Giachino (00:05.0019 - 00:23.0300)
Welcome to IP Protection Matters. I'm your host, Renee Giachino. Today we are joined by Michael Rosen, a nonresident senior fellow at the American Enterprise Institute. We will be talking today about restoring balance to America's patent system. Michael, thank you so much for joining me. It's a pleasure to have you on the program.
Rosen (00:23.0159 - 00:26.0370)
Thank you so much for having me, Renee. It's a pleasure to be here.
Giachino (00:26.0620 - 00:38.0784)
A lot of the work that you do goes to talking about, writing about, exploring and researching the importance of reliable patent rights. Talk to us about that.
Rosen (00:39.0014 - 02:26.0059)
Absolutely. At its fundamental core, as I'm sure your listeners know, a patent is a balancing act. It's an agreement. It's a deal, a bargain that inventors make with the public. In exchange for developing and coming up with lifesaving, life-enhancing inventions and other types of innovation, inventors are entitled to a limited monopoly for a limited period of time. It's a constant balance between what is the appropriate amount of time to reward inventors with and what are the appropriate ways to reward those inventions, while also ensuring that the disclosure of these inventions is adequate, clear, comprehensive, elaborate, and that the rights of the public are also respected.
We've gone back and forth over this since the founding of the nation as patents are alluded to in the Constitution. A big change happened almost 15 years ago with the America Invents Act. I'm happy to get into that and what efforts are being made to try to reverse some of the downsides of that dramatic piece of legislation. But suffice it to say that over the years, over the decades, patent law has undergone some substantial changes. Whether it's judges, lawyers, litigants, companies, individual garage inventors, everyone has a stake in this system and everyone is trying to make it better in one way or another.
Giachino (02:26.0608 - 03:23.0289)
Let's talk about an effort underway in Congress time and time again that is led by members on both sides of the aisle. We can talk about the dynamic duo of Senators Chris Coons and Thom Tillis. They have sought to push legislative patent reform efforts like you said in an effort to bring about substantial changes or to keep in place a lot of what the American Invents Act - the law - had already put into place.
Two recent efforts that we've seen come up again and again are the Patent Eligibility and Restoration Act, commonly known as PERA, and the Promoting and Respecting Economically Vital American Innovation Leadership Act (PREVAIL). Can you give us an update on the status of these measures? I know they've been before Congress in the past. Where do those measures sit right now?
Rosen (03:23.0619 - 06:00.0829)
In this respect, Renee, I feel like we're playing or rewatching the movie Groundhog Day over and over again, which itself is an iterative movie that goes around and around in circles and relives some of the same experiences over and over. Both of the pieces of legislation that you mentioned, both PERA and PREVAIL, have been introduced in Congress multiple times over the years. By the time I got around in June of 2019 to testifying in front of the Senate Judiciary Committee about PERA, about patent eligibility reform, it had already felt like this bill had gone through the wringer and had been put forward and pulled back multiple times.
That was six years ago. Since then, both PERA and PREVAIL have been on a bit of a roller coaster going back and forth until they can finally secure passage, if that happens. I'm happy to get into each of them separately and sort of what the measures lay out in greater detail. At a very high level, there's been a push and pull between different interest groups over these matters. Both the Patent Eligibility Restoration Act (PERA) and PREVAIL seek to tilt the scale back toward stronger patent rights, meaning allowing inventors, companies, individuals and garage tinkerers to enforce their inventions and their patents against others. Whereas the pushback against these measures has come typically from companies, most often in the high-tech sector. Meaning computer hardware and software companies that more often than not find themselves on the receiving end of patent litigation rather than on the giving end of patent litigation.
So in that respect, this has been sort of a push and pull between these different forces. Up until now it's been fought to a stalemate, which is essentially a victory for those interest groups that do not want the legislation to pass. As far as I can tell, both Senator Coons and Senator Tillis are undeterred and continuing to push it forward.
Giachino (06:01.0140 - 06:09.0130)
Taking the temperature then of the current Congress, do you think these efforts to restore balance to America's patent system will prevail?
Rosen (06:09.0540 - 08:51.0651)
I wish I could say I was optimistic about that. I think the best I can say at this point is that I'm agnostic and probably tilting in more of a negative direction. As you may have seen back before the election in October of 2024, I wrote an article for AEI, where I'm a nonresident senior fellow, that examined the latest status of both PERA and PREVAIL. The title of the article was something like “Legislative Patent Reform Efforts Come Up Short Yet Again.” This was another example of how the legislation didn't quite make it. This was in October. At that point, Congress was focused on the election and getting out the vote. There wasn't much appetite for it. However, there was some amount of minor optimism after the election that either in the lame duck session that followed the election in November or next year that there actually could be some sort of momentum to signing these measures.
Since then, as you, your listeners and anyone who's opened a newspaper knows, Congress and the President's attention have been on, shall we say, many other matters. Far too many matters to even count. Some of the everyday type of work that Congress engages in or would like to be able to engage in has, I guess you could say, fallen by the wayside, to be polite, with everything else that's going on in Washington. It’s my opinion, at least at this stage, that until things settle down somewhat, and that would probably include passing a budget and the tax cut package that the Administration wants to get through, it's hard to see anything getting on the radar at this point.
Now, you could always be surprised. You never know if something could come together under the radar, maybe particularly because nobody's noticing. They could try to move forward on some things. I just have to say, I am somewhere between agnostic and pessimistic as to whether this could get done at least in the first half of this year. Maybe toward the second half of the year there would be a little bit more energy and momentum toward it, but that's my sense right now.
Giachino (08:52.0252 - 09:21.0398)
Speaking of settling down, we know that under the Biden Administration there were repeated threats to invoke what's commonly referred to as the march-in rights under the 1983 Bayh-Dole Act in order to unilaterally unwind these patent licensing agreements with companies that have developed critical medicines, so to speak. Have those threats dissipated with the current administration and Congress? Has the appetite waned there?
Rosen (09:22.0018 - 12:29.0700)
I think the answer there is yes, Renee, that the appetite has waned. This was something of a push in the Biden Administration. It didn't end up, thankfully, moving forward to any point where that guidance would have been issued or the administration would actually start enforcing the march-in rights in the way that they had threatened to do. There was a brief moment after Trump was elected and when he announced his candidate, his nominee for Health and Human Services, Robert F. Kennedy Jr., that we thought there might indeed be a sort of Republican MAGA or MAHA (Make America Healthy Again) type version of some sort of march-in rights that would be used in a way similar to the way that the Biden Administration was planning to use those rights. That grew out of some statements that RFK made in the past about march-in rights and Bayh-Dole and certainly more generally speaking had to do with his fairly open overt hostility toward pharmaceutical companies.
But what ended up happening was interesting. In order to secure his nomination, RFK Jr., not in public, but in a private session with Senator Elizabeth Warren of Massachusetts, committed that he would not use march-in in the way that the Biden Administration had been preparing to in order to unwind those patent licensing agreements. He said that to someone by the way, Senator Warren, who was very sympathetic toward doing that and he committed to not doing it. Shortly thereafter, I actually wrote an article for the Washington Examiner and I think the title of it was something like “MAHA’s War on Pharma.”
There were some other aspects where I think that the movement and RFK in particular were hostile to the pharmaceutical industry. I actually struggled to find advocates for the industry, whether industry groups, specific companies or anyone who would actually go on the record and be critical of what RFK and HHS were actually doing. I thought that was interesting from a patent rights perspective. The sense I got was that partly it was a little bit defensive. Let's wait and see. Let's not poke the bear. But I think partly it was genuinely born out of a feeling that these are commitments that the nominee made. I don't want to say [it was said] necessarily under oath, but in a solemn commitment in written question responses to a U.S. Senator. They were willing to take him at his word. So for now, I would say I think that issue is dead in the water, hopefully. But you just never know with this Administration and with this Secretary what could change at any moment.
Giachino (12:30.0030 - 12:56.0143)
We are talking with Michael Rosen, nonresident senior fellow at the American Enterprise Institute. Michael, we've talked about efforts of the executive branch and the legislative branch. Let's turn our attention for a moment to the third branch of government. Can you take us back to 2014 and that seminal Supreme Court decision that ultimately threw the patent world into tumult? Tell us about that case.
Rosen (12:57.0000 - 14:33.0000)
Absolutely. What you're referring to there was a landmark Supreme Court case called Alice Corp v. CLS Bank International. This was a case involving precisely the issue we started the podcast with - a patent eligibility issue. The basic question is what types of inventions are even eligible for patent protection.
The classic example is that you discover a natural law or a mathematical principle, something like the sum of the squares of the sides of a right triangle is equal to the square of the hypotenuse. As a matter of policy and basic justice, you're not allowed to patent the Pythagorean theorem. You're not allowed to patent discoveries and you're not allowed to patent natural laws or naturally occurring phenomena. Instead, what you're allowed to patent is something inventive or something where a human being has taken a step. I say human being, but that alone might be a separate issue that's going before the courts in terms of whether AI can invent. To go off on a slight tangent. This is the subject of the book that I published back in March on AI and public policy.
But for the moment, assuming that whether it's a human or a robot, there has to be an inventive step that the inventor has taken that doesn't foreclose the entirety of something that is naturally occurring. That principle has been well established.
Rosen (14:33.0153 - 17:14.0449)
But what wasn’t well established was exactly how that principle should be applied. In 2014, the courts, specifically the Supreme Court in a unanimous opinion written by Justice Thomas, decided to essentially tighten the reins on patent eligibility. It made it such that it's more difficult now and actually a lot more ambiguous as to what was and wasn't eligible for patent protection. The first items on the chopping block, or the main items on the chopping block, were what are called business method patents. This is basically taking ways of doing something, some sort of business activity, like the specific one at issue in Alice involved the intermediation of third-party risk in different financial transactions that had been done before by hand and computerizing it. Taking something, a principle that people had been doing for a while but then turning it into a technologically improved way of doing it on a computer. That no longer was eligible for patent protection.
In addition to that, a number of different software type patents were also held to be ineligible in the wake of the opinion. Essentially what it came down to is if you're trying to patent something that is too abstract, too out there, and too broad in the sense of foreclosing something that should be available to others, unless you can show that you have something significantly more than just that abstract principle, you cannot get a patent.
In theory and on paper, that makes sense. It sounds logical. But as it's been interpreted over the years by different courts and by the patent office, it's proven to be very tricky. While it has wiped out some unworthy patents, including ones on business methods that maybe are a little bit shaky, it has really thrown into tumult the idea of software patenting. It puts the U.S., by the way, out of sync with the rest of the world in Europe, Asia and other important patent offices which do not impose such draconian limitations on eligibility. That was 11 years ago now. That's what Senator Coons and Senator Tillis are trying to change with PERA. But again, we're in a bit of a of a holding pattern on that.
Giachino (17:15.0020 - 17:53.0069)
That 2014 landmark decision, as you mentioned in Justice Thomas's opinion, tightens the reins. Let's talk about tightening the reins in a different way. The Patent Trial and Appeals Board, PTAB as it's commonly referred to, as I understand it was designed as a forum for relatively cheap, fast and easy invalidation of patents that shouldn't have been issued in the first place. Things like what you just talked about that should not be patented. But the question is whether it has it gone too far in its mission and design? Is it being abused and does PTAB need reining in?
Rosen (17:53.0260 - 21:03.0432)
I think this one is a little bit more challenging, and it's not so much my opinion that PTAB itself has acted, judged or ruled in ways that are inappropriate or improper. They are working within the guidelines that are given to them by Congress and that are formulated for them by the director when appropriate or when necessary to interpret. The guidelines and court rulings that they have to adhere to are those that the Federal Circuit and other courts have issued.
But I do think that the PREVAIL Act offers a few important changes that would actually really benefit the system as a whole and would help to bring things back into balance in a way that they just haven't been in a while. And what I'm referred to specifically with the PREVAIL Act is the notion of harmonizing the burden of proof between the PTAB and the district courts. What I mean by that is that in district court if you have a claim that a patent should be rendered invalid, the challenging party has to substantiate that claim by clear and convincing evidence, which is a fairly high burden to meet.
The reason for having such a high burden is that patents are issued by the Patent Office with a presumption of validity, meaning if a patent examiner has gone through the patent, has considered it against the prior art and against what came before it, and has decided that the patent claims something that is novel and not obvious, then that patent should be entitled to a certain amount of deference. That's what district courts do. But in the PTAB under an IPR proceeding and in other related proceedings, the PTAB only has to find that a patent is invalid by a preponderance of the evidence, which is 50% plus a modicum. Something to tilt the seesaw toward the other side.
The very fact that there is this dichotomy, this difference in the burden, can be problematic. My preference would be to see that burden harmonized between the two and to use a clear and convincing standard in the PTAB as well. There's also other issues about standing and repetitive challenges where different companies or challengers bring the same or very similar kind of patent challenges that they've previously done or that others have done, which is very taxing on the PTAB and on the parties. So I think there are a few worthy measures in the PREVAIL Act that in my view would restore a certain amount of balance.
Giachino (21:03.0842 - 21:23.0038)
Our guest has been Michael Rosen, nonresident senior fellow at the American Enterprise Institute. Michael, we thank you so much for joining us today to talk about restoring balance to America's patent system. I'm going to let you have the last words. If you would just share with us your final parting thoughts on why IP protection matters.
Rosen (21:23.0519 - 23:06.0579)
Thank you again so much for having me on, Renee. As I said at the outset, the notion of patent rights as this fundamental bargain between the public and between inventors inherently means that just like with any bargain, deal or contract, there's going to be give and take over time. There’s no perfect way to balance any of this. There are multiple different approaches and perspectives that need to be listened to, heard out, teased out and developed properly. There will never be a perfect system, but we can try. We in fact need to try to make it as good, as fair and as balanced as we possibly can.
The reason for that is that the United States in particular is just a hotbed of innovation and has been over the entirety of its 249 years and counting of existence. Since World War II, there is nowhere in the world that has been as innovative and as productive as the United States. We can only be as innovative as our system allows us to be. There are limitations inherently on how we can develop and how we can build and invent. We need to make sure policymakers, lawyers, judges, patent examiners and everyday individuals do whatever we can to keep this tremendously important engine of economic growth burning. That's my hope. That's my wish and frankly that's my expectation. I don't think it's too much to expect.
Giachino (23:06.0989 - 23:18.0390)
Excellent conversation and excellent interview. Thank you so much for your time today, Michael. We appreciate it. Our guest has been Michael Rosen, nonresident senior fellow at the American Enterprise Institute. Thank you for tuning in.