Is Patent Eligibility Doctrine in Need of Reform?

Emily Manning: Hello everyone and welcome to this Federalist Society virtual event. My name is Emily Manning and I'm Deputy Director of Strategic Partnerships with the Federalist Society. Today we're excited to host a discussion titled "Is Patent Eligibility Doctrine in Need of Reform?" We're joined today by Joseph Matal, Professor Kristin Osenga, and the Honorable Randall R. Rader, and our moderator today is Michael K. Friedland. Michael is a Founding Partner of Friedland Cianfrani, LLP in Irvine, California. Michael has three decades of IP enforcement experience. He has represented clients in more than 200 intellectual property cases in state and federal courts throughout the country and before the Trademark Trial and Appeal Board. If you'd like to learn more about our speakers, their full bios can be viewed on our website. After our speakers give their opening remarks, we'll turn to you, the audience, for questions. If you have a question, please enter it into the Q&A function at the bottom of your Zoom window and we'll do our best to answer as many as we can. Finally, I'll note that as always, all expressions of opinion today are those of our guest speakers, not the Federalist Society. With that, thank you for joining us today and Michael, the floor is yours.

Michael Friedland: Hi, good morning or good afternoon everyone. We are very privileged today to have this discussion led by three outstanding panelists who all bring slightly different perspectives to this topic as a result of differing but largely overlapping backgrounds. One of our panelists served as the Chief Judge of the Federal Circuit. Two of our panelists have extensive teaching experience. Two of our panelists have extensive legislative experience and one of them has extensive Patent Office experience. Now I'll take a few moments to introduce them. You'll need to forgive me for abbreviating their biographies, it would take the entire hour to do all of their accomplishments justice. I'll begin with Chief Judge Rader. Judge Rader received his Bachelor's degree from Brigham Young University and his law degree from George Washington. He has served as the Legislative Assistant to US Representative Virginia Smith, and Counsel to US Representative Philip Crane. He was the Legislative Director of the US House Ways and Means Committee. He was Counsel to the US Senate Judiciary Committee where he was Chief Counsel or Minority Chief Counsel for the subcommittee on the Constitution and the subcommittee on patents, trademarks, and copyrights. In 1988, Judge Rader was nominated to the US Court of Claims by President Reagan. In 1990. Judge Rader was nominated to the Federal Circuit by President George H.W. Bush. Judge Rader became Chief Judge of the Federal Circuit in 2010 and served on that court until 2014. Judge Rader has taught patent law and advanced IP courses at the University of Virginia, at Georgetown, and George Washington University. He's the co-author of one of the most widely used patent law textbooks, and we're extremely honored to have him here with us today.

We're also very proud to have with us today Professor Kristin Osenga. Professor Osenga received her Bachelor's degree in biomedical engineering from the University of Iowa, her Master's degree in electrical engineering from Southern Illinois University, and her law degree from the University of Illinois College of Law. After graduating, she practiced at Finnegan Henderson where she prosecuted patents and litigated patents. She then clerked for Judge Richard Lynn of the US Court of Appeals for the Federal Circuit. After clerking, she entered academia and was taught at Chicago-Kent School of Law, Emory University School of Law, and William and Mary School of Law. She's been a professor at the University of Richmond since 2006 where she's the Austin E. Owen Research Scholar and Professor of Law, and she's also the Associate Dean for Academic Affairs. The professor is a frequent speaker and a prolific author, and we're extremely honored to have her with us here today as well.

We're also honored to have with us Joseph Matal. Joseph received his Bachelor's degree from Stanford University, and his law degree from UC Berkeley. He clerked for the Alaska Supreme Court for Judge Rabinowitz and he clerked on the Ninth Circuit for Judge Bill Canby. He practiced with Gibson, Dunn, and Crutcher in Washington DC, then moved to Congress where he served as Policy Director to US Senator Peter Fitzgerald. He served as Counsel to the US Senate Judiciary Committee and he served as the Interim Under Secretary of Commerce and the Director of the United States Patent and Trademark Office. At the U-S-P-T-O, he also served as associate solicitor and acting solicitor.

Mr. Matal became a partner at Haynes and Boone in Washington DC and is currently the founder of his own intellectual property law firm. Clear IP, LLC. We are extremely honored to have Mr. Matal and the other panelists with us here today. So, our topic today is titled "Is Patent Eligibility Doctrine in Need of Reform?" So speaking as someone who spends his day advising clients - or at least attempting to advise clients - the question isn't abstract or it's academic. A client can come to me with an invention. It could be brilliant, it could be revolutionary, it could create incredible efficiencies. It could disrupt an entire industry, or it could improve the treatment dramatically in chronic disease, but it involves a computer and it doesn't make the computer work better or it involves using a formula to determine the optimal dosage of a drug to treat the medical condition. So I look at the client and I'll sigh, because I don't need to know a lot more to have a really strong feeling where this is going. The District Court is going to find the patent invalid under Section 101.

The Federal Circuit is probably going to affirm, the Supreme Court is probably going to deny cert. Then an issue arises: As a result of recent Supreme Court decisions, primarily Mayo Collaborative v. Prometheus and Alice Corp v. CLS Bank International. Through these decisions, the court developed a two-step test to determine whether an invention is eligible for patent protection. In step one, the court has to determine whether the patent claim contains an abstract idea, an algorithm, a method of computation or some other general principle. In step two, the court must determine whether the patent adds something extra that embodies an inventive concept and that something extra can't be generic, conventional, or obvious, like requiring a general-purpose computer. Because it's a Federalist Society event, it's worth stepping back for a moment to consider where this fairly elaborate test comes from. It can't be seen in the Constitution. Article One sets forth the powers of Congress and right there in Section VIII between the power to make post offices and the power to create courts inferior to the Supreme Court, the Constitution gives Congress the power to issue patents, or to create a patent system.

And all it says is "To promote the progress of science and useful arts by securing for limited times to authors and vendors the exclusive rights to their respective writings and discoveries." That's it, just discoveries. So there's no two-part test there. So then we'll look at the statute that Congress actually enacted. That's 35 USC Section 101, which says, "Whoever invents or discovers any new and useful process, machine, manufacturer, or composition of matter or any new and useful improvement thereof may obtain a patent therefore, subject to the conditions and requirements of this title." So there's no two-part test there either, but it's the law and it leaves my hypothetical client having to answer questions that are incredibly important to the client and important to the economy and the country as a whole. If a client already has an issued patent, is it worth investing in a lawsuit to enforce it or does the client simply allow it to be infringed? If a client doesn't have a patent yet, is it worth spending the time and money to get one? And most importantly, if the client hasn't yet invested the money to implement the invention, is it worth making the investment? Is it worth taking the risk? If the invention is really as revolutionary as my client thinks it is, a tech giant or medical giant with unlimited resources could simply copy the idea.

It raises numerous questions that we'll discuss today. Among them, in light of the Constitution and Section 101, is Alice even really good law? Is it a good policy, and should it be changed? And there are proposals within Congress now precisely to do that. With that, I turn the microphone over to our panel of experts. I'll give the microphone first to Professor Osenga.

Kristen Osenga: Thank you Michael, and thank you for providing a background to some of the problems. I might cover a little bit in my remarks too as we go over it because as a professor, I can't help but tell you how you should think about things. So I've been writing about patent eligibility since 2006, which I think makes me a little prescient or psychic or something because the real meat of the problem didn't really start till the early 2010s, but there were lingering problems even before then in part because as Michael pointed out, the judicially-created exceptions came from nowhere, except the courts. But what I want to talk about is how the law of patent eligibility has changed over the last 15 years, and then I really want to talk about and spend more of my time talking about the PERA or the Patent Eligibility Restoration Act or "PARA", the pending bill that is intended to address the problem, because I think yes, In answer to the question that is the title of our webinar, "is Patent Eligibility Doctrine in Need of Reform", The answer is "absolutely", and I'm going to go ahead and jump on the, "I think PARA is the way to go" bandwagon with it. So with that, I will try to briefly tell you how I feel about this. 

So 101, as Michael read to you, Section 101 of the Patent Act is really broad and really inclusive. When the Supreme Court first started interpreting it back in the 1970s and eighties - or maybe not first interpreted it - but back in the 1970s and eighties when they interpreted it, what they were saying is "anything under the sun made by man", which is incredibly broad. And if we think about the great innovations that occurred in technology in the 1970s and eighties when we got the introduction of the computing age and the introduction of biotechnology, that really broad reading of 101 really allowed the innovation economy to flourish. And so it was absolutely great.And during that time too, we didn't actually think about patent eligibility. I regularly tell my students that when I took patent law back in the late nineties, we didn't even cover 101. It wasn't a thing. I didn't even know it was a thing until things started popping up with business methods and what have you in the late nineties and early 2000s. So the exceptions to 101 didn't appear in the statute, they're judicially created. But between 1980 and about 2010, it didn't become a problem. It became a problem because in 2010 the Supreme Court issued about four-ish cases - patent eligibility cases that not only narrowed the patent eligibility standard - but also really kind of confused it. As Michael mentioned, the two-step tests that came from Alice/Mayo make it very confusing. We don't know what an "inventive concept" is. We don't know what "directed to" means.

The Supreme Court has even told us they're not going to bother to tell us what an "abstract idea" is. So we have this test that applies to things that we don't know in ways that we don't know how to apply, in ways that are becoming incredibly inconsistent. And as Michael says, it's really important because what it's doing is it's causing clients to be confused. It's causing patent attorneys to be confused. It's causing lower courts to be confused. And so district court judges applying the two-step patent eligibility tests are ending up with incredibly inconsistent results. Inventions that we have long thought were eligible for patenting like machines, actual machines, things like manufactured objects, diagnostic methods, and computer systems in a number of cases have been found to be patent ineligible - not eligible for patenting under 101. And so productive firms that are doing R&D in these areas where patents have long been part of the innovation ecosystem are now faced with the idea that maybe this isn't the best way to spend their money because they may not be able to protect it, because patents may not be available for them.

And what we're seeing is that some of these firms are shifting to jurisdictions that have less ambiguous patent eligibility rules such as China, Japan, and some European countries. Other firms are just jumping out of the R&D game altogether, and that's rather disappointing for somebody who really likes innovation like me. So how can we fix this? I think we have to fix it legislatively. As I mentioned when I started talking, I think that the Patent Eligibility Restoration Act or PARA is a great first start, and so I'm going to talk a little bit more about that. So para seeks to return Section 101 eligibility to a broad and inclusive standard while still acknowledging that not every invention should be appropriate for patenting. So it strikes a nice balance that doesn't leave the barn doors open, as I've heard some people are very concerned about, that by fixing patent eligibility, we're going to end up with the barn doors being open.

So the key features as I see them with respect to PARA is it eliminates these judicially created exceptions that Michael mentioned that the Supreme Court imposed on 101 eligibility, and it definitely gets rid of the two-step process for patent eligibility, the Alice/Mayo two-step. Instead, it provides a much easier-to-apply, clearer standard, which should make it easier for attorneys to advise their clients, make it easier for firms to decide where to invest, and make it easier for courts to apply it without making a lot of mistakes. So despite claims to the contrary, PARA does not allow for any invention in the world or any discovery to be patented. It does not dismiss the inquiry into patent eligibility. It doesn't just erase Section 101 altogether. Everything is not going to be patentable if PARA is passed. And I'm going to give two reasons here why I think that this is a good thing.

First, patent eligibility under Section 101 is just one of a number of tests that an invention has to pass in order to be patented. And that's something that oftentimes is getting lost in the discussion. They're like, "Oh, well if we alter 101 to make more things be eligible for patenting, everything will be patented. The world will come to an end." And that's not really the case because even if it is eligible under Section 101 of the Patent Act, we still have 102, 103 and 112, which are rigorous requirements of patentability that are still going to be in play even if we make 101 more expansive. And then the second thing I think is that PARA includes a number of exceptions that do protect us from having basic ideas and discoveries that are necessary for future research being able to be patented. So we still have this idea that we're not going to allow patent eligibility for things that are required for future innovation and research in a way that is more clear and more thoughtful than the judiciary-created exceptions that the Supreme Court applied. 

So I just want to run through those ideas really quickly in my next few minutes. So like I said, patent eligibility under section 101 is just the first of many requirements, and one of the things that we've seen with patent eligibility, and one of the reasons why it's been confused over the last number of years is that courts in particular have imported into the patent eligibility question a lot of questions that are already being answered in other areas of patent law. And so when we're talking about the Alice/Mayo two-step, and we're talking about the inventive concept and we're talking about preemption and we're talking about all these things that the Supreme Court has kind of glommed into those four opinions that they developed the Alice/Mayo two-step out of what they did is they took a lot of pieces from here and there of other areas of patentability.

And so we can take those out of the 101 patent eligibility analysis without harming patent law because those things already exist. So Section 102 of the Patent Act requires the invention to be new. Section 103 of the Patent Act requires it to be not obvious. Section 112 requires it to be adequately described. And so rather than trying to glom little tiny pieces of all of those tests into 101, let's just say, "Hey, 101 is a broad inclusive standard. Let's let these other legislatively-drafted requirements of patentability actually drive the ship and let's let those be as rigorous as they're intended to be." That's where we're really going to be able to apply patent law in a way such that it's going to work to allow innovations through but protect the right thing. The second thing that I want to say, and I know I'm running out of time, is that by putting the exceptions into 101 rather than letting them live in a judicially-created space, and one of the nice features about the PARA bill is the idea that these exceptions are going to provide clearer guidance to ensure that basic knowledge isn't eligible for patenting and not have these confusing Supreme Court ideas driving the ship there.

So the specific exclusions are related to natural phenomena and abstract ideas, but rather than having vague terms like "natural phenomena" and "abstract ideas", which is how the Supreme Court's exceptions to patent eligibility have been framed since the 1980s and before, these actually are more clearly delineated. So for example, the exclusion is for a mathematical formula not part of a useful invention. Well, that's good, that's helpful. That's much clearer than "abstract idea", right? A mental process that is performed solely in the human mind, right? That gets to this idea of abstract as well, but it focuses the attention on what we are really worried about rather than this idea of an “abstract idea.” And the reason this is important is because as the Supreme Court itself has said, and the Federal Circuit has said almost every invention includes an abstract idea at some level. Many inventions include a natural phenomenon at some level, but where it's not the full invention, the thing that is being invented should probably be patent-eligible and it's hard to suss that out. And so one of the nice things, as I said about the way that the PARA bill lays out the exclusions is it explains what we're really thinking about and worried about when we say things like "abstract idea" or "natural phenomenon." And so with that, I'm going to go ahead and turn it back to Michael to let my fellow panelists tell me why I might be wrong.

Michael Friedland: Thank you, Professor. I'm going to go ahead and turn the microphone over now to Chief Judge Rader.

Randall Rader: Thank you very much Michael and thank you, Professor Osenga. That was a marvelous presentation and I would have liked to have said much of that myself. Let me reflect for just a moment on the fundamental errors that are evident in the current patent eligibility policy. Probably the most important error is an abandonment of the statute. The statute gives the four categories that Mr. Friedland described to us earlier, and those did embrace vast areas of technology, and as long as those vast areas of technology produced some new, non-obvious, and fully disclosed invention, it was patentable, which is different from patent eligible because eligibility was not seen by Thomas Jefferson who wrote Section 101 and those four categories, it wasn't seen as an exclusion as much as a description of the breadth of patent-eligible subject matter.

Next, the question comes, well, if the Supreme Court abandoned the language written by Thomas Jefferson of all people in 1793, by the way, so it's been in existence for 200 years - where is stare decisis when you need it right - but this 200-year-old language is abandoned and what's it abandoned for? Well, the Supreme Court says there are three exceptions to patent-eligible subject matter - natural laws, natural phenomena, and abstract ideas. Now, they're absolutely right that those three categories are not eligible because -not patentable I should say - which is different from eligible, but they're not patentable because of course nobody can invent a natural law. Nobody can invent natural phenomena, and an abstract idea was - in its original Supreme Court uses - defined very clearly as an "unapplied theoretical principle", meaning that the test for eligibility was really "Did you apply natural laws, natural phenomena, and theoretical ideas in a way that produced useful technology?" And this is the rule that governed up until 2010 when the Mayo opinion substituted these vague general categories - natural laws, phenomena, and abstract ideas - none of which was necessary, none of which was in the statute for reasons we've already described.

They said, well, this could be an entirely new examination to see if there are natural laws and natural phenomena and abstract ideas at work in inventions. Well, of course, they're at work in inventions. They're at work in every invention, they're at work in every human enterprise and every endeavor. And so that became the problem. The breadth of the exceptions gave no usable standard for what would be excluded by them. And we've got vague ideas like, well, is the inventive concept providing us something more than a conventional, usable routine? Well-known ideas, all of which are vague, standard, less concepts, and that has rendered this whole area as the professor eloquently described, as chaotic and confused and not predictable, not subject to any of the standards that should apply in statutory law because this is not statutory law. This is an invention - ironic use of that term. I hope you understand - an invention of the court and not a productive one. Let me just for an example, and I'll probably close here, let me tell you what happened in the case that changed all this, Mayo. The invention is a personalized dosage regimen for the man made drug thiopurine. Now, thiopurine is necessary to treat gastronomic distress but not the kind of distress you treat with antacids. This is a severe condition that can result - if not treated - in death, as the stomach acid eats holes in places it shouldn't eat holes. Thiopurine solves that problem, but there's a problem with thiopurine. If you give too much, it exacerbates the situation. If you give too little, it is not a treatment regimen at all and doesn't help. And finding that personalized dose for every person is the invention. They do that by a blood test which gives you certain readings, and based on those readings, you would adjust the dosage to get the proper treatment regimen. Well, where is the problem here? Well, the problem according to the Supreme Court, is that this is a natural law.

You should laugh at this point. I spent a little time telling you about the invention so that I could ask you this question. What's the natural law governing the dosage of a man made drug named thiopurine that saves lives? Where's the natural law? By the way, that question had to be answered by the Supreme Court, and guess what? They didn't answer. They said, "Well, human metabolism is subject to natural laws, therefore this is a natural law." Wow. Now you can see the problem that Mr. Friedland and Professor Osenga described for you. If something as specific as a personalized message dosage discovery or invention is a natural law, what is not? Indeed all inventions in the category of diagnosis and things like the Mayo invention have been struck down and the effect of that has been very severe. I do a lot of work in this area. The money invested for diagnostic research is no longer placed in the United States. It's placed in Europe, which has our prior statutory rule that if you're applying the natural law, it is eligible.

Well, let me just conclude by saying that there's a lesson here and the lesson is that when you stray from the statute and 200 years of very substantial and workable application of that law and substitute your own ideas about what might be exceptions - ideas without standards at all - you're left with the confusion and chaos which needs then legislative correction. And I endorse the bill that Professor Osenga discussed earlier. I'm left with a comment I made in a few opinions and still is valid. When all else fails, consult the statute. The statute had it right. Where are we today except in a mess without the statute? When all else fails, consult the statute. Thank you, Michael. Thank you, Professor.

Michael Friedland: Thank you so much, Judge. I'll turn the microphone now over to Mr. Matal.

Joseph Matal: Thanks, Michael. I kind of expected coming into this that my job would be to be the skunk at the garden party who disagrees with everyone, and I am prepared to say that I think about 90% of the federal circuit decisions are perfectly sound and that PARA is a terrible idea, but I was struck by how much of what Judge Rader said that I actually agree with. The way that the jurisprudence is dealing with natural laws in the field of diagnostics doesn't make sense. The court adopted this rule in Mayo, the Supreme Court. This isn't the federal circuit's fault that for certain types of scientific discoveries, you basically have to assume away the discovery, otherwise, you're claiming the discovery, and then once you get rid of the discovery, you ask, well, what's here that's inventive anymore? And the answer is nothing. That is the test. We apply now to medical diagnostics and as a result, all medical diagnostics are ineligible, but that test isn't applied to any other area of science or engineering.

Even in medical treatment, if you have an advance and you practically apply that advance, that's good enough. The fact that we have a deviant rule just for medical diagnostics and we treat all other fields of technology differently alone is a pretty good indicator that something's wrong with this area of jurisprudence, but what's happening in medical diagnostics is terrible, but it's only a small percent of the overall jurisprudence. And I'd agree with Rader and the professor that the courts could be more clear in the way they articulate the test, but in the end, about 70, 80% of the cases just boil down to a test of is this patent claiming an advance in technology, some kind of technological improvement or breakthrough? And that can be a difficult question identifying human creativity here, the knowledge, does it reflect technology or does it reflect what the Supreme Court referred to as human activities?

And human activities are things like business methods, things where you're really trying to, your advance isn't an advance in your understanding of the natural world, but rather an advance of your understanding of people. And the distinction that the law draws I'd say, is analogous to the one that universities make between your science and engineering departments on the one hand and your sociology departments and the humanities on the other. One of them studies the natural world, one of them studies people and their intuitions into things, and that's basically the line that Alice drew and that's what almost all of these cases come down to. The second thing I'd have to disagree about is that this isn't grounded in the statute. I'll even one-up you on the statute, it's grounded in the US Constitution. The Constitution says we grant patents to promote the progress of science and the useful arts.

Useful arts is kind of the 18th-century way of saying technology - applied science. And so the Constitution itself told us this is what these things are supposed to be about. And then the statute Congress enacted under President Washington just limits patenting to machines, manufacturers, compositions of matter, all pretty physical technological things, and then it adds the word "process.' It used to say the word "art" originally in the 52 Act, they kind of modernized the word art with "process." The argument that things like business methods should be eligible - back when that argument was made two decades ago - was that, well, business methods are a process, but it's a fairly conventional rule of statutory interpretation (unintelligible) that you read one word to acquire the meaning of the things around them. And if machines, manufacturers, and composition of matter are all about technology that gives a limited meaning to process, the process isn't supposed to be this catchall.

It also has things in this technological context, so I'd argue there's a perfectly sound statutory basis as well for drawing this distinction between, again, things that claim some kind of improvement in technology and things that claim an improvement in basically understanding people or their motivations, what makes them buy something or what's a better way to invest and corner the market? What's a better way of communicating information to people or even entertaining them - games and things like that? All those things are out as human activities under this test. There's also a lot of debate about, well, aren't we - to do this test, you have to identify - before deciding whether this is an advance in technology, you have to decide what is the patent's advance. Say the patent claims cite a computer for example, and all these things, but how can I say it's a business method?

Well, the courts developed various things to look at the claims, what the specification describes that as its advance or what's just obviously already known in the prior art, and from that you figure out like, well, are they claiming some improvement in the computer or other technology elements or does this really come down to this business method, you know this better way of targeting advertising to your audience, connecting people with what they want or a better way of persuading them to buy things? And to do that test you basically, yeah, you do have to do an overlapping inquiry with novelty and obviousness. You have to be willing to say, "Yes, although this patent recites a computer or the internet or communications technology, that's not really the invention. The invention, the claimed advance is in this other area, in this other area it just isn't eligible." In the seventies, they used to call this test the "point of novelty" test.

Now we call it the "focus of the claims" test, but it all comes down to the same thing, okay, the claims recite all these things, but what's actually the advance? And if you're going to designate certain subject matter as ineligible, it is just look, creativity in this area, in persuading people, selling them on stuff isn't eligible. Then you have to do this analysis. You have to be willing to say, "Look, although there are computer elements in the claims, that's not the claimed advance, this person did not invent the computer." 

PARA has a provision that says it's just prohibited to look at any of the other issues, enablement or nonobviousness or anticipation, and I'd submit if you have a requirement like that that you're not allowed to consider whether the other features of a claim were already known in the art, if they're not the advance, then you really can't enforce any subject matter restriction. Virtually every kind of invention these days is done on computers or with communications technology, and so it's easy to recite that in the claims and if saying, "By the way, this great idea of mine about how to persuade people to buy this or that, you do it on a computer", if reciting the computer in the claims is enough because you're not allowed to ask whether something was already known in the art, then you really can't enforce that bar on patenting human activities on patenting the sales technique. There's just no other way around it. PARA throws out that test and imposes - so PARA basically gets rid of the test of is there a claimed advance in technology and instead asks, "is this invention something that can't be practically performed without using technology?" 

And so as long as you're using communications technology or computers and whatnot as part of your invention, if you really can't practically do the invention as it's envisioned without using those things, then you're eligible. What that does is it separates out the thing that makes you eligible from the thing that's actually your claimed advance. As long as you need computers or cellular communications technology to carry out your invention, you don't have to make any actual improvement in that technology. You're just using it for your business method and you're eligible. It's a test that's very different from anything that's ever been used in US history. There's always been this, at least an implicit understanding that patents are limited to technology, and one question I've always had is why should that be the test?

The fact that you're doing your business method, for example, at a scale where you need to communicate with people around the world, so of course you have to use modern communications technology, okay, you're using this but you didn't invent it. Patents are supposed to be about what you invented. Why should that be a basis for eligibility? The fact that you have so much information that you need to store it on a computer in order to carry out, again, like a business method, a sales technique, even a form of entertainment, virtually all entertainment uses technology, some kind of recording medium and broadcast medium. Why is the fact that you're using something that somebody else invented that you conceivably don't make any improvement to - why should that make you eligible if we agree that patents are supposed to be about improvements in technology? So I haven't kept track of how much time I've used Michael, so why don't we, I think I've done enough disagreeing with the judge and the professor, so why don't we open it up?

Actually, Judge, since this is the Federalist Society, let me talk a little more about why I agree with you on Mayo. Mayo comes out of a deviation that crept into the Supreme Court's jurisprudence with the Funk Brothers decision in 1948. Funk Brothers was the seed case where they said, well, you figured out this way to get different seeds to work together, but once you assume away that scientific discovery, then what else is there? The rest of it is obvious once you assume that the science was already known. Since this is the Federalist Society. I'll just point out that Funk Brothers was written by William O. Douglas, one of the longest-serving Supreme Court justices, pretty much the poster child for Supreme Court term limits and generally known as one of the left-wing crazies on the court in the 20th century. That alone should be enough to get me at least halfway through persuading the audience that Funk Brothers was wrongly decided, but also by 1948 - patent law goes back to the origins of the Republic - you had pretty well-established law that once you have a scientific discovery, as long as you're not claiming the discovery in the abstract, as long as you're practically applying it for some useful result, it's eligible. That was black letter law in the case books up through the 1930s, and then Douglass comes along with Funk Brothers and says, "Oh, you can't claim science, so if this invention uses a scientific improvement, assume away the discovery and then ask if anything else is obvious."

I'd submit that's a test like peeling an onion. If every invention is based to some extent on science, all mechanical inventions are based on physics, medicine, and biochemistry, obviously, is science. Is there -once you assume away the science behind the discovery - yeah, of course, everything is obvious because every advance in technology is based on science, and I do agree Mayo should be overruled. I love Justice Breyer. He is probably my favorite liberal on the Supreme Court, but he got it wrong in Mayo. He applied kind of a textbook version of Funk Brothers and Funk Brothers is just wrong. If your patent is actually based on a scientific discovery and you're practically applying it, not just claiming the principle in the abstract, then it fully ought to be eligible. So I'll agree with the professor and the judge on that.

Michael Friedland: Thank you so much for the comments.

Randall Rader: Thank you, Joseph.

Michael Friedland: Even if you may end up being the skunk at the garden party, before we go to the questions from the audience, let me give each of the panelists a chance to either react to their fellow panelists or ask a question of a fellow panelist.

Randall Rader: Let me react very quickly to Joseph. By the way, those of us who have taught patent law for 35 years teach Funk Brothers as an obviousness opinion, not as an eligibility opinion, but you at one point kind of suggested that the problem was limited to diagnostics. Let me dispose of that with one recent case, which is in my casebook, Yu v. Apple. The invention - I should hold up my phone right now and you could see it - there's three cameras on the back of my phone that take three separate photographs at three separate settings, combine them to make a single better photograph than can be taken by any single camera or any single lens. That was the invention that was called abstract. What is abstract here? It's a camera. No, it's not a camera. It's three cameras and it's three cameras combined in a way that had never been done before. Is that new? Yes. Nobody questions that. Is it obvious? I've never heard that questioned either because it was very innovative, but somehow it was categorized as abstract. You can see the utter standardless application of eligibility principles in the Yu v. Apple decision and you also see we're not just talking about diagnostics here. We're talking about a great deal of software. We're talking about a great deal of high-technology application, which really drives innovation in this modern age. That's my quick response. Michael?

Michael Friedland: Joseph, would you like a moment to respond?

Joseph Matal: Sure, yeah. I just add, unfortunately, we've gotten into this world where the word abstract is just used as ineligible and all the different ineligibility tests all fall under the rubric "abstract." Before 2010, abstract only meant you were claiming the principle in the abstract. Now, abstract also means, oh, you're claiming a business method or some other human activity, and it also means that you're claiming an end result. The case that Judge Rader is talking about is Yu v. Apple, it's a case that applies this very old Supreme Court case from the 1850s called O'Reilly v Morse that condemned a patent for claiming the end result rather than the specific means by which you reach the result. It actually involved Professor Morse and the telegraph - and he did invent the telegraph - but he had this infamous eighth claim in his patent where he said, "And by the way, I claim using electromagnetic magnetism by any means whatsoever to communicate", and the court said, "You can't do that. You have to claim the specific means that get you there." Yu v. Apple was a case where again, at some point the claims got a little too vague. This comes up in a lot of software patents too, where you have, yes, I use a computer and an input device and display and et cetera, and then when you get to - I'll solve problem X, and then when you get to the end of the claims, it's just that the last part is a module that solves for X, no description of how to get there.

Randall Rader: Joseph, if that was true, you'd have a Section 112 problem, as you and I both know, it would've been vague, not properly claimed. That's an entirely different standard. That isn't what the court said. It said, oh no, it's abstract. We're not looking at anything else that is an error flat out and it's hard to defend.

Joseph Matal: Again I would -

Randall Rader: Nice try on O'Reilly v. Morse, but that's an entirely different subject too.

Joseph Matal: Yeah, again, abstract just means you have a 101 problem these days. Unfortunately, it's not any more informative than that,

Randall Rader: Then maybe we need the PARA Act to describe what abstract is, right, professor?

Kristen Osenga: Yes. Yes, so I'm going to jump in now and get my two seconds to respond. Joseph, I agree with you for the first time, I think ever. I also think Mayo should be overruled so we can now be good friends, but that's probably all I'm going to agree with you on. I just want to just jump back to something that you were talking about, we need to be looking for advances in technology. That's what's supposed to be patentable. We don't want to just add a computer to a sales pitch. PARA does in particular, exclude specifically a lot of human behavior when it says it can't be done on a machine, so I just want to highlight that, but I think, and I also rarely do this, I'm also going to say I actually think the Federal Circuit has done a really good job in one limited respect - with obviousness and computers.

I think the leapfrog case and stuff like that where the Federal Circuit has said, "You know what? If you're just going to add a computer to do something that everybody's been doing all the time, all the ways, it's going to be obvious." I think that really protects that concern that you were highlighting Joseph, was this idea of "You've been doing it and now we're going to add a computer and we're going to say, that's good and it's going to be patent eligible." Yeah, it's going to be patent-eligible, but it's going to fail Section 103, and I'm not really as worried about that as you are. I do think the Federal Circuit's obviousness has increased in rigor, whereas the other things have not.

Michael Friedland: I might ask a question that came from the audience. I'll direct this first probably to Joseph, but I'll ask others to chime in as well. So if I understood Joseph's position, it's that Article One, Section VIII probably is the support for Alice/Mayo, and that defines a fairly narrow scope - a relatively narrower scope of patent eligibility than what others might agree with. In light of that, is it possible that PARA, if passed, would be held unconstitutional because it would broaden the scope of patentable eligible subject matter beyond that which is granted by Article One, Section VIII?

Joseph Matal: It's an interesting question. The courts have never imposed constitutional limits on what can be patented. Congress has forced them to consider the issue in the copyright context with some of the extensions, the clause in the Constitution that's stated as the purpose, et cetera - I don't know how far you could go in saying, "Well, because the purpose was only to promote progress of science and the useful arts, therefore, you can't have patents where the innovation is a business method or some other human-focused activity." - but I guess if Congress passes PARA - which by the way I think is very unlikely - that proposition might be tested again. PARA doesn't - It wouldn't make everything eligible. A pure business method that's just implemented in your head would still be ineligible and just using technology alone wouldn't be enough. But if you can show that I need to communicate at a speed or scale or store enough information accurately that I really need to use a computer, then you're eligible. Even if the invention has nothing to do with that computer, if it's something you're just purchasing off the shelf, it would be again, a pretty radical shift in how we've defined what kind of subject matter is eligible for a patent in the US and pretty much everywhere else too.

Michael Friedland: So one of the things that Joseph said a moment ago is that he doubts that Congress will act on PARA. Professor. Judge, do you agree?

Randall Rader: If you'd like me to go first, I keep a pretty close finger on this. It's certainly not going to happen in this Congress. My vote counts suggest that it's only got around 30% approval in both houses at this point. However, each year it's growing. My experts on the subject, former director Capos and former Chief Judge Michelle, tell me that they think in the next Congress, it'll have a 50-50 chance.

Kristen Osenga: I defer to the good judge on his expertise there, but I also agree with Joseph that the chances of it passing right now are slim.

Michael Friedland: If it doesn't pass or there's not some type of other legislative fix further down the line, what do we think the chances are that the Supreme Court is going to - the Supreme Court and the Federal Circuit are going to make modifications to the rules?

Kristen Osenga: Never.

Randall Rader: Well, I don't think I agree with that, Professor. The Supreme Court's changed. There is more attention to statutory construction. I think there's a chance that you would see Gorsuch and Alito perhaps taking up - and Roberts, by the way, who has written some good patent opinions - taking up another look in something like the Apple case or the American Axle case, which again dealt with hardware technology and its applications, not even software, but Supreme Court's a chance, an even better chance would be the Federal Circuit. The decisions in all three of the major 101 cases were heavily hedged by the Supreme Court. They gave invitations explicitly to the Federal Circuit to ensure that the exceptions were not applied too broadly because of course they would swallow or eviscerate patent law. They left areas completely undefined - like the definition of "abstract" itself - completely undone, inviting the federal circuit to step in and say, "You know, that does mean unapplied." So there is adequate opportunity for the federal circuit to do its job and interpret the statute, which is what they've sworn to uphold - and the Constitution Joseph - I'll let them interpret that too - to put this problem back in the bottle. So there are two chances. One, the Supreme Court may correct itself. This is too glaring an error to sit out there for another decade, and the other chance is the Federal Circuit could realize the opportunity to clarify what up to now they have not done.

Joseph Matal: I'll just add that I think at last count, we've had five CVSGs in the last couple of years from the Supreme Court in Section 101 cases, so the court is still keeping an eye on this area of the law. Someone up there is still interested. I think they just haven't found the right case or the case where-

Randall Rader: And in the American Axle case, the Solicitor General answered that CVSG with a yes, you should take the case and correct it, which again, may help gain momentum for the idea that this error needs correcting.

Joseph Matal: Yeah, the SG recommended taking up the interactive wearables case too - which the invention was the idea of when you play a song, tell people the name of the song at the same time - I am not quite clear what the thinking was on taking that up as a vehicle. I don't think that would've gone well for the patent owner, but again, the courts, they're clearly interested. I don't think they're ever going to throw out the principle that patents have to claim an advance in technology as opposed to human activities. I don't think they're going to ever overrule O'Reilly v. Morse. It's 170 years old at this point and has been around for a long time. I do think there's a good chance they'll eventually figure out why we have one rule for medical diagnostics and a completely different rule for every other field of technology, even medical treatment, and why on earth are we still following a William O. Douglas opinion when it deviates from everything else? And there are always other little areas you can clean up. There are some inconsistencies in the Federal Circuit about how they deal with claims that claim technology for - I mean information for its communicative content - when you're conveying information to people or targeting websites based on demographic information, there's always things to clean up, but to me, medical diagnostics is just such a glaring deviation. And again, when you have that one outlier that's treated differently from everything else for no apparent reason, to me, that just makes it ripe for a correction.

Randall Rader:

I don't think anybody but you, Joseph, says that it's treated differently from everything else. I think 95% of the patent bar would say Yu v. Apple is not a diagnostics case. American Axle is not a diagnostics case. American garage door opener is not a diagnostics case, and I've only mentioned three or four, believe me, I could mention 150 if you had enough time to listen, because -

Joseph Matal: I'd agree those are -

Randall Rader: - they're very heavily into reversing software-driven innovations.

Joseph Matal: I'd agree. There are other cases where things have been held ineligible, but I'd put Yu v. Apple and American Axle pretty clearly applying the O'Reilly v Morse rule. And again, I don't think they're going to throw out the rule that you can't just claim your end result. You have to claim the specific steps in your claim that get you to that result. Those pre-Civil War precedents, once they've made it this far, tend not to get overruled, but we'll see. I guess.

Randall Rader: They overruled the decisions in 101 that had been around for far longer than that - for at least 150 years. And by the way, nobody says Yu v. Apple is an O'Reilly v. Morse case. I've never heard that, except from you.

Joseph Matal: That's what I say. That's my reading of -

Randall Rader: Yeah okay.

Joseph Matal: You know, it's debatable -

Randall Rader: Well, we all have our legal readings. I've only taught patent law for 35 years and I have never heard anyone in the academic field say that. So you have quite a distinction, Joseph,

Joseph Matal: Well, you're hearing it today, Judge, but maybe I'll reconsider in the future. (chuckles) 

Michael Friedland: And this is precisely why we're so grateful for all of our panelists, including the skunks at the Garden party. It's wonderful to have the opportunity to hear different points of view on these issues.

Randall Rader: Absolutely, I commend Joseph vastly and he's made marvelous contributions, particularly when he was working on the America Invents Act. He's made marvelous contributions

Michael Friedland: And all of you have done so in this discussion today. I see that Emily is back on screen, which tells me that we're about out of time. So thank you very much, all of you for just an absolutely terrific discussion, and I'll turn the microphone over to Emily.

Emily Manning: On behalf of the Federalist Society, thank you all for joining us for this great discussion today. Thank you also to our audience for joining us. We greatly appreciate your participation. Check out our website fedsoc.org or follow us on all major social media platforms @FedSoc to stay up-to-date with announcements and upcoming webinars. Thank you once more for tuning in and we are adjourned.