IP Uncertainty for the Innovation Economy
Just when we thought things couldn’t get worse, the state of patent law around eligible subject matter has fallen further into limbo with court decisions that dissenting opinions have said will “lead to insanity,” can only be the product of “result-oriented judicial activism,” have moved the system from its once reliable incentive to innovate “to a litigation gamble”, and could “threaten most every invention for which a patent has ever been granted.”
Despite cries for help and urges to provide clarification from multiple presidential administrations, the Solicitor General, members of Congress, the U.S. Court of Appeals for the Federal Circuit, IP bar associations, and the U.S. Patent and Trademark Office (USPTO), the Supreme Court refused to hear American Axle’s recent bid to overturn a lower court decision that invalidated the company’s patent in a closely followed legal battle with rival Neapco Holdings.
This case offered a much anticipated opportunity to more broadly clarify patent eligibility in a time when many believe that court precedent has undermined the U.S. patent process and, in the words of retired Federal Circuit Chief Judge Paul Michel, “confused and distorted the law of eligibility”, making it an “illogical, unpredictable, chaotic” mess. Critics of these rulings and the resulting present state of IP law claim that the confusion and inconsistency has led to courts canceling many patents that should be protected. SCOTUS taking the pass leaves many inventors, investors, and industries in limbo since, as a USPTO spokesperson said after the ruling, innovation “cannot thrive in uncertainty.”
In this month’s episode, of Patently Strategic, Dr. David Jackrel, President of Jackrel Consulting, along with our all star patent panel, discusses the case law, its implications, and how the present statute is being conflated and is taking Section 101 well beyond its gatekeeping function. The group does this largely through the lens of the application itself, in an effort to answer the fundamental question of, is this patent directed to a method for manufacturing a shaft assembly of a driveline system -OR- is it really just directed to a natural law, as the Federal Circuit Court concludes.
In their analysis of the American Axle patent, the group also provides some great tips that may have changed American Axle’s present fate – and can hopefully improve your odds of success if approached intentionally at the drafting stage.
Subject Matter Eligibility
When patents are examined by the patent office or later litigated in a courtroom, several sections of U.S. Statute come into play in determining if the claims in the patent are eligible, useful, novel, nonobvious, and enabled (or properly described). Patents can be rejected or invalidated if one or more of the claims are determined to be otherwise.
U.S. Code, Title 35, Section 101 covers rejections based on utility and eligible subject matter. The Patent Act says that an inventor can patent “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” Historically, this was broadly interpreted and patents were rarely rejected or invalidated based on it, while instead utilizing the other sections to weed out patents undeserving of protection.
More recently, this has changed, with the courts breathing into being judicial exceptions for eligible subject matter that don’t exist in written law. These 101 exceptions have become grounds to reject and invalidate claims centered around laws of nature, natural phenomena, and abstract ideas. The sticky part is that despite the courts creating these exceptions, there is a lack of clarity and objective guidelines or definitions – which has left it up to the lower courts and the patent office to sort through the ambiguity.
American Axle v. Neapco Holdings: Over-Simplified from 30,000 Feet
- Initial suit. Neapco is sued by American Axle over alleged infringement of its patented method of manufacturing a driveshaft that is quieter due to vibration reduction. Delaware federal court judge rules in favor of Neapco, asserting that the claims are directed to ineligible subject matter.
- American Axle appeals the decision to the Federal Circuit Court of Appeals and loses again when the Court panel votes 2-1 to invalidate claim 22 of the patent, also concluding that it’s related to a natural law (Hooke’s law) and nothing more, making it ineligible subject matter based on judicial exception. However, claim 1 is remanded to the District Court, since the abstract idea basis related to some claim elements was not adequately presented and litigated. In a “bitterly divided” 6-6 deadlock, the Federal Circuit “at a loss” for how to apply the law, decides to not rehear the case with all 12 judges.
- SCOTUS to the Rescue? American Axle appeals to the Supreme Court for clarity and guidance. SCOTUS asked the Solicitor General to weigh in. After a year, the Solicitor General submitted a brief agreeing with American Axle that the court should take up the case given the uncertainty in the application of eligibility law, stating that the lack of objective guidelines has made it difficult for “inventors, businesses, and other patent stakeholders to reliably and predictably determine what subject matter is patent eligible”. Despite a record of following SG recommendations an overwhelming majority of the time, the Supreme Court declined to take up the case before its last recess.
Conflating Eligibility with Enablement
There’s a widely held belief – and it’s echoed in the dissent – that majority ruling opinions are also conflating eligibility (Sec 101) with enablement (Sec 112), further confusing an already murky understanding of the application of Section 101. While lacking the specificity to enable one skilled in the art on how to tune a liner is grounds for enablement invalidation, many argue that it has no place in expanding the gate keeping functionality of Sec 101. This treatment overloads the function of a statute that’s simply intended to prevent the patenting of the fundamental “building blocks of human ingenuity.”
The conflation of eligibility and enablement is discussed at great depth in the episode as it applies to the claim elements required under Section 101 versus content and teaching required to ultimately comply with Section 112 – especially as it pertains to sufficiently explaining structural and/or method steps that describe how to apply a natural law versus just putting an insufficiently described structure in a technological environment, as may be the case with American Axle’s patent.
Precedent Leak Danger
Being left unresolved by the Supreme Court, if this unfortunate precedent stands, then it may very well seep into industries once believed to be immune to these subject matter limitations. Prior to this case, the subject matter eligibility problem was primarily confined to software and biotech. It was widely understood that physical products and their manufacturing were implicitly exempt from being ruled abstract ideas or laws of nature. The American Axle case will now go back to the district court, and American Axle has asked the court to limit the scope of arguments to be presented. Neapco, however, has asked to introduce new invalidity arguments, so it is unclear how this particular case will proceed. And for now the question remains, what box was just left open?
Where’s That Leave Us?
That’s a great question. Oftentimes, indecision leaves you at least no worse than you were before you started, but that doesn’t feel like it’s the case here. An already confusing mess of interpretation and application got even more jumbled with the enablement conflation and now risks seeping into industries once thought immune to eligibility concerns from exceptions like laws of nature. SCOTUS remains quiet, the Federal Circuit remains confused, and the patent office and practitioners are left to sort through the ambiguity on their own. It’s hard to associate hope with a congressional act, but could there be a legislative solution? One way or another, the innovation economy demands an answer.
David is joined by our always exceptional group of IP experts, including:
- Ashley Sloat, President and Director of Patent Strategy at Aurora
- Kristen Hansen, Patent Strategist at Aurora
- David Cohen, Principal at Cohen Sciences
- Ty Davis, Patent Strategy Associate at Aurora
- Sophia Hsin-Jung Li, Patent Strategy Fellow at Aurora
- Arman Khosraviani, Patent Agent and Former U.S. Patent Examiner