The US market is a vital source of revenue for many Taiwanese businesses.

Protecting your innovations has never been more important, which makes it critical for Taiwanese companies to understand how the patent system is changing in the United States.

In the words of Andrei Iancu, the recently appointed Director of the US Patent and Trademark Office (USPTO), the US patent system is "at an inflection point," and the USPTO "will not continue down the same path"¹

What path was the US patent system on? Where will the Director lead it from this inflection point? And how will upcoming policy changes affect business strategies for patent prosecution, post-grant challenges and patent litigation?

What should be patentable? The new USPTO director pushes to clarify the scope of patent-eligible subject matter through administrative guidance and support for legislative reform

Four independent categories of inventions or discoveries are patent-eligible under US law: "processes;" "machines;" "manufactures;" and "compositions of matter."²

While US patent laws historically have been given wide scope to encourage ingenuity,³ the US Supreme Court has created three categories of discovery that are not patentable: laws of nature; physical phenomena; and abstract ideas—what the Court has termed the "building blocks" of human ingenuity. But in trying to distinguish between claims that are merely "building blocks" of human ingenuity—and thus not patentable—from those that transform building blocks into a patent-eligible invention, recent Supreme Court rulings on the issue are "causing significant confusion," according to USPTO Director Iancu.⁴

In an effort to relieve the uncertainty, in 2018 the USPTO began issuing a series of guidance memoranda to its patent examination corps seeking to clarify the contours of patent-eligible subject matter. For example, in an April 2 memorandum discussing subject-matter eligibility case law developments, the USPTO reiterated that claims reciting certain software-related inventions that improve computer functionality are patent-eligible subject matter. In an April 19 memorandum, the USPTO cautioned patent examiners that just because something is disclosed in one prior art document does not mean that it is a well-understood, routine or conventional activity practiced by those in the field— placing an additional onus on US patent examiners to justify rejections under Section 101 of the US patent code. Finally, in a third memorandum published on June 7, the USPTO reinforced the majority holding from a 2 to 1 decision by the US Court of Appeals for the Federal Circuit, which had found method-of-treatment claims that include a diagnostic assay step to be patent-eligible subject matter under Section 101.

The USPTO also has welcomed an opportunity to collaborate with Congress on a legislative fix to subject-matter eligibility. One leading proposal would rewrite Section 101 in a manner that would legislatively overrule the recent Supreme Court holdings to inject certainty in the process by which patents are obtained.

Taiwanese companies can benefit from the renewed focus on patent-eligible subject matter and its impact on patent prosecution and patent litigation strategies. For example, they should preserve all available options through continuation applications, because the scope and interpretation of Section 101 seems likely to be modified.

How will the PTAB apply the narrower claim construction standard in post-grant proceedings?

In October of 2018, the USPTO published a final rule changing the standard by which claims of unexpired patents are construed in inter partes review (IPR), post-grant review (PGR) and covered business method (CBM) proceedings at the Patent Trial and Appeal Board (PTAB). The USPTO had proposed the new rule in May of 2018, shortly after the new Director took office.

In these post-grant proceedings, any party may challenge the patentability of claims in an already-issued patent. And if a panel of PTAB judges finds any claim to be unpatentable, then those claims are deemed unpatentable and canceled. Of course, to determine whether a claim is patentable, the first step is to construe the meaning of the claim.

The final rule replaces the broadest reasonable interpretation (BRI) standard with the claim construction standard used by US federal courts and the International Trade Commission (ITC)—the standard applied in Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) and its progeny. Under the final rule, the PTAB will take into consideration any prior claim construction determination that has been made in a civil action or a proceeding before the ITC, so long as the prior claim construction is properly entered into the record.

Moving to this type of standard would align the PTAB's review standard with the standard employed by US federal courts and the ITC.

Taiwanese companies can prepare for this change to the claim construction standard in PTAB proceedings and its impact on patent litigation strategies by keeping in mind that a new standard will affect strategy in any pending or soon-to-be filed challenges.

What does the future hold?

For Taiwanese companies, the implications of these changes to the US patent system are noteworthy.

Any new patent subject-matter eligibility standards that emerge from the USPTO will require careful assessment. Still, the fact that the Director is seeking clarity and predictability may enable Taiwanese businesses engaged in the US market to plan their cross-border business strategies with greater confidence.

Reforms to PTAB procedures, including the new rule for claim interpretation, are an effort to improve the system in view of more than five years of post-grant challenges.

The USPTO's initiatives and rulemaking may soon start moving the pendulum back toward stronger patent rights and affect patent litigation strategy, due diligence investigations, licensing negotiations and portfolio monetization.

¹ Andrei Iancu, Director, United States Patent and Trademark Office, Speech to U.S. Chamber of Commerce (Apr. 11, 2018).
² 35 U.S.C. § 101 (2012).
³ Diamond v. Chakrabarty, 447 U.S. 303, 308–309.
⁴ Oversight of the U.S. Patent and Trademark Office, Hearing Before the S. Comm. on the Judiciary, 115th Cong. (April 18, 2018) (response of Andrei Iancu, Director, United States Patent and Trademark Office, to question of Kamala Harris, United States Senator).

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2018 White & Case LLP