Legislative reforms to overhaul ‘unfavourable’ patent landscape – for better or worse

Because complying with a standard requires implementers to practice SEPs covering that standard, implementers often have to rely on invalidity (not non-infringement) as their primary defence in SEP litigation. In the United States, the patent litigation landscape has been re-shaped twice in the last 12 years in ways that make it easier to invalidate SEPs – first with the advent of the Leahy-Smith America Invents Act (AIA) and then with the Supreme Court’s shake up of patent eligibility, which culminated in Alice Corp Pty v CLS Bank Int’l (573 US 208, 2014).

Since the AIA went into effect in 2012, the PTAB has provided a streamlined and often cheaper venue for accused infringers and patent protection companies to challenge and invalidate claims, which has resulted in the invalidation of claims from thousands of issued US patents, including many SEPs. Elsewhere, the Supreme Court’s two-step Alice framework, defining what types of inventions are eligible for patenting, has left litigants struggling to reconcile a judicial framework that even Federal Circuit appeal court judges have called “unworkable” and “incoherent” (Interval Licensing LLC v AOL Inc, 896 F3d 1335, 1355, Federal Circuit, 2018).  Despite this, there has been a considerable increase in patent eligibility motions based on the Alice framework.

Against this backdrop – often criticised as unfavourable for patent owners, including SEP owners, and innovators alike – senators Chris Coons and Thom Tillis have introduced two major bills designed to protect patent owners in post-grant proceedings before the USPTO and to clarify the law on patent eligibility: the Promoting and Respecting Economically Vital American Innovation Leadership (PREVAIL) Act (also sponsored by senators Dick Durbin and Mazie Hirono) and the Patent Eligibility Restoration Act 2023.

The PREVAIL Act

The PREVAIL Act represents a patentee-friendly overhaul of the current post-grant regime at the USPTO. It reflects concerns that the PTAB has weakened US patent protection by providing a forum where “patent claims are consistently invalidated”, resulting in the United States “ceding technological supremacy to China”.

According to Senator Coons, the “[u]nintended consequences of the [AIA]” include “the filing of repetitive petitions for inter partes and post-grant reviews that have the effect of harassing patent owners”, causing decreased “investment in innovation and frustrat[ing] the purpose of [the AIA]”. To remedy this, the PREVAIL Act:

• introduces a standing requirement, limiting petitioners to those that have been sued or threatened with a suit;
• limits serial PTAB challenges against the same patent by requiring the USPTO to reject challenges based on arguments it has previously considered and preventing multiple petitions funded by the same parties;
• creates presumptions against joinder for otherwise time-barred petitioners;
• imposes a “clear and convincing” standard for patent invalidation; and
• requires a patent challenger to choose between litigating validity at the PTAB or in the district court via enhanced estoppel provisions.

While the bill intends to remedy unintended consequences of the AIA, it may push adjudication of validity disputes out of the PTAB and back into the district courts. The limitations on seeking PTAB review will, in some instances, make it unavailable to patent challengers. Even where PTAB review remains available, the enhanced evidentiary standard and greater estoppel provisions will undoubtedly make the board a less attractive and riskier forum than it currently is.  Finally, the new standing requirements would provide protection against campaigns by so-called ‘patent defence entities’ that aim to invalidate entire SEP portfolios.

Patent Eligibility Restoration Act 2023

Despite repeated petitions for certiorari on patent eligibility issues and the solicitor general’s recommendation that the court clarify the law, the Supreme Court has not taken a Section 101 case since 2014. Many expect that legislation is the only solution, and commentators have observed that the mere introduction of the Patent Eligibility Restoration Act 2023 is a welcome step in clarifying patent eligibility.

At its core, the bill seeks to broaden the universe of patent-eligible inventions by removing judicial exceptions to eligibility and limiting Section 101 application to a statutorily defined set of exclusions. Proponents of the bill hope that this will resolve uncertainties in current Section 101 jurisprudence and re-focus the courts on sections 102, 103 and 112 for patentability determinations. The eligibility exclusions, which are a subset of currently recognised judicial exceptions under the Alice/Mayo framework, include:

• mathematical formulas that are not part of a useful process, machine, manufacture or composition of matter;
• economic, financial, business, social, cultural or artistic processes – unless the process cannot practically be performed without using a machine or manufacture;
• mental processes performed solely in the human mind;
• natural processes occurring in nature absent human activity; and
• unmodified human genes and natural materials – unless they are isolated, purified, enriched or otherwise altered by human activity or otherwise employed in a useful invention.

Under this bill, more inventions are expected to be patent eligible across a variety of fields, including life sciences and computer-implemented technologies. Likewise, there is an expectation that patentability questions would largely be left to sections 102, 103 and 112, which are well-developed areas of the law that have more concrete applications and tests than the Alice/Mayo framework and have traditionally required a stricter and more structured application of common evidentiary standards.

Despite seeking to avoid the current judicial line-drawing exercises for patent eligibility, however, this proposal may do little more than introduce a new one. The bill still invites disputes over what a claim is directed to (albeit while providing a more concrete set of exceptions) and whether a claim is:

• patent-eligible “process that cannot be practically performed without the use of a machine (including a computer) or manufacture”; or
• a patent-ineligible “process drawn solely to” an exception while “merely stating . . . ‘do it on a computer’”.

The road ahead

Both patent reform proposals seek to enhance participation in the patent system, whether through eligibility expansion or strengthening granted patents. However, expanded eligibility and a weaker PTAB will undoubtably raise concerns from standards implementers about simultaneously permitting broader patent claims (eg, those reciting natural laws or abstract ideas) while also weakening an accused infringer’s ability to challenge those claims at the PTAB. For SEP holders, the biggest change may come from the PREVAIL Act’s new standing requirements, which limits the availability of inter partes reviews to only those entities that have been sued or threatened with a lawsuit. While these would still be a risk during assertion and licensing campaigns, this would eliminate the threat of such reviews being brought by defence-oriented organisations that are looking to invalidate swaths of SEPs on behalf of their members.  Ultimately, while these reforms may strengthen innovators’ rights and promote investment into new inventions, they will also likely result in increased litigation proceedings and costs. Only time will tell whether any of these approaches are ultimately beneficial or harmful to the larger SEP ecosystem.