Patents on Methods of Doing Business

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Patents on Methods of Doing Business

• John R. Thomas
• Associate Professor of Law
• George Washington University
• Washington, DC USA
• jthomas_at_main.nlc.gwu.edu

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Business Method Patentsin U.S. Courts

• U.S. patents on business methods have moved from
  the U.S. PTO into the courts.
• Coolsavings.com settled litigation iQ.com,
  iVillage, planetU, eCentives and others.
• NetZero Inc. v. Juno Online Services, Inc.
• Preliminary Injunction In Place From January 5
  through April 12, 2001

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The One-Click Patent

• U.S. Patent No. 5,960,411 issues September 28,
  1999.
• Amazon.com files suit on October 21, 1999.
• District Court issues preliminary injunction on
  December 1, 1999.
• Federal Circuit overturns preliminary injunction
  on February 14, 2001.

4
U.S. Pat. No. 5,668,736A method of remodeling an
existing building, said method comprising

• Cataloging design ideas that utilize
  predetermined building products
• presenting the design ideas to a client
• allowing the client to select a design idea . . .
  and
• preparing a visual image . . . representing the
  building remodeled with the design idea selected
  by the client.

5
U.S. Pat. No. 5,190,458A method of psychological
testing of a person, comprising

• Instructing the person to produce a drawing . .
  . and
• Subjecting to psychological interpretation the
  drawing produced in response to step (a).

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U.S. Pat. No. 6,022,219A method of painting on a
work surface using the posterior of an infant
said method comprising the acts of . . . dipping
the posterior of the infant in said paint
andstamping the posterior on said background
media to create stamping prints.
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Ex parte AbrahamSeptember 6, 1869U.S. PTO
Commissioner

• It is contrary, moreover, to the spirit of the
  law, as construed by the office for many years,
  to grant patents for methods of book-keeping . ..
  .

8
Giles S. Rich, Principles of Patentability
(1960).

• Of course, not every kind of invention can be
  patented. . . .
• Also outside that group is one of the greatest
  inventions of our times, the diaper service.

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State Street Bank Decision (1998)

• Data transformation is patentable because it
  produces a useful, concrete and tangible result.
• The ill-conceived business methods exception to
  patentable subject matter is rejected.

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The Subject Matter Appropriate For Patenting Is
Important

• There is no derivation requirement for patent
  infringement.
• Patent misuse and antitrust doctrines are weak.
• Experimental use and fair use privileges are weak
  or nonexistent.
• Patents provide a virtually unfettered right to
  exclude.

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Support for Business Method Patents

• Leads to disclosure of inventive business
  methods.
• Protect small entities and the independent
  inventor.
• Difficult to distinguish from other methods.
• Coinage of the Information Age.

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Opposition toBusiness Method Patents

• Historical
• Counters longstanding bases for patenting.
• Business methods antedate the patent system, but
  have only recently been subject to patenting.
• Domestic Policy
• No evidence that proprietary rights will spur
  innovation in this field of endeavor.
• Information economics suggest that Internet-based
  business models are already prone to lock-in and
  network effects.

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Opposition toBusiness Method Patents

• Current Statute
• Patent statute seems ill-suited to business
  methods invention. For example, what is the
  product of a business method?
• International Policy
• Amounts to TRIPS Plus protection.
• The U.S. is not making wise use of this new form
  of IP protection to advance its interests.

14
Patent Quality

• Many business method patents appear to
  appropriate electronic versions of common
  commercial activities.
• U.S. patents increasingly cite only other U.S.
  patents as prior art.
• U.S. PTO examiners lack business expertise.
• U.S. PTO has not business prior art library.

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Social Costs of Invalid Patents

• Speculators play the patent game instead of
  engaging in productive activity.
• Public Goods Problem Who will labor to strike
  down an invalid patent?
• Competitors prefer to pay a small royalty than
  contest an improvidently issued patent.
• Result is higher costs and diverted resources.

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United States - JordanMemorandum of Understanding

• Signed on October 24, 2000, in Washington, DC.
• Provides in part that
• Jordan shall take all steps necessary to clarify
  that the exclusion from patent protection of
  mathematical methods in Article 4(B) of
  Jordans Patent Law does not include such
  methods as business methods or computer-related
  inventions.

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U.S. PTO Business Method Patent Initiative

• Industry Outreach
• Roundtable Forum
• Mandatory Search
• Second Level Review by Senior Examiner

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First Inventor Defense of 1999

• President Clinton signed this bill into law on
  November 29, 1999.
• Creates prior user rights against U.S. patent
  claiming a method of doing or conducting
  business.
• Prior user must have reduced invention to
  practice more than one year before the patents
  priority date.
• Prior user must have commercially used the
  invention before the patents priority date.

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Pending Bills Before Congress

• Business Methods Improvement Act of 2001 (H.R.
  1332)
• Would create an opposition proceedings for
  business method patents.
• Would decrease the effect of the presumption of
  validity for business method patents.
• Would ease the ability of examiners to generate
  obviousness rejections for patent applications
  claiming business methods.

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Pending Bills Before Congress

• H.R. 1333, Patent Improvement Act of 2001
• Would create an opposition proceedings for all
  inventions.
• Would ease the ability of examiners to generate
  obviousness rejections.
• Would require all patent applicants to disclose
  whether a prior art search was done or not.

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Claim Drafting

• Be wary of definiteness issues.
• Make skillful use of the preamble.
• Apply multiple prespectives
• Consumer
• Server that facilitates transactions
• Service Provider
• Employ indirection.
• The client is the workpiece.