and foreign innovative companies. Since the U.S. upended its law governing patent eligibility, many patent applications are approved as patents in China but rejected as ineligible in the United States—all due to Section 101.

The United States is engaged in a competition for technology and innovation leadership with China, with both nations making significant investments in their domestic innovation systems while seeking to undermine the other’s innovation system. The United States, for instance, has implemented export controls and investment restrictions to slow China’s rate of technological innovation, while launching innovation initiatives covering emerging energy technologies, quantum computing, and wireless communications, among other industries.

As the competition intensifies, many policymakers and analysts are caught up in the blow-by-blow of this industrial policy race. However, by focusing on these high-profile policies, they risk overlooking a fundamental driver of innovation: a system of secure and market-based intellectual property (IP) rights.

a. How has the current state of patent eligibility inhibited the development of next generation technologies?

Answer: Innovators and creators are, and have always been, incentivized by intellectual property rights, including the grant of exclusive patent rights. The Founders knew this, and we know this today. Patent rights encourage inventors to invent, and investors to invest. Consequently, the current lack of clarity and predictability in the patent system due to Section 101 jurisprudence has caused reduced investment and reduced innovation in key fields of technology, including medical diagnostics, biotechnology, software and artificial intelligence (AI).

The Supreme Court is unwisely undermining America’s global economic leadership.

For over a decade, the nation’s highest court has sowed doubt about whether inventions in certain high-tech industries — ranging from medical diagnostics to finance — are eligible for patent protections. Without that certainty, investors naturally assume the worst and avoid those sectors.

RESPONSE TO QUESTION 6: After the recent U.S. Supreme Court cases on patent eligibility, the patent systems of the United States’s economic counterparts currently allow for the patenting of a broader range of innovation; academic scholarship has confirmed this assessment with a survey of patent applications that have been granted in the EU and China but not in the United States.13 These trends are mirrored by shifts in capital investment from the United States to these other regions.14

Collectively, this data provides a concerning, early-stage warning of a shift in technological leadership to these other countries—companies are most likely to want to be located where they can secure returns on their investments in research and development, and venture capital is most likely to want to invest in those geographic locations as well. As new technology hubs are created, they are naturally the destinations for the next generation of innovators and entrepreneurs. While the U.S. has established technology hubs already that may obscure the beginning of this shift elsewhere, it will take the U.S. a long time to recover if the next generation of technologies are based on innovation centers in other countries.

[*119] 2. A Comparison to Foreign Countries Demonstrates America Is Falling Behind in Terms of Patenting Inventions and Securing Investment for Innovation

Another indicator that the United States' approach to patent eligibility is not good policy can be seen by comparing our patent law to that of foreign countries. The United States used to be the "gold standard" for patent protection and "has led the world in securing stable and effective property rights in cutting-edge innovation."196 But this statement has become further and further from the truth each day. Currently, the United States is rejecting more patents than foreign countries and is ceding investment in innovative technologies to other countries.197

Beijing is accelerating its investments in science and technology. Its latest moves should be a wake-up call for lawmakers.

China’s government just announced a staggering $52 billion investment in research and development for 2024 — a 10 percent surge over the previous year. In a telling sign of priorities, science and technology funding saw the largest percentage increase of any major area of Chinese government spending — outpacing diplomacy, education and even the military.

Ten years after the Supreme Court decided the last of its four modern patent eligibility decisions, culminating in the Alice-Mayo inquiry in 2014, patent eligibility jurisprudence is now the proverbial millstone around the neck of U.S. innovators. At best, the doctrine remains fundamentally unsettled and indeterminate for inventors, especially innovators in high tech and the life sciences—the two primary drivers of the modern innovation economy. At worst, inventors have achieved a modicum of certainty by adopting to the legal fact that cutting-edge inventions are at substantial risk of invalidation by the courts. They do not apply for patents or they draft patents in ways that no longer properly secure their innovations. In sum, the Alice-Mayo inquiry represents the closing of the doors of the patent system to innovations in healthcare and the hightech sector of the innovation economy. This jurisprudence is significant for several reasons.

First, patent eligibility jurisprudence is no longer “only a threshold test,” as the Court rightly framed the nature of the § 101 inquiry in the 2010 decision in Bilski v. Kappos.40 Since 2014, patent eligibility doctrine stopped serving as only a “coarse filter” that is applied before a court applies the more fine-grained doctrinal requirements of novelty, nonobviousness, and disclosure.41 Instead, the Alice-Mayo inquiry is now an all-pervasive and principal feature of patent law generally, which is an entirely new development in the U.S. patent system. An empirical study by Robert Sachs in 2019 found that court decisions applying § 101 after 2014 jumped 730% with a 659% increase in the number of litigated patents.42 Sachs found that, as “[c]ompared with the five years prior to Alice [reaching back to Bilski in 2009], there has been a 1056% increase in the number of decisions finding ineligible claims, and a 914% increase in the number of invalidated patents” between 2014 (when Alice was decided) and 2019.43 I do not have updated statistics since 2019, but I am unaware of any new study that shows a reversal of this trend since 2014 of substantially higher rates of courts applying the Mayo-Alice inquiry to invalidate patents.

The main point for this softball pitch is the justification that follows: “[M]onopolization of those tools through the grant of a patent might tend to impede innovation more than it would tend to promote it.” Mayo, 132 S.Ct. at 1923. This theory (and the Court senses the weakness of its sole justification by using the words “might tend to”) is akin to a theory known in academic circles as the “tragedy of the anti-commons.” The “tragedy” in a few words is that “too many” patents give too many owners the right to inhibit all future research and progress. This hypothesis sprang from the 1998 writings of Professors Heller and Eisenberg. Heller; Eisenberg; Can Patents Deter Innovation? The Anti-commons in Biomedical Research; SCIENCE Mag. (May 1998). In truth, this so-called tragedy has been fully rejected by academic and empirical studies. See, e.g., Teece, David; The “Tragedy of the Anticommons” Fallacy: A Law and Economics Analysis of Patent Thickets and FRAND Licensing; Berkeley Tech.L.J. Vol 32:1489 (2017) (“The systematic problem identified here is undercompensation, and possibly overuse, not underuse.”). Upon reflection, the Supreme Court’s “tragedy” reasoning becomes a floating softball pitch that the Federal Circuit should hit to knock the entire eligibility doctrine back to statutory sanity.

Now, the Supreme Court often advises the use of “common sense” in patent law settings. See, e.g., KSR v. Teleflex, 550 U.S. 398 (2007). Let’s apply “common sense” to the Court’s “too many” patents justification. If the United States has “too many” patents endangering technological progress, where is the empirical evidence to prove that hypothesis? See, e.g., John P. Walsh, Ashish Arora & Wesley M. Cohen; “Effects of Research Tool Patents and Licensing on Biomedical Innovation”; PATENTS IN THE KNOWLEDGE-BASED ECONOMY 285, 285 (2003) (“[Despite] an increase in patents on . . . ‘research tools,’ . . . we find that drug discovery has not been substantially impeded.”). Where have fields of research been shut down by “too many” patents? Where have prices soared in technologies captured by overbearing exclusive rights? Where have groups of companies abandoned technology because it is too expensive or already locked up? Where is the evidence? The empirical evidence suggests that technology availability has soared and prices have declined as innovation creates intense cycles of research competition. Indeed, the semiconductor chips that run most high-tech phones cost less than a cup of designer coffee.

Mainly unjustified concerns hold that a strong IP system—particularly in the form of strong enforcement— hampers competition and innovation. From this perspective, patents are accused of overly protecting established and non-innovative incumbents from the threatening entrance of new, smaller, but more inventive competitors. Interestingly, proposals to weaken the patent system have mainly been supported by long-standing players that aim to maintain their market share and competitive position. This is because a strong IP system encourages new and innovative players to enter the market with confidence: these new entrants, knowing that their IP will be protected, can safely reap the rewards of their innovation. Put differently, although it may look counterintuitive at first glance, it is indeed a weak patent regime that creates the strongest entry barriers to disruptive innovators.187

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D. Applying this Article's Proposal to Recent Supreme Court Cases to Demonstrate Its Practicality

One of the goals of this Article's proposal is to shift the work currently being done by the subject matter doctrine to the other doctrines of patentability. This shift requires that the other doctrines can perform that exclusionary work. In Mayo, the Supreme Court said:

Volume 156, November 2021, Science Direct, //DH

Rockström et al. (2009) warned that chemical pollution is one of the planetary boundaries that ought not to be crossed to safeguard humanity. Altogether more than nine million humans are dying prematurely each year – one in six deaths – due to contamination of their air, water, food, homes, workplaces, or consumer goods (Landrigan et al. 2018). To place this in perspective, the chemical-related annual death toll is significantly greater than that of World War II and today constitutes the greatest preventable form of mortality. Furthermore, it inflicts catastrophic losses on wildlife, notably insects and animals that depend on them, ecosystems and their services, such as pollination or clean water, on which humans depend for our own existence. This underlines the role of chemical pollution in potential planet-wide ecological breakdown (Dave 2013). There is increasing evidence in recent decades of cognitive, reproductive and developmental disorders and premature deaths caused by chemical contamination of the human living environment (Diamanti-Kandarakis et al. 2009).

During biodegradation, organic substances are completely broken down into inorganic components by microorganisms. Microorganisms are the most abundant in nature. Their diversity, catalytic processes, and capacity to function without oxygen make them efficient and economically viable for the degradation of pesticides and other complex organic pollutants 93. Bacteria, fungi, and actinomycetes are the main pesticide degraders and transformants. They can make structural modifications to the pesticide molecule to reduce its toxicity. In addition, fungi typically biotransform insecticides and other xenobiotics, which bacteria can further degrade and make harmless before being released into the environment 186.

Fungi and bacteria produce several extracellular enzymes that act on various organic chemicals, making them ideal bioremediation agents. Microbial extracellular enzymes, particularly oxidases, laccases, and manganese peroxidases, play essential roles in the degradation process. Cytochrome P450, glutathione S-transferases (GSTs), and esterases have been reported as the primary enzyme families associated with pesticide degradation. Several pesticide-degrading microorganisms have been identified 187. For instance, recent studies by Ambreen and Yasmin 188 using Bacillus thuringiensis strain MB497 showed complete chlorpyrifos degradation (up to 99.9% in nine days). The results of this study also revealed the production of a novel metabolite, di-isopropyl methane phosphonate, which was obtained through alkylation/desulfurization reactions and then mineralized to produce carbon and phosphorus to support bacterial growth 188.