Recommendations for US Patent Reform*
by the Federal Trade Commission (FTC) and the National Academies of Science (NAS)
I. Patentability Standards
The economic impact of the patent system depends significantly on the standards that are used to determine which inventions are eligible to receive valid patents. The proposals consider four aspects:
Subject Matter
The patent statute permits patents to be granted on any “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” Before the mid-1980s, this clause was widely interpreted to mean that patents were largely restricted to tangible industrial products and the processes used to make them. Intangibles such as business procedures were mostly not patentable, and software was patentable only if it related to a novel industrial process.
This changed after the creation of the Court of Appeals for the Federal Circuit (CAFC), the court that hears all appeals of patent cases. The U.S. Patent Office (USPTO) and CAFC have significantly extended the eligible subject matter of patents to include software per se, business methods, gene sequences, surgical procedures, methods of performing sports, and a variety of services such as cutting hair. Critics argue that patents are not necessary in many of these fields and that they may cause problems.
The FTC recommends that the CAFC consider possible harm to competition – along with other possible benefits and costs – before further extending the scope of patentable subject matter.
The NAS recommends preserving an “open-ended” patent system. The CAFC and USPTO should treat different technologies differently, but “without formalizing different standards.”
Non-obviousness
According to the patent statute, patents are to be granted only for inventions that are non-obvious to skilled practitioners of the relevant art. One common complaint is that patents are granted for inventions that are obvious, but that the CAFC considers them to be non-obvious and the patents that cover them to be valid. The reports identified two potential reasons for this.
1. The “Suggestion Test”
First, the CAFC has applied a legal doctrine called the “suggestion test.” Many (if not most) inventions are combinations of previously known elements. For example, Amazon’s famous “one-click” patent can be understood as the combination of long-used methods for storing customer information to expedite payment with well-known web browser interface techniques using a single mouse click. But does this count as a non-obvious invention?
Under the Supreme Court standards, reiterated in several decisions during the 60s and 70s, inventions that were combinations of previously known elements were not patentable unless it was shown that the combination produced a new or unexpected result. Suppose for example, that with the Amazon patent, the examiner found one source that described methods for storing customer information to expedite payment and another source that described methods for streamlining the number of clicks in a browser interface. Then Amazon would have to provide evidence that the combination of these features produces a new or unexpected result in order for the invention to be non-obvious.
But the “suggestion test” prescribed by the CAFC requires the patent examiner to provide additional evidence: the examiner must also show specific documentary evidence that suggests a reason to combine previously known features found in different sources. For example with the Amazon patent, the examiner might find a source saying that a well-known problem for online shoppers is the number of clicks they must enter while providing customer information. Note that the examiner cannot argue that the desirability of reducing the number of clicks is common knowledge among programmers—the evidence must be particular to online shopping. The examiner is expressly forbidden from relying on “common knowledge and common sense” without “any specific hint or suggestion in a particular reference to support the combination” (In re Lee). But such evidence is often difficult to find, especially if the solution is obvious (why should anyone publish a discussion of a problem that is obvious to solve?).
The FTC recommends that in applying the “suggestion test,” the court should “assume an ability to combine or modify prior art references that is consistent with the creativity and problem-solving skills that in fact are characteristic of those having ordinary skill in the art.”
The NAS discusses the “suggestion test” in the context of patents on business methods, recognizing that much common knowledge about business methods is not published. The NAS does not recommend any changes in the “suggestion test,” but the report recommends that the non-obviousness standard should be “assiduously observed” and it recommends a post-grant procedure (see below) to remedy deficiencies in the published literature regarding business methods.
2. The “Commercial Success Test”
Second, even in cases where direct evidence indicates that an invention is obvious, the CAFC has been willing to override such evidence if the invention achieved commercial success. The argument goes that if a commercially successful invention were truly obvious, then someone else would have commercialized it prior to the invention. If a patented invention corresponds to a commercially successful product, the CAFC often presumes that the patent is non-obvious and the challenger has to counter this presumption with evidence that the success was due to factors other than the invention itself (e.g., advertising or marketing efforts). This, too, may be difficult to prove at trial.
The FTC recommends tightening the legal standard applied in the commercial success test in two ways: First, require evaluation on a “case-by-case basis whether commercial success is a valid indicator that the claimed invention is not obvious.” Second, “place the burden on the patent holder to prove the claimed invention caused the commercial success.” Without these inquiries, the FTC concluded, the application of the commercial success test will “err on the side of issuing patents on obvious inventions….”
The NAS does not discuss the commercial success test for non-obviousness.
Evidentiary standards
Given that some obvious patents will be inevitably granted, litigated challenges to such patents are critical to ensuring those patents be declared invalid. Currently, when the PTO decides whether to confer a patent, it does so based on the “preponderance of the evidence” standard. However, when someone challenges a patent, a higher standard of proof, “clear and convincing evidence” is imposed by the CAFC. This higher standard is difficult to meet.
The FTC recommends that Congress enact legislation specifying that challenges to patent validity be determined based on the preponderance of the evidence.
The NAS does not make recommendations regarding this issue.
Gene Sequence Patents
The CAFC has set a low standard of non-obviousness for patenting gene sequences. Even though it is now fairly routine to determine a gene sequence based on knowledge of the protein that the gene generates, the CAFC has, in several rulings, considered the gene sequence non-obvious when the resulting protein is known. In the view of the NAS, this effectively removes non-obviousness as a consideration for gene patents.
The NAS recommends that genetic sequences should be considered obvious if the proteins created by the genes are known.
The FTC did not make a separate recommendation regarding gene sequences.
I, II., III.
>>NEXT: Patent Office Operation
*The analysis provided here (in black) does not necessarily represent the analysis provided by the FTC or NAS. The recommendations (in red) are brief summaries of recommendations in the reports.
