In more detail

PERA was introduced in the Senate in June of last year and aims to clarify the incredibly murky waters that obfuscate patentable subject matter under 35 U.S.C. § 101. Section 101 governs what subject matter is eligible for patent protection under the U.S. patent system. As it currently stands, the text of Section 101 is deceptively simple — totaling just 36 words: “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”.

However, despite — or because of — this brevity, Section 101 has been a source of longstanding confusion and frustration for inventors, patent practitioners, and even judges. Senator Thom Tillis, one of the bill’s co-sponsors, pointed out that the twelve sitting judges of the United States Court of Appeals for the Federal Circuit have lamented the state of patent eligibility at some point. PERA attempts to simplify the analysis of what is eligible for patent protection by wiping the slate clean of judicial patentability exceptions and providing clearer statutory categories to determine patentable subject matter.

Currently, patent eligibility is decided by a two-step “Alice test” derived from the leading 2012 and 2014 Supreme Court decisions, Mayo Collaborative Services v. Prometheus Laboratories, Inc. and Alice Corporation Pty. Ltd. v. CLS Bank International. To analyze whether something is patent eligible, first one must ask if the relevant invention is “directed to” a “patent ineligible concept,” such as abstract ideas (like a method of doing business) and natural phenomena (like gravity). If the answer to this first part of the test is “no,” the material is eligible. If the answer is “yes,” then the material may still be eligible if it contains an “inventive concept” that can “transform” the claimed invention into an eligible application. 

In the years since Alice, the U.S. Patent and Trademark Office and federal courts have struggled to apply the two-step analysis consistently, leaving inventors, companies looking to invest in U.S. innovation, litigants, and other stakeholders in the patent system without clear guidance. In particular, the availability of patent protection for cutting edge developments in software-heavy fields like artificial intelligence, machine learning, and electric vehicles is uncertain because inventions in this space may be viewed as “abstract ideas.”

This uncertainty has led some innovators to avoid patent protection and instead protect such technology using trade secrets, copyright, and contractual protections. Because trade secrets must be kept confidential, the public is deprived of key information about these inventions, which would otherwise need to be disclosed in a patent application in exchange for patent exclusivity.

In order to address this issue, PERA would amend Section 101 to create discrete areas for which patents are ineligible, such as mathematical formulas, mental processes, and unmodified human genes. The bill’s other amendments to Section 101 create some exceptions to the ineligible areas that currently cause most of the debate. Business methods may be patented if they “cannot practically be performed without the use of a machine or manufacture,” and genes would not count as “unmodified” if they are isolated via human activity. This categorical approach to eligibility would simplify and replace the Alice framework.

However, the bill is not without its detractors. Although patent practitioners and stakeholders largely agree that patent eligibility reform is overdue, some have argued that PERA fails to strike the right balance by availing patent protection to whole areas which had previously been subject to close scrutiny, such as isolated (but otherwise unmodified) genes and business methods. At the January 23 hearing, panelists representing the high-technology and biotechnology industries, expressed concerns that PERA would stifle, rather than encourage, innovation by making “almost any human activity patent-eligible,” in the words of David Jones of the High Tech Inventors Alliance.

Next steps

This is not the first time that Congress has proposed reshaping Section 101, including an identically-named bill from last term. Whether the current proposal is simply a case of déjà vu or will lead to meaningful reform remains to be seen.