Senator Thom Tillis (R-NC) has released the promised draft of a bill that would revamp the law governing patent eligibility in the US under 35 USC Section 101. The announcement of that proposed legislation, the Patent Eligibility Restoration Act of 2022, frames it as an attempt to address concerns from stakeholders on both sides of the issue regarding the inconsistent application of eligibility caselaw and its impact on certain “key areas of technology and innovation”. Though the bill preserves the statutory categories of eligible subject matter, it provides a specific list of excluded subject matter rather than leaving such exclusions to the courts. By doing so, its provisions would do away with key aspects of Supreme Court rulings like Mayo, Myriad, and Alice, as well as codify other opinions that have limited those prior holdings or that have otherwise proven controversial.

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How We Got Here: The Current State of the Law on Patent Eligibility

Under current law, the only statutory language defining patent eligibility in Section 101—titled “Inventions patentable”—reads as follows: “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”. The term “process” is defined in Section 100(b) as a “process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material”.

In applying Section 101, courts have long recognized so-called judicial exceptions to patentability, which encompass subject matter that falls outside the four statutory categories of invention: laws of nature, natural phenomena (including products of nature), and abstract ideas. The current two-part analytical framework for applying those judicial exceptions stem from three landmark Supreme Court decisions addressing each of those exceptions in turn: Mayo Collaborative v. Prometheus (Mayo), Association for Molecular Pathology v. Myriad Genetics (Myriad), and Alice v. CLS Bank (Alice).

Two of those decisions have had a significant impact on technologies for diagnostic methods. In Mayo, the Court held that if a process is determined to claim a law of nature (the inquiry at step one), it must contain “additional features that provide practical assurance that the process is more than a drafting effort to monopolise the law of nature itself” (step two). Applying that test, the Court invalidated a patent covering a diagnostic test for measuring the level of a metabolite and making a correlation based on that level to determine the required amount of a drug to be administered. The Court concluded that this correlation depended on the “entirely natural process[]” of drug metabolism—and that the remaining limitations merely amounted to “well-understood, routine, conventional activity”.

In Myriad, the Court extended that holding to genetic testing patents, holding that isolated DNA strands (specifically, the then-newly discovered BRCA1 and BRCA2 genes, which can contain mutations that can be used to predict breast cancer risk) are products of nature not eligible for patenting, as they contain the same genetic information as the naturally occurring gene sequences despite their isolation (but found claims directed to modified complementary DNA, or cDNA, to be patent eligible due to their differences from the original, natural DNA). A particularly impactful result of those holdings is that otherwise groundbreaking medical discoveries can still be held not to be eligible for patenting: as the Court stated in Myriad, “[g]roundbreaking, innovative, or even brilliant discovery does not by itself satisfy the §101 inquiry”.

Most recently, the Supreme Court’s June 2014 Alice decision further refined that two-part test, here as applied to the “abstract ideas” exception, establishing that for claims determined to be directed to a judicial exception at step one, those claims are not patentable unless they include an “inventive concept” that adds “significantly more” to the claimed subject matter. That ruling, in particular, has become a popular defensive tool, allowing companies accused of infringement to challenge the eligibility of an asserted patent early in the course of litigation.

However, courts have since struggled to apply these tests consistently, with the Federal Circuit in particular becoming divided over the proper scope of eligibility law—splitting in recent years in a number of cases addressing the patent eligibility of claims directed to mechanical inventions or otherwise including physical structure.

Among the most prominent is American Axle v. Neapco, a case that saw a fractured Federal Circuit engage in multiple sparring rounds over a patent generally related to an improved automotive driveshaft designed to reduce vibrations. The District of Delaware and a majority of the Federal Circuit both concluded that the patent was invalid for claiming a natural law—Hooke’s law—without claiming sufficient detail as to the means for achieving that result. However, Circuit Judge Kimberly Moore dissented, arguing that this oversimplified Alice by reducing it “to a single inquiry: If the claims are directed to a law of nature (even if the court cannot articulate the precise law of nature)”, and that the majority’s concerns really raise questions of enablement rather than specificity under 101—as a result, memorably deeming the majority’s approach “validity goulash”. The court was split evenly on whether to grant en banc review, prompting a series of additional opinions—including a revised majority opinion, two concurrences, and three more dissents (among them a second from Judge Moore).

Despite the stark disagreements triggered by American Axle—and even though US Solicitor General Elizabeth B. Prelogar filed a brief recommending the decision’s reversal, flagging the Federal Circuit’s division as emblematic of the broader “[o]ngoing uncertainty” in courts’ interpretation of Alice—the Supreme Court declined to review the case in June 2022. The Supreme Court has also denied certiorari in other notable cases, including another controversial ruling invalidating a patent directed to a garage door opener (Chamberlain v. Techtronic industries) and a decision invalidating claims directed to a multi-lens camera (Yu v. Apple). Additionally, in early 2020, the court declined to review another notable Federal Circuit ruling on a more procedural issue—its 2018 holding in Berkheimer v. HP, which barred courts from deciding eligibility motions when the patent owner has raised issues of material fact as to the patent’s inventiveness.

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The Path to Reform: Tech and Biopharma Industries Diverge in Views on Current 101 Caselaw

As the debate over those decisions played out last year, Congress also focused renewed attention on Section 101 reform. In March 2021, Senator Tillis and three other members of the Senate IP Subcommittee—Senators Tom Cotton (R-AR), Christopher Coons (D-DE), and Mazie Hirono (D-HI)—sent a letter to Acting USPTO Director Drew Hirshfeld, stating that it was “past time that Congress act to address this issue” and asking for his assistance as they “consider what legislative action should be taken to reform our eligibility laws”. To that end, the senators asked that Hirshfeld “publish a request for information on the current state of patent eligibility jurisprudence in the United States, evaluate the responses, and provide [them] with a detailed summary of [his] findings”—with an emphasis on current caselaw’s adverse impact on “investment and innovation in critical technologies like quantum computing, artificial intelligence, precision medicine, diagnostic methods, and pharmaceutical treatments”.

The USPTO published that request for comment in July 2021, receiving over 140 comments by the October deadline—feedback that reflected a divide between technology and life sciences companies. In June 2022, the USPTO published a report recapping those results (the “USPTO eligibility study”), along with summaries of the various analyses on Alice’s impact that it has undertaken over the past few years. As noted in that report, opinions on current jurisprudence diverged among larger companies with substantial R&D and patenting activity, even within the tech industry: some argued that their investment and innovation in emerging technologies has actually increased in the current climate, by helping them focus more on innovation and technological development, while others have argued that the current uncertainty observed in patent eligibility jurisprudence makes obtaining and enforcing patents more expensive, negatively impacting innovation.

Opposition to the current eligibility regime was more uniform in the life sciences arena, however. For example, the Intellectual Property Owners Association (IPO) stated that its members widely agree on “the negative impact our colleagues in bio/pharma have seen to precision medicine, pharmaceutical treatments, and diagnostic methods”. The Biotechnology Innovation Organization (BIO), moreover, noted that innovation in these spaces “has been jeopardized by the uncertainty and doctrinal drift in the area of subject matter eligibility”, and asserted that the lack of predictability in biopharma patenting raised a significant question of whether investment in the space could continue. As summarized in the USPTO’s report, some commenters remarked that this lack of investment is decreasing competition and concentrating the market among a smaller number of “large, well-funded incumbents”. Moreover, some companies indicated that they have turned away from patent protection in favor of other forms of IP protection like trade secrets, resulting in a drop in public disclosure of innovations.

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The Draft Bill: Codifying Eligibility Exceptions and Revamping the 101 Framework

In comments leading up to the release of his new bill, Senator Tillis framed the proposal as reflecting a “compromise” approach factoring in the views on both sides of the issue. The text of that released bill reflects at least some of the cited concerns from critics and supporters of the current 101 regime—including biotech and pharma companies critical of the Mayo-Myriad narrowing of patent eligibility in that sector, and tech companies that view Alice as a key counterweight to litigation over what the USPTO deemed “‘overbroad,’ mostly software, patents”.

The bill opens by redefining what constitutes a “process” in Section 100(b), which as noted above is incorporated into Section 101’s language regarding the eligibility of a “new and useful process, . . . or any new and useful improvement thereof”. In particular, it replaces the language “includes a new use of a known process” in the current Section 100(b) with a mostly expanded version: “includes a new use, application, or method of manufacture of a known or naturally-occurring process” (emphasis added). The bill would also define the term “useful” to mean, “with respect to an invention or discovery, that the invention or discovery has a specific and practical utility from the perspective of a person of ordinary skill in the art to which the invention or discovery pertains” (emphasis added).

Eligibility Exceptions: Revisiting Myriad’s Gene Patent Restrictions, Among Other Holdings Targeted

The remainder of the newly expanded Section 101—which would be retitled “Patent eligibility”—covers three areas: provisions detailing what subject matter is and is not patent-eligible, the manner in which eligibility is to be determined (setting limits on the courts), and procedural constraints on the application of Section 101 in litigation.

The provisions dealing with specific subject matter include some that address criticisms of the current 101 regime related to biopharma. Among them are proposed subsections 101(b)(1)(C) and (D), which respectively establish that a patent may not be obtained for “[a]n unmodified human gene, as that gene exists in the human body”, nor for “[a]n unmodified natural material”. However, subsection 101(b)(2)(B) provides a key exception under which such human genes and natural materials that are “isolated, purified, enriched, or otherwise altered by human activity, or that is otherwise employed in a useful invention or discovery, shall not be considered to be unmodified”—and would thus be patent-eligible. This would essentially overturn the part of Myriad that held that isolated, but otherwise unmodified, genes are not patent eligible, expanding that principle to include isolated natural products as well as isolated genes.

That proposed change reflects criticism from some biopharma stakeholders, including comments cited in the USPTO eligibility study stating that this aspect of Myriad is “technically misplaced” because it unduly ignores the relevant functional changes that occur when genes are isolated. The change would also bring US law into closer alignment with other jurisdictions; as noted by some of the same critics, the US’s current requirement is narrower than in China, Korea, and Europe, where genes or DNA fragments are patent eligible. Critics of the proposed expansion of gene patenting, on the other hand, include Professor Jorge L. Contreras of the University of Utah (among the first to publish a response in opposition to the bill), who has argued that this reversal of Myriad would lead to higher consumer prices and further limits on access to medical care—and that preemptive gene patenting could hamper researchers’ efforts to study newly emergent viruses in future public health crises.

Another provision, subsection 101(b)(1)(B), delineates types of processes that would not be patent eligible, including (i) “non-technological economic, financial, business, social, cultural, or artistic process[es]”, (ii) “mental process[es] performed solely in the human mind”, or (iii) processes that “occur[] in nature wholly independent of, and prior to, any human activity”. While no examples are provided, the first two categories broadly overlap with two of the USPTO’s own high-level groupings of the various “abstract idea” judicial exceptions from its January 2019 Revised Patent Subject Matter Eligibility Guidance: “Certain methods of organizing human activity”, including “fundamental economic principles or practices”, “commercial or legal interactions”, and “managing personal behavior or relationships or interactions between people”; and “[m]ental processes”, namely “concepts performed in the human mind (including an observation, evaluation, judgment, [or] opinion)”.

Notably, one exception to the draft legislation’s exclusion of processes that are “non-technological” (a term not defined anywhere in the bill) appears to target cases that have invalidated claims related to mechanical and electronic devices under Section 101. Under subsection 101(b)(2)(A), the aforementioned exclusion does not apply when such a process “is embodied in a machine or manufacture, unless that machine or manufacture is recited in a patent claim without integrating, beyond merely storing and executing, the steps of the process that the machine or manufacture per- form” —echoing the exclusion of “do it on a computer” claims foreclosed by Alice and its progeny. Perhaps significantly, the language does not define the term “integrating”, which could lead to uncertainty (along with the aforementioned “non-technological” ambiguity) should this language make its way into any final litigation.

While Senator Tillis’s office has described most of these provisions in high-level terms, mainly without reference to any specific cases, two exceptions are American Axle and Chamberlain—both of which the senator has criticized extensively, even cofiling an amicus brief in the former case’s appeal along with former Federal Circuit Judge Paul Michel and former USPTO Director David Kappos. According to an unnamed staffer of Senator Tillis quoted by Law360 the day before the bill’s announcement, the patents invalidated in both cases would have survived under the proposed legislation’s revamped standards.

Although the interview does not identify the corresponding provisions that would have allegedly saved those patents, one potentially relevant section for American Axle, at least, would be proposed subsection 101(b)(1)(A), which would exclude from patent eligibility a “mathematical formula, apart from a useful invention or discovery” (emphasis added)—since the patent invalidated in that case was found to be directed to Hooke’s law, a mathematical formula.

Changes to Section 101 Analysis

A third part of the bill, subsection 101(c), lays out various general criteria for patent eligibility, starting with one requirement in (c)(A) that eligibility shall be determined by “considering the claimed invention as a whole and without discounting or disregarding any claim element”—apparently, a response to criticisms that some courts have overgeneralized claims or focused on some limitations while ignoring others.

The subsection’s other requirements, in subsection (c)(B), lay out factors related to other patentability requirements that courts would not be allowed to consider when evaluating eligibility. Among them is subsection (c)(B)(i), barring consideration of “the manner in which the claimed invention was made”—a reference to Section 103, which provides that “[p]atentability shall not be negated by the manner in which the invention was made”. Additionally, subsection (ii) prevents courts from considering “whether a claim element is known, conventional, routine, or naturally occurring”. The first three qualifiers appear designed to bar a common practice under which courts performing the step two “inventive concept” analysis will consider whether a claim limitation involves more than just “well-known, routine, and conventional” activity. Some have criticized this practice, which involves the consideration of prior art, as improperly equating patent eligibility with other patentability requirements such as novelty under Section 102 and obviousness under Section 103. This practice has also been characterized as improperly departing from the Supreme Court’s earlier holding in Diamond v. Diehr, which foreclosed such an approach with respect to 102: “The ‘novelty’ of any element or steps in a process, or even of the process itself, is of no relevance in determining whether the subject matter of a claim falls within the 35 U.S.C. § 101 categories of possibly patentable subject matter”. The goal of this change is further underscored by subsection (iii), which establishes that eligibility may not be determined with regard to “the state of the applicable art, as of the date on which the claimed invention is invented”. A similar but even broader limitation follows in subsection (iv), which bars courts from evaluating eligibility with regard to “any other consideration in section 102, 103, or 112”.

Procedural Changes: Early Alice Challenges Are Allowed When Facts Are Undisputed

The proposed bill concludes with a concession to frequent defendants, establishing in subsection 101(c)(2)(A) that a court may rule on the eligibility of a patent at “any time”, thereby continuing to allow early Alice challenges. However, that section also provides that the court may do so “on motion of a party when there are no genuine issues of material fact”—essentially codifying Berkheimer, which has limited the early application of Alice for cases where the court finds such a factual dispute over inventiveness. For such motions, subsection (B) clarifies that a court “may consider limited discovery relevant only to the eligibility described in” subsection (A).

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What Comes Next

As noted above, Senator Tillis has characterized the Patent Eligibility Restoration Act of 2022 as striking a compromise across both sides of the issue, stating that the bill is the “product of almost four years of consensus driven stakeholder conversations from all interested parties” and that passing eligibility reform remains one of his top priorities. That said, a staffer told Law360 that Senator Tillis is “realistic” about the bill’s likely slow pace as it moves forward in Congress, and that it will “likely undergo edits and changes” during that process (as paraphrased in the article) as the bill faces feedback and critique. Stay tuned for more coverage as that process continues.