US patent eligibility law is driving a shift of investment and R&D to US competitors like China

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).

b. What is the long-term technological and economic impact of the current eligibility jurisprudence?

Answer: Reduced investment is stunting investment of resources into development of cutting edge technologies. More directly, there are many examples of lifesaving technologies (e.g., in biotech) whose programs were abandoned due to Section 101 impediments. If Section 101 is not fixed, the U.S. will continue to slow down. All the while, our international rivals are actively seeking to make it easier to patent new technologies and therefore present an attractive alternative for investment and R&D activity.

c. Can you quantify, in easy to understand terms, the economic impact of the current state of patent eligibility?

[See answer to “d” below.]

d. In other words, how much is the current uncertainty costing our economy in terms of jobs, innovation, and development?

Answer: Numerous studies have shown that the Supreme Court’s changes to subject matter eligibility law through Myriad, Mayo and Alice have decreased confidence in the U.S. patent system, decreased private investment in key areas of technology that rely on patents, decreased commercialization of innovations in these areas, and created threats to America’s economic, social and national security interests. One 2022 empirical study concluded that in the four years following Mayo, venture capital investment in disease-diagnostic technologies was nearly $9.3 billion lower than it would have been without that verdict. A 2020 study similarly concluded that almost one-third of venture capital and private equity investors who knew about at least one of the Supreme Court’s eligibility decisions indicated that these cases caused their firms to either invest less in affected areas, or shift investments out of biotechnology, medical device, pharmaceutical and software and internet industries into other areas. Meanwhile, 62% of investors “agreed that their firms are less likely to invest” in companies developing patent-ineligible technologies “given the unavailability of patents.”

4. One of the key concerns from innovators is that, absent additional clarity in this space, we’re going to start seeing American companies start developing their inventions overseas in jurisdictions which have broader standards of patent eligibility.

Do you agree with that concern and, if you do, what evidence have you seen to suggest that technological inversion is already occurring?

Answer: I absolutely agree with that concern, and the data confirms it. For example, one study shows that from 2016 to 2020, the market capitalization of Chinese biopharma companies increased exponentially in value, from $1 billion to over $200 billion, and China saw over $28 billion invested in its life sciences sector in 2020, double the previous year’s amount. Another study states “it should be a warning to our law and policy makers that Chinese AI start-ups are now receiving more funding than American AI start-ups. According to a review published in 2018 by MIT Technology Review, of the $15.2 billion invested in AI startups globally in 2017, 48 percent went to China and just 38 percent to America. The U.S. is starting to lose out in capital investments in key industries, such as artificial intelligence which has interconnections to newly emerging medical diagnostic technologies, highlighted by the fact that while the U.S. accounted for 77 percent of such investment before the Alice decision, that investment fell to 50 percent three years after the Alice decision.”