Emerging Litigation Podcast
Litigators and other legal and risk professionals share their thoughts on ELP about new legal theories or areas of litigation that plaintiff attorneys, defense counsel, corporations, risk professionals and others will want to be aware of. The host is Tom Hagy, long-time legal news enthusiast, former editor and publisher of Mealey's Litigation Reports, current Editor-in-Chief of the Journal on Emerging Issues in Litigation, and owner of HB Litigation Conferences and Critical Legal Content. ELP is a co-production of HB, CLC, Law Street Media, and vLex Fastcase. Contact Editor@LitigationConferences.com.
Emerging Litigation Podcast
Last Days of Patent Eligibility Confusion with Ryan Phelan
As if the rocketing evolution of technology isn't presenting enough challenges to inventors under patent law, the Supreme Court has done its part, too.
I just finished reading Graham Moore's novel "The Last Days of Night," where titans of the late 1800s and early 1990s Thomas Edison, George Westinghouse, and Nikola Tesla "clashed with sparks flying over AC and DC electrical power systems," a corny description suggested by my AI editor.
Having read the book, it was fun to speak with modern day attorney Ryan N. Phelan of modern day Marshall Gerstein. Listen as this seasoned patent attorney walks me through:
- The intricate landscape of patent eligibility in the United States.
- Twin patent law decisions from the Supreme Court -- Mayo and Alice (the name of a singer-songwriter group if I ever heard one, or a sandwich shop).
- The proposed Patent Eligibility Restoration Act and how -- if passed -- it could unlock new opportunities for innovation amid the challenges posed by judicial exceptions.
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This podcast is the audio companion to the Journal of Emerging Issues in Litigation. The Journal is a collaborative project between HB Litigation, a brand of Critical Legal Content (a custom legal content service for law firms and service providers) and the vLex Fastcase legal research family, which includes Full Court Press, Law Street Media, and Docket Alarm.
If you have comments, ideas, or wish to participate, please drop me a note at Editor@LitigationConferences.com.
Tom Hagy
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Host of the Emerging Litigation Podcast
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Welcome to the Emerging Litigation Podcast. This is a group project driven by HB Litigation, now part of Critical Legal Content and VLEX Company's Fast Case and Law Street Media. I'm your host, tom Hagee, longtime litigation news editor and publisher and current litigation enthusiast. If you wish to reach me, please check the appropriate links in the show notes. This podcast is also a companion to the Journal of Emerging Issues and Litigation, for which I serve as editor-in-chief, published by Fastcase Full Court Press. And now here's today's episode. If you like what you hear, please give us a rating. Today we're going to talk about protecting inventions, specifically through the patent process.
Speaker 1:You might think that inventors, as I do, are wild-haired lab dwellers, or maybe they're just hard-working professionals. That's probably what they are. They've been characterized in a lot of ways like that. Invention itself has enjoyed a lot of characterizations and its family ties have also been explored over the years, commented on. We all know the mother of invention is necessity. That's credited to Plato and others. But who really knows? Apparently, invention also had a father. According to Galileo, doubt is the father, so Doubt and Necessity. You know they got together and then had a whole bunch of inventions. According to Susanna I think her name is pronounced Settler- Anyway she's a playwright from the 17th century.
Speaker 1:She said that Want is the mistress of invention. So once Necessity and Doubt had a baby, that baby went on to have a mistress. Apparently, agatha Christie also a writer, of course. We all know her she also weighed in on this. She didn't think necessity was the mother of invention. She said that invention comes from quote idleness, possibly also from laziness to save oneself trouble. So, according to Agatha Christie, we invent to stay out of jail. A lot of us lazy slobs with nothing to do and who is that really? Those folks should be upping their invention game.
Speaker 1:There's a great book I happened to just finish reading called the Last Days of Night, written by Graham Moore, and the book is about, among other things, the invention and patenting what was then the perfect light bulb, and whether the nation's power grid was going to be AC, like it is today, or DC. It's a historical fiction with characters including Nikola Tesla, thomas Edison including Nikola Tesla, thomas Edison, george Westinghouse and a young lawyer, who was in way over his head at the time, named Paul Cravas. That's a famous name in legal circles. Tesla, who's featured prominently in the book, said that ideas are born when he's alone. So be alone and you're going to come up with ideas. That's Nikola Tesla Words to Live by. Now Mark Twain was not in the book, but I recall anyway.
Speaker 1:He once said that the greatest inventor of all time was the accident, and there are certainly a lot of inventions that are said to have come from accident. I think I talked about this on another podcast. I know some of them were vulcanized rubber. That was supposed to be an accident. I think the microwave guy was testing one thing. I forget what it was, but maybe some kind of radar or something, I don't know. But he was testing one thing and he had a sandwich in his pocket and sandwich heated up. That can't be true, but I have a feeling it kind of is. And wow, that sounds dangerous. If the sandwich in your pocket is heating up, that can't be good for you know, your body, for example. And then there was another one. What was it? Velcro or penicillin? There were some other ones, but we all know those and I don't even know if they're true. So if they aren't true, please tell me, and I'll happily admit that I'm wrong.
Speaker 1:But this whole thing about creation by accident, that's something that Edison disagreed with. He said he never came up with anything that was worse than anything accidentally. Nothing came by accident, he said. It all came by hard work. In fact, he's famously quoted as saying invention is 1% inspiration and 99% perspiration. That adds up to 100% for those of you who have your scratch pads out. Then another inventor said that invention is 93% perspiration, 6% electricity, 4% evaporation and 2% butterscotch ripple. That, of course, was Willy Wonka, famously played by Gene Wilder. Willy Wonka wasn't real. I feel like I need to throw that in, but anyway.
Speaker 1:Graham Moore, in writing about Paul Cravath, felt that it was Cravath's belief that it wasn't the job of a litigator to determine facts. It was his job to construct a story from those facts by which a clear moral conclusion would be unavoidable. That was the business of Paul's stories. Graham moore wrote to present an undeniable view of the world and then to vanish, and it goes on from there. Uh, there's more to that sentence. Anyway, it's a great book. I recommend it. It's a love story. Uh, it's a bunch of other things. It's a litigation story and uh, of course, it touched on what was patentable. But more to the point, the book discusses the battle between Edison and Westinghouse over which electricity system would become the standard in the country whether it was going to be direct current or alternating current. They call it the war of the currents.
Speaker 1:Edison was a DC guy. Tesla and Westinghouse promoted AC. Dc guy Tesla and Westinghouse promoted AC. So Edison developed his first bulb in the late 1870s and it was designed to run on DC. So he began building a system of wires all around the country to produce and distribute electricity so businesses and homes could use his new invention. Westinghouse struggled to come up with a patentable alternative. But when he did come up with his own tweak, he faced a barrage of lawsuits for medicine. And that's where Paul Kravath came in. So he entered Tesla, who was a young engineer from Croatia. He immigrated to America, started working for Edison. He helped improve Edison's DC generators. He was also trying to get Edison interested in AC motors, which he'd been developing. But Edison was already dedicated to DC and he said AC had no future so he wasn't interested in that. So he set out to prove as much. One of the ways he tried to prove as much was using a Westinghouse generator in the first electric chair. It's a pretty grisly scene that I won't go into, but it ended up demonstrating that AC current wasn't the killer that Edison wanted everybody to believe. That was his thing. You put AC into homes and people will fry themselves. You put AC into homes and people will fry themselves, anyway. Later Tesla would strike out on his own. He got a number of patents for his AC technology and Paul Krabath, who represented Westinghouse in the Edison litigation, played a key role in Westinghouse's ultimate victory In 1888, he facilitated Tesla's sale of his patents to Westinghouse, who would win the war of the currents with their AC generators that have lit us up ever since.
Speaker 1:Come forward to the present of patent eligibility in the country, particularly in the wake of some Supreme Court decisions that have narrowed the scope of patentable subject matter. It sets out to clarify and strengthen the standards for eligibility, particularly in areas like software and artificial intelligence and biotechnology. Addresses the concept of the abstract idea to provide more specific guidance on what constitutes an abstract idea that is not patentable. He seeks to promote innovation, protect intellectual property, balance innovation and the public interest. So that's a big deal. By addressing these issues, the proposed law would create a more predictable and favorable patent landscape for inventors and businesses. But that is really all I know in general. But that is really all I know in general.
Speaker 1:Fortunately for you, I got to interview Ryan N Phelan, an attorney, with Marshall Gerstein. Ryan is a registered patent attorney who counsels and works with clients in all areas of IP Focus on patents. Ryan helps clients prepare and prosecute high-quality patent applications and develop strategic patent portfolios for innovative products and services. He prepares legal opinions as to patentability, non-infrigment, validity, innovative products or services. He's also a litigator who helps clients protect market share from competitors and defend clients from IP lawsuits against competitors or non-practicing patent entities. Ryan plays a role similar to what Paul Kravath played back in the day. He's a former technology consultant with Accenture background in computer science and engineering. He represents numerous startups and Fortune 500 clients with patent matters in tech areas like artificial intelligence, machine learning, medical devices, biometrics, data, virtual reality, imaging, internet, e-commerce the whole thing. Read his bio. Brian received his JD from Northwestern University School of Law, cum laude. He also has an MBA from Northwestern's. With that, here's my interview with Ryan Phelan, an attorney with Marshall Gerstein. Hope you enjoy it. Ryan Phelan, thank you very much for talking to me today.
Speaker 2:Thank you, tom, glad to be here.
Speaker 1:Good, we're talking about the patent eligibility restoration bill, so what can you tell us about it? What problems is it trying to fix? What are its goals?
Speaker 2:Sure, this is a bill that was entered by Senators Tillerson and Kuhn, and it's trying to fix the patent eligibility in the United States that patent attorneys such as myself figure out on a day-to-day basis, because the law in this area has gotten a little abstract, so to speak.
Speaker 1:Well, what do you mean by that? What's the current state of patent eligibility law and how does it impact innovation and economic growth?
Speaker 2:patent eligibility law and how does it impact innovation and economic growth? Sure, so there's some history there. It could take us all the way back to around the mid-90s, when a Supreme Court decision State Street Bank came out, stating that highly functional claims and I'm a computer scientist so I tend to think in those terms but highly functional claims terms, but highly functional claims are in fact patentable which kicked off a decade or 15 years or so, with inventors and patent attorneys and patent agents writing very functional claims to cover computing technology. And this makes sense because it was in the day and age where personal computers are starting to emerge and there were quite a number of inventions dealing with computing technology and doing old things on computers or new things on computers, and so the law in that area started to develop.
Speaker 2:And then I'll fast forward to 2014, where two cases came out. One was Mayo and the other Alice. Alice seems to get the most attention, especially in my field, computer arts where the Alice case was the bookend to the State Street Bank case, and the Alice decision swung the pendulum back with respect to patent eligibility, basically carving out a few judicial exceptions and naming judicial exceptions where the Supreme Court started to recognize, or at least, in that case, recognize that the claims at issue were covering traditional ways that banks performed banking operations. In that particular case it was a third-party mediation for transfers of money and the Supreme Court basically said that it was an abstract idea, which is a type of judicial exception, and found and provided an opinion that those types of abstract ideals were no longer patent eligible under Section 101. And that opened the door for invalidating patents under a Section 101 patent eligibility in the US.
Speaker 1:So just for people who aren't patent attorneys, what's the difference between?
Speaker 2:abstract ideas and other ideas. Sure, the Section 101 is a section in the United States Code, title 35, which deals with patents, and that section enumerates four categories of inventions process, machine, article, manufacturer or composition of matter and our composition thereof. One of those four things. And unless your invention fits into one of those four broad categories, then your invention is said to be ineligible. And what the courts have done over the years have created some judicial exceptions. So they're created by the courts and not by statute, not by Congress, and they've said that certain things can't be patent eligible, one of which, a simple example, is a mathematical equation. Einstein's E equals MC squared is a mathematical equation. Einstein's E equals MC squared is a good example because that's a natural law expressed with the mathematical equation. So if Einstein had wanted to patent that formula, he could not, because it's something that occurs naturally, it's a formula that exists in physics. Other things, such as naturally occurring things found in nature, can also not be patented because they're simply not new, they're not inventions, they already exist. That kind of thinking between the categories of inventions and the judicial exceptions is what is at play here.
Speaker 2:What about Mayo? So Alice came second, mayo came first. They are different, typically computer science, electrical engineer practitioners will focus on Alice, because that case dealt with a hedge fund type activity in the computing space with computer components. And then Mayo was a biotech related case. That came first and they happened one after the other and the Supreme Court was defining these judicial exceptions further, one in the biotech space and the other in the computing space, and they more or less say similar things with respect to patent eligibility and from that date, around 2014, they made Section 101 a very hot area of the law. Before that it was a very hot area of the law. Before that it was a very sleepy area of the law.
Speaker 1:To just elaborate on that a little bit as you go into what the patent eligibility restoration bill does. So just, you've described it, but what problem is it trying to solve? And then what are the benefits for inventors and businesses, et cetera?
Speaker 2:Sure. The problem that it's trying to solve is I guess you could define it in a couple of ways. First, it's a lack of judicial insight or additional cases coming down from the Supreme Court. There's been many cases that have been requested that the Supreme Court take up on cert, but the Supreme Court has denied those cases since that 2014 date. The Supreme Court has not taken up any substantial patent eligibility case up since 2014. So we're 10 years out from that case and there's been a lot of frustration, at least on some constituent side, regarding when can we have more clarity with respect to what happened in 2014,. Respect to patent eligibility and the current rule of the Supreme Court case cannot change unless the Supreme Court provides additional guidance through additional decisions either changing it or adding to it, or if Congress steps in and basically changes it. And this bill, to answer your ultimate question, is designed to do just that to sweep away the judicial exceptions and start afresh or anew with Section 101, patent eligibility. It's like hitting the restart button for this area of the law.
Speaker 1:Okay. So from a very ground level perspective, this is like an inventor or a business they're either not clear on what can be patented in some cases, or they want to challenge something. Is that kind of the gist of it? We've got an invention here, but is it eligible? Is that sort of a ground level?
Speaker 2:Yeah, that's right. So one of the questions that we think about as patent attorneys when we're reviewing a new invention is how can we satisfy patent eligibility? The 2014 Alice decision and Mayo decision, depending on where that technology sits whether it's computer or bio will come to mind immediately, because it's one of the hurdles that has to be overcome in order for the patent to issue.
Speaker 1:Gotcha Okay. Do you see any potential drawbacks or potential unintended consequences of the bill?
Speaker 2:So the bill is written in a way where it captures some of the judicial exceptions. In fact they call them eligibility exclusions and they list five different eligibility exclusions. The first three of them are directed towards and this is my own categorization, not in the bill itself, but it's primarily directed towards computer-related inventions. These are exceptions A through C and these the text of the proposed bill. And then the last two, d and E, are directed towards biotech, and the text captures some of the traditional judicial exceptions, although they do weave in some questions, including and I'll just read you one of them One of the exceptions in the abstract idea.
Speaker 2:Space or the computer space is a process that is substantially economic, financial, business, social, cultural or artistic, even though not less than one step in the process refers to a machine or manufacturer, is not patent eligible. So that language is interesting because it uses the word substantially, and so anytime you have in um statutory text and ambiguous word like substantially, what does that mean? And um, that can be debated. So the text does try to clarify that later on. That basically stating that if it's something that can be performed wholly, an abstract idea has to be performed solely in the human mind and other points of clarification. But again, even that level of text can be ambiguous and subject to debate With respect to negatives of the text. The real question is this text, even if passed and right now it hasn't been passed by either Senate nor the House, but even if it was would this provide sufficient clarity or would we be arguing about the same thing again, going forward?
Speaker 1:Yeah, whenever I hear words like substantial or reasonable, it just feels like whoever's drafting something is like yeah, lawyers and judges can figure that out.
Speaker 2:That's exactly right. Yeah, I think. Perhaps I'm guessing, you know, maybe there's some kind of compromise language that was put in there and, substantially, is certainly one of those, and so perhaps, in one sense, it could create more questions than it alleviates, but I would say that it does provide much more clarity than what the current Supreme Court case leaves us with. Since the Supreme Court case has come out, there's been judges across the country trying to figure out the scope of 101.
Speaker 2:The Patent Office has put out several guidances which are not law. They try to provide guidance to the patent examination court so they can use it practically to examine patents and allow patents. This happened at least twice generally One time in once in early 2019, and then a second time an update later in 2019. And it recently came out with an AI eligibility guidance for artificial intelligence-related inventions. And it's always the same thing.
Speaker 2:The USPTO, the US Patent Office, is constrained because they're not a lawmaking body and so they have to use existing law, which the problem still exists, given that we have to go back to the 2014 to get that Supreme Court decision. So you're trying to make a practical solution but at the same time, it doesn't have any legal force of law behind it, but we use practitioners such as myself, examiners, courts, everyone in the US practice of law for this particular Section 101, with a lot of ambiguity as to what in fact fact is patent eligible. And that's the thrust of the bill it's hoping to restore clarity and get the patent system back on track with respect to patent eligibility.
Speaker 1:Okay. Do you think some of this is happening because technology is advancing so quickly?
Speaker 2:You could say that in one sense. Certainly there are technologies that the Patent Office is focusing on, ai being one of them. They've put out, like I mentioned, the AI eligibility guidance recently this year in track, and AI is certainly advancing rapidly. There's other technologies advancing rapidly, but Section 101 covers it is intended to be agnostic with respect to technologies it's supposed to. If your invention fits into one of those four buckets that I had mentioned earlier, then you should be subject to a patent.
Speaker 2:I would say that the Alice case with respect to subject matter eligibility, became the tail that wagged the dog scenario where I don't think before the courts nor Congress expected judicial exceptions become such a large problem or a large consideration, but it has. This bill is designed to put Section 101 back to where it needs to be and, on that last point, many commentators, many attorneys, including myself, have begun to think that Section 101 has started to bleed into the other sections of Title 35, including obviousness, where some courts and some decisions taken from the Alice decision have started to have overlaps between 101 and these other areas of the law 102, which is novelty, and 103, which is not obviousness, where some feel that they should be separate because they're separate areas of the law all I gotcha Okay.
Speaker 1:So it's less about technological advances than it is about the Alice decision through things in a different direction.
Speaker 2:Yes, and that doesn't mean to. It certainly has an impact on technological advances, but all patents it'll have an impact on, some more than others. Certainly those in the computer space and in the biotechnology space are targeted or impacted more. Mechanical inventions tend to be less, but there has been some cases, like the American axle case, where mechanical invention was at issue with respect to patent eligibility.
Speaker 1:Okay, how do you think courts would receive this?
Speaker 2:I think the courts would receive it as a welcomed area of the wall. It would give them something that's more bright-lined than the Alice decision, certainly, which is where they start in the more recent federal circuit decisions that have come after that. So the text is pretty sharp. Decisions that have come after that. So the text is pretty sharp. It's other than the portions that I mentioned, such as substantially using those types of words. It's compact and it allows court to look at a small statutory set of terms and figure out whether something's patent eligible. So I think it'll be welcomed by the court. Certainly there'll be court decisions from the federal circuit that will define what these terms mean and give some kind of. Maybe after we build up 10 cases, 20 cases, 30 cases, you'll get a sense of what that means and examples that come from the cases and that'll take time, but I think the district courts will look at it as a welcome tool.
Speaker 1:Okay, you think the bill has a chance.
Speaker 2:I think it may. This has been tried over the years to introduce a bill that will address patent eligibility, and each time it's been recycled or updated and it hasn't been passed. So I think there's just and this is just my own feeling it seems like everyone's waiting for the Supreme Court to take up a decision and add clarity so that Congress doesn't have to act. Perhaps the courts can figure this out for themselves, but it's been such. It's been a decade and that has not happened, and perhaps the Supreme Court is indicating that it doesn't want to handle this and it's punning to Congress.
Speaker 1:Yeah, and, as you said, it will take a while before if it passes. When it passes, it'll take a while before its effects to be felt in the patent system, because you said courts are going to have to rule and things like that.
Speaker 2:Yeah, that's right. Even if this passed today or tomorrow, then new decisions would pick it up and we would see those decisions play out within the probably immediately many, many decisions pending right now where subject matter eligibility is at issue, many, many decisions pending right now where subject matter eligibility is at issue I imagine those current cases. There'd be motion practice based on the new law and it would take time for the courts to rule on those. Within a year's time we probably have, at least at the district court level, some decisions and then a few year or two after that we'd see some stuff from the federal circuit.
Speaker 1:So if I'm a client of yours and I've got an invention, I've got a business and we've invented something, what guidance would you give me in light of Alice and Mayo and in light of this potential new law?
Speaker 2:Yeah, absolutely so. If we were filing, let's say, a computer-related invention, I would look at or show you the three abstract idea type exceptions, eligibility exceptions that are in the statute, the first three. The first one is, and going on, our E equals MC squared analogy. It says you can't patent a mathematical formula that is not part of the claimed invention in a category described in section A, and so the law carves out these specific exclusions for these judicial exceptions and most of these, the three or the traditional judicial exceptions recognized by the courts or created by the courts. So they're just, they're putting in those well-known exclusions, eligibility exclusions, into the statute itself and it basically saying these are the only ones that we're going to recognize, and it tries to define shorter what those are and what those aren't. If I was advising you as an inventor, we would go through these kind of one by one and make sure that we're not claiming any of these things in a way that says that we can.
Speaker 1:Gotcha All right. Good, ryan Phelan, thank you very much for talking with me about this today.
Speaker 2:Happy to be here. Tom, Appreciate it.
Speaker 1:That concludes this episode of the Emerging Litigation Podcast, a co production of HB Litigation, Critical Legal Content, VLEX Fastcase and our friends at Lostry Media. I'm Tom Hagee, your host, which would explain why I'm talking. Please feel free to reach out to me if you have ideas for a future episode and don't hesitate to share this with clients, colleagues, friends, animals you may have left at home, teenagers you irresponsibly left unsupervised, and certain classifications of fruits and vegetables, and if you feel so moved, please give us a rating. Those always help. Thank you for listening.