“Chaotic Patent Eligibility Standards”: Senate Hearing Weighs in on Patent Eligibility Restoration Act (PERA) as a Savior

February 1, 2024  

  • Intellectual Property
  • Property, Markets & Trade
  • Blog

By: Nishant Shrestha

On January 23rd, 2024, the US Senate Judiciary Subcommittee on Intellectual Property held a round of hearings on the proposed Patent Eligibility Restoration Act (PERA). Eight witnesses from various industries and organizations testified before the hearing committee, carefully weighing PERA’s advantages and potential risks. There was a growing consensus in the room on the pressing necessity to take legislative action against the present unreliability of the USC §101-patent eligibility examination, introduced by the Alice/Mayo test.

Senator Coons and Senator Tillis convened the session with opening remarks highlighting the paramount responsibility of Congress to preserve US leadership in innovation and technology, particularly in core areas, including AI and medical diagnostics. Senator Coons cited that he was concerned about US patents and inventions being invalidated and unpatentable, thereby redirecting invaluable investments and skilled workers in these fields to the US’s competitors, including China and the EU, where such inventions and patents are still being protected. He also mentioned that during the 2019 hearings on §101, forty out of forty-five witnesses stated that the current criteria made patent law unpredictable and restrictive. Senator Tillis further commented that the current system discourages young inventors and entrepreneurs, ultimately affecting the US’s economic future.

Perceptions of Patent Eligibility Examination Quality

To contribute to the dialogue regarding the effect of the Supreme Court’s 2012 and 2014 rulings in the Mayo and Alice Corp. cases in the area of patent subject matter eligibility, the Sunwater Institute has analyzed the results of the surveys conducted by the USPTO’s Office of Patent Quality Assurance. These surveys are sent to 3,000 frequent-filing customers semi-annually, asking about their perceptions of patent examination quality. The analysis compares the reasonability of rejections across all statutes in terms of being technically, legally, and logically sound. The results paint a discontent with §101—eligibility examinations. Referencing Figure 1, when applicants were asked whether their expectations were met with how patent examiners addressed rejections on their recent office actions, 76% of the applicants said they were only up to moderately satisfied with §101 examinations, among which more than half reported their expectations were only met to a small extent. Comparing dissatisfaction levels with other statutory rejections, §101 rejections cause the largest dissatisfaction among applicants.

Figure 1: Expectation perceptions on rejections

Figure 1: Expectation perceptions on rejections

Figure 2 depicts how often applicants found the rejections they received as reasonable in terms of correctness; 64% of applicants believe §101 rejections are rarely correct or only some of the time; in fact, out of those, more than half found rejections to be rarely correct. Figure 3, which is on the clarity of rejections, shows that 58% of applicants found §101 rejections to be unclear most of the time. Figure 4, which is on the consistency of rejections, shows that 66% of applicants perceive §101 rejections to be inconsistent most of the time.

Figure 2: Perceptions on the correctness of rejections

Figure 2: Perceptions on the correctness of rejections

 

igure 3: Perceptions on the clarity of rejections

Figure 3: Perceptions on the clarity of rejections

 

Figure 4: Perceptions on the consistency of rejections

Figure 4: Perceptions on the consistency of rejections

To summarize, applicants disproportionately perceive §101 rejections negatively compared to other statutory rejections. In fact, §101 rejections are the only statute that records double digits high dissatisfaction in terms of clarity, consistency, and correctness. The results presented in the graphs are from the most recent survey conducted in fiscal year 2023 Q4, and the USPTO also mentions that these survey results have been consistent with prior surveys, indicating that customer discontent has developed into a chronic problem.

Witness testimonies

Former USPTO director David Kappos, who was one of the witnesses, gave insights into why the current system is “chaotic.” He mentioned that the current judiciary exceptions, a key part of Alice/Mayo, are restrictive, vague, and circumvent current legislative patent law, causing interpretation issues for patent examiners and judges in courts.

Conversely, David Jones, another witness and the executive director at High Tech Inventors Alliance, testified that present §101 guidelines are predictable and unambiguous and reported that USPTO §101 rejection rates are lower than pre-Alice/Mayo, indicating strong evidence to maintain the present status quo. However, in his testimony, Kappos explained that such evidence, unfortunately, indicates that investors are eschewing investments in inventions in important areas like biotechnology, with high patent eligibility uncertainty. As the 2022 USPTO Report on patent subject matter eligibility found, businesses involved in areas such as precision medicine and medical diagnostics are relying less on patent protection and more on alternative forms of IP protection, including trade secrets, resulting in the privatization of novel information.

To conclude, the current US patent examination unpredictability, as Andrei Iancu, a witness and former USPTO director, testified, hurts “American innovation and competition” while also “threatening constitutional rights to patent protection.” The Sunwater Institute is closely following the dialogue around patent subject matter eligibility and conducting studies to evaluate the effects that changes in US laws brought about by court decisions had on the quality of US patents.

 

Nishant Shrestha works with Sunwater Institute as a Research Analyst on a project that studies the quality of patents issued by the USPTO. He holds a Bachelor of Science in Mathematical Economics from Bucknell University. His research interests are in the intersection of IP and AI.