Last week's most read: USPTO eligibility guidance could create consistency for tech and life sciences

The USPTO’s new eligibility guidance could create a more consistent framework for Section 101-related patent examinations, according to in-house lawyers.

Sources at Regeneron Pharmaceuticals, Amadeus, Barclays and four other tech-focused and life sciences firms say the revised guidelines are less open to interpretation than the large and perhaps inconsistent body of case law previously used by examiners.

They add that the document issued in January 2019 should ensure that the USPTO’s analyses of subject matter relating to laws of nature, natural phenomena and abstract ideas allow more inventions to receive patent protection. But they say that only time will tell how examiners apply the guidance in practice.

“These guidelines have helped by giving direction to examiners,” says Cassandra Derham, head of technical IP at travel software company Amadeus in France. “The document relies less on contradictory case law and is an attempt by the USPTO to be more prescriptive.”

She adds that businesses will have to wait and see how examiners implement the guidance and whether it has an impact on the way the courts make decisions before they know how useful it will be.

Gareth Jones, IP vice president at drug-discovery firm Benevolent AI, says that the guidance may even indicate a slight turnaround of the eligibility system.

“We have had scenarios in the US where some case law has swung too far one way, and now they are swinging back. It is probably too early to say but the director, Andrei Iancu, seems to be having quite an impact at the USPTO.”

Barclay’s global head of IP Calum Smyth in the UK agrees that it is too early to tell how the guidance is affecting the eligibility framework, but indicated there have been more positive noises coming from practitioners.

One source from a high-tech company in the US adds that the guidance should be helpful in bringing some predictability to the system over time, so long as the USPTO does not issue patents that should not be granted.

She adds that the return to a pre-Alice framework would not be welcomed by most tech companies because it would allow weak or overly broad patents onto the register that would fuel litigation from entities not investing in R&D.

Regeneron chief IP counsel, Gonzalo Merino in the US, says that the guidance is a step in the right direction from his side, but adds that there is a deep problem with Section 101 and that a more decisive reversal enshrined in legislation is needed to solve all the problems of the US eligibility framework debacle.

This reform is needed because courts can still ignore the guidance. He notes that a Federal Circuit case came down on April 1 2019 that invalidated two diagnostic patents by the Cleveland Clinic. The court specifically pointed out that it is not bound by the USPTO section 101 guidance that suggested that such patents should be valid.

Such legislation is being drafted by US senators Thom Tillis and Chris Coons. They are expected to give companies a glimpse of their work in a closed-door discussion on April 17 2019. The current US eligibility framework was largely established after the Supreme Court decisions in Mayo, Myriad and Alice. Biotech and high-tech businesses are at loggerheads over whether the change is a good or a bad thing for the US patent system.

Smyth at Barclays hopes that the guidelines will increase certainty and so be beneficial for businesses – particularly for SME software firms and start-ups will need that incentive to make more use of the patent system.

He points out that the approach taken by examiners since Alice has caused many companies to drop pending applications being challenged under Section 101, particularly where budgets have been constrained.

“Organisations are reluctant to gamble what can be a considerable investment on prosecution fees in the face of such a negative outlook from patent offices and advisers alike,” he says. “With ongoing pressure to reduce costs, it can be all too easy for patent departments to conclude that Alice has made Section 101 objections impossible to overcome, and to simply let those applications go.”

He adds that the danger is that two or three years later, the pendulum will swing and businesses will have depleted you’re their estates when their competitors may not have been so hasty and instead seen their software patent applications grant.

“It is a very real situation, and no doubt there will be those that are aggrieved at having lost rights unnecessarily and perhaps even critical business assets.”  

He adds that smaller companies, in particular, are vulnerable in this situation.  Due to insufficient funds, they have missed out on the assets that those patents would have represented – assets that could have underpinned their entire business and been seen as highly attractive for future investors.

Derham at Amadeus pointed out at this year’s Managing IP International Patent Forum that her company went through the process of deciding whether to keep patents after the perceived value of its US portfolio plummeted in 2014, when the Alice decision was issued.

“We were not sure what to do: keep paying extortionate fees to keep things going or leave it be. We kept them going in the hope that the pendulum would swing back, but our main competitor has not filed for anything since 2014.”

She tells Patent Strategy that the new guidelines have helped because eligibility criteria kept going back and forth and the business was forced to argue similar cases from both sides.

The USPTO’s guidance has included direction on organisation of human activity, and Derham adds that she is curious to find out whether that will be interpreted as meaning having a human interact with the system at some point.

“I think what they meant was that you cannot patent something that makes people fill in a form in a certain way, for example,” she says. “But they have tried to be more prescriptive here in things that are abstract.”

The guidance also contains a step which asks, in a case where something is abstract, whether something is directed to the abstract concept in a claim or whether it is reciting the abstract concept.

“This would be interesting for us because we always have processes doing things and are not just reciting an abstract concept.”

Sources say that the guidance will also help patent attorneys by creating a harmonised approach to Section 101 between USPTO art units. Merino at Regeneron says that there has been some suggestion that different standards are being applied by different units, and that this guidance should help ensure that all examiners to employ a consistent and rigorous application of case law.

He adds that the guidance also requires examiners to identify the specific limitations in the claims within rejections that will help patent attorneys more easily understand why a particular invention did not meet Section 101 standards.

“Such clarity will allow us to respond in an appropriate manner. Sometimes you get rejections that are much too short and that are not helpful in letting us know why we do not meet the standard,” says Merino.

The guidance also helpfully acknowledges the difficulties examiners face in applying the concept of an abstract idea when it comes to computer programs and whether they are patentable, he points out.

“Unfortunately it only addresses abstract ideas, and it would have been great if it had addressed laws of nature and natural phenomena too, which applied to many pharma and biotech inventions,” he says. “Ultimately, the guidance should provide for uniform application of the law, drive efficiency in the patent process when it comes to Section 101 and allow us to better understand rejections.”

All of the life sciences and most of the tech-focused businesses that Patent Strategy spoke to say that they hope the new guidance signifies the start of a Section 101 turnaround in the US.

Biotech companies say that the way Mayo and Myriad and the following 2014 USPTO guidance were interpreted by the lower courts has removed swathes of key technologies from patent eligibility, and will likely stifle innovation around new fields such as gene-editing.

Tech-focused businesses such as Barclays and Amadeus also say that the post-Alice framework has made patenting inventions more difficult.

But high-tech companies including Microsoft and Amazon have praised the established eligibility framework as a means of stopping non-practising entities and other organisations from gaining weak patents that block tech innovation through the threat of litigation.

A high-tech source says that most of the tech industry is united in its view that Alice was needed to correct the course that the USPTO was taking on software patents.

“Organisations used to get broad or weak software patents and would wait until a business spent money on R&D developing an idea and just sue them,” she says. “That constitutes a breakdown of the patenting system. Patent troll litigation picked up in 2007 and peaked in 2017, and much of it was driven by bad patents.”

She adds that she cannot speak for the life sciences sector and their experience of the Section 101 framework, but it has largely been a good thing for technology companies.

Whether a business believes that the current eligibility framework in the US is a good or a bad thing, they all agree that the latest USPTO guidance should allow for a more consistent approach to Section 101 case law.

But an eligibility solution that meets high-tech’s and biotech’s patenting needs can only be reached by legislative change.

US politicians have listened to that call and we may find out in a few short weeks how they plan to reach a good compromise that will secure innovation in the country.