US reform plan for patents raises innovation concerns | Financial Times

Far more inventions could qualify for patents in the US if a reform bill making its way through the Senate becomes law.

The changes would not only increase the disconnect between European and American rules on what can be patented. They also have the potential to stifle innovation and create greater uncertainty for companies that want to protect their intellectual property globally, experts warn.

The bill is the bipartisan brainchild of Republican Thom Tillis and Democrat Chris Coons, who head the Senate judiciary committee’s intellectual property subcommittee. The panel believes a section of the US Patent Act, which defines and limits what ideas and inventions can be patented, does not incentivise innovation. Their aim is to restore predictability and stability to patent eligibility, according to a note accompanying the proposed amendment.

Yet in three days of testimony last month, industry experts and lobbyists could not even seem to agree on whether patent eligibility rules should be reformed at all, let alone how they should be modified, says Michael Borella, partner at McDonnell Boehnen Hulbert & Berghoff.

Most life science innovators in particular want a more “open” or permissive system, making it easier to lodge patents, Mr Borella says.

However, the software world has two opposing camps. Larger companies generally want it to be harder for non-practising entities — so-called patent trolls — to file patents and then sue companies for infringement.

“These developers want to make it easier to invalidate patents,” says Mr Borella. “But smaller software developers are asking for better protection for their own innovations.”

Based on its questioning of witnesses, Mr Borella thinks the subcommittee wants to make patent law less restrictive “but they are not settled on how to do it”.

More patents do not necessarily equate to more innovation

Siva Thambisetty, associate professor in intellectual property law at the London School of Economics, says she is not surprised that the subcommittee was not able to come to a consensus.

“The senators complain that experts cannot agree on what is and what isn’t patentable under current law, but that’s not necessarily a bad thing,” she says. “It is only the cases that push the rules or raise interesting determinations that are going to be litigated — and which are by definition uncertain. This is particularly true of unprecedented or emerging technologies that often raise the most acute eligibility questions.”

Ms Thambisetty also questions what a more permissive approach to filing patents would achieve. “More patents do not necessarily equate to more innovation, so it is difficult to see what problem is resolved by allowing more patents to be granted,” she says.

With Europe and China, the US is one of the three most important patent jurisdictions. Patent lawyers say divergence between their legal frameworks makes it riskier and more expensive for companies that are trying to innovate to protect their intellectual property. International treaties try to help streamline patent applications but any variation adds complexity, Mr Borella notes.

After last month’s hearings on the possible legal reform, the subcommittee accused the US Supreme Court of confusing and narrowing patent eligibility “to the point that investors are reluctant to pursue the innovations that propel our country forward”.

Three recent Supreme Court decisions in particular are bugbears for some patent reform advocates because they are perceived by some as limiting the patentability of innovative ideas, says Timo Minssen, a professor at the University of Copenhagen and director of the Centre for Advanced Studies in Biomedical Innovation Law.

In Myriad Genetics, the US Supreme Court held that a patent cannot be granted for isolating genes found in nature, and in Alice Corp it unanimously decided that abstract ideas cannot be patented simply because the idea was implemented in software. A 2012 decision known as Mayo has been criticised as potentially damping innovation in personalised medicine and diagnostic tests.

“Certain measures the senators are attacking are important bulwarks that make competitive innovation possible by keeping the building blocks of science and technology freely available for all to use,” Ms Thambisetty says.

Matthew Fisher, a lecturer in intellectual property law at University College London, is also concerned about the bill’s potential to jettison the legal rules that dictate what types of things can — and cannot — be patented. “The eligibility of subject matter sits as a gatekeeper that tends to take out patent applications which are too broad in application or too abstract,” he says.

Mr Fisher explains that European legislation reflects a belief that software is better protected under copyright — where the code can be attributed to an author — but that it is problematic to try to protect the functionality of software in an ever-evolving world where innovators try to solve practical problems in continually better ways.

“This belief does not necessarily hold in the US, where software and business systems can be patented,” he says. “This bill seems to be aimed at encouraging large companies. The US system is already quite protectionist of small inventors and I can’t see this bill in its current form really changing the landscape for those inventors in a positive way.”

Towards the end of the subcommittee hearings, Senator Tillis said he intended to have a vote on the bill before summer was out, yet so far there is no agreement on what shape reforms should take. Mr Borella thinks a reform bill may have a chance. “Patent law is one of the few things for which you can get bipartisan support,” he says.

But Karl Manheim, professor at Loyola Law School in Los Angeles, knows bipartisan support does not necessarily mean smooth sailing through Congress. In 2007 he served as special counsel to a congressional committee reviewing the internet and intellectual property.

“This was the first major legislative reform of patent law for years and enjoyed bipartisan support,” he says. “Yet it still took years to promulgate.”