Along with Michael, I was pleased that the Court has clearly dealt a serious blow to the “machine-or-transformation” test of eligibility suggested by the Federal Circuit as an exclusive test in Bilski. (I have argued that it is neither a necessary nor a sufficient test, but only the result of applying a different test to cases before the information age.) The claims at issue in Prometheus was held invalid. It contemplated physical administration of physical entities (synthetic drugs) for the purpose of (chemically) transforming physical entities (humans). This “method of treatment” claim (applying a discovered correlation between blood levels of synthetic drug metabolites and safety and efficacy) recited specific structures (the drugs, which were not “machines” but “compositions of matter”) and the claim as a whole achieved physical transformations.

I also was pleased that the Court extended its Bilski (really Flook) approach to the “law of nature” category of excluded subject matter. Because the case did not address an “abstract idea,” the Court did not base its actual holding on “abstractness” (or vague breadth of the claim) but rather on the lack of any meaningful addition to the “law of nature” by adding “‘conventional or obvious’” “’[pre]-solution activity’” to the claim steps or by “’”limit[ing] the use of the [discovery] to a particular technological environment.”’” In doing so, the Court reinforced that a physical application of a law of nature is not enough – “a process that focuses upon the use of a natural law [to be eligible must] also contain other elements or a combination of elements, sometimes referred to as an ‘inventive concept,’ sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the natural law itself.”

Specifically, the claim at issue was found not to have “additional features that provide practical assurance that the process is more than a drafting effort designed to monopolize the law of nature itself.” Since such drafting efforts will always limit the scope of application of the law of nature, the Court here suggests that something more is going on than just a concern for overbreadth (the point that Michael “backtracked” to in his terrific article with Mark Lemley, Ted Sichelman, and Polk Wagner – and to which my own article responds). The Court appears to treat the claims as “determine and infer” claims, notwithstanding the prior physical administration step, and to hold that such claims add nothing to the natural discovery. (Here, the Court could have usefully cited to Kevin Collins’ brief in Bilski.) “Nor could Archimedes have secured a patent for his famous principle of flotation by claiming a process consisting of simply telling boat builders to refer to that principle in order to determine whether an object will float. What else is there in the claims before us? The process that each claim recites tells doctors interested in the subject about the correlations that the researchers discovered…. And since they are steps that must be taken in order to apply the laws in question, the effect is simply to tell doctors to apply the law somehow when treating their patients.” In reaching this result, Justice Breyer read the “administering” a drug limitation to be nothing more than an identification of the relevant “audience” to hear of the discovered correlation, or as an instruction to do what was already being done in the world. Justice Breyer specifically addressed the argument that the combination of steps was the invention, but apparently rejected it based on the necessity of using the steps in any practical application. “[T]o consider the three steps as an ordered combination adds nothing to the laws of nature that is not already present when the steps are considered separately…. Anyone who wants to make use of these laws must first administer a thiopurine drug and measure the resulting metabolite concentrations, and so the combination amounts to nothing significantly more than an instruction to doctors to apply the applicable laws when treating their patients.” Of course, “administering a drug” does amount to more than an instruction to do or communication of information to an audience that may already do so, but Justice Breyer treats this as insignificant (because conventional to do so).

Given the Court’s approach, Michael cuts to the heart of the matter – the decision effectively holds that “a key way to tell whether a claim is unpatentable subject matter is to see how novel and nonobvious it is in its application of the natural principle.” And that is precisely what I argued to the Court (substituting “creativity” for “nonobviousness”) in the brief that the Court did not cite. From the Summary of Argument: “Consistent with the Constitution, the Patent Act since 1790 has been construed to require that there be creativity in the application of any scientific, natural, or abstract discovery in order for a patent eligible ‘invention’ to exist.” Even as an academic, I can say it’s better to win than to be cited. But like Michael, I really would have liked both. And had the Court cited my brief, it might have gone further to supply a theory of sufficient creativity for determining significance (or conventionality) of limitations along the lines that I had also suggested (based on the case law) – “analogousness” of the claimed process to the discovery (that must be treated for eligibility as if it were prior art).

Unfortunately, the Court’s decision will perpetuate confusion. Having adopted a creativity requirement (i.e., non-conventional limitations) for when an invention applying an excluded law of nature is eligible, the Court then sought to justify its new requirement by reverting to overbreadth concerns. By finding the claim limitations (that also limit the scope of application of the discovery) to be insignificant, the Court indicated that the claim was effectively as broad as the discovery itself. (Michael makes the point that this was therefore an easy case, although I don’t agree on this point, without himself accepting that the limitations were in fact insignificant.) The Court then justifies the exclusion for laws of nature on “a concern that patent law not inhibit further discovery by improperly tying up the future use of laws of nature.”

But there is no necessary reason why this concern should be limited to claims that effectively cover the same scope of application as the discovery. More limited, uncreative claims applying an ineligible discovery may also inhibit further discovery, including future use of a law of nature, without conveying any meaningful public benefit. It is either the creativity of the application of the law of nature alone that should justify the claim’s eligibility (which I have argued was the rule adopted in Dolbear, the famous telephone case, which held that a sufficiently creative invention is eligible whatever its scope), or some comparison between the creativity and the scope of exclusion that justifies eligibility (which Michael believes is a question best left to Section 112 criteria).

The Court reinforces reliance on breadth concerns in one phrase in the opinion, qualifying its reliance on the “conventional” nature of the additional “steps” by adding the phrase that the steps are (must be?) “specified at a high level of generality.” Presumably, only such highly general limitations can make the claim appear to be (effectively) as broad as the law of nature it applies. This reinforces that Court’s apparent (sole?) concern for eligibility is the scope of the exclusions for laws of nature (and similarly broad applications), rather than the (lack of) creativity of the applications. But why should a conventional step (that is not creative in combination) convey eligibility merely because it has a narrower scope than an equally conventional (and uncreative) but broader step — and particularly if the Court has rejected artful claim drafting as a means to avoid the law of nature exclusion? In taking this approach, the Court implicitly rejected the argument (that I made in my brief) that the public domain of applications of a natural or abstract discovery should not be constricted piecemeal by many narrow (but uncreative) claimed applications, just as it should not be constricted wholesale by one broad (but uncreative) claim having highly general limits.

In sum, if subsequent courts (and the PTO) pay attention to this phrase, Michael may be relieved to find that the Court will have rendered ineligible only claims that contain both highly general and uncreative limitations applying excluded discoveries (or “easy cases” that will rarely arise). But the Court has simultaneously invited continuous assessment of the conventionality of each limitation before determining whether the scope of the claim should be considered effectively identical to that of the discovery itself. And in doing so, it will be hard to limit the effects of Prometheus to such cases.

The law has some provisions that went into effect immediately, see the effective dates, and have already generated controversy – such as the constitutional challenge to the legislative abolition of private qui tam false marking suits as an uncompensated taking of property in the lawsuit – see Brooks v. Dunlop Mfg. Co., Case No. C10-CV-04381 CRB (N.D. Cal.) – discussed here. Other provisions of the act will take some time to implement, requiring rulemaking for new procedures that may swamp the patent office’s current judicial capacity – see here. And the long-term changes to the patent law may need either immediate legislative revision or creative interpretations that must be upheld by the courts – see my post here.

Nevertheless, the new law moves the U.S. from a first-to-invent system to a first-inventor-to-file system, placing our patent system in closer alignment with those of the rest of the world – see here. With new fee-setting authority and corresponding expansions of its examination and judicial corps, the PTO may over time develop both the administrative resources it needs to process applications in a more timely and effective fashion and the expertise it needs to engage in effective substantive rulemaking, which would make it look more like other administrative agencies – see here, here, and more generally on PTO rulemaking powers here. Further, the law remains the product of compromise – such as the elimination of the best mode requirement as a basis for invalidity or inequitable conduct, see here – and given political realities perhaps it is the best that can be done substantively (if not in terms of clearer drafting) at this time. But having amended the act, Congress may be more likely to do it again (particularly if there is a President asking for it) and we should expect more revisions to the Patent Act over the next few years.

This was what I would call “high art” in debate, at least at the outset.  Not only are these very sophisticated academics/lawyers and great public speakers, they were given significant, uninterrupted time – almost fifteen minutes each – to present their initial arguments before engaging in a much faster-paced and interactive Q&A session. The debate was also preceded by neutral factual information that placed the issues in context, and certainly was helpful for anyone coming to the issues new. The debate lasted for almost an hour and a half on a single topic, and the subsequent discussion was incredibly cogent and far-reaching (marred only by occasional talking over each other, reminiscent of the McLaughlin Group even if more insightful and trenchant).

For anyone who would be willing to spend that much time listening to law professors talk on abstruse issues, the result would certainly be substantial edification or a remarkable introduction to the policy and legal concerns that make intellectual property law a fascinating area. This is true even if the listeners might not at the end know where to come down, either because they lack enough practical experience to form socio-political judgments on the issues or can’t adequately correlate their own predilections and experience to the particular speakers positions to decide which one’s views to rely on as a proxy.

It’s not that I don’t think that exhaustion is important. But I could not help comparing this debate to the public debates during the recent Presidential campaign and feeling totally jipped. In the context of Presidential debates, even fifteen minutes of uninterrupted presentation time would be wholly inadequate to address any particular question having dramatic national and international significance. And at best we get a few debates on different days where the candidates can address a few issues for a few minutes. Most of the time, we are treated to so-called “neutral” questions, evasive short answers, no real follow-up by the media to require that the question be answered, and no in depth treatment of anything. Is there some reason the campaigns or the media don’t believe we are entitled to sustained treatment of particular issues and an answer to questions that really highlight where the differences are?  The sustained time allowed to each presenter to discuss a single issues highlighted by the exhaustion debate made the debaters’ positions, the issues, and the differences much clearer than a continuous stream of short statements and critical (often irrelevant) interchanges.

So I started wondering whether we could get something like this format going on national TV for health care, Afghanistan, the global warming bill, etc.   I really would like the Presidential candidates next time around to be able to engage on issues in something more than a sound-bite – and for the media to actually test them on it.  But perhaps that is asking too much of candidates and of the media. They need to keep track of hundreds of issues, and the candidates need to do so in a way that won’t lock them in or alienate voters, and the media need access that the candidates will only provide with favorable (or at least not terribly critical) coverage. So being honest and extremely careful and detailed simply may be incompatible with the job descriptions.

But is it asking too much of the public to want these kinds of debates and media approaches, to demand that candidates at least designate their proxies to be able to engage in the issues at this level of detail, and to look elsewhere if the mainstream media doesn’t provide it? But where else will such information be provided? Law professors may be willing to do this (and for free), but candidates aren’t going to volunteer for ScotusCast. And as for the public, we may be so saturated with fifteen second image advertisements that no one in their right mind would listen to an hour of erudite discussion of a single issue, much less ten of them, in order to form their political beliefs.

Well, I can’t leave it just on the process. The substance of the debate was fascinating. Lemley initially focused on the difference between patent versus contract remedies (as violation of the contractual requirements should in theory remit you to a less powerful contract remedy), jurisdiction (both in regard to federal or state courts and in regard to the ability to sue downstream parties who are not in privity), and antitrust and misuse (in regard to contracting around or beyond the default rules of exhaustion). Epstein initially discussed the advantages of contracting around exhaustion , including being able to price discriminate (increasing overall demand and use) by charging downstream users without forcing upstream sellers to pay a uniform royalty, and noted that if transaction costs are significant the transactions simply won’t happen so there is nothing to worry about. Von Lohmann initially identified reasons why exhaustion was important and servitudes in chattels have been prohibited: (1) reducing information costs (and need for notice); (2) independent repair/replacement; (3) secondary markets; (4) impacts on innovation when secondary markets/use restrictions are not prohibited; and (5) (sometimes) social welfare reducing price discrimination. He also asked whether patent holders after Quanta can define unauthorized sales to avoid triggering exhaustion, and whether courts will in the future enforce such restrictions (or permit infringement actions) against unauthorized downstream secondary purchasers. Kieff initially focused on the presumption (not immutable requirement) of freedom to use the purchased good and absence of adhesion in the contracts for selling less than all rights, and the benefits of freedom to contract. From there, the interchange entwined historic case law in real property, intellectual property, and antitrust, and exceptionally cogent (and differing) views of market behaviors (and their normal benefits and costs), and the perennial favorite of whether downstream benefits and sequential innovation will harm upstream production incentives. I won’t try to summarize the interchanges further – it really is worth hearing (except for the short frolic and detour to mention the Bilski case on patentable subject matter and the fear of Supreme Court action, as a point on which three of them apparently could agree but which is not elaborated).

Some of the distinctions highlighted in the exchanges go to how we view customers and their preferences and abilities, particularly how sophisticated we think the general public is (as distinguished from business entities), especially in regard to contracting behaviors and who those people choose to contract with, which returned the discussion to privity of contract and the different remedies of contract and property. So this returns us to the process issue of whether the public can engage this level of discourse and understanding in their market behaviors , and whether the real debate is over paternalism. Does the public need more protection from (and more freedom from the costs of) contractual decisions of upstream sophisticated parties? Ultimately, it will be our political representatives who decide – but a position on patent exhaustion or a position on the kind of judges to nominate in regard to patent exhaustion (cf. abortion) will NOT be a question about which any Presidential candidate is ever likely to be asked in a debate.

For my first post to Madisonian.net, I’m focused on culture and norms and how they affect intellectual property policy. No doubt, this is prompted by being in Kolkata, India, where I was invited by a good friend, Shamnad Basheer, Ministry of HRD Professor in IP Law at the National University of Juridical Sciences and the founder of the SpicyIP blog, to join a conference on Publicly Funded Patents & Technology Transfer: A Review of the Indian “Bayh Dole” Bill.  I had been  asked to present on lessons learned from the U.S. Bayh-Dole Act experience that might be relevant to India’s consideration of a pending bill on government-funded innovation policy.   What became immediately apparent from a brief discussion before the conference – at a dinner with Shamnad over the local West Bengali specialty, the Hilsa fish – was how much initial conditions and normative context and responses matter. Before the conference, I had planned to focus on the empirical disputes over the effects of the U.S. Bayh-Dole act, the policy levers that exist within the act, and the choices that the U.S. experience illustrates are available for for Indian consideration. But I quickly realized that I needed to say more about why the U.S. act was created, the context for its enactment of the American culture of open science, the history of academic-industrial collaborations (including universities acting as low cost centers of basic research for industrial product development), and the effects of the act in changing norms and practices.

During the conference, various presenters noted that In India, unlike in the U.S., few universities place their employees under invention assignment contracts, and few funding agencies take title to the inventions they fund. Thus, India is not facing the same situation that motivated enactment of the Bayh-Dole act in the U.S. Rather, the problem (if it is one) has to do more with the culture of professorial incentives and the lack of any governmental policy (to date) regulating patenting and commercial development of government funded research.

One particular presentation made this point forcefully. Professor Amit Shovon Ray of Jawaharlal Nehru University discussed his recent research, in which he found substantial heterogeneity of practices, awareness, and understanding of the value of patenting and of commercializing research through industrial partnerships. In particular, Professor Ray noted that Indian professors are more likely to respond to calls for patenting and commercialization activity by appeals to the “intrinsic” social benefits of commercialization than by “extrinsic” private rewards that they may gain (whether they are money, advancement, or prestige).

Comparing the U.S. Bayh-Dole Act experience with the potential Indian Bayh Dole experiences that may develop in the future thus raises important questions of whether and how quickly norms can be changed by legal structures, how best to structure extrinsic and intrinsic incentives, what approaches will most effectively promote various kinds of innovation behaviors for basic research, research tools, and commercial products at various levels of industrial development, and the relative competencies of governmental and non-governmental administration. These questions are related to the questions of the choice of theoretical models of patent law, incentive models versus disclosure models versus prospect theory models, etc. For a good recent treatment of some of these issues, see Kathy Strandburg’s terrific recent paper Evolving Innovation Paradigms and the Global Intellectual Property Regime, which addresses differences between seller-innovators and user-innovators and their incentives and motivations.

So, take this as a call for more cultural anthropologists and empirical economists to join the IP endeavor.