The Legal Definition Of Patentable Subject Matter: Q&A With EVW Partner Maxim Waldbaum

What constitutes patentable subject matter? It’s an important topic in the Intellectual Property Law community and for economic and technological development at large. Eaton & Van Winkle partner Maxim Waldbaum recently authored a piece Driven By Abstraction that was published on earlier this year.

Mr. Waldbaum is critical of how the courts and the United States Patent & Trademark Office (USPTO) have handled this issue. He joins us here for a Q&A to outline the basic parameters of the current landscape…

The relevant text in 35 U.S. Code § 101 says the following– “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

Do you see the language in the code a problem—i.e., does it need to more explicitly protect “abstract” property, or does the problem lie in judicial interpretation?

The language in the code is not a problem at all. That is basically the language we have worked with since 1790 and certainly, until recently under the 1952 Act. The important words in S 101 are “new and useful”. An abstract principle, like a mathematical equation or a law of nature like an available DNA strand do not meet those words.

The problem is clearly one that lies in the hands of the judiciary. Alice takes its Cue from a few earlier decisions including primarily Bilski and the Mayo Clinic v. Prometheus. At some point, there was a determination in the Courts to get rid of patents which were clogging the court’s dockets and affecting the development of commerce- i.e., multiple non-practicing entities (“NPE”) lawsuits making up 65% – 80% of court’s dockets on software and telecommunication related patents which appeared to the Justices who reviewed them to be ill advisedly issued and creating a negative landscape for Commercial growth.

Mayo Clinic and Myriad followed to try to corner and stop multiple filings of complicated DNA and other biotechnology patents and medical procedure patents felt to be counter-productive and against public policy such that doctors could not perform their normal work. Thus, Alice was born like the alien that pops out of the stomach of William Hurt in the movie Alien.

The rulings have significant brashness and unnecessary breadth, causing maximum preemption, all of which issues could have been determined under 35 U.S.C.S 102 and 103 as to whether they’re anticipated or obvious in light of the prior art. This comment is important because almost all of the cases refer to useful inventions and, by definition, if an invention is useful, it is not abstract. Therein lies the problem.

The 2014 Supreme Court ruling of Alice Corp vs. CLS Bank International set in place the basis for current legal interpretation on what constitutes patentable subject matter. Can you summarize why this decision was so consequential?

Alice turned the law of presumption of validity on its head. Under Alice there was no longer a 35 U.S.C.S 282 presumption of validity as these inventions were claimed to be not under the patent laws, i.e., preempted and under Alice if they’re not under the patent laws then there’s no reason to go into any analysis of the technical subject matter. That is why these “new and useful” inventions were so improperly and dramatically invalidated at a rate close to 80% – 85%.

The ulterior motives to control NPE’s restrict dockets and assist the Patent Office in eliminating patents that should not have been allowed (say the Alice courts) were radically and wrongfully evaluated. In the software and telecommunications patents that were invalidated, the issue should have been were they new and useful nonobvious processes or methods and that wasn’t done.

It is easy to say that something is “abstract” when you don’t define the term. And these cases had a great deal of difficulty in defining the term or no difficulty by not bothering to define the term. All of this led to an invalidation scheme that had no basis. And further it caused the non-filing of thousands of inventions that are now trade secrets and not available to the public – a worse conclusion than merely invalidating patents.

Enfish LLC vs. Microsoft, a Federal Appeals Court ruling earlier in 2016, ruled that software patent claims were in fact eligible for protection. How did the court reconcile this ruling with the precedent set by Alice.

The Court determined in Enfish that there was a technical improvement (undefined) by looking at the subject matter of the patent that took it out of the realm of abstract. But, the language used is not worthy of logical explanation. It is in summary form (i.e., a technological improvement, a term which could be used for most all of the prior Alice invalidation decisions). That is why it is subject to such severe criticism.

The Courts and the USPTO have used terms like “laws of nature” and “natural phenomenon” to describe a “judicial exception” to the patent norms. Can you cite examples of what these might entail?

These terms primarily refer to methods or processes involving previously known chemical identifiers or products of nature, like DNA sequences and other biotechnology inventions, which did exist but were modified by man to create different, not available in nature, synthetic, new identifiers or sequences. The Courts from Myriad forward have found such work is merely working with the laws of nature and not creating anything new.

These decisions have resulted in a significant lessening of filing of DNA sequencing patents or many other biotechnology patents in that specific industry, thus debilitating many, if not most of the industry in not being able to protect inventions. This was certainly true with Myriad, where the DNA sequence that was created by man, having been modified from an existing in nature sequence caused significant lessening of royalties to Myriad, who had invested tens of millions of dollars in the development of these man-made, modified sequences. The sequences had a particular purpose, to diagnose and be a preventable Solution to potential cancers.

What do you see as the economic impact of the current patent landscape?

At present, there is at least a 10%-20% downward spiral in the amount of patent filings. This effect is not only U.S. based but becomes world-wide because of U.S. companies having a major position in significant industries, such as telecommunication software, medical procedures, and the biosciences. Fortune 50 companies and small shop inventors both have decided not to file for protection as the protections no longer exist. Everyone has to rely on trade Secret status to protect their inventions. This is a very difficult proposition as it requires significant layering of protection; such as documenting all the work and to whom the work goes, thus preventing a patent portfolio, legitimate in nature, to allow a company to grow or obtain investment funding.

What is the ideal solution to the problem—does it need to come from Congress, the courts or the USPTO?

At present it needs to come from the Supreme Court of the United States. District Courts can determine through illogic that Alice does not apply (dancing around Alice) to typical situations involving subject matter of software, telecommunications, and biosciences. But, ultimately the Supreme Court is going to have speak.

It is not a problem for Congress, too complicated, as many times it is a case by case basis analysis. It is not a problem for the USPTO as they have shown that they are incapable of dealing with the concept of abstract principles and loss of nature by following the herd of litigated cases in court to create rules that are not explainable and not usable. At least four or five attempts at Examiner Guidelines have failed. The solution must come from the courts. And the Courts must begin to recognize that Alice cannot apply to where you have a useful process, method, etc. Usefulness and abstraction are not synonymous. Only by illogical thinking have Courts come up with these Solutions which have created great harm.