CP solves - current patent eligibilities contain too much uncertainty, but Federal and Circuit Court Judges show concern.

The United States—the land of innovation—has an innovation problem. Two reports recently published announced that the country has fallen from its previous position as a leader in innovation. One report, the 2018 Bloomberg Innovation Index, stated that the United States dropped out of the top ten innovative countries for the first time in the six-year history of the index.1 The other report, the United States Chamber of Commerce’s Global IP Index for 2018, stated that the country remained atop the list generally but fell significantly with respect to patent protection.2 In fact, in the Chamber’s index, the United States dropped completely out of the top ten with respect to countries offering strong patent protection to innovators, falling to a tie for twelfth with Italy.3 Additional reports indicate innovative firms are leaving the United States and shifting their operations overseas to Europe and China.4

What is behind the collapse of the United States as an innovation leader? In part, it is due to the erosion of effective and reliable patent protection available to inventors and innovators.5 There is a strong correlation between effective patent rights and growing innovation economies, including investment in new ideas.6 One particular area of patent law that has contributed to the erosion of reliable patent rights is patent-eligible subject matter—or what types of inventions can be patented. Patent-eligible subject matter, as others have recognized, is a “real mess.”7 It is chaotic,8 “a foggy standard cloaked as a rule,”9 “rife with indeterminacy,”10 and in a “state of crisis.”11 Even U.S. Court of Appeals for the Federal Circuit (Federal Circuit) judges, who are partially responsible for the state of the doctrine, have expressed concern about the level of confusion surrounding the doctrine.12 Importantly, the issue of patent-eligible subject matter disproportionately affects two industries that represent a substantial sector of the United States economic and innovation base: biotechnology and computer-related inventions.13

The current chaos that is patent-eligible subject matter arose largely from a series of cases decided by the U.S. Supreme Court between 2010 and 2014, followed by aftershocks driven by the lower courts and the United States Patent and Trademark Office (Patent Office) as these institutions tried to figure out what the Supreme Court had actually decided. This rapidly developing (or perhaps devolving depending on your perspective) jurisprudence had two destabilizing effects on patent law and on innovation more broadly. First, there is immense confusion about precisely what the test for patent-eligible subject matter is and how it should be applied.14 Second, a number of previously-issued patents have been invalidated for lack of patent-eligible subject matter, raising questions about the viability of extant patent rights in many important industries.15 These two issues are having negative effects on the certainty, reliability, and strength of patent rights in this country.16

The first issue—uncertainty as to the test for patent-eligible subject matter and how it is to be applied—should come as no surprise given the nebulous test that has been imposed by the Supreme Court. Specifically, the current test comprises two parts. The first part of the test asks whether the claims are directed to an ineligible concept, including laws of nature, natural phenomena, and abstract ideas.17 If the first question is answered in the affirmative, the second part asks whether the claim’s other elements transform that claim into a patent-eligible practical application of an otherwise ineligible concept.18

Sadly, the Supreme Court intended to clarify the doctrine of patent-eligible subject matter when it announced the current two-step inquiry, but this test and how it is to be applied is anything but clear. While the question of part one invokes uncertainty about what these three categories of ineligible concepts include, the question of part two is indeterminate in even what it is seeking. A former Chief Judge of the Federal Circuit described the test as “too vague, too subjective, too unpredictable and impossible to administer in a coherent consistent way.”19 Not surprisingly, others have likened the two-part test to Justice Stewart’s test for obscenity: “I know it when I see it.”20 Courts have offered little guidance for implementing these two questions, beyond stating that routine or conventional steps will be insufficient to render a claim patent eligible.21

The second type of uncertainty, resulting from the invalidation of many existing patents, is a different matter altogether. Based on the Supreme Court’s quadrilogy of patent-eligible subject matter opinions decided in the last decade, the Patent Office and all levels of courts have been invalidating many patents as directed to ineligible subject matter.22 Patents are property rights,23 but are also legal rights that businesses use for a variety of purposes, including to prevent others from copying their innovative technology, to signal technological competence or market strength to investors and the public, to defend against infringement lawsuits, and to increase cross-licensing negotiation power.24 In fact, there is a demonstrated relationship between a start-up company having a patent and a higher probability of it receiving venture capital funding and ultimately succeeding as a business.25 Whether a start-up company or an established firm, patents are extremely important to many firms’ existence. To the extent that firms fear that granted patents will be taken away from them, the patents then lose their value for the various purposes for which they are being used. This in turn may hamper a business’s ability to commercialize its technology and deter investment in additional innovation, or may even spell the end of the firm itself.

The uncertainties surrounding patent-eligible subject matter have led to multiple calls—from academia, from the bar, from industry, and more—to fix this doctrine.26 However, the various proposals aimed at fixing patent-eligible subject matter are doomed to fail. Specifically, the current proposals generally add more words to the current statute and are likely to result in tests just as vague and unworkable as the current statute, with additional words to be misinterpreted.27 More importantly, however, is that none of the proposals have examined which institution or institutions would be best suited for determining patent-eligible subject matter. Even if a clear and appropriate test could be drafted, if the wrong institution is wielding it, the problem is unlikely to be resolved.

Instead of simply adding to the cacophony of ineffective reform proposals, this article advances a radical solution that calls for situating patent-eligible subject matter inquiries with the institution best suited for the task and in a way that also may enhance and incentivize innovation. Specifically, this article argues patent eligibility inquiries should not be undertaken by the Patent Office. This means two things: before a patent is issued, the question of patent eligibility should not be considered by the examiner or by the Patent Trial and Appeals Board (PTAB or Board), and after a patent is issued, patent-eligible subject matter should not be the basis for any post-grant review at the Patent Office. Instead, to the extent patent-eligible subject matter is in question, these decisions must be made by the courts.

It may seem incongruous to situate patent-eligible subject matter with the courts, especially as the courts have created a large portion of the mess associated with the doctrine. However, in looking at how to best fix an uncertain doctrine to align with the purpose of patent law and applying various tenets of institutional design, the courts become the optimal choice for this undertaking. Administrative law provides additional support for courts to take on this task as well. Vesting the decision-making power with the courts ensures that the issue is before the best institution for the task. Furthermore, this should incentivize courts to craft a more workable and certain test for patent-eligible subject matter, strengthen patent rights, and ultimately, enhance innovation.

This Article proceeds in three parts. Part I provides a background of patent-eligible subject matter, including what the doctrine entails, which institutions currently address the question of subject matter eligibility, and what sort of mess the doctrine is in. Part II explains recently proposed reform efforts for patent-eligible subject matter and why these reforms are unlikely to make a difference for the disastrous doctrine. Part III describes a radical solution—that determinations of patent-eligible subject matter should not be made at the Patent Office—as well as why this solution makes a lot of sense. This Part also explains why taking this radical step, and taking patent eligibility decisions away from the Patent Office, is more likely to provide more clarity to the doctrine than the other proposed reforms, is apt to strengthen patent law, and will put the United States back at the top of the list of innovative countries. Finally, this Article ends with a discussion of recent changes at the Patent Office, and how these changes could ultimately be used to operationalize the solution proposed in this Article.