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America’s intellectual property laws are so unclear that even experienced attorneys can’t figure out which inventions are eligible for patent protection. This lack of predictability means far less job-creating investments for American companies that need patent protection to compete.
Investors simply don’t invest when they aren’t certain that a company will be able to protect its intellectual property.
I’ve seen this predictability problem firsthand. I’m an IP lawyer and investor who recently taught a class at the Practicing Law Institute. My students included more than 300 attorneys, most very experienced in intellectual property law. But when I polled them, 90% said they weren’t confident they could predict whether a software invention even qualifies for patenting.
This is a problem — and not just for these lawyers and their clients. When even trained IP experts can’t tell what’s eligible for a patent, the average American inventor and investor has no chance. The whole patent system has become unreliable.
This crisis has been long in the making. For more than a decade, the U.S. court system has slowly eroded patent eligibility for high-tech inventions. It began with several Supreme Court decisions that created vague guidelines for patent eligibility.
Federal district and circuit courts have interpreted those rulings broadly to disallow patents on high-tech inventions — such as software algorithms and medical diagnostic tests — whose complex workings judges have dismissed as “abstract,” “laws of nature” or “natural phenomena.”
The U.S. Code says that “any new and useful process, machine, manufacture or composition of matter” should be eligible for patenting. But companies whose innovations meet this statutory definition routinely have their patents challenged on the ground of allegedly being “abstract.”
This situation creates a significant barrier to entry for young, innovative companies and intrepid investors looking to compete with established giants. And it sets patent owners up to fail.
As bleak as the situation may seem, a legislative fix could solve the problem. A bipartisan bill introduced by Sen. Thom Tillis, R-N.C., and Chris Coons, D-Del., called the Patent Eligibility Restoration Act, or PERA, would set clear standards for what is and isn’t eligible for a patent. It would remove courts’ discretion to deny patents based on ambiguous concepts like “abstract ideas” and “laws of nature,” reestablishing predictability for patent owners and investors.
PERA seeks to remove the guesswork around what is or is not “abstract” by setting forth specific categories of inventions that are ineligible for patenting. It would establish easy-to-understand criteria for patent eligibility, providing inventors with the certainty and predictability needed to take immense risks.
Without clear standards, more and more inventors will simply opt to keep their technologies secret or not develop them at all. The risk of pouring millions — or billions — of dollars into a new invention, only to have a court declare it patent ineligible at the eleventh hour, would be too high.
It’s high time for reform.
When I polled my class, 85% of the students agreed that intervention from Congress is necessary to fix patent eligibility. Sen. Tillis and Coons have already drawn up a solution. Everybody else just needs to vote “yes.”
Michael Gulliford is a Founding Partner at Soryn IP Capital Management, which provides a variety of capital solutions to companies, universities, and law firms that own and manage valuable intellectual property. Michael has more than two decades of experience working in the intellectual property arena.
