Professor Taylor Goes to Washington

Professor David O. Taylor is even-tempered and unfailingly polite. A Harvard Law School grad with a mechanical engineering degree from Texas A&M, it’s hard to imagine him ranting.

But Taylor, a professor in SMU’s Dedman School of Law, minces no words when the subject turns to what he, among many experts, sees as the U.S. Supreme Court’s treatment of patent law’s eligibility requirement. He’s deeply troubled by Court decisions on point over the past decade.

The 43-year-old Taylor, a former patent litigator with Baker Botts in Dallas, is a nationally-recognized authority on patent eligibility, the body of law governing which inventions qualify for patent protection. He’s published a half-dozen law review articles on the subject and presented talks on the subject at law schools from New York to California. He’s also testified in Congress about the need for reform.

Here’s a sampling from his written analyses of the Supreme Court’s handiwork. “A questionable understanding of historical precedent,” he said, discussing one of the first seismic patent-eligibility cases from 2012. “Unilluminating,” he said of another, 2014 opinion discussing the present eligibility standards.

“A mystical mystery.” “Indefensible.” “Untenable.” “Reflects a lack of understanding.” “Confused.” “Misguided.” “Vague and subjective.” “Critical flaws.” “Perverse impact.” “Devastating consequences.” “Incoherence.” “A raft of unanswered questions.” “Clearly wrong.”

In other words, the Court has stuck us with patently bad patent law. So bad, Taylor says, that Congress should step in to fix the mess.

Perhaps responding to his calls for reform, Congress invited him to Washington to testify before the Senate Judiciary Committee’s Subcommittee on Intellectual Property on June 4, 2019.

“Patent law,” he began his testimony, “is in a state of crisis…There is intense dysfunction with respect to the law of patent eligibility.” And “the crisis,” he explained, “is one of confusion and incorrect results leading to reduced investment in innovative efforts.”

The Court, he told the subcommittee, “has embarked upon a drastic and far-reaching experiment” to rewrite patent-eligibility law. Step by step, Taylor said, the Court had replaced familiar legislative, administrative, and judicial guidance with new requirements that “significantly increased” the odds that an array of technological innovations would be deemed ineligible for patents. This, in turn, has shrunk the pool of investment dollars for research and development, including investment in new drug therapies, he said.

Historically, patent law has recognized that laws of nature, natural phenomena, and abstract ideas are not patentable, since they are, as one 1972 Supreme Court opinion put it, “the basic tools of scientific and technological work.” An oft-cited example is that Newton could not have patented the law of gravity. Since all inventions, to one degree or another, “embody, use, reflect, rest upon, or apply” laws of nature, natural phenomena, or abstract ideas, however, historically a discovery can qualify for a patent if it involves an application of one or more of those broad concepts.

In 2012 and 2014, the Court moved the goal posts. It specified that a discovery must involve an inventive application of a law of nature, natural phenomenon, or abstract idea. That qualifier, “inventive,” while perhaps of modest significance to an untrained observer, in fact represented “a sea change” in the eligibility standard, Taylor said.

For example, Taylor explained, a scientist who discovered a cure for cancer could not, under the new approach adopted by the Court, obtain a patent unless she could show that she applied her discovery in some new (“inventive”) way. A practical application of the discovery—a useful application of the discovery—no longer would be enough. Taking a pill that includes the cure to cancer, for example, would not be enough because doctors have previously given pills to patients.

Not only is that standard inconsistent with hundreds of years of Supreme Court precedent; it’s impossible to understand, Taylor said, since the Court failed to define clearly what exactly constitutes an “inventive application.” This “misguided test,” he wrote, all but ensures “incorrect results,” “intense dysfunction,” and “unpredictable” decisions on patents and patent applications.

For years, Taylor and other patent-law scholars critical of the Court’s direction on eligibility had worried that it would drive venture capital away from emerging technologies.

“Venture capitalists expect a return on their money,” he said. “How likely were they to scale back investment in research and development if they couldn’t be certain that a new product, even an exciting, innovative one, would be eligible for patent protection? Which industries were likely to be the most adversely affected?

“These seemed like fundamental questions. So, I was surprised to discover that almost no research had been done in this area. Nobody had any data one way or the other” regarding the impact of the Supreme Court’s cases on patent eligibility.

A 2017 study by the SMU professor provided the first empirical evidence that his and others’ worries were well-founded. That summer, he surveyed 475 venture capitalists and private equity investors nationwide to ask if and how the Court’s rulings had changed the way they invested in technology companies.

His findings, he said in his congressional testimony, “while perhaps not surprising, nonetheless confirm one of the central premises on which the patent system rests: that patents help to spur investment in development of technology.”

In particular, he found, this was true in the realm of life-science industries, where patent protection is integral to the potential value of an innovative product. Overwhelming majorities of those he surveyed, for example, said eliminating patents would somewhat decrease or strongly decrease their investment in the medical devices (79 percent), biotechnology (77 percent), and pharmaceuticals (73 percent).

Taylor wrote a detailed article about these and other findings for the Cardozo Law Review. Titled “Patent Eligibility and Investment,” the article discusses all the results of his groundbreaking survey.

In his view, the results of his research show a stifling of investment isn’t hypothetical, some possible eventuality. He thinks it’s happened already.

“It is highly likely the Court’s decisions have delayed or altogether prevented the development of medicines and medical procedures,” he wrote on Feb. 24, 2019—not quite one year before the first coronavirus death in the United States.

Taylor’s appearance before the Senate subcommittee was, in a roundabout way, the result of a March 2017 workshop he and two other professors convened at the University of California, Berkeley. The workshop brought together more than three dozen patent-law scholars, litigators, corporate counsel, and federal officials trying to make sense of the recent jurisprudence on eligibility.

While there was a consensus among participants that the Court cases were, according to the workshop’s final report, “indefensible as a matter of statutory interpretation or fidelity to prior case law,” there was less agreement on what to do about it. Many, but not all, favored new federal legislation to supersede the Court’s actions.

When the Senate’s IP subcommittee convened two years later to hear suggestions on what such a law might entail, Taylor was ready to testify, empirical data in hand.

“It was nice—having done all the research I’ve done on the subject—to be able to discuss it in a forum where, hopefully, it will prove helpful,” he said in an interview. He praised the subcommittee’s chair, Sen. Thom Tillis, R-N.C., and its ranking member, Sen. Chris Coons, D-Del., who jointly presided at the hearing. “They were very well-prepared. They asked excellent questions,” Taylor said.

To date there has been no action in Congress on any proposed legislation to reform patent eligibility law. Perhaps more cutting language from Taylor will be forthcoming.