James E. Daily & F. Scott Kieff, Anything Under the Sun Made by Humans: Patent Law Doctrines as Endogenous Institutions for Commercializing Innovation

• Citation: Vol. 62 No. 4
• Publication year: 2013

ANYTHING UNDER THE SUN MADE BY HUMANS: PATENT LAW DOCTRINES AS ENDOGENOUS INSTITUTIONS FOR COMMERCIALIZING INNOVATION

James E. Daily*

F. Scott Kieff**

ABSTRACT

This Essay outlines a comparative institutional analysis among various doctrines in patent law to show how they can have different impacts on the way inventions are commercialized. It builds on a prior body of work about the positive role that property rights in patents can play in commercializing innovation to show how recent shifts in approaches to the particular legal doctrine known as patentable subject matter can be expected to have different effects on the commercialization of inventions than prior approaches. It concludes that, to the extent society wants to increase the overall rate of invention commercialization and increase overall competition as reflected in diversity in firm size among participants in the markets for commercializing innovation, society should consider reversing course on the law of patentable subject matter and return to an approach that is closer to the “anything under the sun made by man” view that was championed by the Supreme Court in the 1980s and by Congress through most of the second half of the twentieth century, updating only its gender biased language.

* Research Associate, Stanford University Hoover Institution Project on Commercializing Innovation.

** Fred C. Stevenson Research Professor, The George Washington University Law School; Ray & Louise

Knowles Senior Fellow, Stanford University Hoover Institution.

This work is part of the Hoover Task Force on Property Rights, Freedom, and Prosperity, which studies the philosophical, historical, legal, and economic foundations of property rights, as well as the Hoover Project on Commercializing Innovation, which studies the law, economics, and politics of innovation and which is available online at www.innovation.hoover.org.

INTRODUCTION 968

1. A PRÉCIS ON INSTITUTIONS 969

2. BASIC GOALS FOR A PATENT SYSTEM AND BROAD INSTITUTIONAL DESIGN 971

3. ALTERNATIVE APPROACHES TO THE PATENTABLE SUBJECT MATTER DOCTRINE 974

CONCLUSION 980

INTRODUCTION

This conference volume arises out of the 2012 Randolph W. Thrower Symposium, which is part of the endowed lecture series sponsored by Mr. Thrower’s family and hosted by the Emory Law Journal and Emory University School of Law. The 2012 symposium was entitled “Innovation for the Modern Era: Law, Policy, and Legal Practice in a Changing World.” This Essay was presented on the panel entitled “The Role of Institutions in Fostering and Disseminating Technological Innovation” and offers a comparative institutional analysis of different approaches to one of today’s hot topics in

modern patent law—the issue of patentable subject matter1—to elucidate the

ways different approaches to institutional design in patent law can have different impacts on the markets for commercializing innovation.

This Essay proceeds as follows: Part I introduces a précis on institutions and their application to intellectual property. Part II highlights some links that can be found between, on the one hand, a patent system’s overall goals and the types of dispute resolution it conducts, and on the other hand, the different relationships these set up between the government and market actors. Part III lays out as a benchmark the “anything under the sun made by man” approach towards patentable subject matter that was featured in the 1952 Patent Act, championed by the Supreme Court in the 1980s, and followed by Congress

through most of the second half of the twentieth century,2 as well as a

1 See, e.g., Andrew Pollack, Justices Send Back Gene Case, N.Y. TIMES, Mar. 27, 2012, at B1 (describing case about whether technologies relating to genes associated with breast and ovarian cancer are eligible subject matter for patenting); Eduardo Porter, Tech Suits Endanger Innovation, N.Y. TIMES, May 30, 2012, at B1 (describing case about whether technologies relating to computer software are eligible subject matter for patenting).

2 See Diamond v. Diehr, 450 U.S. 175, 182 (1981); Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980);

S. REP. NO. 82-1979, at 5 (1952); H.R. REP. NO. 82-1923, at 6 (1952). The historical and revision notes for 35

1. § 101 state that the 1952 Act expanded the definition of process to include a “new use of a known process, machine, manufacture, composition of matter, or material,” 35 U.S.C. § 101 hist. n. (2006), which is highly relevant to many technologies such as software, which is fundamentally about finding new uses for

   contrasting more subjective approach the Court again deployed in its most recent cases. This Essay concludes by elucidating some reasons why, to the extent society wants to increase the overall rate of invention commercialization and increase overall competition as reflected in diversity in firm size among participants in the markets for commercializing innovation, society should consider largely returning to the prior approach toward the law of patentable subject matter, updating only its gender biased language.

   
   

   1. A PRÉCIS ON INSTITUTIONS

      
      

      In the social sciences, the term institutions refers to constraints that are human imposed—laws, rules, norms, and their enforcement characteristics; and the field known as New Institutional Social Sciences, including the narrower field known as New Institutional Economics, studies the nature and degree of the impact that institutions can have on overall economic and social

      performance.3 Institutions are usually considered to be largely endogenous to a

      given democratic society—meaning that they are seen as internally generated rather than imposed from outside—because it is generally at least some subset of the people in that society that decides which institutions are implemented.4

      
      

      This Essay outlines a comparative institutional analysis among various doctrines in patent law to show how they can have different impacts on the way inventions are commercialized. It recognizes that one size rarely fits all because different societies have different goals they intend to further within the systems of institutions they implement; that no one approach to furthering any particular set of goals is perfect; and that it may make sense to eliminate patent systems in their entirety. In so doing, this Essay builds on a prior body of work

      
      

      existing machines (i.e., computers). See Omnibus Consolidated Appropriations Act of 1997, Pub. L. No. 104- 208, § 616, 110 Stat. 3009, 3009-67 to -69 (1996) (codified as amended at 35 U.S.C. § 287(c) (2006)) (providing a safe harbor for certain medical methods but declining to exclude them from patentability); American Inventors Protection Act of 1999, Pub. L. No. 106-113, 113 Stat. 1501, 1501A-552 to -57 (codified as amended at 35 U.S.C. § 273 (2006)) (providing a prior user defense for business method patents but declining to exclude them from patentability).

      1. For a general discussion of these terms in relation to intellectual property, see F. Scott Kieff,

         Coordination, Property, and Intellectual Property: An Unconventional Approach to Anticompetitive Effects and Downstream Access, 56 EMORY L.J. 327, 338–40 (2006); and Henry E. Smith, Institutions and Indirectness in Intellectual Property, 157 U. PA. L. REV. 2083, 2083–101 (2009).

      2. See Stanley L. Engerman & Kenneth L. Sokoloff, Debating the Role of Institutions in Political and

         Economic Development: Theory, History, and Findings, 11 ANN. REV. POL. SCI. 119, 124–25 (2008) (discussing the definition of institutions and their endogenous and exogenous origins). In contrast, sometimes laws are imposed largely by outside forces, such as when a society is controlled by a foreign power. For more on endogenous institutions, see id.

         about the positive role that property rights in patents can play in commercializing innovation.5 We show how recent shifts in approaches to the particular laws about what types of subject matter are eligible for patent protection can be expected to have different effects on the commercialization

         of inventions than prior approaches.

         
         

         The particular institution that is the focus of this Essay is the area of patent law known as the patentable subject matter requirement, which is distinct from the other more widely known legal requirements for a valid patent, such as novelty, nonobviousness (known outside the United States as inventive step),

         and adequate disclosure.6 The patentable subject matter requirement is an

         additional requirement that is designed to entirely exclude from patent eligibility particular fields of inventive activity, even if they satisfy those other requirements for patentability.7 Common targets of the patentable subject matter requirement include those inventions relating to life, such as biotechnology,8 those relating to computers, such as software,9 those relating to business, such as financial techniques,10 and those relating to fun, such as sports moves.11 This area of the law has again become a hot spot, and the Supreme Court recently decided two high-profile cases in it: Bilski v. Kappos, involving finance and software, and Mayo Collaborative Services v. Prometheus Labs, involving biotechnology.12

         
         

      3. See Stephen H. Haber et al., On the Importance to Economic Success of Property Rights in Finance and Innovation, 26 WASH. U. J.L. & POL’Y 215 (2008) (surveying recent developments surrounding property rights and their economic impact).

      4. See 35 U.S.C. § 102 (2006) (amended 2011 and 2012) (setting forth the substantive requirement in

         patent law for novelty); id. §§ 103, 112 (2006) (setting forth the substantive requirements in patent law for nonobviousness and disclosure). For more on all of these requirements, see F. SCOTT KIEFF ET AL., PRINCIPLES OF PATENT LAW 154–688 (5th ed. 2011), which discusses disclosure, novelty, and nonobviousness.

      5. Rebecca S. Eisenberg, Wisdom of the Ages or Dead-Hand Control? Patentable Subject Matter for

         Diagnostic Methods After In re Bilski, 3 CASE W. RES. J.L. TECH. & INTERNET 1, 1 n.2 (2012).

      6. See Eisenberg, supra note 7.

      7. James...