Can Software and Business Model (BM) be Patented?

 

  As technology develops rapidly, new types of inventions that have never existed before are increasing. As the world enters the IT era, new software continues to be created, and various business models are being created one after another according to economic and industrial trends. In this trend, we wonder whether software and business models can be protected by intellectual property rights or as patents. In this issue, we will look at application trends and legal protection methods for *software and *business models that are difficult to protect under the traditional categories of intellectual property rights.

*Software: The opposite of computer hardware, it performs the function of instructions by giving instructions directly to the hardware or providing input to other software.

*Business Model (BM): A model of what value is created for the company's business, how to deliver it, and how to make profit.

Software and Business Model (BM)

  Since the beginning of the 21st century, 90% of research and development subjects have been software-related. Inventions implemented by computer can now be found in almost every field of technology. This aspect is also reflected in patent applications, and most computer-implemented inventions are based on software. The development of software dates back to the 1960s. In the past, software development was primarily focused on mainframe and minicomputer computing, but today it is further divided into software development for personal, general purpose, and embedded computing.

*Mainframe: A computer that can support numerous users, applications, and device, large computers process complex tasks such as statistical data, financial computing tasks, and enterprise resource management.

Can it be protected by a patent?

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  In the past, software was primarily protected legally through copyright, but now many companies are trying to protect their software inventions through patents. For example, SAP Software Group established its own patent department in 1998. As of May 2001, SAP held four software-related patents. Through this period, the impact of patents became increasingly important in international market competition.

  The start of the software patent boom occurred in 1992, thanks to a groundbreaking court decision that led to the *Freeman-Walter-Abele test (two-step test), which made it possible to patent software in the United States. In 1998, this test was repudiated in the *State Street Bank court decision in the United States, which made mathematical algorithms patentable if they led to something concrete and substantive in their results, rather than being simple algorithms. This ruling marked the beginning of the era of business method (BM) patents in the United States. In fact, this ruling led to a rapid increase in the number of patent applications and granted patents for software and business methods worldwide in the 2000s. We will discuss the two-step test in detail below along with the Alice decision.

*Freeman-Walter-Abele test: The first step examines whether the claim directly or indirectly recites a mathematical algorithm. If it does not contain a mathematical algorithm, it may be subject to a patent. The second step is, if it contains a mathematical algorithm, it is to determine whether the algorithm is applied in any manner to a physical element or process step or it is subject to protection in some other respect other than the algorithm. If these two tests are met, the invention is eligible for a patent.

*State Street Bank court decision: If the claim only claims the mathematical algorithm itself without any application, patentability should be denied. However, it is eligible for protection by a patent if the mathematical algorithm described in the claim is useful, concrete and tangible results.

Computer-Implemented Inventions (CII)

  In the European Patent Office, software is considered ambiguous as a patent. This is because software refers to a list of programs written in a programming language to implement an algorithm, but it also refers to code loaded on a computer-based device and may include accompanying documentation. Therefore, in place of this ambiguous term, the concept of *computer-implemented invention is introduced. A computer-implemented invention refers to one or more features implemented entirely or in part through a computer program using a computer, computer network, or other programmable device.

  For a computer-implemented invention to be patentable, a technical problem must be solved in a new and non-obvious way. Additionally, a computer-implemented invention must be novel to be patentable, involve a creative step, and be capable of industrial application. Furthermore, in protecting a patent, the basic rule is that it must apply to an invention in any technical field.

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Patentability according to appellate precedent

  EPO precedents state that the control or execution of a technical process is not excluded from patentability, regardless of how it is implemented in hardware or software. Cases have shown that patentability should not be rejected on the grounds that a computer program is involved, as whether a process is executed via special circuits or a computer program may depend on economic and technical factors.

  *Computer-implemented inventions (CIIs) that are protected by patents include computer programs and computer program products. Subject matter claimed in this form may be patentable if the computer program, when run on or loaded into a computer, is capable of producing 'additional technical effects' beyond the 'ordinary' physical interaction between the computer program and the computer hardware which is running. The usual physical effects of program execution, such as electrical flow, are not enough to give technical properties to a computer program, and additional technical effects are needed.

  Additionally, plans, rules, and methods (BMs) for doing business cannot be patented as methods of doing business. However, new methods that solve technical problems rather than simply administrative functions can actually be patented.

Things that do not apply to inventions by each country’s patent office

  Below is a list of items that are not recognized as inventions by the patent offices of each country. Looking at items that do not constitute inventions, we can see why software and business models require examination and legal/institutional considerations from various perspectives to be recognized as patentable. This is because they’re an item that does not qualify as an invention but has technical creativity, so patent eligibility must be judged more deeply.

Alice decision and second step test

  The 2014 Alice decision has implications for how we view the patentability of business methods. This ruling was issued in a legal dispute between Alice Corp. and CLS Bank, in which the U.S. Supreme Court at the time did not recognize the patentability of a method of securing intermediary payments (electronic escrow). By ruling Alice's patent invalid, the court introduced a new procedure called the two-step test to determine patent eligibility.

EPO's two-step approach for evaluating computer-implemented invention (CII)

  This test first determines whether the claimed invention relates to an abstract idea, natural phenomenon, natural law, mathematical formula, or similar abstract concept. If it applies to a listed concept, the court will take a second step to examine how the claimed invention embodies the abstract concept and whether it includes a creative concept. According to the Alice test, a claimed invention is patentable only if it involves a natural phenomenon or abstract idea along with a creative concept or creativity. If it has that level of creativity, the claim can be registered as a patent.

  The USPTO’s examiner group for Business Methods responded quickly to the Alice decision. The number of finance-related patents allowed has been reduced to 10% of its pre-Alice decision. The Patent Appeals and Appeals Board reacted in a similar way. We found that only about 20% of appeals of business method rejections by patent examiners resulted in the results being overturned by the appeals board. This can be seen as meaning that it was not easy to have enough creativity to be recognized as a patent.

Decrease in patents related to business methods compared to software after the Alice decision

  So far, we have looked at the patent perspective on software and business models. After the 4^th Industrial Revolution, the need to determine the patent suitability of various IT technologies, including software, and business models is expected to gradually increase. Since securing patent rights is the first step toward technology protection and industrial development, we hope that laws and systems to protect new types of inventions can be systematically developed and reorganized. Furthermore, we hope that new types of inventions will be protected by law and they will lead to the competitiveness of companies and individuals and become a driving force for industrial development.

 

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In the text, contents related to ‘Software and Business Model (BM)’, ‘Computer-implemented inventions’, ‘Patentability based on appellate precedents’, ‘Things that do not qualify as inventions by each country’s patent office’, and ‘Alice decision and two-step test’ is excerpted and referenced from 'Patent management: Protecting Intellectual Property and Innovation 2021', Oliver Gassmann, Martin A. Bader, Mark James Thompson, Springer. Other contents were written by WIPS.

The explanation of the ‘Freeman-Walter-Abele test’ and the ‘State Street Bank court ruling’ are excerpted and referenced from ‘The validation of a Business Model as an Invention’ by Duhyeong Lee

The 4th Industrial Revolution, Internet of Things (IoT), and future challenges

 

 We are living in the era of the 4th Industrial Revolution. The word ‘smart’ is added to the front of most electronic devices, and connecting devices in different spaces has become a daily routine and a virtue for efficient work processing. The Fourth Industrial Revolution, first claimed by Klaus Schwab, the founder of the World Economic Forum, in an article for Foreign Affairs in 2015, is no longer a world of imagination or unknown territory. In this way, the 4th Industrial Revolution has penetrated deeply into our lives, but the reality is that the social foundation to welcome the new trend has not yet been established. In this issue, we will look at the definition and current status of the 4th Industrial Revolution and its representative technology, the Internet of Things (IoT). And with the advent of a new paradigm, let's look at the problems we face and the challenges that need to be solved.

  The 4th Industrial Revolution, smart connecting to the world

 The 4th Industrial Revolution, also known as the next-generation industrial revolution, is a name that expresses major technological trends observed across various technological fields. The 4th Industrial Revolution includes various technologies such as the Internet of Things (IoT), which has led technological trends with its emergence, cloud computing, and artificial intelligence. These technologies make it possible to smartly connect multiple objects and utilize them to their full potential. That is why the 4th Industrial Revolution is called the era of hyper-connectivity, hyper-intelligence, and hyper-convergence.

 The term ‘Industrial Revolution’ captures the overwhelming penetration and destructive potential of the latest technologies. The previous industrial revolution achieved automation of repetitive physical labor, but the 4th Industrial Revolution goes further. The 4th Industrial Revolution implements large-scale automation of all tasks, including repetitive intellectual labor. Furthermore the 4th Industrial Revolution can greatly improve efficiency and flexibility in the producting process, as well as enhance the value of goods and services. The transition to ‘smart’ factories that operate autonomously without human physical labor has already been recognized as an important challenge in many countries, including Europe.

*Intellectual labor: As opposed to physical labor, it refers to knowledge-based, intellectual work.

 “ A world that changes with technology “

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  Under the development of the 4th Industrial Revolution, smartly connected objects are changing the paradigm of existing transportation (ex. autonomous vehicles), energy (ex. smart grid), cities, medicine, and agriculture. Behind this development, there are also economic and social problems that appear one by one, just like the industrial revolution in the past. For example, the automation of intellectual labor requires that the meaning of human labor be redefined and its value established in line with technological trends. Also, new jobs are created and existing jobs disappear that shakes the balance of the labor market.

 Change is spurring companies to rethink their business models and adapt to new forms of competition. In addition, policymakers in each country are tasked with forming a foundation and system so that all economic entities can adapt to the new trend. The details of the task are as follows.

 <Tasks of the 4th Industrial Revolution>

. Design workforce training and investment methods to enable workers to adapt to new trends

. Design ways to support and regulate new digital infrastructures

. Design a Legal Framework to Compete in the Digital Age

. Design appropriate legal frameworks to protect cyber security and consumer rights

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Technology trends in Internet of Things (IoT)

  The 4th Industrial Revolution is also called the Industrial Internet of Things (IIoT). It can be said to be a name that shows the influence of the Internet of Things, which has led the 4th industry. The Internet of Things is broadly divided into the following three categories.

 <3 types of IoT technologies>

. Core technologies: Technologies that can transform any object connected to the Internet into a smart device.

. Enabling technologies: Technologies with legitimate utility used with connected objects (analysis, security, artificial intelligence, location, power supply, 3D systems, user interface)

. Application domains: Areas that can utilize the potential of connected things (home, individual, business, manufacturing, infrastructure, vehicle)

  Over the past three years, the growth rate of patent applications for the Industrial Internet of Things (IoT) has been 54% (see Table 1), exceeding the overall patent application growth rate of 7.65% over the past three years. In particular, in 2016, more than 5,000 inventions related to autonomous driving objects were filed with the European Patent Office, proving that the Internet of Things is a trending technology. Among them, the 3D system artificial intelligence and user interface fields have grown the fastest over the past three years, and the number of corporate filings in application fields closely related to these technologies accounted for the largest portion of the total number of applications related to IoT technology.

 The increase in IoT inventions all occurred in three categories: core technologies, enabling technologies, and application domains. While application domains and core technologies account for a large proportion of inventions, the number of inventions related to enabling technologies is considerably small (see Table 1). In addition, in recent years, the number of inventions of core technologies has grown more rapidly, almost outpacing the number of applications.

Patent application patterns in the 4th Industrial Revolution

  Of the 20 companies that account for 42% of all industrial Internet of Things (IoT) patent applications filed with the EPO from 2011 to 2016, most are located in Asia (see Table 2). In addition, innovation in core technologies is mainly achieved by a small number of large companies focusing on information and communication technology (ICT). On the other hand, in the field of enabling technologies and application domains, applications are not concentrated only in large companies, and the top applicants in this field include not only large companies but also companies from various industries.

  Since the mid-1990s, Europe, the United States, and Japan have been hotspots for industrial Internet of Things (IoT) technology innovation. Large companies from various fields in Europe, the United States, and Japan are major applicants in the IoT enabling technologies field. In Korea and China, IoT innovation began later than in the countries above, and to date, a small number of information and communication technology (ICT) companies are leading the IoT industry. It is a familiar fact, but in Korea, LG and Samsung control 90% of IoT application domains, and in China, Huawei and ZTE control 70% of the 4th Industrial Revolution patents.

 The 4th Industrial Revolution in Europe tends to be concentrated in Munich and Paris. France and Germany are the two most key countries in the technological development of the 4th Industrial Revolution. Germany, which has been at the forefront of the 4th Industrial Revolution since the late 1990s, has stood out in the manufacturing, vehicle and infrastructure sectors. Additionally, the technology profiles of Nordic countries, including France and Benelux, mainly showed specialized technologies in artificial intelligence, user interface, 3D processing, and security. Philips (Netherlands), Nokia (Finland), and Ericsson (Sweden) are the representative leaders for those technologies.

*Benelux: A general name for three countries, derived from the initials of three countries: Belgium + Netherlands + Luxembourg.

 And future challenges

  The development of IoT is expected to accelerate the advent of the 4th Industrial Revolution. The technologies of the 4th Industrial Revolution are already beyond what the existing legal system can respond to. For example, although it is claimed that self-driving cars are statistically safer than those driven by humans, the probability and occurrence of an accident cannot be ignored. However, criminal and civil legal liability in the event of an accident has not yet been clearly defined. Therefore, we need a legal system and regulations on responsibility that can hold the responsible party accountable. Going one step further, society will need to legally consider cases where software and networked devices can each become their own economic entities using distributed ledger technology.

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“What is Distributed Ledger Technology?”

 *Distributed Ledger Technology (DLT): Distributed network participants use encryption technology to jointly distribute the ledger on which transaction information is verified and agreed upon. As a management technology, it doesn’t require central administrator or central data repository. Additionally, to increase the reliability of data management, all participants within the distributed network replicate and share transaction information with each other according to the consensus algorithm. Because this transaction information is distributed and managed, counterfeiting can be prevented, and the representative implementation of this distributed ledger technology is blockchain.

*Refer to Naver Encyclopedia and Dictionary of IT Terms (provided by Korea Information and Communication Technology Association)

  A representative example of this distributed ledger technology is the protocol for the cryptocurrency IOTA, issued by the German non-profit foundation IOTA. IOTA is an upgraded version of existing blockchain technology and is a distributed ledger developed to process, execute, and settle transactions between devices required to implement the Internet of Things. IOTA achieves decentralization based on a consensus protocol that does not require central administrators. IOTA is operated by a proprietary technology called Tangle. This technology does not require separate miners and has the great advantage of no remittance fees because traders directly act as miners.

iota.org

iota.org

  In this way, we looked at the concepts of the 4th Industrial Revolution and the Internet of Things (IoT), which are familiar terms but difficult to define, and the future tasks we must prepare for. As in the text, issues such as ‘jobs that will be in the spotlight in the future and jobs that will disappear’ and ‘liability and legal basis in case of accidents’ are already actively being debated. We will need to pay attention to how workers who lose their jobs will adapt to the new technological environment, how technology and consumer rights protection laws will be established more systematically and fairly, and how cyber security technology will be strengthened. We hope that not only technology but also systems that respond to change will develop in a balanced manner so that everyone can happily welcome the wave of the 4th Industrial Revolution.

 

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. In the text, the contents of 'The 4th Industrial Revolution, connecting the world smartly', 'Technological trends of the Internet of Things (IoT)', 'Patent applications in the 4th Industrial Revolution', 'And future challenges (first paragraph)' are excerpted and referenced from Patent management: Protecting intellectual property and innovation 2021, Oliver Gassmann, Martin A, Bader, Mark James Thompson, Springer. And the other contents were written by WIPS.

. Korea Information and Communication Technology Association “Distributed Ledger Technology” – Refer to Naver Encyclopedia IT Glossary (Distributed Ledger Technology (naver.com))

 

Biotechnology patent management strategy in a global environment

  The world is focused on overcoming human biological limitations and inventing technologies for healthy living. Amid this trend, biotechnology is attracting attention as a representative field that will solve humanity's long-cherished aspirations and homework in the 21st century. In this issue, we will look at the status of patent applications for biotechnology, ethical issues and other issues, and patent management strategies for biotechnology in the global environment(1) based on various patent standards of countries.

 Biotechnology inventions and patents

  First, let's look at the definition and concept of biotechnology inventions. The European Patent Convention defines biotechnology inventions as ‘products consisting of biological material’ or ‘products containing biological material’. This refers to inventions related to the process of producing, processing, or using DNA sequences, genes, proteins, or biological materials. Additionally, biological material refers to any material that contains genetic information and can reproduce or reproduce on its own in a biological system. This includes living organisms as well as biological tissue and DNA. Biotechnology patents are patents for biotechnology inventions, including plants, animals, human cells, tissues, and organs, or genetically modified animals, plants, and genetically modified seeds.

Biotechnology patents with many things to consider

  Over the past few decades, biotechnology has grown rapidly and ranks among the top 10 technology fields, accounting for approx. 4% of the total number of applications filed at the EPO.

Number of EPO biotech applications and its increase/decrease rates by year

  Applications in the biotechnology field range from microorganisms to agricultural and medical patents. When registering patents for biotechnology inventions, not only legal and economic aspects but also ethical and social aspects are considered. Sometimes, social controversies and issues arise as various opinions clash as to whether an applied invention is truly suitable for a patent. Examples include genetically modified plants (GMOs), animal cloning, or the use of human embryonic stem cells.

 Licenses and Research Funds

  In biotechnology field, basic procedures such as ‘gene isolation’ are essential for research. For example, polymerase chain reaction (PCR) is a basic process in genetic engineering that can amplify extremely small amounts of DNA as desired. A number of patents have been applied for on the subject of this PCR.

  Patents about PCR were licensed to other researchers, making it easier to use PCR, and as a result, many researchers were able to actively conduct other research. This can be seen in the exponential increase in the number of scientific papers referencing PCR technology that appeared between 1987 and 1997 following the announcement of the PCR patent. Typically, research costs may increase because patent fees must be paid when using a license, and this cost will act as an important factor in research.

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EPO respects traditional knowledge

  In order to prevent the indiscriminate privatization of traditional knowledge, the EPO goes through a process to check whether the subject of the application corresponds to the traditional knowledge of a specific country when granting a patent. In this case, EPO uses specialized databases such as the Traditional Knowledge Digital Library of India (TKDL). In 2009, the EPO signed an agreement with the Government of India to get online access to this database. In addition, EPO also refers to Asian data that describes traditional knowledge of Asian countries.

(left) Indian Traditional Knowledge Digital Library (TKDL)/
(right) EPO's Asian patent information database

Biotechnology stands on the standards of ethics

  The EPO strictly adheres to the European Patent Convention, which serves as its legal basis, and considers ethical issues when granting patents. The law (EPC article 53) sets out several exceptions where patents may not be granted for ethical reasons. These include human cloning, modifying human genome, and use of human embryos. Below table shows that patentable and non-patentable inventions in the biotechnology presented by the EPO.

EPO's list of patentable biotech inventions and non-patentable biotech inventions

  The EPO does not grant patents on genes with no known activity or on unidentified gene fragments. Additionally, for a human gene, the activity of the gene must be described in the application and must be meaningful as a patent, not just a discovery. There must be a medically important benefit, and the application will be rejected if it conflicts with ethical issues without proof of gene function.

  It is possible to obtain a patent under the law even if the animal's genes have been modified, but most of the related applications submitted to the EPO concern genetically modified mice used in medical research. The EPO applies ethical standards to this. If a modified genetic invention is found to cause suffering to animals, it can only be patented only for the case  ‘provides substantial medical benefit to humans or animals.’

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Dispute issue: a genome editing tool CRISPR-Cas9 and patent rights

  CRISPR-Cas9, called the third generation genetic scissors, is a genome editing technology that uses cutting enzymes to remove the DNA that causes disease in the human body and treats the disease by recombining and editing the desired gene in its place. CRISPR-Cas9 is attracting attention as a historic invention that saves humanity from disease and creates a new future.

(*CRISPR- Clustered Regularly Interspaced Short Palindromic Repeats)

  The first people to announce CRISPR-Cas9 were Professor Jennifer Anne Doudna of UC Berkeley and Professor Emmanuelle Marie Charpentier, who were in the same lab at the time. They were honored as joint recipients of the Nobel Prize in Chemistry in recognition of their achievements in 2020. However, even though UC Berkeley applied for the technology using genetic scissors earlier in 2012, the Broad Institute, which applied later in 2013, obtained a patent before UC Berkeley by using the expedited review system, leading to a long dispute between UC Berkeley and Broad Institute (MIT and Harvard Univ.) over the patent rights for CRISPR-Cas9.

  This legal battle, which began in 2015, is still ongoing, focusing on the infringement review by the U.S. Patent and Trial Board (PTAB) (2). Following is the argument of each research institute during the second round of the patent dispute.

▶UC Berkeley: Through infringement proceedings under U.S. patent law, the CRISPR-Cas9 system that operates in eukaryotic cells is included in UC Berkeley's patent claims.

▶The Broad Institute (MIT, Harvard): A technician with ordinary knowledge who can understand the differences between prokaryotic cells and eukaryotic cells cannot expect the CRISPR-Cas9 gene editing function to be successful in the eukaryotic cell environment.

- Recognized as 'Broad Institute have priority' by the U.S. Patent and Trial Board

UC Berkeley vs Broad Institute

  The outcome of this dispute is expected to have a ripple effect enough to reorganize the global CRISPR licensing market. The CRISPR-Cas9 patent battle can be referred to be a volume war that combines financial power, original research capabilities, and the ability to effectively conduct litigation in foreign countries with different patent systems and procedures. Furthermore, if the market value of the CRISPR-Cas9 invention is overwhelmingly large, patent disputes are expected to expand to other countries and not be limited to the United States or EPO. In fact, CRISPR-Cas9 patent disputes are beginning not only in the United States and Europe, but also in China and Japan.

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      < Biotechnology patent management strategy in a global environment >

1.      Review the aspects that can be socially and ethically discussed during patent examination. Also, prepare evidence to persuade that the invention meets social and ethical standards and countermeasures to counterarguments.

2.      Manage the schedule, cost, and funds of the research project reasonably through a patent license agreement appropriate for the purpose.

3.      Conduct research that does not infringe traditional knowledge monitoring global patent databases. Use various databases from each country to plan original research.

4.      In-depth search of prior arts and trial precedents. Submit application conforming to patent eligibility.

5.      Understand different patent standards and systems/laws in detail by country. Secure capabilities to respond to global conflicts

 By exploring the status of applications for biotechnology, patent standards by country, and recent issues, we can obtain answers to patent management strategies. As the industrial and commercial value of a patent increases, the legal review of the invention becomes more sophisticated and specialized. In other words, designing a global patent management strategy will become as important as inventions in the future. Especially in the biotechnology field, establishing a global patent management strategy will become an essential competency.

   

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1. Full text excerpt: Patent management: protecting intellectual property and innovation 2021, Oliver Gassmann, Martin A. Bader, Mark James Thompson, Springer

2. The Dong-A Ilbo, article “The MIT-Harvard team won the second round of the genetic scissors patent dispute.”

The Dong-A Ilbo (www.donga.com), https://www.donga.com/news/article/all/20220306/112194171/1

 

 

 

Intellectual property protection strategy of AI-based business model

 

  AI-based business models (hereinafter BM) once again received a lot of attention as the AI language model ChatGPT3 was released. In particular, the whole world was seething beyond the industry when Open AI introduced ChatGPT4 not long after the ChatGPT3. How can the intellectual property rights of AI-based BM be protected? In this issue, we will introduce research on IP protection of AI-based BM.

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  Intellectual property can be protected in both formal and informal ways. Formally it’s protected by patents, design, trademarks, and copyrights. Informally, trade secrets, strengthening product and complexity of manufacturing process to increase the difficulty of imitation, and lead-time advantage to secure competitive advantage through faster innovation than competitors. This study examines how formal and informal protection strategies can be applied to AI-based BM, with an emphasis on balancing open innovation with existing practices. Depending on the BM, optimization and supplementation of formal and informal IP protection strategies may be necessary to maximize value creation.

 

Challenges in applying a formal IP strategy

  One of the major challenges for patent protection of AI-based inventions is that algorithms play an important role in designing AI concepts. Algorithms are considered mathematical methods “in their own right” under patent law and are therefore excluded from patentability. AI concepts are often aimed at automating or performing tasks or activities currently performed by the human mind, which fall under patent ineligibility because they are mere theoretical concepts or lack novelty. However, many AI-based inventions are currently based on and implemented in software, and over the past few decades, patent law and practice have been building around how software-based inventions are dealt with.

 Europe

  In Europe, AI as a mathematical method is exempt from patent, but if the method involves a technological means (e.g. a computer) or a device, it may be of a technical nature as a whole (computer-implemented inventions, CII). The European Patent Office (EPO) applies a 'two-hurdle approach' to 'Mixed-type inventions' when evaluating patentability to see if AI methods contribute to the technical characteristics of the invention. In this context, the EPO recently updated its screening guidelines with a specific section on ‘Artificial Intelligence and Machine Learning’. In this context, the EPO recently updated its screening guidelines with a specific section on ‘Artificial Intelligence and Machine Learning’. These Guidelines provide guidance on how to assess whether inventions relating to artificial intelligence and machine learning are based on the 'technical characteristics' required to be patentable, and provide detailed information about how to evaluate relevant cases and the CII's technological prowess as determined by the EPO Appeals Board.

US

  In the United States, abstract ideas cannot be patented. Also, just using a computer to implement an abstract idea to inventions is not enough to qualify for a patent. Law firm Baker McKenzie explains that perhaps the biggest legal hurdle to patenting AI inventions in the US is §101 US Federal Regulations (35 U.S.C.). This is because patentable subjects are limited to ‘process, machine, manufacturing, or composition of matter’, and abstract ideas, natural laws, and natural phenomena are excluded from patentability. The criteria for eligibility for these patents were further strengthened in the 2014 U.S. Supreme Court decision for Alice Corporation vs CLS Bank, which applied a more stringent two-step test for software and computer-implemented inventions.

Current status of AI-related innovation patents

  AI-related innovations are often based on software and computer-implemented inventions. These inventions may be directed towards one or more specific AI applications. Based on previous and current laws, various companies and research institutes have begun to apply for patents in the field of AI as well. As shown in the figure below, approx.. 340,000 family patents have been filed and published since the 1960s. Additionally, by mid-2018, a total of more than 1.5 million scientific publications had been published, indicating that AI has become a major field of science. By the early 2000s, scientific publications had grown significantly (nearly doubling at an average annual growth rate of 18% from 2002 to 2007), but it took another decade for patent applications to skyrocket (CAGR of 28% from 2012-2017). It is reasonable to interpret that this is because basic research is usually published as scientific publications first, whereas R&D related to industrial use takes a considerable amount of time and, leads to patent applications by its nature.

Trend in the number of AI family patent/ scientific publications
by year of first publication (WIPO 2019)

  As seen in the figure below, patent applications for specific application field have emerged since the mid-1990s. Those are mainly transportation and communication field, and artificial intelligence-related inventions are constantly being filed across multiple application fields.

Trend in the number of family patents with the earliest priority year 
by application field (WIPO 2019)

IP protection strategy for AI-based BM

  AI research and innovation requires significant investment. The European Union (EU) aims to invest at least EUR20 billion per year in AI after 2020 (Euro Commission 2018). According to the World Intellectual Property Organization (WIPO), more than 3,000 AI-related companies have received funding worth $46 billion, and M&A has become a means of securing AI technologies, data access, and related patent portfolios. Nearly 500 companies have been acquired, more than half of them have been happened since 2016.

  Given the high level of investment in AI technologies and applications, companies and investors use a variety of strategies for protecting AI-related intellectual property to protect these investments and generate returns. These strategies include formal IP measures, such as patents and copyrights for AI algorithms and codes, and informal IP measures, such as trade secrets for AI data.

Formal/ Informal protection

  In addition, ③ there is a method based on standardization through disclosure (Public Domain). There are two main challenges when developing AI technologies. (a) developing AI systems and algorithms from a technical perspective; and (b) accessing suitable data sets to train optimized AI algorithms or AI systems. Access to data sets is an important issue not only for competitive advantage across legal systems, but also for investors investing in startups. Issues include available datasets, costs associated with data quality, and more. In public institutions, access to data is more difficult due to budget constraints or data protection regulations. Especially in the life sciences, where regulations are more stringent, accessing data can be more difficult. In other words, companies can collect/expand datasets while accelerating development by utilizing standardized open sources in AI R&D, and gain a competitive edge by simultaneously using official/unofficial IP protection strategies.

Implication

  There are various studies that suggest that formal/informal protection strategies are complementary to each other in AI-based BM. Since the current system mainly regards AI as software and clearly stipulates the criteria for patent registration applying AI algorithms, legal, practical, and ethical challenges remain regarding the patent protection of AI-based methods and systems.

 As the development of AI technology accelerates, fast response is required than ever before. Especially when it comes to financing or direct investment, how to deal with public contributions (e.g. access to specific data sets or specific AI algorithms) and value creation (e.g. monetization of ownership/access to specific data sets) are an important premise to establish strategies. Andreessen Horowit, an American private venture capital firm headquartered in Silicon Valley, notes that large companies are investing heavily in AI, so they suggest that startups need to 1) have smart and ambitious teams, 2) access unique data sets that larger companies do not have, and 3) differentiate by not relying too much on AI.

 AI technologies are already beginning to impact urban life, and according to the Stanford 100 Year Study on Artificial Intelligence, AI could challenge human cognitive jobs while strengthening ownership of intellectual capital. Therefore, while the combination of AI-based BM innovation and intellectual property protection strategies remains important, it is important to strike a balance between public perception of the fairness of AI technologies and the monopoly demands of innovators.

 

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< Source >

The above is excerpted from; 

Patent Management: Protecting Intellectual Property and Innovation 2021, Oliver Gassmann, Martin A. Bader, Mark James Thompson, Springer.

Growth of University Technology Transfer Offices (TTOs) in US and China

 

 In recent years, universities in the United States and China have begun establishing their own Technology Transfer Offices (TTOs) to manage and commercialize intellectual property (IP) within universities. These TTOs act as intermediaries between university researchers, students and faculty, and businesses, and contribute to creating an economy from generating revenue to increasing employment opportunities for students by commercializing university innovations.

In this issue, we’ll look at the growth of University Technology Transfer Offices (TTOs) which increase in universities in the United States and China.

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l  USA

The role of university TTOs

 The primary role of American university TTOs is to foster and support development and invention in general. It encourages professors and students to submit technical inventions to the TTO, and determine patent protection considering the analysis of the invention and the market value and maturity level of the technology. It also helps inventors obtain support in the technology transfer process. The reason TTO provides sufficient support to inventors is that their inventions have high potential for commercialization.

University TTOs activities

Major activities of university TTOs
(source: World Patent Information 68, 2022)

IP management and technology licensing

 The TTOs manages intellectual property rights and conducts a preliminary evaluation of inventions to determine whether they meet the criteria for filing a patent and commercial value. And then decide whether to apply for patent protection for your invention. Also TTOs evaluates published inventions and investigate the market readiness and commercial potential in detail. Through this process they determine whether to enter into a technology licensing agreement or establish a spin-off company.

Industry-university cooperation

 Some universities in the US have already collaborated with TTOs having separate departments of industrial and corporate studies. Many TTOs are responsible for building and maintaining partnerships between industry and universities that can lead to innovative technology discovery and employment and wealth creation. In order to achieve successful industry-university cooperation, mutual understanding, goals, and complementarity between industry and university must be reflected.

Academic Entrepreneurship

 Academic Entrepreneurship aims to foster the entrepreneurial spirit, skills, and character of students. This is an effort to promote the growth of students' entrepreneurship and also very important for TTOs. TTOs carries out activities providing financial support or resources for capacity development such as education, training, and research.

Proof of Concept (PoC) for Funding

 PoC is the process of verifying the feasibility of a new project and its effectiveness and utility. TTOs also play a role in proving the PoC and attracting funds. Verification evaluates inventors' proposals based on Technology Readiness Levels (TRL) developed by NASA. The results reflected by evaluation are used to estimate the size of the fund and reflected to attract the fund and plan the activities.

Technology Readiness Levels (TRL)
(source : World Patent Information 68)

Management of university’s IP policy

 TTOs manage the university's IP policy as well as TTOs internally. It is common for TTOs in the United States to establish intellectual property policies that comprehensively cover legal issues related to participation agreements, disclosure and review, inventions (including student inventions), and returns of inventions.

 

l  CHINA

Status of China's IP Development

 China has developed gradually since its first intellectual property law was officially adopted in the 1980s. Since then, social awareness of IP and the law in China has also increased, and most Chinese universities own IP under the support of the Chinese government and have the rights to generate revenue. In particular, in 2002, China granted a significant number of IP rights through government funding to universities, and since then, the number of patent applications filed by Chinese universities has increased dramatically. From 2016 to 2020, Chinese universities received 568,825 patent grants out of the total patent grants issued by the State Intellectual Property Office of China. This is due to the growing understanding and appreciation of intellectual property in China's universities and the growing acceptance of the concept of intellectual property within Chinese culture. In particular, China's prestigious universities, such as Tsinghua University, are contributing to the improvement of China's IP and increasing invention values as well as their own capabilities through IP management and commercialization.

2016-2020 Statistis on patent grants of major universities in China
(source: World Patent Information 68)

TTOs of China's top university, Tsinghua University

 True to its name as China's most prestigious university, Tsinghua University is also making top-notch achievements in technology transfer and technological innovation. In September 2003, Tsinghua Holdings, an internal IP asset management organization, was established. Since then, it has developed into a subsidiary for the commercialization of research technology, and is currently mainly performing tasks such as technology transfer, IP management, cooperation with large companies, entrepreneurship and planning technology strategy.

 Tsinghua Holdings has commercialized 56 national technological innovations and 62 key technological developments, and has contributed to the commercialization of 3 national science and technology projects. Tsinghua University TTO invested 6.95% in R&D from royalties and startup revenue in 2016, ranking 6th among China's top 500 companies.

Tsinghua University, China
(source: https://www.tsinghua.edu.cn)

 In the meantime, university TTOs have had many difficulties in commercializing IP with academic significance due to the lack of professional technical manpower. But now, under the leadership of the state, it is also attracting funds to develop technologies in cooperation with universities, governments and industries, and provides economic support and tools to commercialize researchers' ideas. The background of the US and China's vitalization of university technology transfer and the growth of TTOs can be seen as closely related to the legislative framework and policies of the two governments that actively encourage IP management and technology transfer. It is hoped that technology transfer and technology sharing will further increase through active cooperation between universities and industries along with the preparation of policy foundations.

 

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< Source >

www.elsevier.com – World Patent Information 68 (2022)

“An overview on patenting trends and technology commercialization practices in the university technology transfer offices in USA and China”