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A Simple Fix to §101 with Arbitration

October 03, 2019
Post by Kirk M. Hartung

This summer’s decision by the Federal Circuit in Athena Diagnostics, Inc. v. Mayo Collaborative Services, LLC, highlights the consensus that something needs to be done regarding the current state of the law of patent eligibility under 35 U.S.C §101. In particular, the judicially created exceptions to patentability under 101 are laws of nature, natural phenomena, and abstract ideas. The last, abstract ideas, has been the most troublesome to courts, patent practitioners, inventors, and patent owners.  The 2014 Supreme Court decision in Alice Corp. v. CLS Bank International set forth a two part test for analyzing patent claims for eligibility: (1) determine whether the claims are directed to an abstract idea, and if so, (2) determine whether the claims involve an “inventive concept.”  However, “abstract idea” has not been defined by the courts or by Congress.

In Athena, the en banc Court issued eight opinions, including the majority, three concurrences, and four dissents, all of which suggested that §101 needs fixing by Congress or the Supreme Court.  While these opinions acknowledge the need to follow Supreme Court precedent on patent eligibility, they also show frustration in the inconsistent precedent which has led to non-patentability of inventions which fit the objectives of the patent statutes. 

In the majority opinion, Judge Lourie noted that this was not the first time that the Federal Circuit has been concerned about the dilemma of patent eligibility under §101.  The first concurring opinion by Judge Hughes also expressed that the multiple opinions of this case are illustrative of how fraught the issue of 101 eligibility is.  Judge Dyke, in the second concurring opinion also noted the tension between the various Supreme Court decisions on §101. 

In the third Athena concurring opinion,  Judge Chen recognized that “Congress plainly contemplated that the patent laws would be given wide scope  Even though §101 provides that whoever invents or discovers a new or useful process, manufacture, machine, or composition of matter is entitled to a patent, Judge Chen cites the 2013 Supreme Court decision in Association for Molecular Pathology v. Myriad Genetics, Inc,  as proclaiming that “groundbreaking, innovative, or even brilliant discovery does not by itself satisfy the §101 inquiry.”   Also, Judge Chen expresses concern that the different analytical approaches taken by the Supreme Court on patent eligibility are difficult to reconcile and compete against one another. Judge Chen states that practical application of science and technology should be patentable.

Judge Moore, in the first dissent in Athena, provided a thorough and detailed discussion of the medical diagnostic industry and its importance to healthcare, then noted that since the Supreme Court’s 2012 decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., the Federal Circuit has never found one of these medical inventions eligible for patent protection. She also noted that jurisprudence has ignored the explicit instruction from Congress in the patent statute that discoveries can be patentable. 

In the second dissenting opinion of Athena, Judge Newman explained that the patent system provides the economic foundation for the cycle of experimental study, clinical evaluation and proof, and implementation in commerce for new medical diagnostic procedures.  She also noted the legislative history of the 1952 Patent Act, which confirmed that Congress intended patentable subject matter to include “anything under the sun created by man.”  The legislative intent of the patent system is to provide an incentive to advance useful technologies by enabling inventors to benefit economically.  Judge Newman concluded that when an entire industry and various scholars criticize this §101 situation, judicial attention is warranted. 

Judge Stoll, in the third dissent, stated that the current test for patent eligibility undermines the constitutional rationale for the patent system, that is, promoting the progress of science and the useful arts. 

In the last dissent, Judge O’Malley states that the Supreme Court in Alice Corp.requires an “inventive concept” under §101, even though Congress removed this concept in the 1952 Patent Act.  He therefore encourages Congress to clarify what it said 67 years ago when it eliminated the “invention” requirement, which was unworkable then and is not workable now.

So, with the ongoing concerns about §101 and eligibility, what should be done, and who should do it?  The Supreme Court appears to be hesitant, or unwilling, to take a case on certiorari to clarify the matter.  Congress has been working on proposed bills, and holding hearings, which potentially could be voted into law, including an abrogation of the Supreme Court precedent which has led to the current 101 mess.  But even non-partisan Congressional action usually is slow.  Are there any other options that can bring a quicker and clearer resolution to the §101 problem? 

YES!  Arbitration provides a simple solution to §101, and specifically to the abstract idea exception to patentability that is the primary cause of the current unworkable state of the law.

On January 8, 2019, the U.S. Supreme Court decided Henry Schein, Inc. v. Archer & White, Inc., a case involving the Federal Arbitration Act.  The Arbitration Act, signed into law in 1925, allows parties to agree to submit disputes to arbitration, rather than litigating in court.  Sometimes parties disagree as to whether an arbitration clause in a contract applies to a particular dispute. Even when the contract delegates this initial threshold question to the arbitrator, some federal courts apply a judicially created exception and decide themselves if the argument that the arbitration clause applies is "wholly groundless," so as to prevent frivolous attempts to transfer disputes from courts to arbitration.

In Schein, the District Court ruled that the argument for arbitration was wholly groundless and denied a motion to compel arbitration. The Fifth Circuit Court of Appeals affirmed. With the Circuit Courts split on this "wholly groundless" exception, the Supreme Court granted certiorari to decide the question of whether the exception is consistent with the Arbitration Act. The Supreme Court reasoned that Congress designed the Act in a specific way, and it is not the Court's role to redesign the statute. Noting that the Act contains no "wholly groundless" exception, the Court explained that they could not engraft their own exceptions onto the statutory text. More specifically, the Court stated, "We may not rewrite the statute simply to accommodate that policy concern" of preventing frivolous motions to compel arbitration.

The Federal Circuit can adopt the Supreme Court’s reasoning from Schein regarding judicially created exceptions to statutory acts of Congress, including the laws of nature, natural phenomena, and abstract idea exceptions to patentability under §101. Since there is no basis in the patent statutes for these exceptions, these exceptions appear to be an impermissible "redesign" of the statute, as in Schein. If so, it seems that at least the abstract idea exception that has been subject to much debate in recent years, should be dead.

In Schein, the Supreme Court concluded that public policy cannot supersede statutory text approved by Congress to support a non-statutory exception. The same rationale should apply to the patent statutes, and the judicially created exceptions of abstract ideas, laws of nature, natural phenomenon.  As recognized by the various opinions in Athena, the Federal Circuit is bound by Supreme Court precedent, including Schein, which provides a simple solution to the current issues surrounding §101 patent eligibility, by eliminating the judicially created exceptions to patentability.


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