Patent Law Based Concepts for Promoting Creation and Sharing of Innovations in the Age of Artificial Intelligence (“AI”) and Internet of Things (“IoT”)

(Paper presented by Prof. Dr. Heinz Goddar)

1. The Role of the Patent System in the Age of AI/IoT

When the Venetians created the first patent system in the 14th Century, the role thereof, as it is widely believed by scholars, lawyers and users of today’s patent systems, has been to encourage inventors not to keep their inventions secret anymore, rather to disclose them through a governmental channel to the public. That would, according to the intention of the creators of the first patent system and still believed to be applicable today, give “followers”, i.e. “improvers” of certain technologies that otherwise would have to be held secret to stand, as Isaac Newton has expressed it, on the shoulders of giants etc., thereby improving the speed of technological developments.

Meanwhile, in the high-tech-area of which AI and IoT are characteristic features, practically everything is disclosed rather rapidly by creators of technical innovations, i.e. “inventors”, be it by internet, be it intentionally, be it unintentionally. The need for a system encouraging inventors to disclose, instead of keeping certain developments secret, has therefore dramatically diminished.

Accordingly, nowadays modern scholars believe that the main role of the patent system is no longer to encourage inventors to disclose, rather to solicit and steer, resp., capital investment into Research & Development (R&D), which choice investors will make only if they can protect the results of innovative activities in a reliable manner against unauthorized use, so that a marginally higher profit can be expected by investors into R&D compared with e.g. buying rental apartments, doing other investments etc.. As a consequence, the main purpose of the patent system, insofar, is to enable innovators to create a fence around their innovations preventing unauthorized use of their inventions and therefore enjoying a competitive advantage, leading to higher prices, profits etc., obtainable by their products, compared with competitors.

Another function of the patent system, however, deeply embedded into it at least since the coming into force of TRIPs, is derived from Article 7 thereof, namely to enhance transfer of technology and therefore the possibility of “non-inventors” to enjoy the benefit of innovations created by investors into R&D and, thereby, becoming e.g. patent owners.

In other words, a strong patent system, amongst other IP systems, is not only meant to have the effect of steering investment into the creation of innovations, but there should also be a “door” in the aforementioned fence, namely in order to enable third parties to enjoy the fruits of innovative activities, once created. The aforementioned “door” in the “fence”, being an integral part of the patent system as defined by TRIPs, being the base law, so-to-say, of all patent systems in the modern high-tech-world, needs to be opened under fair, reasonable and non-discriminatory provisions to third parties that did not participate in the creation of innovations, but wish to enter the protected “garden”, defined as the area covered by certain innovations, against a fair contribution to the development cost, sharing their profit with the originators.

The respective “entrance fee”, with regard to the aforementioned door, by the way, has not necessarily to be paid in cash (only?), rather e.g. by cross-licenses, duly valued, as part or even complete component of the entrance fee.

The modern patent systems, like in Germany, make sure that not only a reliable fence, consisting of patents, can be built around innovations, thereby fulfilling the investment-steering function as described above, but contain also provisions for enabling sharing of such innovations with others, particular “newcomers” to certain fields of technology, as will be described below.

2. Specific Challenges for the Patent System in the Age of AI and IoT

The function of the patent system as described under 1. does not raise specific problems in areas where usually a single patent, or few patents only, cover a whole product or a limited number of products. This is the world of e.g. pharmaceuticals. In that regard, it only needs to be made sure by suitable legal provisions – e.g. compulsory licensing - , if parties in the field, i.e. potential licensors and potential licensees, cannot “independently” agree on reasonable arms-length licensing conditions, that still a sharing of the respective technologies can take place in such cases.

In this article/paper, the aforementioned single-patent-world, however, will not be dealt with in any additional detail. Rather reference is made insofar e.g. to an article “Price Differentiation and the Conundrum of Exhaustion Principles”, written by the author of this paper and published in “Differential Pricing of Pharmaceuticals inside Europe”, ZERP, Volume 58, ISBN 978-3-8329-4280-9.

In the field of AI and IoT, however, specific problems arise insofar as usually many patents, i.e. whole patent portfolios, cover certain technologies. As a specific example for this, though the problem is not restricted to that field, is specifically telecommunication. Beyond that field, however, also other software-related inventions and their protection by patents causes specific problems, which, however, can be solved by patent-system-based provisions, as it will be shown below.

In other words, under the principles as developed by the Boards of Appeal (BoA) of the EPO, adapted also by German Courts lateron, like particularly the Xth Civil Senate of the German Federal Court of Justice (GFCJ), there is not a specific problem, concerning eligibility for patenting, to protect inventions directed to AI. This even applies to inventions made by AI. At the end of the day, all such inventions are eligible for patenting under the European Patent Convention (EPC) as long as they are directed to a technical solution of a technical problem. Specific questions, like who should be the inventor of inventions made by AI, including questions of remuneration for employees’ inventions, need to be solved, but such questions do not cause specific problems with regard to incentives for creating innovations in the respective field and sharing the results of such innovations with others.

Rather, two specific different problems are created and exist in AI/IoT related inventions, namely as follows:

2.1.1. Scope of protection of AI related/created inventions and accessibility thereto

If AI created inventions are generously patented, the problem exists that further developers of applications of the respective patented AI as well as improvers thereof will have to respect the possibly rather broad, even “prophetic” patents granted on such inventions. This is a problem not unknown to users of the patent systems in other fields, like in case of so-called reach-through claims covering research tools in pharma discovery and development.

The author of this paper, however, is of the opinion that the aforementioned consideration should not restrict the rather generous granting of patents on AI related inventions, provided that access to the respective technologies, for the purpose of further developments, is given to newcomers without undue problems.

One should keep in mind, however, that the covering of AI-“produced” inventions will increase the number of patents in AI-related fields dramatically, including Standard Essential Patents (SEPs).

2.1.2.

Another problem with regard to AI related inventions, particularly “generously” granted ones, namely besides of how newcomers and improvers can get access to patented technologies, is created by so-called Standard Essential Patents (SEPs), which, if really essential for using the respective technology, must be used by other players in the field, not belonging to the originators of the respective Standard, particularly newcomers.

In a nutshell: How can modern patent systems make sure that AI/IoT-related inventions, specifically in an age where huge portfolios covering certain technologies, like telecommunication, will be developed, get access for “using” such technologies for developing further improvements on the basis thereof? Additionally, how can it be guaranteed that SEPs can be used by competitors, particularly newcomers to the respective technology, under fair, reasonable and non-discriminatory, so-called FRAND, conditions?

Fortunately, the patent systems contain already “inherently” provisions which solve the aforementioned problems, as will be shown in the following.

3. Solutions proposed by Patent Systems in order to create Freedom to Improve and Freedom to Use AI Inventions, including SEPs, under FRAND Conditions – Germany as an Example

3.1. The de-blocking provision of Art. 24 (2) of German Patent Act (GPA)

The German Patent Act (GPA) contains in its Art. 24 (2) an interesting de-blocking provision, namely as follows: Whoever makes an “important” improvement of a patented invention and patents it, is, in case that the owner of the “superior” patent subject matter protected by which is improved by the “newcomer”, does not give a voluntary license to the “newcomer”, entitled to get a “compulsory” license under the “superior” patent. That specific “compulsory” license comes at a price, however: The license under the “superior” patent is granted to the newcomer in exchange for a cross-license under the newcomer’s patent, so that the combination of the license under the “superior” patent and the “dependent” patent leads to the effect that both patent owners are entitled to use the respective inventions. It is not necessary, in this case, to check public interest, as for a “normal” compulsory license in accordance with Art. 24 (1) of German Patent Act, rather it is assumed by the legislator that there is always a public interest to make important innovations available to the public, which can be only done by a “de-blocking” provision of the aforementioned or a similar kind.