🤖 ARTIFICIAL INTELLIGENCE

ChatGPT Won’t Be Filing Any Patents...For Now

If an AI invents a new device, who claims the patent? Can it even be patented?

The issue of artificial intelligence-assisted inventorship has become increasingly urgent and murky. So when the US Patent and Trademark Office (USPTO) released its new guidance this week, it was a welcomed clarification.

"This guidance explains that while AI-assisted inventions are not categorically unpatentable, the inventorship analysis should focus on human contributions, as patents function to incentivize and reward human ingenuity," the document reads.

In a statement following the guidance's release, Kathi Vidal, director of the USPTO, noted that "the right balance must be struck between awarding patent protection to promote human ingenuity and investment for AI-assisted inventions while not unnecessarily locking up innovation for future developments." She then added that "as AI becomes ubiquitous, including as people build on each other’s AI-assisted inventions, it will become increasingly difficult to identify the ways in which AI plays a role in the inventive process."

While the guidance helps clarify this new frontier of patent law, implementation will continue to be a challenge, Jamie Nafziger, of Dorsey & Whitney, told CNN. “How sophisticated of a prompt will be required for a given invention? In connection with training an AI system, what level of planning will be required? Patent examiners will surely have some interesting challenges ahead.”

SCOTUS Agrees

Last year, the Supreme Court upheld a lower court’s ruling against Stephen Thaler, a computer scientist who was attempting to patent an invention created by an AI system he developed. The USPTO rejected the patent request, stating that no human inventors were involved, and the US Court of Appeals for the Federal District supported the claim.

However, Thaler’s supporters worried the ruling would have economically destructive effects. The Appeal Court’s ruling "jeopardizes billions (of dollars) in current and future investments, threatens U.S. competitiveness and reaches a result at odds with the plain language of the Patent Act,” Lawrence Lessig, a Harvard Law professor, wrote in a brief to the Supreme Court, notes Reuters.

It's a point that firm Skadden underscores. "As the conversation around AI inventorship unfolds, companies should be aware of alternative ways to protect their AI-generated inventions, such as using trade secrets," an insight piece published by the AmLaw100 firm states. "Similar developments in copyright law denying protection for purely AI-developed works only add to the complications that owners face in obtaining adequate IP protections for AI creations."

THE VERDICT:

So where should inventors and businesses alike land? IP law seems likely to continue in the direction that human contribution is a key factor in IP claims, but that should not limit AI investment, or its use in development. In-house counsel should focus on creating clear policies on AI integration in workflows, and protocols for how AI output is used in R&D and business development.

🚫 ANTI-TRUST

The Burden Of Additional Review

For most major mergers and acquisitions, the law requires merging parties to submit a Hart-Scott-Rodino pre-merger notification to the FTC and DOJ. These agencies use the HSR notification as a way to check the proposed deal for anti-competitive risk. In certain cases, the DOJ and/or FTC may make a second request (which acts like a subpoena) to more fully understand the proposed merger.

In the DOJ/FTC's most recent annual report released for fiscal year 2022, the agencies found that about 75% of deals subjected to a second HSR request were voluntarily abandoned or restructured. As the report continues, "During fiscal year 2022, the Commission brought 24 merger enforcement challenges: eleven in which it issued final consent orders after a public comment period; seven in which the transaction was abandoned or restructured as a result of antitrust concerns raised during the investigation; and six in which the Commission initiated administrative or federal court litigation. The 24 merger enforcement challenges the Commission brought in fiscal year 2022 is the second-highest figure in the last ten years," behind only the 2020 fiscal year.

In an analysis by Legal Dive, second request reviews were only issued in 1.6% of deals subjected to HSR during the first two years of the Biden Administration. This rate is inline with the Obama Administration, and remains relatively low. "What has appeared to change, though, is the rate at which the agencies seek settlements with companies whose deal is subject to a second request," Legal Dive continues. "Of the almost 9,000 HSR filings, only 0.39% were subject to settlement, a big drop from 1.04% during the last administration and 1.42% during the second Obama term."

"Perhaps because formal settlements with the agencies are an unlikely outcome, there has been a recent uptick in parties taking matters into their own hands to avoid litigation: either by abandoning or restructuring their transactions in response to antitrust scrutiny," an analysis by Morgan Lewis states. "In fact, recent data suggests that over the past year or two, roughly 35–45% of all transactions in which a Second Request has been issued now end in abandonment as a result of an antitrust investigation prior to litigation, and even more are restructured."

Parsing the data further shows that certain industries are more likely to receive Second Requests during a proposed merger/acquisition. "Machinery Manufacturers" were nearly double as likely to receive Second Requests during fiscal year 2022, while Hospitals were roughly five-times as likely, and broadcasting companies saw their likelihood at nearly seven times other industries.

Program Changes

Last summer, the FTC and DOJ proposed changes to the HSR pre-merger program that would slow the process down and require more effort by businesses to receive approval. "The proposed changes to the HSR Form and instructions would enable the Agencies to more effectively and efficiently screen transactions for potential competition issues within the initial waiting period, which is typically 30 days," the FTC wrote in a press release. In its own white paper, Jones Day notes that the new administrative burden "is not likely to lead to increased deal risk, and in many cases this additional information is not the kind of information that an agency would factor into its review."

THE VERDICT:

The Biden Administration has been clear from Day One that it will pursue antitrust cases and work to break-up monopolies in the US economy. FTC Chair Lina Khan has been particularly vocal about this. However, the probability of a second request for mergers and acquisitions subject to HSR review remains low, yet parties should be prepared for ways to handle such requests and outline possible voluntary restructurings of their deal.