A coalition of anti-patent groups — including the R Street Institute, the Electronic Frontier Foundation, Public Knowledge, and others — recently sent a letter to Senate Judiciary Committee leaders urging them to oppose the Patent Eligibility Restoration Act (PERA). The letter recycles a familiar set of unfounded accusations against PERA, including that restoring clarity on patent eligibility would hurt small businesses and that stronger patent rights would dampen innovation in important sectors like artificial intelligence. The letter also took aim at recent attempts to reform the procedures of the Patent Trial and Appeal Board (PTAB). These critics inaccurately claim that reforming the PTAB so that its procedures are more balanced harms small innovators, when such reforms help small and large innovators alike from the abusive and repetitive patent validity challenges that have unfortunately characterized the Board’s operations.
In short, despite what the critics claim, both PERA and PTAB reform efforts are necessary to support inventors and entrepreneurs, promoting innovation in the United States.
The letter contains numerous misleading claims:
| Claim: “Recent USPTO changes to Patent Trial and Appeal Board practice are “dismantling” a key safeguard for innovative small businesses” |
| In reality: The USPTO’s decision to rescind its 2022 discretionary-denial memorandum and adopt a new two-step review process is a necessary corrective measure to curb PTAB abuse by deep-pocketed patent infringers, which commonly file repeated and duplicative patent validity challenges against their opponents, including small companies, in order to escape accountability. The rescinded guidance had enabled this predatory infringement strategy by allowing Big Tech and other large firms to easily file PTAB petitions related to cases already being litigated in court. The new interim USPTO guidance empowers the Director and PTAB to deny institution when an issue is being litigated elsewhere or has already been under review at the agency, reducing wasteful duplication. The new guidance preserves the process of post-grant review for its intended purpose of checking the validity of patents rather than allowing large incumbents to weaponize the process against their competitors. Further, despite what the critics’ letter alleges, the USPTO’s interim changes are meaningful to small innovators, who often lack the legal and financial resources to fight against simultaneous challenges in court and at the PTAB. Put simply, the interim USPTO agency guidance is necessary to ensure that small innovators have a fair chance to defend their patents on the merits instead of being overwhelmed by their opponents’ resources. |
| Claim: “Expanding patent subject matter eligibility through the Patent Eligibility Restoration Act (PERA) would entrench large incumbents and harm small businesses and startups” |
| In reality: Small businesses and startups depend on strong patent rights to compete with large incumbents and would therefore benefit from patent eligibility that is commensurate with the scope of technological innovation in the United States. By enabling inventors to protect their inventions against potential infringement, patents allow small companies to attract funding from outside investors and compete against market incumbents on the merits of their innovation. However, when patent eligibility is uncertain, it becomes difficult for innovative small companies to attract the outside financial backing needed to compete in the market. One study found that 74% of responding investors treat patent eligibility as an important consideration when deciding whether to invest in a company developing new technology. Another study found that after the Supreme Court reduced patent eligibility for medical diagnostic technology in Mayo v. Prometheus (2012), investment in U.S. disease-diagnostic technologies fell by nearly $9.3 billion compared to what it would have been without the decision. PERA solves these problems by clarifying the scope of patent subject matter eligibility and restoring the common-sense, historically grounded rules that existed prior to the Supreme Court’s misguided jurisprudence in the 2010s. In short, under PERA, small companies would once again be able to patent innovative technologies in fields where Supreme Court precedent has injected uncertainty, such as artificial intelligence and medical diagnostics, ensuring that there are the proper incentives for innovation in these economically important areas, especially for small businesses. |
| Claim: “Expanding patent eligibility – such as through PERA – would harm artificial intelligence innovation.” |
| In reality: Restoring patent eligibility to its historic scope is critical to robust AI innovation. Under current precedent, inventions in AI and other emerging industries are often deemed ineligible for patenting, which has deterred innovation in those areas. Most pertinent to the issue of AI is the Supreme Court’s decision in Alice Corp v. CLS Bank (2014), which ruled that a particular computer algorithm was simply an “abstract idea” and therefore ineligible for patenting. Over time, as the court’s decision in Alice has been applied by lower courts to weaken patent eligibility for computer algorithms more broadly, a growing share of AI technologies have been denied patents. C4IP Co-Chair and former USPTO Director David Kappos found that in 2018, the majority of AI patent applications were rejected on eligibility grounds. At a time when patenting of AI technologies is growing rapidly around the globe — and other countries, including China, allow more patenting of these technologies than the United States — needlessly limiting patent eligibility threatens to hold back domestic scientific progress in a crucial strategic sector. |