Antitrust Considerations in the American Patent Eligibility Restoration Act of 2023

The Patent Eligibility Restoration Act of 2023 (PERA), introduced by Senators Thom Tillis and Chris Coons, aims to expand the scope of patentable subject matter in the United States. The act addresses the limitations of Supreme Court decisions such as Alice Corp. v. CLS Bank International, which limited the eligibility of patents under Section 101 of the Patent Act. A year after its introduction, it is crucial to assess its impact on innovation and competition. By expanding patent eligibility, PERA has the potential to promote innovation. However, it also raises serious antitrust concerns. Expanded patent protection can allow dominant firms to amass large patent portfolios, creating barriers to entry and stifling competition from smaller firms. Ensuring that these broader protections do not lead to monopolistic practices is essential to maintaining a competitive marketplace. Effective regulatory oversight and antitrust enforcement are critical to achieving this balance.

Patent Eligibility Explained

PERA seeks to clarify patent eligibility by defining statutory categories. Under Section 101 of the Patent Act, any invention or discovery that is a useful process, machine, production, or composition of matter is eligible for patent protection. This change eliminates the judicial exceptions that previously excluded abstract ideas and natural phenomena. However, the Patent Act includes several exclusions from patentability, such as mathematical formulas that are not part of a useful invention, processes that are primarily economic, financial, business, social, cultural, or artistic unless they involve machinery, mental processes performed in the mind, naturally occurring processes, and unmodified natural materials.

By eliminating the judicial exceptions and clearly defining the statutory categories, PERA aims to provide a more predictable and stable framework for patent eligibility. This is intended to encourage innovation by providing clearer guidelines on what can be patented. However, it also means that some inventions that were previously considered ineligible because of their abstract nature or natural phenomena can now be patented if they fit into the statutory categories. This change could lead to an influx of patents in areas such as biotechnology and software that were previously limited by judicial exceptions. While this could spur innovation, it also risks enabling dominant firms to obtain broad patents. These firms could stifle competition, especially if they broadly patent basic technologies or minor improvements.