Welcome
Pharmaceutical & Life Sciences News

House, Senate Lawmakers Focus on Patent Eligibility Changes

Feb. 26, 2019, 9:45 AM

House and Senate lawmakers are ramping up efforts to rewrite the definition of patent eligibility, in a bid to create greater legal certainty around patents held by pharmaceutical, life sciences and technology companies.

Lawmakers are quietly meeting with company and trade group representatives to ask for suggestions on how to rewrite Section 101 of federal patent law, which defines what inventions may be patented. The U.S. Supreme Court has issued a series of decisions on patent eligibility that practitioners say have left the law poorly defined. Companies are uncertain about what inventions are patentable, and which granted patents can survive challenges.

“There have been a few Supreme Court rulings that have affected the ability of the patent office to know with certainty what is patentable, particularly in the realm of medical diagnostics and computer software, and these are areas of great growth,” Rep. Hank Johnson (D-Ga.), the new chairman of the House Judiciary’s intellectual property subcommittee, told Bloomberg Law.

“They want to do the research, invest the money, come up with the product—and then the product is not patentable,” Johnson added. “That’s a big issue we need to address.”

The legislative effort may stretch past this year, as Johnson and other lawmakers try to balance competing industry interests.

Sens. Thom Tillis (R-N.C.) and Chris Coons (D-Del.) are holding a series of closed-door meetings with companies, including Apple Inc., Alphabet Inc.'s Google, IBM Corp., pharmaceutical industry group PhRMA, and the biotechnology industry’s trade group BIO. The most recent meeting was Feb. 14; the next meeting is scheduled for March 21.

Johnson is planning a series of hearings in the coming months, and said he would work with his Senate counterparts on legislation.

Defining Eligibility

Section 101 allows patents for a new and useful process, machine, manufacture, or composition of matter. U.S. courts have held that inventions covering a law of nature, a physical phenomenon, or an abstract idea can’t be patented.

The U.S. Supreme Court since 2012 has created tough standards to overcoming those patent eligibility exceptions. It ruled a software-based invention covering a financial transaction service was unpatentable for covering an abstract idea in Alice Corp. vs. CLS Bank Int’l. It said patents on methods to diagnose susceptibility to cancer through DNA sequencing are ineligible for protection because they involved a product of nature in Ass’n for Molecular Pathology v. Myriad Genetics, Inc.

Such rulings have made it harder for companies, particularly in biotech and life sciences, to raise venture capital, and protect their inventions in legal disputes, some trade groups say.

Senate lawmakers could provide more clarity on the court-made exceptions and tests to gauge if an invention is patentable. The challenge is zeroing in on parameters that are neither too broad nor too narrow, while balancing the different industries’ concerns.

Competing Interests

The biotech industry, which takes years to innovate compared with the technology industry’s faster-moving, iterative inventions such as smartphones, is grappling with the laws of nature and natural phenomenon exceptions. The industry has hit roadblocks in obtaining legal rights on inventions, such as medical diagnostic methods, as they deal with detecting and analyzing things found in nature.

Biotechnology companies are winning patent grants in Europe and China on diagnostic methods that are being rejected in the U.S. because of patent eligibility law, Hans Sauer, deputy general counsel of BIO, the biotechnology industry’s trade group, said. BIO’s nearly 1,000 members include Genentech and AbbVie Inc.

“That never really was the case that there are inventions that aren’t unpatentable in the U.S. but patentable in countries with which we trade and compete,” Sauer said. Congress also could more clearly articulate the Supreme Court’s policy on what patents can withstand scrutiny in legal disputes, he said.

But technology companies are urging a go-slow approach. The Supreme Court’s patent eligibility guidelines can help curb frivolous patent infringement lawsuits, they say. Tech companies oppose any changes to patent eligibility law that would make them vulnerable to infringement litigation threats.

U.S. courts apply a two-step test prescribed by the Supreme Court in Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Alice. Under the test, an invention must not be directed at an abstract idea or law of nature. If it is, the patent must include an inventive concept to be eligible for protection.

Courts have thrown out numerous patent infringement lawsuits against technology developers after finding the patents covered abstract ideas in the wake of Alice and Mayo rulings. Patent holding companies that rely on licensing and litigation for revenue commonly file such lawsuits.

If Congress broadens the scope of Section 101, it could weaken that two-part test, which helps knock out weak patents that software developers often are sued for infringing, Joe Mullin, an IP policy analyst at the Electronic Frontier Foundation, said.

“Before Alice, we had a lot of terrible cases that never should have proceeded in court,” Mullin said.

Outlining Legislation

Nearly 60 people attended the Feb. 14 meeting, including representatives from IBM Corp., enterprise technology company Salesforce.com Inc., and biotech company Genentech Inc., sources who participated and spoke on condition of anonymity to describe the meeting said. The U.S. Patent and Trademark Office was present as a silent observer, according to one of the sources.

Spokespersons for Genentech and Salesforce confirmed company representatives attended the meeting. IBM didn’t immediately respond to Bloomberg Law requests for comment.

Rep. Doug Collins (R-Ga.), the ranking member of the House Judiciary Committee, also attended the senators’ roundtable, where he voiced his interest in bipartisan legislative action on Section 101, the sources said.

Aides to Tillis and Coons have asked roundtable participants, including legal associations and industry groups, to respond to a questionnaire by March 14 before the upcoming March 21 meeting, according to an invitation seen by Bloomberg Law.

Tillis’s and Coons’s aides intend to use the responses to develop a broad structure on reworking patent eligibility law, the senators said in their email. They will pose further questions after the March 21 meeting before they turn the broad framework into an outline of a legislative proposal, the email said.

“If Section 101 should serve a gatekeeping function, how narrow or broad should it be?” the questionnaire asks. Participants who don’t see the need for change have been asked to explain why the current law is acceptable.

Other questions include which legislative proposals, including those submitted by American Bar Association’s IP law section, the IP Owner’s Association, and the American IP Law Association (AIPLA) could provide the basis for a new Section 101 framework.

Although it’s unclear how quickly a bill will move, Johnson and the other lawmakers involved in the process are clearly interested in writing some new ground rules.

“It’s good for the legislative branch to lay down some firm guidelines,” Johnson said. “Then it takes the pressure off of the court and it makes their job easier.”

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bloomberglaw.com

To contact the editor responsible for this story: Keith Perine at kperine@bloomberglaw.com