In the era of AI and ever more dominant Big Tech, patents are a key protection for businesses and innovators. But judicial opinions and reforms passed over the last decade have severely disadvantaged small and medium sized businesses. The Patent Eligibility Reform Act (PERA) that’s currently being debated by the U.S. Senate offers a critical lifeline that can protect and incent ongoing American innovation.
The history of patent law in the U.S. is nearly as old as the U.S. itself. Designed to grant inventors exclusive rights for the economic exploitation of their creations, patent law was initially broad and sweeping, offering inventors protection for products deemed both novel and tangible.
The advent of the internet pushed the U.S. Patent Office further, as businesses figured out how to move traditional business methods and practices online in new and different ways. But as the market expanded, the courts weighed in more heavily, holding that many innovations were merely abstract ideas and therefore judging them ineligible for patent protection.
Things got worse in 2011 when the America Invents Act dealt another blow to small businesses, creating the Patent Trial and Appeal Board (PTAB) and granting it the authority to invalidate previously-granted patents at a low cost. Suddenly large businesses (including the Big Tech companies) could get competitors’ patents revoked fairly quickly, easily, and inexpensively when they prevailed.
The final nail in the innovation coffin came via a 2014 US Supreme Court ruling (Alice Corporation v. CLS Bank International) which rather vaguely stated that simply implementing an “abstract idea” on a computer doesn’t make it patentable. Suddenly, patents on software were much harder to obtain, with software often being deemed little more than an “abstract idea.”
Small and medium sized software companies found themselves at the short end of the stick.
That’s created a terrible environment for smaller businesses trying to compete through innovation. These “reforms,” designed originally to help the Patent Office rectify mistakes and keep up with the pace of innovation, have benefited almost exclusively the largest of the large tech companies. With the Supreme Court ruling damping down what’s protectable and predatory Big Tech players happy to pay the $300,000 it costs to challenge a patent in front of the PTAB, innovation has been in a world of hurt.
And the PTAB seems like it’s stacked against innovators. About 84% of cases reviewed by the PTAB result in the patents being invalidated, with large companies even coming together to bring multiple cases against the same patent holder, forcing the small players to defend themselves on multiple fronts, again and again.
Retroactively, the PTAB has invalidated hundreds of software patents, promoting the idea that software that performs a function that could otherwise be done by a human is ineligible for patent protection. Google, notably, last year won a major PTAB case, invalidating the voice recognition patent of a smaller competitor by arguing precisely that — because a human could otherwise recognize the speech pattern, the patent was too broad and abstract. It’s an absurd line draw; it’s like invalidating a patent on prosthetic arm because a human arm could otherwise perform the same function.
It’s a nightmare for inventors. Without clear guidelines in place, there’s a high degree of unpredictability in the patent process, while tech patents especially have become less valuable and offer fewer protections for patent owners. I’ve worked on cases where highly innovative software inventions have been rejected multiple times because the current restrictive definition of “patent eligibility” is not met.
In the era that’s dominated by software, this is simply untenable.
The PERA bill introduced by Senators Coons and Tillis last year looks to address some of these issues, codifying patent eligibility by broadening the scope of what can be patented and clarifying what constitutes being too “abstract” to be patented. It’s explicitly aimed at resolving some of the issues that have hampered software development in the U.S. For the sake of US innovation, it’s vital that Congress passes this bill.
Of course, it doesn’t address every issue that plagues the U.S. patent process. The existing language in the bill is too broad in certain clauses, granting exceptions on inventions that are “‘substantially’ economic, financial, business, social, cultural, or artistic” in their nature from patent protection. Setting the standard at “substantial” is so broad it undermines the entire purpose of the bill.
PERA also does little to address the ability of large companies to bully and extort their competitors through the PTAB process. That a single patent can be challenged multiple times in front of the PTAB for the same reason is a double jeopardy scenario that doesn’t exist anywhere else in our legal system. The patent system should serve inventors, industries, and the public — not the monopolies.
Patent protections in the U.S. have historically fueled both innovation and the economy. But the current system has fallen out of line. Vague legal decisions and a lack of clear legislation around the eligibility and protection have created a monstrous process that only benefits Big Tech companies — at the distinct disadvantage and harm of small inventors and innovators.
That’s a situation where Congress can rectify and re-ignite American innovation again by passing the Coons/Tillis PERA bill.
