PIPLI Clarifies the Record on Patent Eligibility’s Impact on U.S. Innovation & Competitiveness

Alex Moss | March 24, 2023

We sent a letter to the House of Representatives’ Subcommittee on Courts, Intellectual Property and the Internet to clarify the record of its recent hearing on Intellectual Property and Strategic Competition with China: Part I. Our letter dispels myths about patent eligibility, explains the impact of U.S. patents on innovators, businesses, and consumers, and calls for greater transparency about patent ownership and litigation funding.

One of the main criticisms of patent eligibility is that it prevents the issuance of U.S. patents, as a paper by Kevin Madigan and Adam Mossoff claims. That claim has been proven false.

For example, Abby Rives conducted a case study of the data on which Madigan and Mossoff relied that confims patent eligibility law rarely prevents patents from issuing. Based on a statistical sample of the applications in their data set, only 15% of patent applications received a sole, eligibility-related rejection when they were abandoned. Even that is misleading as 22% of these abandoned applications are the basis for applications that are still pending. Patents claiming the same or overlapping inventions have or could still issue.

Another myth about patent eligibility is that it disadvantages innovators in the U.S. Not so. Many patent applications have little to no connection to domestic innovation, and patent eligibility rejections overwhelmingly affect foreign entities. In fact, Rives’ case study shows that foreign entities owned 75% of the applications in the Madigan/Mossoff dataset. Notably, the entity with the most rejected and abandoned applications was Huawei.

In fact, foreign entities can and do weaponize U.S. patents against U.S. interests. Patents give their owners the right to stop others from making, using, or selling whatever their patent covers, but only in this country. They can, however, be asserted by anyone, including foreign entities. When foreign entities assert their patents against domestic businesses, they burden them with exorbitant litigation costs as well as the risk of injunctions, huge damages awards, and compelled disclosure of confidential information during discovery.

Foreign entities are also involved in U.S. patent litigation indirectly—and often secretly—by funding litigation brought in the name of companies organized domestically. Foreign litigation funders can be private as well as government-controlled foreign entities. For example, a foreign sovereign wealth fund was identified as a funder and beneficiary of patent assertion entity VLSI’s lawsuit against Intel.

The involvement of foreign sovereign wealth funds raises grave concerns as they may fund litigation in the US to further foreign policy or military goals. To protect U.S. companies and consumers from abusive patent assertion by foreign entities, greater transparency about patent ownership and patent litigation funding is necessary.

Patent eligibility law overwhelmingly benefits U.S. innovation, competition, and economic vitality. The evidence shows we need patent eligibility law to protect American innovators, businesses, and consumers. But we also need more transparency about patent ownership and patent litigation to stop foreign entities from hiding in the shadows when they weaponize U.S. patents against U.S. interests.