What Patent Bills Would Mean for Infringement Litigation | Farella Braun + Martel LLP
Two bills recently introduced in Congress could significantly affect the current patent litigation landscape.
The bipartisan bills are titled the Patent Eligibility Restoration Act of 2023 and the Promoting and Respecting Economically Vital American Innovation Leadership Act, or the PREVAIL Act.
Put simply, the Patent Eligibility Restoration Act would change the substance of the law regarding patent eligibility, while the PREVAIL Act would change the procedures for litigating patent invalidity in the U.S. Patent and Trademark Office, or USPTO.
This article summarizes each bill and discusses its possible effect on patent litigation.
The Patent Eligibility Restoration Act of 2023
The Patent Eligibility Restoration Act is designed to completely overhaul the law around patent eligibility by eliminating judicial exceptions to Title 35 of the U.S. Code, Section 101. [1]
The bill asserts that these judicial exceptions have rendered an increasing number of inventions ineligible for patent protection, and that patent practitioners and courts, including the U.S. Court of Appeals for the Federal Circuit, have for years requested greater clarity on Section 101 patent eligibility.
The proposed Patent Eligibility Restoration Act would eliminate these judicial exceptions to patent eligibility and replace them with newly crafted statutory exceptions.
The U.S. Supreme Court has so far refused to take up any cases addressing this topic since its well-known Alice Corp. v. CLS Bank International ruling in 2014 that created the current legal framework for the patent eligibility analysis.[2]
Currently, courts utilize this two-step Alice framework to determine whether a patent covers ineligible subject matter such that it should never have been issued under Section 101.
In step one of the analysis, the court determines whether the claims are directed to a judicially created exception to patentability, such as an abstract idea, and thus cover ineligible subject matter.
If so, the court proceeds to step two to determine whether the claims nonetheless include an inventive concept. If the patent fails both Alice steps, the claims are ruled ineligible.
The two-step Alice test is also applied by the Patent Office itself during examination of new patent applications.
But this Alice framework has led to considerable confusion, particularly regarding:
- Whether any patent viewed from a high-enough lens is directed to an abstract idea;
- Where step one ends and step two begins; and
- Whether step two’s inventive concept improperly bleeds into a Section 102 novelty or Section 103 obviousness analysis.
In the press release for this proposed bill, the office of Sen. Thom Tillis, R-N.C., stated that the current framework has “led to inconsistent case decisions, uncertainty in innovation and investment communities, and unpredictable business outcomes.” [3]
The Patent Eligibility Restoration Act attempts to reform patent eligibility by eliminating existing judicially created exceptions and starting over from scratch. Under the proposed bill:
Any invention or discovery that can be claimed as a useful process, machine, manufacture, or composition of matter, or any useful improvement thereof, is eligible for patent protection, except as explicitly provided in section 101 of title 35, United States Code, as amended by this Act.
The proposed bill amends Section 101 to articulate statutory exceptions to patent eligibility under subsection (b), which includes the following exceptions:
(b) ELIGIBILITY EXCLUSIONS:
(A) A mathematical formula that is not part of a claimed invention in a category described in subsection (a).
(B) (i) Subject to clause (ii), a process that is substantially economic, financial, business, social, cultural, or artistic, even though not less than 1 step in the process refers to a machine or manufacture.
(ii) The process described in clause (i) shall not be excluded from eligibility for a patent if the process cannot practically be performed without the use of a machine or manufacture.
(C) A process that —
(i) is a mental process performed solely in the human mind; or
(ii) occurs in nature wholly independent of, and prior to, any human activity.
(D) An unmodified human gene, as that gene exists in the human body.
(E) An unmodified natural material, as that material exists in nature.
The bill also emphasizes that Section 101 patent eligibility is a distinct analysis from the novelty, obviousness, and indefiniteness requirements of Sections 102, 103 and 112, respectively.
In fact, the amended Section 101(a) removes the word “new” from the existing opening language of “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”
The bill also directs courts to consider eligibility “without regard to … whether a claim element is known, conventional, routine, or naturally occurring … or any other consideration in section 102, 103, or 112.” This instruction will avoid the risk of eligibility rulings that appear to go beyond the reach of Section 101.
The proposed bill has the potential to create more predictable outcomes when the eligibility of an issued patent is challenged. It may well lead to fewer patents being deemed patent-ineligible, which would benefit patent owners over alleged infringers.
Defendants would have to utilize Section 101 challenges more judiciously. And the notoriously hard- to-parse Alice terms of an “abstract idea” and “inventive concept” would no longer hold sway in the analysis, potentially allowing more informed business decisions from clients choosing whether to dispute or defend a patent’s eligibility.
But any expectation that this bill will be a panacea for eligibility litigation may be misguided. In practice, courts may simply trade the Alice framework for difficult questions of first impression in applying the proposed amended Section 101. For example, what does it mean for a “process” to be “substantially economic, financial, business, social, cultural, or artistic”?
Subsection (b)(B) may also lead to confusion regarding whether a computer is invoked in a nonessential manner or whether the process cannot practically be performed without one. On a motion to dismiss, this could turn the Section 101 analysis into a fact-intensive inquiry requiring more discovery than courts are typically comfortable with at that stage.
The subject matter eligibility requirements of Section 101 are foundational to what is patentable, yet they have bedeviled litigators and the courts for years. If this bill is passed, it will drastically shake up the manner in which patent eligibility is litigated.
The PREVAIL Act
The PREVAIL Act has the stated purpose of improving the U.S. intellectual property system, promoting innovation, and securing economic and national security interests in an increasingly competitive global landscape.[4] The proposed bill would, among other things, overhaul the rules and procedures of the Patent Trial and Appeal Board.
The PTAB is the administrative body of the USPTO that conducts inter partes reviews, or IPRs, and post-grant reviews, or PGRs — two procedures created by the America Invents Act in 2011.
While the PREVAIL Act has the potential to resolve uncertainty for all parties in a number of areas of PTAB practice, it does so by implementing a number of changes long requested by patent owners.
Among other things, the bill limits the number of potential challenges to any particular patent, limits who can challenge it, and increases the burden of proof for showing that a patent is invalid in a PTAB proceeding.
The main provisions in the PREVAIL Act would make the following changes:
Require Standing in IPRS
Under the PREVAIL Act, anyone challenging a patent in an IPR would have to be sued or threatened with a lawsuit before filing a petition — this new standing requirement would not apply to PGRs, which are similar to IPRs but must be filed within nine months after a patent issues.
Remove Joinder for Time-Barred Parties
Currently, although a defendant must file an IPR within one year of being sued, a party that misses the deadline can still join an IPR proceeding brought by another party.
This bill creates a rebuttable presumption against joinder for such a defendant and prohibits it from maintaining the IPR if the original challenger drops out.
Apply Estoppel as Soon as a Petition Is Filed, Rather Than When a Final Decision Issues
Currently, estoppel applies when the PTAB issues a final written decision in a PGR or IPR proceeding. The PREVAIL Act would apply estoppel when a challenge is filed, meaning that the petitioner cannot file a subsequent petition on any ground that the petitioner raised or reasonably could have raised in the prior IPR or PGR petition, with some limited exceptions.
Standardize PTAB and District Court Proceedings
Right now, the PTAB applies a “preponderance of the evidence” standard to determine whether a patent is invalid, while a “clear and convincing evidence” standard applies in district court proceedings.
The PREVAIL Act would require the PTAB to use the same clear and convincing evidence standard. The bill also requires the PTAB to officially adopt the “plain and ordinary meaning” standard for claim construction used in district courts — which codifies the Patent Office rule that already requires this standard.
Require Challengers to Pick a Single Forum
If an IPR or PGR is instituted, the petitioner and related parties would be prevented from raising or maintaining in another forum any invalidity arguments against the same patent that could have been brought in that PTAB proceeding.
This new system would effectively prohibit parallel litigation of invalidity in the PTAB and in district court; the PTAB thus could not use the existence and timing of co-pending litigation as a basis for denying institution.
The bill would also require the PTAB to dismiss any party’s validity challenge where the patent’s validity has been upheld against that party in another forum.
End Multiple USPTO Actions
There are a number of available ways to challenge an issued patent within the Patent Office. The PREVAIL Act would prohibit multiple actions in the Patent Office where the subsequent challenge includes the same prior art or arguments that the Patent Office considered during a previous action — even if filed by a different party.
In addition, any entity financially contributing to an IPR or PGR would not be permitted to bring a separate challenge on that same patent. It would also require the director to be made aware of all related Patent Office proceedings to determine whether to stay, transfer, consolidate, or terminate any such proceeding.
Monitor PTAB Officials
The bill requires the PTAB director to establish a code of conduct for PTAB judges, refrain from influencing any PTAB panel decisions, and issue a written opinion if rehearing a PTAB decision.
The bill also states that if a review is instituted, the PTAB judge(s) who made the decision whether to institute the requested review would be ineligible to hear the review itself.
Implement Miscellaneous Other Changes
The bill also proposes ending the diversion of USPTO fees to other agencies and programs, reporting on the impact of abusive demand letters from patent owners on small businesses, expanding access to patent-searching databases, and harmonizing reexamination proceedings with IPR and PGR proceedings.
If this bill passes, petitioners will have to ensure that if they choose to attack the patent’s validity, they do so in the most strategic manner available.
Defendants accused of infringement will have to carefully consider which forum to argue invalidity (district court or PTAB), what type of USPTO challenge is most appropriate, and which prior art arguments should be included.
Even if this bill simplifies the PTAB process itself, it will not diminish the importance of carefully mapping out and successfully navigating the interplay between any district court litigation and related PTAB proceedings.
Conclusion
Each proposed bill, if passed in its current form, will do more than refine the edges of patent law. Instead, both proposals would meaningfully impact two of the three central disputes in a typical patent infringement lawsuit — whether the patent is subject-matter ineligible and whether the patent is invalid.
Only the question of noninfringement is untouched. Intellectual property lawyers and technology companies should familiarize themselves with both bills and consider the ways in which their litigation strategies may have to be adjusted.
[1]
[2] Alice Corp. Pty. Ltd. v. CLS Bank International, 573 U.S. 208 (2014).
[3] american-innovation.
[4]
