Uncertainty doesn’t impact investment

One of the concerns frequently raised with regard to a narrower scope of patent protection for AI as with any software is that investors will be hesitant to provide capital without powerful monopoly rights to exclude others from practicing the inventions, particularly with regard to larger companies that can rely on their market dominance for competition.263 Although there is no shortage of theoretical arguments and opinions on Alice's impact on investment, as Professor David Taylor remarked in his recent study of the issue, "[e]xisting literature provides surprisingly little data even to begin to answer [the question]."264 Generally, the argument is fundamentally sound and well-founded: the less power a company has to exclude others from the marketplace, the less attractive the company is for investment, since any other market player can swoop in to overtake their place. Existing empirical evidence also supports this proposition, generally, at least with regard to some industries.265 However, factors other than patent protection often play a key role, and thus, details very quickly complicate the analysis.

Although Professor Taylor's study found "negative impact of the Supreme Court's eligibility cases generally on investment," it also found that "most investors do not report changing their investment decision making based upon the Supreme Court's eligibility decisions," though a significant portion of those investors were also not informed about the relevant decisions.266 One additional key finding from the study was that "[t]he availability of patents... was not the most important consideration to the investors."267 Instead, "[t]he quality of a target [*47] company's people ranked as most important, followed by the quality of the company's technology and the size of the potential market for the technology."268 Only 6% of respondents identified the availability of patents as the first or second most important factor in deciding whether to invest.269 Additionally, Professor Taylor's second key finding was that "reduced patent eligibility correlates with particular investment behaviors in particular industries."270 As one example, in contrast to biotechnology, "[i]nvestors overwhelmingly indicated... that the elimination of patents would either not impact their firms' decisions whether to invest in companies or only slightly decrease investments in companies developing technology in... software and Internet (80%)."271 In light of Professor Taylor's important findings, perhaps it is not surprising that other evidence also shows that investment and private equity funding for AI, in particular, has continued to increase substantially, notwithstanding the concerns over the patentability of software and AI raised by Alice.272 More so, some evidence shows that when AI startups are acquired there appears to be little focus on their existing patent portfolio,273 suggesting that a lack of patent protection in the AI space, at least at this time, is not as detrimental as might be the case in other industries. Further empirical research in the context of AI companies is necessary.