U.S. Senators Thom Tillis and Chris Coons recently introduced a legislative proposal that, if enacted, would significantly change the law of patentable subject matter under Section 101 and how that subject matter can be claimed in functional terms under Section 112(f). The proposed changes, released on May 22, 2019, can be accessed here.1 On June 4, 5, and 11, 2019, the Senate Judiciary Subcommittee on Intellectual Property held hearings to obtain testimony regarding the proposed changes to the patent statute. The sponsoring senators plan to move this proposal forward quickly by revising it based on those hearings, and introducing a final bill based on the proposal sometime after the July 4th recess. Part I of this article discusses the proposed changes to Section 101 and the potential impacts of those changes, while Part II of this article considers the history of functional claiming under Section 112(f) and potential impacts of the legislative changes.
Part I: Patent Subject Matter Eligibility: A Thing of the Past?
With regard to the law on patentable subject matter, the proposed bill would likely lower the bar for patent eligibility both in district courts and during prosecution and provide additional tools for practitioners to resist rejections under § 101. Companies with patent portfolios, those looking to potentially expand their patent portfolios, or companies with active prosecution can take steps now to better position themselves for the potential changes. Additionally, companies who often have relied on § 101 as a defense in litigation may want to strategically consider the impact if the proposal is enacted.
How we got here
While courts and the USPTO have shifted their analysis of 35 U.S.C. § 101 many times, the statutory language of 35 U.S.C. § 101 has not changed. In fact, the language of the statute has remained the same since it was first enacted in 1952.2 However, over the years courts have moved the line demarcating patentable and unpatentable concepts, especially in the technology and software fields.3 Most recently, in Alice Corp. Pty. v. CLS Bank Int’l, the Supreme Court applied a two-part framework to analyze patent eligibility for software claims, instructing courts to first ask if the claims are directed to an abstract idea.4 If the claims are directed to an abstract idea, courts must then decide whether the claims contain an inventive concept or something more that would make the claims patent eligible.5
Since its inception, the two-step patent-eligibility framework from Alice has come under scrutiny because of difficulty in uniformly applying the standard, as well as its alleged bar on important innovations. In response, Senators Thom Tillis, and Chris Coons have released a proposal to reform patentable subject matter by amending 35 U.S.C. § 101. The current proposal changes § 101by removing the requirement that the invention must be “new,” and adding additional clarification on how eligibility should be determined.6 The current proposal reads:
(a) Whoever invents or discovers any useful process, machine, manufacture, or composition of matter, or any useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
(b) Eligibility under this section shall be determined only while considering the claimed invention as a whole, without discounting or disregarding any claim limitation.
This proposal, if enacted, would significantly change the test for patentable subject matter by abrogating the Supreme Court decisions, dictating that the claimed invention be considered as a whole for eligibility, making utility a central issue for patent eligibility, and requiring that the statute be construed in favor of eligibility.7
What does the future look like
To start a discussion of their proposed legislative changes to patentable subject matter, Senators Tillis and Coons hosted three days of hearings with 45 witnesses and almost 8 hours of testimony.8 Through these hearings, various individuals and organizations including law professors, the EFF, the Innovation Alliance, and the Pharmaceutical Research and Manufacturers of America expressed their satisfaction and concerns regarding the proposed legislation.
Supporters of the changes expressed that the current law on patentable subject matter has introduced unpredictability into the patent system, and that under the current law it is almost impossible to predict whether a patent will be held patentable or unpatentable. In the first hearing, Judge Paul Michel, a former Chief Judge of the United States Court of Appeals for the Federal Circuit, expressed that even he could not predict validity decisions on patentable subject matter. Additionally, those who support the proposed changes expressed their concerns that the current law stifles innovation because the risk that patents could be incorrectly invalidated causes less investment into research and development, especially around emerging technologies such as gene therapies, machine learning, and artificial intelligence. Supporters of the proposed changes believe that if the changes are enacted, they will bring certainty back to the patent system, thereby encouraging renewed investment in innovation.
Though Senator Tillis’s and Coons’s proposed amendments to 35 U.S.C. § 101 garnered significant support, they also drew strong criticism. The criticism focused on the current law’s deterrence of frivolous litigation based on the assertion of weak, likely invalid patents. In fact, various witnesses testified that under the current patent-eligibility standards, the amount of money spent by innovators on litigation against “patent trolls,” or “non-practicing entities,” has significantly decreased, and these savings have been used to fund additional innovation. The parties that oppose the proposed changes believe that the changes would deprive businesses of a process to invalidate weak patents early in litigation at low cost, and would therefore encourage frivolous patent litigation by “non-practicing entities.”
It is evident from the recent hearings that any legislative changes to patentable subject matter must strike a balance between creating strong patent rights and deterring nuisance patent litigation. Over the course of the hearings, several ideas for striking such a balance through edits of the proposed legislation were suggested. One of these ideas involved making utility, which is essential to patent eligibility under the proposal, a question of law to be decided by a judge to allow early resolution of nuisance cases. Additionally, Senator Tillis himself proposed further defining the “field of invention” term for clarity, and proposed further clarifying that true abstractions, natural laws, and naturally occurring phenomenon do not pass the patent-eligibility test. Finally, Senator Tillis also proposed adding an enhanced experimental use and research exemption to ensure that basic research is not unduly inhibited by any changes to patent eligibility.
What to do in the present
Although the specifics of how Congress will strike a balance between strengthening patent rights and deterring nuisance litigation remain to be seen, there is little doubt that Senator Tillis and Coons are determined to steady the swinging pendulum on patentable subject matter. Although the final bill will likely change from the current draft, the Senators plan to move quickly, with a goal to introduce a final bill soon. Senator Tillis expressed that the proposal needs further refinement, and he repeatedly noted that the record is open, requesting additional input so that Congress may address industry concerns and garner a consensus for the patent-reform proposal. Accordingly, companies with significant patent exposure may consider entering comments in the record to have their voice heard on the matter.
Despite the uncertainty, there are many actions companies can take to best prepare themselves for the potential changes. Companies with active prosecution dockets may consider filing more continuations to keep prosecution open until the new legislation is finalized, particularly if there are applications that have a pending § 101 rejection. Patent families with current applications that had been previously written off may have renewed value in light of the new eligibility changes. Additionally, companies with well-defined protocols regarding what inventions to pursue patents on, particularly in the areas of artificial intelligence and machine learning, may consider re-evaluating their filing strategy as there will likely be new opportunities to cover subject matter that may arguably be unpatentable under the current eligibility framework. Finally, because there could be a surge of patent applications filed once the legislation takes effect, companies may wish to file sooner rather than later to beat a potential influx of applications and to maintain the advantage under the first-to-file system.
Owners of large patent portfolios should also consider re-evaluating their current holdings. This is especially true for owners of software patents, which could have substantial value changes depending on how the legislation is finalized. Accordingly, companies should also reconsider their strategies regarding allowing patents to expire and not paying maintenance fees.
Active litigants should consider how these changes may affect their current and future litigation strategies. It may be more difficult going forward to escape litigation at an early stage using § 101. The proposal is also likely to lead to an increase in patent assertions, and companies should prepare accordingly.
Regardless of the specifics of the final bill, it is apparent that the growing sentiment for Congress to step in has been heard.9 The final legislation is likely to cause a shift in patent law, and companies should continue to monitor this issue and assess the potential impact.
Part II: Changes to Functional Claiming Requirements
While this proposed legislation appears primarily driven by concerns about section 101, it also contains proposed changes to section 112. As explained by Senator Tillis’ opening remarks during the June 4 hearing:
We didn’t just fix the issues with section 101. We are proposing changes to improve functional claiming requirements in section 112. We believe that we can reach a compromise that addresses the legitimate issues raised by both sides. It restores the broad eligibility requirements of section 101 and simultaneously prevents overbroad functional claiming.10
This part discusses these proposed changes to section 112 and provides an overview of the testimony given in the recent Congressional Hearings regarding these changes and their potential impact on the patent law.
Proposed Changes to Section 112, Paragraph (f)
The proposal as currently articulated would change post-AIA section 112, paragraph (f) as follows:
(f) Functional Claim Elements
Element in claim for a combination.—An element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof , and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof.11
Significantly, the proposed changes would eliminate the “means or step for performing” language in the current statute. The stated rationale for this change, as described in Senator Tillis’ opening remarks, is to prevent “overbroad functional claiming” and is presented as a counterbalance to the proposed section 101 changes. The proposed section 101 changes would eliminate the judicially created exceptions to patentable subject matter and are intended to broaden the scope of patentable subject matter under the statute discussed in Section I.
Current Section 112 Case Law.
Historically, the application of section 112 paragraph (f) (or pre-AIA paragraph 6) has turned on whether the claim term recites the term “means” (or other equivalent term).12 The “use of the word ‘means’ in a claim element creates a rebuttal presumption that § 112, para. 6 applies.”13 On the other hand, the “failure to use the word ‘means’ also creates a rebuttal presumption” that the statute does not apply.14 As stated by the Federal Circuit in Williamson v. Citrix Online LLC, “when a claim term lacks the word ‘means,’ the presumption can be overcome and § 112, para. 6 will apply if the challenger demonstrates that the claim term fails to recite sufficiently definite structure or else recites function without reciting sufficient structure for performing that function.”15 Until its decision in Williamson, the Federal Circuit had previously held that the presumption against invoking the statute in the absence of “means” language in the claim was a “strong one that is not readily overcome.”16 Pre-Williamson, this presumption could not be overcome “without a showing that the limitation essentially is devoid of anything that can be construed as structure.”17
The Federal Circuit in Williamson recognized that this heightened standard “shifted the balance struck by Congress in passing § 112, para. 6 and has resulted in a proliferation of functional claiming untethered to § 112, para. 6 and free of the strictures set forth in the statute.”18 Accordingly, the Williamson decision overruled the heightened evidentiary standard for invoking the statute and held that even where “a claim term lacks the word ‘means,’ the presumption can be overcome and § 112, para. 6 will apply if the challenger demonstrates that the claim term fails to ‘recite sufficiently definite structure’ or else recites ‘function without reciting sufficient structure for performing that function.’”19 Nevertheless, the Federal Circuit still applies a presumption against application of the statute when a claim does not recite the term “means.”20
In the wake of the ostensibly lowered evidentiary standard articulated under Williamson, the Federal Circuit has employed an approach that does not necessarily require the recitation of “means” in the claim, but instead looks for language that may operate as a “substitute” for that term. In Diebold Nixdorf, Inc. v. Int'l Trade Comm'n, the Federal Circuit found that “the term ‘cheque standby unit,’ as understood by one of ordinary skill in the art, both fails to recite sufficiently definite structure and recites a function without reciting sufficient structure for performing that function.”21
On the other hand, in Zeroclick, LLC v. Apple, Inc., the Federal Circuit found that the district court erred when it “effectively treated ‘program’ and ‘user interface code’ as nonce words, which can operate as substitutes for ‘means’ and presumptively bring the disputed claims limitations within the ambit of § 112, ¶ 6.”22 The Federal Circuit found this erroneous because “the mere fact that the disputed limitations incorporate functional language does not automatically convert the words into means for performing such functions.”23 Further, the Federal Circuit reasoned that the district court removed the terms from their context and “made no pertinent finding that compels the conclusion that a conventional graphical user interface program or code is used in common parlance as substitute for ‘means.’”24
The proposed changes to section 112 would presumably make it easier to argue for the applicability of section 112 paragraph (f) and will make the presence or absence of the term “means” irrelevant. Instead, disputes will likely center on whether the claim element in question is solely “functional” in nature or constitutes sufficient “structure” to avoid the application of section 112, paragraph (f). To illustrate, in TEK Glob., S.R.L. v. Sealant Sys. Int'l, Inc., the Federal Circuit addressed whether the term “conduit” was a nonce word or was instead a recitation of structure.25 While the Federal Circuit found the claim language itself was not conclusive, the Federal Circuit found that the specification “clearly contemplates a conduit having physical structure.”26 The proposed legislation would likely increase these types of disputes because the proposal would likely eliminate the presumption that the statute does not apply to functional language merely by omitting the term “means.” Since language that might be construed as solely “functional” would arguably fall into the scope of the statute, the potential for disputes over whether a claim element is “functional” rather than “structural” may increase.
It is unclear to what extent the proposed changes to section 112 will gain traction given that much of the testimony and coverage of the proposed legislation has focused on the proposed changes to section 101 jurisprudence. For example, Professor Mark Lemley of Stanford University testified primarily about section 101, but he described the section 112 paragraph (f) portion of the bill as “a significant improvement to the current law.”27 Professor Lemley further testified that he believed the bill would “narrow the patent to cover what they actually invented and equivalents thereof.”28
On the other hand, Professor David Taylor of Southern Methodist University testified that he has concerns with the proposed change, citing a concern that the scope of claims would be “significantly limited” and may prompt patentees to draft more “encyclopedic disclosure,” at potentially increased costs.29 President Elect of the AIPLA, Barbara Fiacco, also stated that the AIPLA has “some concerns with the proposed amendment to section 112(f).”30 She went on to state:
For example, as drafted the proposed amendment would broadly apply to all claims that use functional language, not just claims using specific functional language such as means-for or step-for or other triggering language. It’s likely—very likely—that there would be disputes over what constitutes functional language. The result could be significant uncertainty, not only about how to draft patents properly under this provision, but also how those claims would be interpreted. Such a development could be even more problematic if the proposed amendment were applied retroactively. 31
Accordingly, while some support for the proposed changes was expressed during the hearings, many also expressed concerns. Judge Paul R. Michel, former Chief Judge of the Federal Circuit testified “the 112 paragraph (f) portion of the bill probably needs more assessment and work.”32
According to recent Congressional testimony, the recently proposed changes to section 112 may potentially impact the cost of drafting robust patent applications and the scope of issued patent claims. On the other hand, others appear to support the proposal’s perceived potential for limiting the issuance of overly broad patents. In the end, it is unclear to what extent the section 112 changes will gain traction in view of the heavy focus on addressing perceived problems with section 101. In any event, as the industry considers the recently proposed changes to section 101, careful attention should also be paid to the proposed changes to functional claiming requirements under section 112.
1 See Website for U.S. Senator Thom Tillis, https://www.tillis.senate.gov/services/files/E8ED2188-DC15-4876-8F51-A03CF4A63E26
2 35 U.S.C. § 101 (2019) (enacted on July 19, 1952).
3 Gottschalk v. Benson, 409 U.S. 63, 71–72 (1972) (“The [formula to covert signals from binary-coded decimal into pure binary form] has no substantial practical application except in connection with a digital computer, which means that . . . the patent would wholly pre-empt . . . and in practical effect . . . patent . . . the algorithm itself.”); Diamond v. Diehr, 450 U.S. 175, 179, 192–193 (1981) (“A mathematical formula . . . [does not receive patent protection, even if its] use . . . [is limited] to a particular technological environment. . . . [In contrast, when a claim implements or applies a mathematical formula] in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e. g., transforming or reducing an article to a different state or thing), then it satisfies the requirements of § 101.”); Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208, 212 (2014) (“[T]he claims [to exchange of financial obligations through a computer system serving as a third-party intermediary] are directed to a patent-ineligible concept[,] . . . the abstract idea of intermediated settlement. . . . [T]he . . . claims . . . merely require generic computer implementation, [and] fail to transform that abstract idea into a patent-eligible invention.).
4 The first step is to determine if “the claims at issue are directed to [laws of nature, natural phenomena or abstract ideas, which are the three] patent ineligible concept[s].” Alice, 573 U.S. at 217.
5 Courts must “consider the elements of each claim both individually and ‘as an ordered combination’ to determine whether the additional elements ‘transform the nature of the claim’ into a patent-eligible application.” Id. at 217.
6 35 U.S.C. § 101 currently reads: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”
8 Recordings of all three of the hearings, along with the written testimony, can be found at: https://www.judiciary.senate.gov/meetings/the-state-of-patent-eligibility-in-america-part-i. https://www.judiciary.senate.gov/meetings/the-state-of-patent-eligibility-in-america-part-ii, and https://www.judiciary.senate.gov/meetings/the-state-of-patent-eligibility-in-america-part-iii
9 Ohio Rep. Steve Stivers recently said he wants to move forward with a patent eligibility reform bill in the House as well, further increasing the chances for legislative changes.
10 United States Committee on the Judiciary, Hearing on The State of Patent Eligibility in America: Part I,116th Cong. (2019-2020), https://www.judiciary.senate.gov/meetings/the-state-of-patent-eligibility-in-america-part-i (statement of Senator Thom Tillis).
11 Compare Website for U.S. Senator Thom Tillis, https://www.tillis.senate.gov/services/files/E8ED2188-DC15-4876-8F51-A03CF4A63E26 with 35 U.S.C. § 112(f).
12 See Williamson v. Citrix Online, LLC, 792 F.3d 1339, 1349 (Fed. Cir. 2015).
13 Id. at 1348.
15 Id. (internal quotations omitted).
16 Id. at 1348-49 (citing Lighting World, Inc. v. Birchwood Lighting, Inc., 382 F.3d 1354, 1358 (Fed. Cir.2004)).
17 Id. at 1349 (citing Flo Healthcare Solutions, LLC v. Kappos, 697 F.3d 1367, 1374 (Fed. Cir.2012)).
21 Diebold Nixdorf, Inc. v. Int'l Trade Comm'n, 899 F.3d 1291, 1298 (Fed. Cir. 2018).
22 Zeroclick, LLC v. Apple Inc., 891 F.3d 1003, 1008 (Fed. Cir. 2018)
25 TEK Glob., S.R.L. v. Sealant Sys. Int'l, Inc., 920 F.3d 777, 786 (Fed. Cir. 2019).
27 United States Committee on the Judiciary, Hearing on The State of Patent Eligibility in America: Part I,116th Cong. (2019-2020), https://www.judiciary.senate.gov/meetings/the-state-of-patent-eligibility-in-america-part-i (statement of Prof. Mark Lemley).
29 Id. (statement of Prof. David Taylor).
30 Id. (statement of AIPLA President-Elect Barbara Fiacco).
32 Id. (statement of J. Paul R. Michel).
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