Intellectual Property Report

A New Playbook for § 101? The USPTO's Guidance on Using Technical Evidence
Michael Burger
Section 101 eligibility remains one of the most unpredictable and frequently contested areas of U.S. patent practice, particularly for software, artificial intelligence, and machine learning. USPTO Director John Squires has identified bringing clarity to § 101 as a primary objective of his tenure, emphasizing the need to reduce inconsistent and confusing eligibility determinations that can hinder innovation. In furtherance of that goal, Director Squires issued two memoranda in December 2025 addressing how technical evidence can be used by applicants, and how it must be evaluated by Examiners, in the context of § 101 rejections. For applicants, the guidance provides a practical roadmap for responding to § 101 rejections by linking claim language to technological improvements disclosed in the specification.
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Out of the Shadow Library: Fair Use and AI Training Data
Julie Albert, Jasmine Boyer (Law Clerk)
Since the launch of the first Large Language Models (LLMs), a wave of copyright litigation has been initiated by authors, musicians, and news organizations alleging that their works were misappropriated to build today's most powerful generative AI tools. In response, AI companies have asserted that such use is non-infringing fair use. These lawsuits target a spectrum of alleged copyright infringement. Some lawsuits focus solely on the unauthorized use of works as training inputs, others focus on the model's ability to generate allegedly infringing outputs, and many premise liability on both behaviors.
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Our Take on AI: February 2026
California Eliminates the "Autonomous AI" Defense: California's Assembly Bill 316 took effect January 1, 2026, prohibiting defendants who "developed, modified, or used" an AI system from arguing that "the artificial intelligence autonomously caused the harm" in civil actions. The law responds to arguments like Air Canada's unsuccessful attempt to characterize its customer service chatbot as a "separate legal entity" responsible for providing inaccurate information to a passenger. Importantly, AB 316 does not create strict liability—defendants may still contest causation, foreseeability, and comparative fault. However, the law has significant implications for the AI supply chain, as it applies to foundation model developers, fine-tuners, integrators, and deployers alike. Organizations using third-party AI tools should review their vendor agreements, particularly indemnification provisions and limitation of liability clauses. Read more about this development here: "California Eliminates the 'Autonomous AI' Defense: What AB 316 Means for AI Deployers."

China Proposes Regulations on Human-Like AI Services: On December 27, 2025, the Cyberspace Administration of China released draft regulations governing human-like interactive AI services. The proposed rules require providers to ensure AI-generated content conforms to China's core socialist values, implement user protections including intervention measures for users showing signs of emotional distress or addiction, and clearly label AI-generated content. The draft includes specific protections for minors (requiring guardian consent for emotional companionship services) and elderly users (requiring notification to emergency contacts if threats to life, health, or property are detected). Providers must also conduct security assessments when launching new services, implementing major technological changes, or reaching user milestones such as 1 million registered users. Read more about this development here: "China's Draft Regulations on Human-like AI: Key Takeaways."

The AI Enforcement Seesaw: Federal Retreat Meets State Advance: Recent developments highlight a bifurcating regulatory landscape for AI. On December 19, 2025, New York Governor Kathy Hochul signed the RAISE Act, requiring frontier AI developers to publish safety protocols and report safety incidents within 72 hours, with penalties up to $1 million for first offenses. Days later, the FTC voted 2-0 to vacate its consent order against AI writing tool Rytr LLC, citing the Trump Administration's AI Action Plan. The FTC's decision signals a shift from "potential harm" to "actual harm" as the threshold for AI enforcement—the Commission found allegations that a tool "might" be used deceptively insufficient without evidence of actual misuse. Meanwhile, states continue advancing: Texas's Responsible AI Governance Act took effect July 2025, Colorado's AI Act becomes effective February 2026, and California's Transparency in Frontier AI Act takes effect January 2026. Nearly two dozen state attorneys general sent a letter urging the FCC not to preempt state AI laws. For AI deployers, federal pullback should not be mistaken for regulatory relief—compliance obligations are multiplying at the state level. Read more about this development here: "The AI Enforcement Seesaw: Federal Retreat Meets State Advance."

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