Patentable Subject Matter and Nonpatent Innovation Incentives

U.C. Irvine Law Review, Vol. 5, p. 1115, 2015

32 Pages Posted: 22 Sep 2014 Last revised: 16 Mar 2016

Date Written: September 21, 2014


In four patentable-subject-matter cases in five recent Terms, the Supreme Court has reaffirmed the judicially created prohibitions on patenting “abstract ideas” and “nature,” but the boundaries of these exceptions remain highly contested. The dominant justification for these limitations is utilitarian: courts create exemptions in areas where patents are more likely to thwart innovation than to promote it. The resulting debates thus focus on whether patents are needed to provide adequate innovation incentives in disputed fields such as software or genetic research, or whether private incentives such as reputational gains, first-mover advantages, or competitive pressures are sufficient. But because they are framed by patent blinders, these debates frequently overlook a significant fact: the absence of patents does not imply that there would be only private incentives. Rather, federal and state governments facilitate financial transfers to researchers through a host of mechanisms — including tax incentives, direct grants and contracts, prizes, and regulatory exclusivity — which already provide substantial research support in the fields where patents are the most controversial.

What do these nonpatent incentives mean for patentable-subject-matter doctrine? For those who argue that patentable subject matter should be based on an economic cost-benefit analysis, the answer is that this balancing must include a much broader array of factors — which might militate against tasking courts with this analysis at all. But patentable-subject-matter debates are not just about economics, and nonpatent incentives might help ease the tension between utilitarian and moral considerations. If many people find patents on certain inventions (such as human genes) morally objectionable, utilitarian goals can still be served by using other transfer mechanisms to substitute for the incentive provided by patents. Indeed, nonpatent incentives may be more effective than patents in contested areas, where inventors who share moral objections find little incentive in patents, and those who do not still find the patent incentive to be dulled by the persistent uncertainty that has plagued patentable-subject-matter doctrine in recent years. In short, if courts continue to enforce robust subject matter exceptions, they should worry less about the lack of patents removing all incentives for nonobvious and valuable research, and more about creating stable doctrine.

Keywords: patentable subject matter, R&D tax incentives, prizes, grants, innovation, Alice v. CLS Bank, AMP v. Myriad, Mayo v. Prometheus, Bilski v. Kappos

JEL Classification: K00, O34

Suggested Citation

Ouellette, Lisa Larrimore, Patentable Subject Matter and Nonpatent Innovation Incentives (September 21, 2014). U.C. Irvine Law Review, Vol. 5, p. 1115, 2015, Available at SSRN:

Lisa Larrimore Ouellette (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305
United States


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