Patent uncertainty increases capital flight---investors leave the US due to a lack of predictability.

‐ U.S. Application B relates to digital rights management and the secure provision of content keys used to encrypt streaming content. The B Application is part of an expansive patent family, including a corresponding PCT Application and granted international patents throughout Europe and China. No eligibility rejections were raised in any of the corresponding foreign patents. The B Application, however, faced multiple rounds of § 101 challenges over the course of three years, which were finally withdrawn after subsequent amendments and argumentation.

‐ U.S. Patent C relates generally to digital rights management. The C Patent is part of an expansive patent family, including granted patents in Europe and Asia. No eligibility rejections were raised in these corresponding foreign patents. The C Patent similarly began prosecution, prior to the Supreme Court’s Alice decision, without any eligibility concerns in the first few Office Actions. However, after the Alice decision, the C Patent faced brand new § 101 rejections. After multiple additional rounds of prosecution, including claim amendments, the § 101 rejections were finally overcome, and the patent was granted, 13 years after filing.

In our increasingly global economy, it leaves the U.S. at a competitive disadvantage to allow for vital emerging technologies to be left without adequate patent protection—either at the Agency level or through the court system—that would be afforded in other IP5 jurisdictions. Eligibility standards must be able to follow quickly evolving technology. Furthermore, some form of harmonization and consistency with the IP5 jurisdictions will help provide consistency, reliability, and security in patent rights around the world.

Even when patents are granted in the U.S., Ericsson, like all companies, must strategically consider which patents to maintain to their full term. A healthy, efficient, and accurate USPTO depends on its ability to collect and retain fees from stakeholders. If innovators can’t reasonably rely on patents around key technology areas due to the lack of predictability of § 101, then companies may be forced to take their patent filing and maintenance fees to other more predictable jurisdictions. Investments may also follow, moving capital to either less IP-intensive industries or abroad, potentially creating a vicious cycle. If more companies, small businesses, universities, and small inventors decide to forego focusing on obtaining and maintaining their U.S. patent portfolios, the budget and operations of the USPTO could be significantly impacted in the future. Ericsson strongly opposes any attempts to divert USPTO fees outside of the Agency. We also further encourage more clarity and certainty on § 101 eligibility as a tool to further boost full participation in the U.S. patent system by the continued reinvestment in granted patents.

b. patent enforcement and litigation;

While the evolving USPTO guidance to examiners on § 101 has proved very helpful, the unpredictability of eligibility challenges in litigation remains. According to one study, a promising telecommunications patent that is granted by USPTO as novel, non-obvious patentable subject matter still has a nearly 50% chance3 of not surviving an eligibility challenge if raised during litigation post-Alice. In 2017, Ericsson was awarded a $75 million patent infringement award based on infringement of a patent that had been successfully prosecuted to grant before the USPTO. This patent had faced and survived multiple PTAB challenges and had been found valid and infringed by a district court jury. But in 2020, a split panel of the Federal Circuit reversed the decision, finding the patent invalid because it covered an ineligible abstract idea.4 In a strong dissent, Judge Newman pointed out that, not only did the majority set aside well-established rules of procedure to reach its decision, but the majority’s decision on eligibility was out of accord with law and precedent.5 This type of decision, coming after significant investments of time and money, erodes confidence in the U.S. patent system and discourages future investment.

d. research and development;

While Ericsson continues to file large numbers of patent applications and successfully license patents around the world, the unpredictability of the current eligibility jurisprudence does influence R&D investments and future filing decisions. As mentioned earlier, Ericsson invests significant portions of its revenue—including patent licensing revenue—back into R&D. If eligibility concerns begin to affect licensing and other revenue forecasts, the resulting re-investment in R&D will suffer as well, with potential repercussions throughout the U.S. innovation ecosystem. The U.S. is rightly viewed as a global leader in innovation and technology development. The rest of the world watches to see how the U.S. interprets and enforces important policy matters such as § 101 eligibility. The lack of clarity on this issue threatens to undermine the technology innovators investing in these key technology areas, potentially causing a decrease in U.S.-based investment and competitiveness in critical next generation and emerging technology.

n. competition.

The U.S. has long recognized that “intellectual property laws and the antitrust laws share the common purpose of promoting innovation and enhancing consumer welfare” and that “[t]he intellectual property laws provide incentives for innovation and its dissemination and commercialization by establishing enforceable property rights for the creators of new and useful products, more efficient processes, and original works of expression.”6 Innovation and competition are overlapping concepts since companies compete through innovation. In fact, the term “dynamic competition” has been used by antitrust agencies as intertwined with “innovation.”7

Another pro-competitive feature of patent rights is that they often serve as a check on significant market power held by incumbents. A strong patent system allows innovators of all sizes to compete by protecting the technology and R&D they develop. Patents are one of the few ways new entrants can effectively compete in the current global economy, which makes a strong patent system especially important at this time.8 In order for patents to effectively spur market competition, parties considering R&D and patenting activity must have a good idea of what is patentable. A lack of such clear notice generates uncertainty about the scope of the patent right. It therefore reduces patents’ pro-competitive role because it may discourage inventors from dedicating innovative efforts in fields where the availability of patents is in doubt. Thus, competition and innovation in such fields can be expected to be less robust, to the detriment of consumers. For this reason, antitrust luminaries have called for clarification of § 101 of the Patent Act to ensure that the competitive process is not curtailed.9 Ericsson agrees with this call from its first-hand experience described in this response.

3. Please explain how the current state of patent eligibility jurisprudence in the United States impacts particular technological fields, including investment and innovation in any of the following technological areas:

Ericsson innovates in many different emerging technological areas, including artificial intelligence, machine learning, media coding, virtual/augmented/extended reality, IoT, quantum technologies, and green technologies. As mentioned above, Ericsson has faced challenges obtaining U.S. patent protection on certain inventions, due to § 101 eligibility, in a wide range of technological fields, including in media coding, digital rights management, and network security. The challenge in obtaining robust U.S. patents on any of these or other emerging technologies, of a similar scope to their foreign counterparts, negatively affects the ability to utilize patents and obtain a fair return on R&D.

Artificial intelligence is an excellent specific example. As recognized by the USPTO, “[t]he broad scope of new products and services that build on AI technologies suggests that AI has the potential to fundamentally change how people perceive the world around them and live their daily lives…[which] is the essence of technological progress, and realizing these changes happens through innovation.”10 Ericsson certainly agrees, as AI is creating business value in terms of improved performance, higher efficiency, enhanced customer experience as well as creating new business models and use cases for 5G, IoT, and enterprise. Lack of clarity and uncertainty on § 101 eligibility could allow other countries to command a greater share of the market because of a void in U.S. policy. As a consequence, the inability to secure patent rights could increasingly force the market to be guided by the policies of other countries taking the lead.

4. Please explain how your experiences with the application of subject matter eligibility requirements in other jurisdictions, including China, Japan, Korea, and Europe, differ from your experiences in the United States.

For any given invention, Ericsson usually seeks patent protection in multiple countries. As mentioned above in Question 2(a), in some instances we have faced subject matter eligibility rejections in the U.S. for inventions where eligibility concerns are never even raised in China, Japan, Korea, and Europe. Many of these cases face the same art-based challenges across jurisdictions. It is extremely frustrating to overcome prior art challenges and obtain claims that are deemed patentable by every other jurisdiction, only to continue to face ambiguous § 101 challenges in the U.S.

5. Please identify instances where you have been denied patent protection for an invention in the United States solely on the basis of patent subject matter ineligibility, but obtained protection for the same invention in a foreign jurisdiction, or vice versa. Please provide specific examples, such as the technology(ies) and jurisdiction(s) involved, and the reason the invention was held ineligible in the United States or other jurisdiction.

Please see the example cases highlighted in Question 2(a). In some of those cases, a U.S. patent ultimately granted, but with amended claims from what was granted in other jurisdictions.

7. Please explain whether the state of patent eligibility jurisprudence in the United States has caused you to change business strategies for protecting your intellectual property (e.g., shifting from patents to trade secrets, or vice versa). If so, please identify the changes and their associated impacts.

The understated value of a patent is that it allows for new technologies to be made available to the public. The filing of a public patent application makes that technology known to the world. While the right to use that technology is exclusive when protected by a patent, other innovators are free to learn and build off of the shared knowledge around the created technology. In many ways, the filing of a patent allows for an open and transparent process. Without the ability to protect key technologies due to ambiguous and unpredictable § 101 challenges, innovators will be less likely to publish and share new technologies, hindering research and development and a sharing of knowledge through healthy technology transfer programs (as is currently done with many universities). Asa consequence, more companies will rely on trade secrets to protect valuable technology, which could lead to less sharing of valuable technologies, fewer new entrants to foster new innovation, and vulnerabilities in security due to lack of disclosure.11

8. Please explain whether you have changed your behavior with regard to filing, purchasing, licensing, selling, or maintaining patent applications and patents in the United States as a result of the current state of patent eligibility jurisprudence in the United States. If so, please describe how you changed your behavior.

Ericsson often must make strategic, cost-based decisions to abandon patent applications during prosecution or before the payment of maintenance fees. As mentioned above, the inability to overcome ambiguous § 101 challenges during prosecution and the unpredictability of ambiguous § 101 challenges in courts often factor into these decisions.

9. Please explain how, in your experience, the status of patent eligibility jurisprudence in the United States has affected any litigation for patent infringement in the United States in which you been involved as a party, as legal counsel, or as another participant (e.g., an expert witness). For example, please explain whether this jurisprudence has affected the cost or duration of such litigation, the ability to defend against claims of patent infringement, the certainty/uncertainty of litigation outcomes, or the likelihood of settlement.

As shown in the answer to Question 2(b), Ericsson has clearly seen the effects patent eligibility jurisprudence on U.S. patent litigation. All patent litigation requires a significant investment of time, money, and resources, and the unpredictability under the current jurisprudence will lead to wasted resources for all parties involved.

Section II—Impact of Subject Matter Eligibility on the General Marketplace

10. Please identify how the current state of patent eligibility jurisprudence in the United States impacts the global strength of U.S. intellectual property.

As several reputable and knowledgeable commentators have pointed out12, the current state of eligibility impacts the global strength of the U.S. patent system and the U.S. economy as a whole. The current eligibility jurisprudence is viewed by many as unpredictable. If this status remains, innovators are less likely to invest in U.S. patent protection or the U.S. economy. We strongly applaud the efforts taken by the USPTO and leaders in the U.S. Senate, including Senators Tillis, Hirono, Cotton, and Coons, to provide guidance and reform in this area. Without legislative change, unpredictability of U.S. eligibility jurisprudence is unlikely to improve.

11. Please identify how the current state of patent eligibility jurisprudence in the United States impacts the U.S. economy as a whole.

We believe that the strength of the U.S. patent system and the U.S. economy go hand-in-hand. As reported by the USPTO, “On September 26, 2016, the U.S. Commerce Department released a comprehensive report, ‘Intellectual Property and the U.S. Economy: 2016 Update,’ which found that IP-intensive industries support at least 45 million U.S. jobs and contribute more than $6 trillion dollars to, or 38.2 percent of, U.S. gross domestic product (GDP).”13 Other studies have shown that countries with strong, effective patent protection have significant advantages in attracting investment, producing innovation, and increasing competitiveness. For instance, those countries with effective patent protection are 39% more attractive to foreign investment, have 26% greater global competitiveness, have 6 times more high-skilled researchers, and are 70% more likely to produce more innovative output than other countries.14 Thus, any negative effects of the current eligibility jurisprudence will directly impact the U.S. economy as a whole.