Debunking Big Tech’s False Argument: Patent Legislation Won’t Raise Drug Prices

In the U.S. Senate, there is a push to markup the Patent Eligibility Restoration Act (PERA) and the Promoting and Respecting Economically Vital American Innovation Leadership Act (PREVAIL). Both are patent-related legislation introduced in the Senate, and PREVAIL has been introduced in the House.

The recent lobbying blitz by those on all sides of the legislation indicates that Senators Tillis and Coons want to bring both bills to mark up and then pass them into law.

That is a bad idea, but not for the reasons the lobbyists tell you. 

(To learn why these bills should not become law, inventors and startups have reasoned and fact-based analyses on PREVAIL here, here, and here, and on PERA here, here, here, here, and here.)

Big Tech Lobbyists Against PERA and PREVAIL

Recently, Alex Moss, Executive Director at the Public Interest Patent Law Institute (PIPLA), and Timi Iwayemi, Research Director at the Revolving Door Project (RDP), came out with a poorly written and naïve opinion piece titled Senators’ Latest Attempt to Enrich Big Pharma Must Not Prevail. The gist of their wrongheaded arguments is that both bills will increase drug prices for U.S. consumers, and that will benefit Big Pharma.

Moss obviously has an agenda. She was Mark Cuban Chair to Eliminate Stupid Patents at the Electronic Frontier Foundation (EFF) and continues to serve as a Special Advisor. Big Tech social media companies like Facebook and Google fund the EFF. You can read more about how the EFF distorts facts to suit their Big Tech paymasters here. We can safely assume that their article is from Big Tech’s mouth.

Curiously, the RDP claims they ensure that executive agency appointees “use their office to serve the broad public interest, rather than to entrench corporate power…”

That is a lofty and important goal. But it is directly opposite what is described in this very article authored by the RDP and PIPLA. The solution they offer is to keep entrenched corporate power intact, especially their Big Tech paymasters.

PREVAIL Has Virtually No Effect on Drug Patents

Unfortunately, facts don’t matter to Big Tech lobbyists. Drug prices are high in the U.S. for reasons completely outside the patent system.

From one side of Big Tech’s mouth, they tell us that a drug patented in the U.S. drives up the drug’s cost for U.S. consumers. From the other side of their mouth, they explain that the same drug is less expensive in other countries even though it is patented in those countries.

If a U.S. drug patent drives the cost of that drug higher in the U.S., why doesn’t patenting it in other countries drive the price up there?

There must be something other than the patent system driving U.S. drug prices higher. That culprit is likely the Food and Drug Administration (FDA), which effectively controls access to the U.S. drug market through its Orange Book. The FDA is unique to the U.S.

This sleight-of-hand argument benefits both Big Tech and Big Pharma. On one hand, Big Tech can kill legislation intended to fix the broken patent system by blaming patents for high drug prices. On the other hand, Big Pharma can hide their FDA gold mine.

Big Tech tells us that PREVAIL helps Big Pharma get rich. But PREVAIL solely affects procedures within the Patent Trial and Appeal Board (PTAB). It does nothing to stop drug patents from being invalidated by the PTAB.

PREVAIL has no real effect on drug patents. Even if it did, of the thousands of patents destroyed by PTAB, only a few dozen are drug patents. The impact of PREVAIL on drug patents is insignificant at best.

Big Pharma Pushes PERA

Diagnostic methods involve diagnosing an illness and administering a drug. A 2012 case, Mayo Collaborative Services v. Prometheus Laboratories, Inc. (Mayo), made diagnostic methods ineligible for patent protection.

Mayo damaged the entire industry that finds new cures for old drugs, a very important industry that many people, including me, benefit from.

Millions of dollars are often invested in research and testing new cures for off-patent drugs. Because the drug’s original patent has expired, it cannot be patented again, so the investment in finding a new cure cannot be secured. Patenting diagnostic methods offer an alternate way to protect that investment.

Mayo eliminated that protection in the U.S., so investment in new cures for old drugs goes to other countries that provide diagnostic method patent protection.

Other Supreme Court cases made many gene therapies ineligible for patent protection. Gene therapies include inventions like the COVID-19 vaccines, which have helped many people. Like diagnostic methods, if patent protection is not offered in the U.S. for gene therapies, investment goes to other countries.

If the U.S. is to be competitive in these markets, we need patent eligibility restored for diagnostic methods and gene therapies. PERA fully restores that eligibility.

But what does it do for tech patents?

Failed Patent Eligibility Pushed China Dangerously Ahead of the U.S.

The Supreme Court destroyed patent eligibility for entire swaths of tech innovation critical to our national security and economic growth in a 2014 decision called Alice Corp. v. CLS Bank International (Alice).

Alice created an unintelligible and undefined exception to patent eligibility called the “abstract idea.” Because nobody knows what qualifies as an abstract idea, Alice gutted the patent protection for most inventions in artificial intelligence, cybersecurity, quantum computing, blockchain, 5G/6G, enterprise systems, and much more. These technologies are critical to our national security and economic growth and are the bulk of the 37 of 44 technologies in which China now leads the world.

It is impossible to know exactly how many tech inventions Alice has destroyed, but the number is in the thousands. The courts invalidate around 50% of patents challenged as abstract ideas, and the United States Patent and Trademark Office (USPTO) has refused to issue thousands of meritorious patents whose companion applications are patented in China or Germany. 

Failed Patent Eligibility Created Big Tech Monopolies

Not only did Alice enable China to eclipse the U.S. in these critical technologies, but it also enabled Big Tech to monopolize.

Since the beginning of the tech industry, new tech companies with better technology have knocked out lethargic incumbents. Most tech companies last only a few years before new technology eliminates them. But some monopolized a sector of the market only to be eventually knocked out by a startup with better technology a few years later. For example, in the 1980s, IBM monopolized personal computers. But in the 1990s, Microsoft and Intel broke IBM’s hold and created their own personal computer oligopoly. Later, Apple and Google broke that oligopoly up with their own monopolistic versions of mobile devices.

It used to be that every tech giant felt threatened by a startup with better-patented technology. That competitive environment drove American innovation. But now, Big Tech is just growing bigger.

Big Tech knows it is much more efficient to steal technology than to develop it. So, it fabricated false political narratives intended to drive all levels of government to gut the patent system, eliminating its startup competition. Somehow, this false narrative infiltrated the Supreme Court, which bought it and gave us Alice.

Today, Big Tech multinationals simply steal the unprotected inventions of startups and run them out of business using their massive markets, deep pockets, and patent lawfare.

PERA Codifies the Abstract Idea

Big Tech is not monolithic. The massive corporations that make up the Big Tech cabal have very different needs. For example, Big Tech social media giants, like Facebook or TikTok, do not care much about chip design patents, but Qualcomm and Intel do. They all care about software patents but in different ways.

Some software is integral with a computer. As an example in low level software, a BIOS process cannot be performed without the processor because BIOS controls how ones and zeros go in and out of the processor. You can’t separate the processor from the BIOS because a processor is required for all its operations.

But social media inventions are different. They operate on the outer edge of technology in a browser or a phone app. While computers are required for these inventions to work, several layers of software are removed from the processor. For that reason, claim language is written functionally with functions like send, receive, or save.

There is a legal concept called insignificant extra-solution activity, which seems to have originated with a case called Parker v Flook in 1978. It is a method of evaluating patent claims most often applied to patent eligibility analysis. (It is important to understand that it is a method of evaluating patent claims, not a judicial exception to eligibility.)

This method of evaluating claims “can be understood as activities incidental to the primary process or product that are merely a nominal or tangential addition to the claim.” In software patenting, this means that common computer functions like send, receive, or save are considered insignificant extra-solution activity.

In practice, insignificant extra-solution activities are removed from the claim language, and whatever is left is examined. But once you remove all the normal computer functions, the invention is no longer connected to a computer or anything else in the real world. As a result, meritorious inventions are deemed to be abstract ideas and not eligible for patent protection.

But here is the crux of PERA’s problem. PERA eliminates all judicial exceptions, including the abstract idea. However, it does not eliminate evaluation under insignificant extra-solution activity.

PERA then creates a new complicated eligibility exception for software inventions in sections B(i) and B(ii). In this two-part test, the inventor must prove multiple negatives. The test begs for an evaluation of insignificant extra-solution activity. The preamble of PERA states, “for example, ‘do it on a computer’ shall not establish such eligibility,” which effectively instructs the courts to evaluate the claims under insignificant extra-solution activities to see if the claims “do it on a computer.”

There can be no doubt that the courts will apply insignificant extra-solution activity evaluation under this new test. The result is to codify the effects of the abstract idea. PERA changes nothing.

PERA Perpetuates Big Tech Social Media Monopolies

Not all software patents will be affected in the same way. Computer hardware companies may be okay with PERA because low-level software inventions will be eligible for patent protection, but those at a higher level will not.

PERA risks codifying the damage to U.S. innovation that made patent-ineligible inventions in artificial intelligence, cybersecurity, quantum computing, blockchain, 5G/6G, enterprise systems, and much more. As previously stated, these technologies represent the majority of the 37 of 44 technologies in which China has achieved global leadership. 

PERA not only denies patent protection to startups capable of direct competition with Big Tech social media giants, but it also denies patent protection to small company products sold on Big Tech app stores.

Big Tech will still be able to ambush startups by encouraging them to develop products for their app stores. But once the startup’s product is proven successful, Big Tech can simply copy it and kick the startup out of the app store thereby killing the startup and taking their technology for themselves. 

If sections B(i) and B(ii) are removed from PERA, these problems disappear. Once again, startups will be able to protect their new technologies and bring them to market, thus creating competitive markets for Big Tech monopolies and restarting America’s innovation engine so we can take the lead back from China.

If sections B(i) and B(ii) are not removed from PERA, PERA must not become law.