Data confirms uncertainty is driving investment to 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

While the United States is dealing with its § 101 uncertainty, other countries are developing and, perhaps, surpassing the United States in being the world leader for patent protection.198 A recent study tracked over 17,000 U.S. patent applications that were rejected and then abandoned on eligibility grounds and found that nearly 10% of these applications were granted by the European Patent Office, China, or both.199 True, granting fewer patents does not necessarily mean that innovation is stalling. For example, if the patent system was only invalidating, rejecting, or preventing applications for undesirable patents, then our system would be functioning optimally. But that is not the case. Though it is difficult to determine whether the patent system is [*120] promoting or preventing innovation,200 there are a couple of key indicators that innovation is being stalled.

First, other countries are now receiving more funding than the United States for innovation. For example, in 2013, the United States received 77% of capital investments for software driven industries but received only 50% four years later.201 Further, in 2017, 48% of the funding for artificial intelligence startup companies went to China, and the United States received only 38%.202 Because funding is crucial to developing certain technologies, decreased investment is likely to result in decreased innovation.

There is also evidence to suggest that this reduction in funding is caused by the change in our patent eligibility jurisprudence. In a recent survey of 475 venture capital and private equity investors, 74% said that patent eligibility is a key reason to invest or not invest in a company's developing technology.203 And in a different study, 33% of investors said that the patent eligibility laws caused their firms to shift their capital investment away from new software or new technology related to the biotechnology, medical device, and pharmaceutical industries.204

Second, anecdotally the United States is not allowing patents on some very desirable inventions. One example is the patent that the Federal Circuit invalidated on eligibility grounds in Ariosa Diagnostics, Inc. v. Sequenom, Inc.205 That patent was for a technology that utilized cffDNA to detect fetal abnormalities noninvasively206 a medical advancement that is unequivocally desirable. The United States invalidated this patent,207 but both the United Kingdom208 and Australia209 upheld the patentability of the very same technology.

To summarize, our current patentable subject matter doctrine has caused a trickledown effect in which: (1) section 101 has been used more frequently to invalidate patents, (2) different subject matter invalidity and rejection rates have led to inequality amongst fields, (3) there is a perception that patents [*121] are unavailable in certain fields, (4) companies and investors fund and conduct less research in these fields that are perceived to be patent-ineligible, and (5) ultimately, there is less innovation in these fields. Though the Supreme Court warned that applying the Alice Two-Step too strictly could eviscerate patent law and cautioned against such an application,210 in practice that is precisely what happened. As a result, innovation in America is being curtailed and is lagging behind that of other countries.