PROTECTION FOR METHODS OFDOING BUSINESS

REGIONAL SEMINAR ON INTELLECTUALPROPERTY AND INFORMATION TECHNOLOGY

MOSCOW July 10-12, 2001

MARIA ELISEEVABrown Rudnick Freed & Gesmer

Boston, MA, USA

U.S. law defines patentable subject matter as “any new and useful process, machine, manufacture or composition of matter, or any new and useful improvements thereto.”

What is patentable anyway?

What is not patentable?

The U.S. Supreme Court has enumerated non-patentable categories:1. Laws of nature

2. Natural phenomena

3. Abstract ideas.

•Mathematical algorithms not reduced to a practical application are just abstract ideas.•Mathematical algorithms reduced to practical application and producing auseful, concrete and tangible result are patentable subject matter in the U.S.

From non-patentable to patentable

Important!

Even if an invention is identifiedas patentable subject matter, it stillmust satisfy other requirements for patentability (novelty, non-obviousness, certain requirementsof description and claims) for a patent to issue.

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998)

State Street Bank and Signature Financial are in the business of being custodians and accounting agents for certain funds.

Signature Financial had a patent (US 5,193,056) for a data processing system.

Negotiations broke down and State Street filed a declaratory judgment action of invalidity, non-infringement and unenforceability of the ‘056 patent.

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998) One of the grounds for challenging the

validity of the patent was that it was directed to a mathematical algorithm and to a method of doing business, which are not , as State Street asserted, subject matter patentable under U.S. patent law.

The patented system was directed to a data processing system facilitating a structure in which mutual funds (Spokes) pool their assets in an investment portfolio (Hub)

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998)

The system provides a way to allocate daily the assets of two or more Spokes invested in the same Hub (investment portfolio)

A fund administrator is required to calculate the price of the shares to the nearest penny.

A computer with the appropriate software is a necessity in such a situation.

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998)

The case reconfirmed that a mathematical algorithm, formula or calculation which produces a useful, concrete and tangible result is patentable subject matter.

Software-related inventions producing a useful, concrete and tangible results are capable of protection by a patent.

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998) This case reconfirmed that the transformation of

data resulting in a calculation of a share price, constitutes a practical application of a mathematical algorithm, which is a useful concrete and tangible result.

If a computer related invention produces a concrete and useful result, it is patentable subject matter, provided that other conditions for patentability are satisfied.

Class 705 Filing Data

Application Filing and Patents Issued Data

Class 705 1995 1996 1997 1998 1999 2000

Applications Filed 330 584 927 1340 2821 7800

Patents Issued 126 144 206 420 585 899This data is based on information available as of 01/01/01 and will be updated annually. Patents have been associated with Class 705 based on their primary classification (called the ORIGINAL classification, in USPTO-specific terminology). Annual counts are based on the fiscal year which begins on October 1 and ends on September 30.

TITLE: Data processing: financial, business practice, management, or cost/price determination.

DEFINITION:Machines and methods for performing data processing or calculation operations in the:1) practice, administration or management of an enterprise;2) processing of financial data;3) determination of the charge for goods or services.

Class 705

What is a business method claim?

“Business method” is a generic term used bymany to describe various types of process claims

It has been stated in court, however, that claims drawn to a method of doing business should beexamined like any other process claims, and should not be categorized as special “business method” claims.

Patentability of methods of doing business

The State Street court concluded that claims should not be categorized as methods of doing business. Instead, they should be examined as any other process claims.

The key to patentability is that useful, concrete and tangible result must be produced.

How to successfully prepare and prosecute a business method patent?

Specification: - clearly define the invention - identify and describe the problem solved by the invention - describe the best mode of practicing the invention - clearly describe one or more practical applications of the invention, how it produces a “useful, concrete and tangible result”.

Computer-implemented inventions

Identify the functionality of the programmed computer (what itdoes when the software runs on it).

How the elements of the computer are configured, interactand interrelate to provide the described functionality.

Describe if the computer is to be integrated with other elements;or how the computer is to be used in the claimed process.

Source code is not required to disclose the functions of the software; disclosing the functions of the software is usuallysufficient.

Patents and the Internet

A new emphasis on Internet, software, and business method and business model patents

The law is in fact unchanged since at least ten years ago

Despite this, such patents have been much more visible in the media lately. The highly publicized cases made such patents more visible. All that changed is that now everyone knows it can be done

The following list of some e-commerce related patents granted by the Patent Office is illustrative of the kind of subject matter patented by various companies:

Sales and Purchasing:

•Patent No. 5,960,411 to Amazon.com on "one-click" shopping•Patent No. 5,715,314 to Open Market on "e-shopping cart”•Patent No. 5,895,454 on a single shopping cart for use in multiple sites •Patent No. 6,029,141 to Amazon for its affiliate program•Patent No. 5,963,916 to Intouch on methods to preview •prerecorded music samples over the Internet

Web Auctions:

Patent No. 5,778,367 to Network Engineering Software on database technology on the web (eBay sued)

Patent No. 5,794,207 to Priceline.com on reverse auctions

Patent No. 5,890,138 to Bid.com on price and availability decrease

The following list of some e-commerce related patents granted by the Patent Office is illustrative of the kind of subject matter patented by various companies:

Financial Transactions:

Patent No. 5,870,721 on real time loan approvalPatent No. 6,006,207 on loan repayment

Consumer Reward Models:

Patent No. 5,794,210 to Cybergold on attention brokerage, also known as pay-for -view adsPatent No. 5,774,870 to Netsentives on award redemption (frequent flyer miles for on-line shopping) system

The following list of some e-commerce related patents granted by the Patent Office is illustrative of the kind of subject matter patented by various companies:

Claiming strategy

When patents are analyzed for the purpose of licensing, infringement, litigation, the advantage of having a lot of independent claims of varying scope is more evident.

In litigation, the more independent claims a patent has, the more difficult and expensive it is to analyze and attack the patent.

In licensing, a greater number of independent claims makes it more likely that the patent coverage is complete.

Some recent Internet patents and related lawsuits

Amazon.com obtained a patent on its 1-click ordering method, sued Barnes and Noble, obtained a preliminary injunction (reversed by the appellate court).

Priceline.com obtained a patent on reverse auction of airplane tickets and sued Microsoft.

Amazon.com also now has a patent on referral sales commissions.

Getting patent protection

Getting patent protection is important even if you don't think you would ever use the patent offensively

Cost to prepare and file, for complex subject matter, is likely to be in the range of $5K to $15K. The law permits you to do this yourself. There are, however, many reasons to consider hiring a patent firm

Waiting too long to file

It is important to file promptly after inventing, and before public disclosure or sale

US “grace period” of one year does nothing to excuse delay with respect to non-US patent rights

Keep lab notebooks and reward inventors

Thank you for your attention!

This presentation can be found at

http://www.patentbar.com/ms.ppt