The real US patent ‘crisis’

Stakeholders throughout the patent system agree that patent quality is a good thing. We all want the U.S. Patent and Trademark Office (USPTO) and its examiners to have sufficient resources to perform their exacting work, to keep patent fees from being diverted to other uses and to improve predictability in the patent system. So at the Innovation Alliance, a group of R&D-focused technology companies for which I serve as executive director, we supported the Senate Judiciary Subcommittee on Intellectual Property’s decision recently to hold a hearing on patent quality.

While the hearing was informative, unfortunately, proponents of weaker patent rights, primarily incumbent corporate interests seeking to lower their patent licensing costs, appear to be trying to distort the issue of patent quality to serve their own ends. The term “bad patent” or “poor quality patent” is now often used as shorthand to denigrate a patent that may in fact be strong on substance, but that stands in the way of someone who wishes to use the invention protected by the patent without taking out a license to do so.

These anti-patent interests cite statistics about the percentage of patents declared invalid in litigation to claim that the United States is in the midst of a patent quality “crisis.” But these statistics involve only the small minority of patents that are reviewed in court and ignore the vast majority of patents that are valid and never seriously challenged.

Experts have noted that the overall patent litigation rate has been remarkably steady for nearly a century, at less than two litigations per 1000 patents issued. That does not at all suggest there is a “crisis” in patent quality that has resulted in a disproportionate number of lawsuits or patents being invalidated.

The true crisis in our patent system is the dire state of Section 101 jurisprudence, the area of law determining what is and what is not eligible for patent protection. For nearly 150 years, Section 101 of the U.S. Patent Act was interpreted to allow inventions to be patented across broad categories and subject matters. These patents incentivized American R&D and innovation and led to countless technological and medical breakthroughs.

Starting in 2010, however, the Supreme Court issued a series of decisions that have upended longstanding settled law and narrowed the scope of patent-eligible subject matter. These decisions have created chaos in the patent world and have left inventors uncertain about what is patentable. Senate Judiciary IP Subcommittee Chairman Thom Tillis (R-N.C.) recently noted the “madness in this area of law,” citing a case where the courts found the invention of a garage door opener to be too abstract to patent. The courts have so muddled the interpretation of Section 101 that something sufficiently concrete that you can literally drop it on your foot can now be considered an abstract concept ineligible for patenting.

Meanwhile, our foreign competitors are granting patents on many inventions that are now unpatentable here. A 2017 study of 18,000 patent applications rejected in the United States found that nearly 1,700 were granted in the European Union or China, or both. A recent World Intellectual Property Organization (WIPO) report further documented that among leading patent offices, the USPTO was among those that granted the smallest percentage of patent applications – fewer than 35 percent of all applications processed in 2018 – and the share of rejected applications was among the highest.

Restoring clear patent rights will be essential to maintaining a strong and healthy U.S. innovation ecosystem. That, in turn, will help U.S. innovators keep up with the fierce international competition to develop the technologies so critical to the future of U.S. national security, including artificial intelligence, advanced computing and 5G. In many of these areas, U.S. companies are competing against state actors who operate without regard to market forces. For instance, reports show that China is now rivaling the United States in the patenting of AI technologies. We need to ensure that U.S. policy facilities private U.S. investment into these key technologies as much as possible.

So yes, patent quality is important, and we must provide the USPTO with the resources it needs to carefully weigh patent applications and make consistent, defensible and predictable decisions. But the real patent crisis we face is the inability of innovators to get patents for their new inventions under Section 101.

Thankfully, Chairman Tillis and his counterpart on the IP Subcommittee, Ranking Member Chris Coons (D-Del.), are well aware of the problem and are hard at work on a solution. They are making an important effort to help restore clarity over what is and what is not eligible for patent protection. More members of Congress should be focusing their attention on this patentability crisis.

Brian Pomper is executive director of the Innovation Alliance.