Artificial intelligence is “technology that enables computers and machines to simulate human learning, comprehension, problem solving, decision making, creativity and autonomy.” AI will play an increasingly important role in driving innovation and economic growth. Strong patent protection can incentivize AI-related inventions and the transmission of AI-specific technological improvements throughout the economy.
Accordingly, the Trump Administration may wish to focus on developing a robust AI patent policy as a key part of its economic growth agenda. Specifically, it might consider supporting efforts to strengthen legislative protection for patents in general, and to eliminate unwarranted regulatory barriers to AI development.
Strong Patent Protection Promotes Economic Growth
The U.S. Constitution empowers Congress to authorize the issuance of patents, which provide limited-time property rights for novel inventions. Congress passed the first patent law in 1790, and over time patents have been instrumental to the growth of the American economy, especially in high tech industries.
I discussed how robust patent protection promotes the spread of new technologies and economic growth in a June 2024 Forbes online article:
“Technological innovation generates new products and processes, thereby contributing mightily to economic growth. Numerous economic studies find that patents help spur the R&D that fuels all of this. Indeed, patent rights create a ‘market for inventions.’
Licensing agreements allow patent holders to transfer their rights to third parties. This allows inventors, who may not be experts in manufacturing or marketing, to profit while enabling the widespread adoption of their new technologies that spur economic growth. Innovation economics expert Professor Daniel Spulber describes this process in detail in his 2020 book The Case for Patents.”
The U.S. Patent Act basically provides that “anything under the sun” can be patented, if it is novel and inventive.
The Supreme Court, however, created judicial exceptions to this broad principle over a decade ago in its Alice and Mayo decisions. These exceptions stem from application of the “Alice/Mayo” test, which denies patents to inventions that are “directed to” an ineligible concept (a law of nature, a natural phenomenon, or an abstract idea), unless that concept is “transformed” into a patent-eligible application.
These ambiguous exceptions have created much confusion about what is patentable. In January 2024 Senate testimony, patent law expert Professor Adam Mossoff explained:
“[They] have created a tremendous amount of uncertainty for innovators and severely restricted the patent eligibility of high-tech and biopharmaceutical innovations … [They have] had a negative impact on both inventors and the companies working in the innovation industries that invest millions of dollars in creating the new products and services that drive economic growth, job creation and higher standards of living. Thus, [they are] … undermining the longstanding comparative advantage by the U.S. in the world in securing reliable and effective patent rights for all innovators.”
Disincentives to patenting also were created by a 2006 Supreme Court decision, eliminating the long-standing presumption that the holder of a valid patent that has been infringed is entitled to an injunction against the infringer (who used patented technology without permission). As Professor Mossoff put it in a 2021 article, this “resulted in a significant reduction in availability of injunctive remedies for patent infringements”.
Recent bipartisan bills that would reject these judicial interpretations, restoring broad patent eligibility and presumed injunctive rights, may be reintroduced in the next Congress.
Stronger AI Patent Protection Is Needed
Like other types of innovation, AI benefits from a vibrant patent system. This is particularly true of generative AI, which uses machine learning to create new content like text, images, music, audio, and videos.
Studies indicate that the economic gains from further incentivizing AI likely will be huge.
Studies Show AI Spurs Economic Growth
Economic research projects that AI innovations will have a major positive impact on economic growth.
A 2024 report by economists Annalisa Lusardi and Bastien Drut finds that:
“AI has the potential to significantly increase total factor productivity across the economy, impacting a wide range of industries through multiple channels – such as the labour market, investment and productivity – that may not be fully captured by official statistics.”
A study by Accenture recently cited by a European Parliament report estimates that by 2035 AI could double annual economic growth rates.
A January 2024 analysis published in the Journal of Financial Economics “document[ed] that AI is strongly associated with higher firm growth, and this growth comes mainly from firms’ use of AI technologies for product innovation.”
A great deal of other research reaches similar results.
One leading scholar, 2024 Nobel Prize Winner in Economics Professor Daron Acemoglu, is a bit more restrained. He estimates that AI will yield increases “in GDP between 1.1 to 1.6 percent over the next 10 years, with a roughly 0.05 percent annual gain in productivity.”
AI’s Status Under U.S. Patent Law is Uncertain
As a new Congressional Research Service Report explains, in 2024 the U.S. Patent and Trademark Office issued separate guidance documents, addressing (1) whether inventions made using AI (“AI inventorship”) are patentable; and (2) whether inventions about AI (i.e., new AI technologies) are patentable.
PTO’s AI inventorship guidance states that AI-assisted inventions may be patented so long as at least one natural person “significantly contributed” to the claimed invention. It also requires patent applicants to provide any evidence that the named inventor’s “purported contribution(s) was made by an AI system.” Dozens of patent community stakeholders commented, raising serious concerns about uncertainties associated with the “significant contribution” and “not made by an AI system” requirements.
PTO’s guidance on the patentability of new AI technologies focuses on how to apply the Alice/Mayo test. Commentators also have raised varied concerns about this document. Some have argued that the guidance makes it “unnecessarily difficult” to obtain patents by treating AI as a generic computer. Others have asserted that the guidance ignores AI-specific technical considerations and may be in conflict with the reasoning of Alice/Mayo.
Overall, PTO’s guidance has very limited utility. As the Council on Innovation Policy points out, “the non-binding nature of USPTO guidance on courts contributes to a false sense of security for AI patent applicants. These potential validity issues threaten investment in a technological field critical to American competitiveness”. Consistent with that observation, a “coalition of former judges and government officials ended [ended their comment] by urging the PTO to take a proactive role in advocating for legislative reform”.
What Comes Next
To strengthen incentives to promote AI innovation, the Trump Administration may wish to consider a five-pronged strategy, involving:
· Possible active support for legislation that would (1) eliminate judge-made exceptions to patentable subject matter; and (2) restore the patent holder’s presumed right to an injunction when a court finds its patent has been infringed.
· In the meantime, possible withdrawal of PTO’s October 2024 guidance on AI patent subject matter eligibility and its replacement with new guidance that clarifies the eligibility of AI-related patents. The guidance might, for example, avoid confusing questions of the role of AI as an inventor, simply treating AI as merely another innovation that ultimately has a human inventor behind it. Realistically, though, even the best guidance will provide only limited assistance to inventors absent clarifying legislative reform.
· Possible aggressive international advocacy in favor of protecting AI-related U.S. patent rights, with consideration of new targeted trade sanctions aimed at foreign infringers.
· Possible repeal of the Biden Administration’s highly regulatory October 2023 AI executive order, which is fraught with new legal risks that could blunt innovation by AI developers.
· Possible issuance of a new executive order that directs agencies to study and, to the greatest extent legally possible, repeal excessive federal regulatory barriers to the creation of AI.
Taken in tandem, these initiatives might play a significant role in furthering American AI-related innovation, to the benefit of the U.S. and global economies.