Susceptibility of Digital Products to Section 271(g) in the Age of Cloud Computing, Artificial Intelligence, Blockchains, and 3d Printing

• Publication year: 2021

David Ludwig and Michelle Divelbiss^*

Emerging technologies such as cloud computing, artificial intelligence, block-chain, and 3D printing have changed our world. This article discusses these new and emerging information-generating technologies, their potential value, and case law with respect to the digital products created by these technologies.

Emerging technologies such as cloud computing, artificial intelligence ("AI"), blockchain, and 3D printing have undoubtedly changed our world. As commerce becomes increasingly digital, and the value generated by innovative processes is not limited to purely physical products, it becomes more complicated to predict to what extent the existing patent laws may or may not apply to such new technologies.

Section 271 of Title 35 of the U.S. Code was enacted in 1952 when modern digital technologies could only be dreamt about, if contemplated at all.¹ The contours of Section 271 are not decisive with respect to processes of producing digital products, at least where those processes occur outside the United States.

This article discusses new and emerging information-generating technologies, their potential value, and case law with respect to the digital products created by these technologies.

The first part of the article discusses various types of digital products and related technologies.

The second part of the article describes the current case law surrounding digital products.

The third part of the article reflects on the U.S. Court of Appeals for the Federal Circuit's recent decision in Syngenta Crop Prot., LLC v. Willowood, LLC,² which pertains to processes for creating digital products performed abroad.

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Lastly, we provide practical considerations for producers and consumers of digital products.

Emerging Technologies Based on Digital Information

The emerging technologies discussed in this article are innovative methods of generating, using, or transmitting digital content, particularly where the result may not be a tangible product. For example, the importation of a 3D model of a physical product—used by a generic 3D printer within the United States to create a physical product—is somewhat similar to importing the physical product itself. Cloud computing, artificial intelligence, decentralized public blockchains, and 3D printing are primarily digital information.

Cloud Computing and Artificial Intelligence

Many advertisements portray cloud computing as something akin to the internet. In reality, cloud computing is much more like a virtual computer, with software or digital infrastructure provided as a service. For example, a user might contract with an outside service provider to perform specific analytic or diagnostic computations with the user's data and/or specifications on remote servers.³ Due to the remote nature of these arrangements, cloud-based service providers can be located outside the United States while providing their services to U.S. users. Cloud-based services might also entail the collaboration of a network of firms, each potentially operating in different countries. Under such circumstances, U.S. patent laws are inapplicable due to the extraterritoriality of services performed.

A current trend in cloud computing is the use of cloud-based medical diagnostic systems, where a patient's data is transmitted to an outside firm to run a proprietary diagnostic analysis.⁴ That analysis creates a digital report, which is then electronically transmitted to the physician to consider in developing a treatment plan. Cloud computing service providers are also developing AI systems to improve their offerings. Such AI systems allow cloud computing services to extract value from raw data in novel ways to produce useful reports and/or other digital products. IBM's Watson is one example of such a cloud-based AI system.

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As the state of the AI art improves, the digital products of AI-based systems will increase in economic importance.

Blockchains

The first and most well-known blockchain—Bitcoin—was developed over a decade ago. Bitcoin served as a proof-of-concept for blockchain generally, demonstrating the technology's potential for a future dominated by digital commerce driven by digital currency.

Among Bitcoin's achievements was creating digital scarcity. Although a single Bitcoin token on the Bitcoin blockchain is purely digital code, it cannot be reproduced like other digital content can. When a person sends an amount of bitcoin to someone else, that bitcoin becomes permanently inaccessible to the sender. There is no copy/paste, only cut/paste. Bitcoin—and blockchain technology more generally—is thus different from most forms of digital information, which are infinitely reproducible.

Although Bitcoin is typically viewed as a digital currency network, blockchain's digital scarcity technology is not limited to creating currencies. Companies have begun to experiment with "tokenizing" intangible assets such as stocks⁵ and intellectual property.⁶ Others have tokenized rights to physical commodities such as gold,⁷ and have even aspired to tokenize real estate deeds.⁸ These developments are made possible by the digital scarcity function of blockchains, as blockchain-based claims to property cannot be reproduced.

Perhaps most interesting of these projects, from the patent law perspective, are blockchains that create and store digital assets that have value in themselves. These types of blockchains are unlike Bit-coin and similar blockchains that purport to be currencies, which are nothing more than public ledgers assigning rights to fungible tokens. These blockchains are also unlike blockchains that tokenize other assets, which are public ledgers assigning rights to other items of value. One aspiration of such blockchains is to privately store and assign rights to data such as patient health records⁹ or personal identities.¹⁰ Such blockchains could potentially store and allow the transaction of data in ways that protect confidentiality while simultaneously compensating the sources (e.g., patients, users of online services) that generate the data.

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Blockchains also allow the creation of "smart contracts," which are self-executing software programs operating a blockchain, governed by internal algorithms.¹¹ A public blockchain—e.g., Bitcoin or Ethereum—is a fully decentralized, censorship-resistant block-chain with no central operator. At least where a smart contract operates on a public blockchain, it theoretically cannot be enjoined or otherwise controlled by legal authorities. Any capital the smart contract controls (e.g., crypto assets stored on an internal "wallet") cannot be seized in enforcement actions. Such smart contracts also have no physical territorial presence, as they run on decentralized networks of computers across the globe. Smart contracts thus may be effectively immune from patent enforcement. Although smart contract technology is still in its infancy, with the most notable smart contract programs being games¹² and methods of funding speculative start-up cryptocurrency projects,¹³ smart contract technology may eventually combine with AI, dramatically increasing the importance of both technologies in the global economy.

3D Printing

3D printing generally refers to the manufacture of a three-dimensional physical product from base materials, usually by applying one layer of base material at a time, based on instructions from a digital file. Although 3D printing was invented as early as the mid-1980s,¹⁴ it is rapidly maturing as the technology has more recently taken off, inspiring individuals to create 3D printed products from the comfort of their homes.¹⁵

Modern 3D printers are capable of producing products from a variety of different materials, including plastics and metals.¹⁶ One of the advantages of 3D printing is that the products they produce are highly customizable. For example, 3D printed prosthetic limbs and other medical devices have been custom-built to match a patient's anatomy, and larger-scale 3D printers have been used to print entire houses.¹⁷ With quickly advancing 3D printing technology, it has the promise of localizing manufacturing for a wide range of consumer products.

One of the keys to successful 3D printing is the digital schematic used by the printer. Many 3D printing schematics are created as computer-aided design ("CAD") files; these digital files are as complex as the printed items themselves and necessarily require

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engineering (either human or AI) to produce. Apart from the 3D printers themselves, these digital files may be the most significant source of costs for developing new products, particularly in terms of the hours required to conceive of and create the digital schematic.

Digital schematics can be developed outside the United States and sent to U.S. printers for the local manufacture of products. U.S.-patented processes used to develop these 3D schematics cannot be enforced against non-U.S. digital schematics makers for using the claimed processes.

Globally Sourced Digital Products

Subsections (a), (b), (c), (e), and (f) Do Not Apply to Digital Products Created Abroad

Section 271(a) offers patent protection for making, using, offering to sell, selling, or importing "any patented invention." Digital information such as medical diagnoses, 3D printer schematics, and the like are not patent-eligible subject matter, and thus they cannot be patented with apparatus claims.¹⁸ Processes of using such information within the United States, however, can potentially be claimed, and thus application of Section 271(a) at the individual user level is possible. This type of contention is still challenging when the underlying invention is the method of creating the digital product rather than the method of using it. Claims that incorporate both methods of producing and methods of using a digital product are not practically enforceable, as they are vulnerable to Akamai split infringement defenses where the...