As the U.S. Patent and Trade Office (USPTO) forges ahead with its Strategic Plan for 2022-2026, it has outlined the following proposed five central goals to realize its mission and vision of overseeing a fair and effective patent system:
- Promote innovation and global competitiveness;
- Promote efficient delivery of reliable intellectual property (IP) rights;
- Promote the protection of IP rights against threats;
- Allow innovation to positively impact the public; and
- Allow for impactful employee and customer interactions.
This strategic vision is crucial for small businesses that depend on a fair and effective framework to protect their intellectual property while competing globally. However, the proposed Patent Eligibility Restoration Act of 2023 (PERA) threatens to undermine these efforts by expanding patent eligibility in ways that could restrict innovation rather than promote it.
Deciphering PERA
Against this backdrop, Congress is considering measures that would threaten USPTO’s core mission as well is its Strategic Plan. PERA would expand the scope of inventions that could receive patent protection. Current patent law excludes three broad categories from patentability: physical phenomena, abstract ideas, and the laws of nature. However, a legal precedent has been established that using software and computers for routine company operations does not qualify as patentable. PERA, §2 (E)(ii), would undo this precedent and provide that “any process that cannot be practically performed without the use of machine (including a computer) or manufacture shall be eligible for patent coverage.”
PERA, if passed, would come at the cost of stifling innovative activity in software-driven products and services. It would do this by prioritizing broader IP protection of processes, which could lead to the resurgence of business method patents (BMPs). The failed BMP experiment has already been dealt with by Congress, the courts, and the USPTO, necessitating the creation of a post-grant review process specifically to invalidate improperly granted BMPs.
Historical Lessons from Failed Policies
Broad concepts like completing a transaction with a business online were never intended to receive patent protection and should remain unpatentable as an abstract idea. For example, under our patent system’s current subject matter eligibility regime, a patent applicant must do more than claim a method performed by human thought alone, even if that claim qualifies that the method is computer-assisted. Such claims would allow BMP holders to monopolize common business practices, ensuring their dominant position and control of multiple market sectors. This analysis is particularly important for businesses to challenge BMPs through the courts or the USPTO’s Patent Trial and Appeal Board (PTAB) post-grant review process. An example is American Needle, Inc.’s patent covering “a method for facilitating sale of objects…over the Internet…,” which was invalidated by a court because it did not possess a true “inventive concept.” As a result, companies do not have to worry about negotiating a license from American Needle, Inc., to conduct basic over-the-internet sales to their customers. Under PERA, American Needle, Inc., would likely be able to continue enforcing its patent against any company that operated in a manner conflicting with the far-reaching scope of its BMP.
We have collectively learned a crucial lesson from the past: BMPs should never have received patent protection. It is imperative that the current legal standard, which disallows their issuance, remains in effect. The small business members of the App Association have also experienced assertions of overly broad patents, even under the legal standard that generally bars BMPs. The last thing they, or any startup, want is to see another door opened for the sue-and-settle business model that comes with poorly defined patents and tends to single out small businesses.
In Conclusion
The creation of BMPs have a significant negative effect on our economy. As we formulate an IP plan to maximize investment and productivity over the next several years, it is crucial that policymakers learn from prior mistakes. It is essential that Congress safeguards the process of innovation by rejecting PERA.