Business Method Patent Proliferation: Convergence of Transactional Analytics and Technical Scientifics

Business Lawyer

Volumn 56, Issue 1, 2000, Pages 423-457

  Bagby, John W ^a  

^a NONE

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0034550247     PISSN: 00076899     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (205)

1. 35 U.S.C. § 101 (1994). Section 100(b) defines "process" as a "process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material."
2. Rinaldo Del Gallo, III, Are "Methods of Doing Business" Finally Out of Business as a Statutory Rejection?" 38 IDEA 403 (1998) [hereinafter Del Gallo].
3. 35 U.S.C. § 102 (1994). Novelty is "an essential requisite of the patentability of an invention or discovery." "A device or process unknown and unused by others prior to its invention or discovery by the applicant for a patent" is a novelty. BALLENTINE'S LAW DICTIONARY 869 (3d ed. 1969).
4. 35 U.S.C. § 103 (1994 & Supp. IV 1998). The requirement for non-obviousness focuses on persons of ordinary skill in the art relevant to the invention. An obvious invention is essentially a small incremental development and a non-obvious invention is more significant. The invention must meet the requirements of Graham v. John Deere, 383 U.S. 1, 17-18 (1966): (i) determine the scope and contents of the prior art; (ii) ascertain the differences between the prior art and the claims in issue; (iii) resolve the level of ordinary skill in the pertinent art; and (iv) evaluate evidence of secondary considerations.
5. 35 U.S.C. § 101 (1994).
6. 33 F.3d 1526 (Fed. Cir. 1994).
7. 149 F.3d 1368 (Fed. Cir. 1998), cert. denied 525 U.S. 1093 (1999).
8. Id. The Federal Circuit Court of Appeals is generally recognized by the IP community as the premier federal court with IP expertise.
9. Representatives Rich Boucher (Va.) and Howard Berman (Cal.) introduced the Business Methods Patent Improvements Act of 2000, H.R. 5364, in October 2000 just before the close of the second session of the 106th Congress. H.R. 5364 is largely a quality control measure designed to limit issuance of bad MoDB patents. There are two key provisions, sections 2 and 3, that trigger several consequences unique to MoDBs. Section 2 would amend 35 U.S.C. § 100 to define "business methods," see infra text accompanying notes 101 to 131. Section 3 would require PTO to determine whether any invention claimed in an application is a "business method invention." Section 3 also contains several consequences: (i) the PTO must publish business method patent applications after 18 months from filing; (ii) an invitation extends to the public to engage in various forms of participation in quality control; (iii) a new opposition panel procedure is created to review patentability of issued MoDB patents; (iv) the burden of proof in legal challenges of MoDB patents would change from the clear and convincing standard to the preponderance of the evidence standard; (iv) there would be a new presumption that mere computer implementation of an existing business method is obvious; and (vi) MoDB applicants must disclose the extent to which prior art was searched in preparing the application.
10. See, e.g., James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000 at 44; Holman W. Jenkins Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000 at A23; Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000 at A22; Patent Nonsense: The Knowledge Monopolies, ECONOMIST, Apr. 8, 2000; Victoria Slind-Flor, The Biz-Method Patent Rush, Nat'l. L.J., Feb. 28, 2000 at 7; Scott Thurm, The Ultimate Weapon: It's the Patent, WALL ST. J., April 17, 2000 at R18; Steven M. Zeitchik, Newest Amazon.com Patent Concerns Industry, PUBL.WKLY., Mar. 6, 2000 at 9; Jeff Bezos, An Open Letter from Jeff Bezos on the Subject of Patents, (visited Aug. 5, 2000) available at 〈http://www.amazon.com/exec/obidos/subst/misc/ patents.html/〉. But see, Victoria Slind-Flor, Bar reacts to Bezos patent reform plan, NAT'L L.J., Mar. 27, 2000 at A1.
11. See, e.g., James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000 at 44; Holman W. Jenkins Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000 at A23; Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000 at A22; Patent Nonsense: The Knowledge Monopolies, ECONOMIST, Apr. 8, 2000; Victoria Slind-Flor, The Biz-Method Patent Rush, Nat'l. L.J., Feb. 28, 2000 at 7; Scott Thurm, The Ultimate Weapon: It's the Patent, WALL ST. J., April 17, 2000 at R18; Steven M. Zeitchik, Newest Amazon.com Patent Concerns Industry, PUBL.WKLY., Mar. 6, 2000 at 9; Jeff Bezos, An Open Letter from Jeff Bezos on the Subject of Patents, (visited Aug. 5, 2000) available at 〈http://www.amazon.com/exec/obidos/subst/misc/ patents.html/〉. But see, Victoria Slind-Flor, Bar reacts to Bezos patent reform plan, NAT'L L.J., Mar. 27, 2000 at A1.
12. See, e.g., James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000 at 44; Holman W. Jenkins Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000 at A23; Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000 at A22; Patent Nonsense: The Knowledge Monopolies, ECONOMIST, Apr. 8, 2000; Victoria Slind-Flor, The Biz-Method Patent Rush, Nat'l. L.J., Feb. 28, 2000 at 7; Scott Thurm, The Ultimate Weapon: It's the Patent, WALL ST. J., April 17, 2000 at R18; Steven M. Zeitchik, Newest Amazon.com Patent Concerns Industry, PUBL.WKLY., Mar. 6, 2000 at 9; Jeff Bezos, An Open Letter from Jeff Bezos on the Subject of Patents, (visited Aug. 5, 2000) available at 〈http://www.amazon.com/exec/obidos/subst/misc/ patents.html/〉. But see, Victoria Slind-Flor, Bar reacts to Bezos patent reform plan, NAT'L L.J., Mar. 27, 2000 at A1.
13. See, e.g., James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000 at 44; Holman W. Jenkins Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000 at A23; Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000 at A22; Patent Nonsense: The Knowledge Monopolies, ECONOMIST, Apr. 8, 2000; Victoria Slind-Flor, The Biz-Method Patent Rush, Nat'l. L.J., Feb. 28, 2000 at 7; Scott Thurm, The Ultimate Weapon: It's the Patent, WALL ST. J., April 17, 2000 at R18; Steven M. Zeitchik, Newest Amazon.com Patent Concerns Industry, PUBL.WKLY., Mar. 6, 2000 at 9; Jeff Bezos, An Open Letter from Jeff Bezos on the Subject of Patents, (visited Aug. 5, 2000) available at 〈http://www.amazon.com/exec/obidos/subst/misc/ patents.html/〉. But see, Victoria Slind-Flor, Bar reacts to Bezos patent reform plan, NAT'L L.J., Mar. 27, 2000 at A1.
14. See, e.g., James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000 at 44; Holman W. Jenkins Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000 at A23; Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000 at A22; Patent Nonsense: The Knowledge Monopolies, ECONOMIST, Apr. 8, 2000; Victoria Slind-Flor, The Biz-Method Patent Rush, Nat'l. L.J., Feb. 28, 2000 at 7; Scott Thurm, The Ultimate Weapon: It's the Patent, WALL ST. J., April 17, 2000 at R18; Steven M. Zeitchik, Newest Amazon.com Patent Concerns Industry, PUBL.WKLY., Mar. 6, 2000 at 9; Jeff Bezos, An Open Letter from Jeff Bezos on the Subject of Patents, (visited Aug. 5, 2000) available at 〈http://www.amazon.com/exec/obidos/subst/misc/ patents.html/〉. But see, Victoria Slind-Flor, Bar reacts to Bezos patent reform plan, NAT'L L.J., Mar. 27, 2000 at A1.
15. See, e.g., James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000 at 44; Holman W. Jenkins Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000 at A23; Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000 at A22; Patent Nonsense: The Knowledge Monopolies, ECONOMIST, Apr. 8, 2000; Victoria Slind-Flor, The Biz-Method Patent Rush, Nat'l. L.J., Feb. 28, 2000 at 7; Scott Thurm, The Ultimate Weapon: It's the Patent, WALL ST. J., April 17, 2000 at R18; Steven M. Zeitchik, Newest Amazon.com Patent Concerns Industry, PUBL.WKLY., Mar. 6, 2000 at 9; Jeff Bezos, An Open Letter from Jeff Bezos on the Subject of Patents, (visited Aug. 5, 2000) available at 〈http://www.amazon.com/exec/obidos/subst/misc/ patents.html/〉. But see, Victoria Slind-Flor, Bar reacts to Bezos patent reform plan, NAT'L L.J., Mar. 27, 2000 at A1.
16. See, e.g., James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000 at 44; Holman W. Jenkins Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000 at A23; Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000 at A22; Patent Nonsense: The Knowledge Monopolies, ECONOMIST, Apr. 8, 2000; Victoria Slind-Flor, The Biz-Method Patent Rush, Nat'l. L.J., Feb. 28, 2000 at 7; Scott Thurm, The Ultimate Weapon: It's the Patent, WALL ST. J., April 17, 2000 at R18; Steven M. Zeitchik, Newest Amazon.com Patent Concerns Industry, PUBL.WKLY., Mar. 6, 2000 at 9; Jeff Bezos, An Open Letter from Jeff Bezos on the Subject of Patents, (visited Aug. 5, 2000) available at 〈http://www.amazon.com/exec/obidos/subst/misc/ patents.html/〉. But see, Victoria Slind-Flor, Bar reacts to Bezos patent reform plan, NAT'L L.J., Mar. 27, 2000 at A1.
17. See, e.g., James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000 at 44; Holman W. Jenkins Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000 at A23; Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000 at A22; Patent Nonsense: The Knowledge Monopolies, ECONOMIST, Apr. 8, 2000; Victoria Slind-Flor, The Biz-Method Patent Rush, Nat'l. L.J., Feb. 28, 2000 at 7; Scott Thurm, The Ultimate Weapon: It's the Patent, WALL ST. J., April 17, 2000 at R18; Steven M. Zeitchik, Newest Amazon.com Patent Concerns Industry, PUBL.WKLY., Mar. 6, 2000 at 9; Jeff Bezos, An Open Letter from Jeff Bezos on the Subject of Patents, (visited Aug. 5, 2000) available at 〈http://www.amazon.com/exec/obidos/subst/misc/ patents.html/〉. But see, Victoria Slind-Flor, Bar reacts to Bezos patent reform plan, NAT'L L.J., Mar. 27, 2000 at A1.
18. See, e.g., James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000 at 44; Holman W. Jenkins Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000 at A23; Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000 at A22; Patent Nonsense: The Knowledge Monopolies, ECONOMIST, Apr. 8, 2000; Victoria Slind-Flor, The Biz-Method Patent Rush, Nat'l. L.J., Feb. 28, 2000 at 7; Scott Thurm, The Ultimate Weapon: It's the Patent, WALL ST. J., April 17, 2000 at R18; Steven M. Zeitchik, Newest Amazon.com Patent Concerns Industry, PUBL.WKLY., Mar. 6, 2000 at 9; Jeff Bezos, An Open Letter from Jeff Bezos on the Subject of Patents, (visited Aug. 5, 2000) available at 〈http://www.amazon.com/exec/obidos/subst/misc/ patents.html/〉. But see, Victoria Slind-Flor, Bar reacts to Bezos patent reform plan, NAT'L L.J., Mar. 27, 2000 at A1.
19. 564 F. Supp. 1358, 1369 (D. Del. 1983). U.S. Patent No. 4,346,442 ("Securities brokerage-cash management system," issued Aug. 24, 1982) (visited Sept. 19, 2000), available at 〈http://164.195.100.11/netacqi/nphParser!...442!WKU.&OS=PN/4,346, 442&RS= PN/4,346,442〉.
20. U.S. Patent No. 5,794,207 ("Method and apparatus for a cryptographically assisted commercial network system designed to facilitate buyer-driven conditional purchase offers," issued Aug. 11, 1998) (visited Sept. 19, 2000), available at 〈http://164.195.100.11/netacqi/ nphParser?...1&S1=5,794,207&os=5,794,207&RS=5,794,207〉 [hereinafter '207 patent]. This '207 patent is now owned by a Priceline.com affiliate, Walker Asset Management, L.P., an MoDB incubator.
21. U.S. Patent No. 5,948,061 ("Method of delivery, targeting, and measuring advertising over networks," issued Sept. 7, 1999) (visited Sept. 19, 2000), available at 〈http://164.195.100.11? netacqi/nphParser?...061!WKU.&OS=PN/5,948,061&RS=PN/5,948,061〉 [hereinafter '061 patent].
22. See 1 WILLIAM C. ROBINSON, THE LAW OF PATENTS FOR USEFUL INVENTIONS § 160 (1890) [hereinafter ROBINSON].
23. 2 is not patentable subject matter because such discoveries must be "free to all . . . and reserved exclusively to none." Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948).
24. Rubber-Tip Pencil Co. v. Howard, 87 U.S. 498, 507 (1874) ("An idea of itself is not patentable, but a new device by which it may be made practically useful is.").
25. Gottschalk v. Benson, 409 U.S. 63, 71-72 (1972) (holding that mathematical algorithms are not patentable subject matter).
26. "[T]he architect of an ingenious new method of vulcanizing rubber was not even considered to be an inventor but rather the discoverer of a law of nature." Del Gallo, supra note 2, at 404 (citing ROBINSON, supra note 15, at 405 n.8, "the inventor of an art was merely the discoverer of the natural operative force, unless he also had devised the instruments through which the force was practically applied" (emphasis in original)).
27. See ROBINSON, supra note 15, at 232 n.1, for discussion of Boulton and Watt v. Bull (1795), 2 H.B1. 463 (confirming grant of improvement process patent to James Watt for more efficient use of steam in steam engine).
28. E.g., 35 U.S.C. § 101 (1994).
29. In re Bergy, 596 F.2d 952, 965 (1979) (noting that unpatentable subject matter includes "principles, laws of nature, mental processes, intellectual concepts, ideas, natural phenomena, mathematical formulae, methods of calculation, fundamental truths, original causes, motives, the Pythagorean theorem, and the computer-implementable method claims of Benson and Tabbot"). See also infra note 56 and accompanying text for discussion of mathematical algorithms and abandonment of the Freeman/Walter/Abele tests for software patentability.
30. 447 U.S. 303 (1980).
31. Id. at 309 (quoting S. REP. No. 82-1979, at 5 (1952) and H.R. REP. No. 82-1923, at 6 (1952)).
32. Ex parte Abraham, 1869 Dec. Comm'r Pat. 59 (1869) ("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, to which the system in question is perfectly analogous.").
33. United States Credit Sys. Co. v. American Indem. Co., 53 F. 818, 819 (C.C.S.D.N.Y. 1893), aff'd. 59 F. 139 (2d Cir 1893).
34. United States Credit Sys. Co., 59 F. at 143.
35. Claus D. Melarti, State Street Bank & Trust Co. v. Signature Financial Group, Inc.: Ought The Mathematical Algorithm And Business Method Exceptions Return To Business As Usual?, 6 J. INTELL. PROP. L. 359, 364 (1999) [hereinafter Melarti].
36. "[I]t is necessary to 'channel' certain creations into the realm of patent law, and other creations (notably those in written form) into copyright law." ROBERT P. MERGES, INTELLECTUAL PROPERTY IN THE NEW TECHNOLOGICAL AGE 155 (1997).
37. 160 F. 467 (2d Cir. 1908).
38. Hotel Security, 160 F. at 469. For the claims to be contained "within the language of the statute at all, it must be as a 'new and useful art'" under the prevailing patent law.
39. Id. "A system of transacting business disconnected from the means for carrying out the system is not, within the most liberal interpretation of the term, an art."
40. Del Gallo, supra note 2, at 407-08. Hotel Security essentially holds that "an invention of a process had to be directed to a physical means." Id. at 408.
41. Hotel Security, 160 F. at 469.
42. See, e.g., In re Wait, 73 F. 2d 982 (C.C.P.A. 1934).
43. Hotel Security, 160 F. at 469.
44. Id. at 472.
45. Geo. E. Tew, Method of Doing Business, 16 J. PAT. OFF. SOC'Y 607, 607 (Aug. 1934).
46. See, e.g., In re Howard, 394 F.2d 869, 871-72 (1968) (affirming "the decision of the Board of Appeals on the ground that the claims do not define a novel process, [making it] unnecessary to consider the issue of whether a method of doing business is inherently unpatentable."). Apparently this rejected application disclosed a precursor to barcode retail pricing: separate code marking on the label of each different kind or type of item, in conjunction with apparatus for assimilating and utilizing the code markings to supply applicable retail prices at the check-out counters in the store . . . converter to compare each code input signal with the code and price data stored in the memory device and feed back to the register. Id. at 870; See also Munson v. City of New York, 124 U.S. 601, 604 (1888) (holding that there was no patentable novelty in an accounting system for recording, organizing, indexing, recording payment and canceling of bond coupons, and to prevent fraud).
47. See, e.g., Hocke v. New York Cent. & H.R.R. Co., 122 F. 467, 469 (2d Cir. 1903) (holding that a means to secure against loss of freight by using document holding locations and reconciliation steps; claims invalidated as lacking invention, the predecessor requirement to non-obviousness, and novelty, dicta inferring obviousness by taking judicial notice of industry's expectations for needed refinement of existing practice to avoid errors); Dann v. Johnston, 425 U.S. 219, 229-30 (1976) (holding that a bank coding system to classify customer payments was unpatentable as obvious).
48. See, e.g., Ex parte Murray, 9 U.S.P.Q.2d (BNA) 1819, 1820 (P.T.O. 1988) (holding that novelty and non-obviousness were lacking in a "accounting method requiring no more than the entering, sorting, debiting and totaling of expenditures."); In re Chatfield, 545 F.2d 152, 159 (C.C.P.A. 1976).
49. But see, In re Schraeder, 22 F.3d 290, 296-97 (Fed. Cir. 1994) (holding that a bidding optimization system lacked statutory subject matter) (Newman, J. dissenting). Justice Newman argued that: the fact that mathematical procedures are performed does not preclude patentability . . . [and I] can not agree that the claimed invention is no more than a mathematical algorithm . . . . [A] statutory "process" is limited only in that it must be technologically useful. A process does not become nonstatutory because of the nature of the subject matter to which it is applied . . . . Id. I discern no purpose in perpetuating a poorly defined, redundant, and unnecessary "business methods" exception, indeed enlarging (and enhancing the fuzziness of) that exception by applying it in this case. All of the "doing business" cases could have been decided using the clearer concepts of Title 35. Patentability does not turn on whether the claimed method does "business" instead of something else, but on whether the method, viewed as a whole, meets the requirements of patentability. Id. at 298.
50. 73 F.2d 982 (C.C.P.A. 1934).
51. The Manual of Patent Examining Procedures, in section 706.03(a) (1994), states: Though seemingly within the category of process or method, a method of doing business can be rejected as not being within the statutory classes. See Hotel Security Checking Co., 160 F. at 469 and Wait, 73 F.2d at 983, 24 U.S.P.Q. (BNA) 88, 89 (1934), 22 C.C.P.A. 822 (1934).
52. Wait, 73 F.2d at 982.
53. Id. "[T]hrough it there may be an elimination of brokers and like agents as well as quickly made and accurately kept records of the transactions which take place, together with other advantages." Id. 47. Id at 983. The applicant's attempt to amend the process claims by directing them to an apparatus were rejected as untimely.
54. 174 F.2d 547 (1st Cir. 1949).
55. Id. at 550. Hollingshead's claims disclosed the now well-known design for drive-in theater parking areas: a scheme for parking automobiles in an open lot in such a way that persons sitting therein, either on the front or back seat, can see a screen or stage without obstruction from automobiles parked nearer the screen or stage or from automobiles moving in or out of the lot. Id. In the specification, Hollingshead stated: [t]he surface of the field in front of the screen is graded with a slight generally down grade toward the screen, and alternate accurate stall-ways and drive-ways are arranged generally about the screen as the center of the arcs. The stall-ways are each inclined upwardly at a slight angle while the drive-ways may be generally horizontal, and the rear boundaries of the drive-ways are at a level below the front boundaries of the next succeeding stall-way. This slight upward inclination of the stall-ways . . . is so that the automobile will be tilted upwardly to an extent sufficient to [align viewers to] the angle of vision . . . . Id. at 550-51.
56. Id. at 552. Described as "'ingenious,' 'practical,' 'a good business investment,' 'a completely new idea of giving entertainment to people who could not ordinarily go to the theatre,' and 'is a beneficial contribution to the art of exhibition of motion pictures.'" Id.
57. Id. "[I]t did not take [Hollingshead] long to solve th[e adaptation] problems." Id. at 553.
58. "[T]he open-air drive-in system for conducting the motion picture theatre business, however novel, useful, or commercially successful is not patentable apart from the means for making the system practically useful, or carrying it out." Id. at 552 (citing In re Patton, 127 F.2d 324 (C.C.P.A. 1942) and Hotel Sec. Checking Co. v. Lorraine Co., 160 E 467 (2d Cir. 1908)).
59. See, e.g., Berardini v. Tocci, 190 F. 329, 332 (C.C.S.D.N.Y 1911) (system of devising codes for international wire transfers - telegraphic remittances); "The patent is really [for advice]. It is for an art only in the sense that one speaks of the art of painting, or the art of curving the thrown baseball. Such arts, however ingenious, difficult, or amusing, are not patentable . . . ." Id. at 333.
60. Patton, 127 F.2d at 327-38.
61. Id.
62. See In re Shrader, 22 F.3d 290, 298 (Fed. Cir. 1994) ("[T]he jurisprudence does not require the creation of a distinct class of business unpatentable subject matter.").
63. A trilogy of companion cases comprise the test: In re Freeman, 573 F.2d 1237 (C.C.P.A. 1978); In re Walter, 618 F.2d 758 (C.C.P.A. 1980); In re Abele, 684 F.2d 902 (C.C.P.A. 1982).
64. See generally, Melarti, supra note 28 and accompanying text (comparing conceptual problems of physical embodiments in software with physical embodiments in MoDB).
65. See Automated Financial or Management Data Processing Methods (Business Methods), USPTO White Paper (July 2000) (visited Aug. 7, 2000), available at 〈http:www.uspto.gov/web/menu/ busmethp/〉 [hereinafter PTO's MoDB White Paper].
66. 149 F.3d 1368 (Fed. Cir. 1998), cert. denied 525 U.S. 1093 (1999).
67. Id. at 1374.
68. Id. at 1377.
69. 927 F. Supp. 502 (D. Mass. 1996).
70. Id. "Hub and Spoke" is Signature's proprietary mark; State Street termed it a "multi-tiered fund complex." Id. The '056 patent can be viewed from the IBM's Intellectual Property Network at the following URL (visited Aug. 7, 2000), available at 〈http://www. patents.ibm.com/details?pn=US05193056_〉.
71. State Street, 149 F.3d at 1371.
72. Gottschalk v. Benson, 409 U.S. 63, 70 (1972) (holding that 〉transformation and reduction of an article 'to a different state or thing' is the clue to the patentability of a process claim, that does not include particular machines〉); Parker v. Flook, 437 U.S. 584, 595 n. 18 (1978) (noting that a "claim for an improved method of calculation, even when tied to a specific end use, is unpatentable subject matter under § 101"); Diamond v. Diehr, 450 U.S. 175, 192 (1981) (holding that "physicality" required that a claim be permitted if it contains a mathematical formula that implements or applies that formula in a structure or process which is performing a function).
73. State Street, 927 F. Supp. at 508-09.
74. In re Freeman, 573 F.2d 1237 (C.C.P.A. 1978); In re Walter, 618 F.2d 758 (C.C.P.A. 1980); In re Abele, 684 F.2d 902 (C.C.P.A. 1982).
75. State Street, 927 F. Supp. at 510-11.
76. Examination Guidelines for Computer-Related Inventions, 61 Fed. Reg. 7478, 7484 (1996) [hereinafter Examination Guidelines]. If the "acts" of a claimed process manipulate only numbers, abstract concepts or ideas, or signals representing any of the foregoing, the acts are not being applied to appropriate subject matter. Thus, a process consisting solely of mathematical operations. i.e. converting one set of numbers into another set of numbers, does not manipulate appropriate subject matter and thus cannot constitute a statutory process. Id.
77. State Street, 927 F. Supp. at 512.
78. State Street v. Signature Fin. Group, 149 F.3d 1368, 1371 (Fed. Cir. 1998).
79. Id. at 1373 (citing S. REP. No. 82-1979, at 5 (1952) and H.R. REP. No. 82-1923, at 6 (1952) (Patentable subject matter "include[s] anything under the sun that is made by man.")). See Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980).
80. 149 F.3d at 1375 (citing In re Alappat, 33 F.3d 1526, 1544 (1994)).
81. Id.
82. Id.
83. Id. at 1373.
84. Id. at 1375. The business method exception is "an unwarranted encumbrance to the definition of statutory subject matter in section 101, that [should] be discarded as error-prone, redundant, and obsolete." Id. (citing In re Schrader, 22 F.3d 290, 298 (Fed. Cir. 1994) (Newman, J., dissenting)).
85. State Street v. Signature Fin. Group, 927 F. Supp. 502, 516 (D. Mass. 1996).
86. U.S. PATENT AND TRADEMARK OFFICE, MANUAL OF PATENT EXAMING PROCEDURES § 706.03(a) (7th ed. 1998).
87. Examination Guidelines, supra note 70 at 7479, stating: "Office personnel have had difficulty in properly treating claims directed to methods of doing business. Claims should not be categorized as methods of doing business. Instead such claims should be treated like any other process claims."
88. 172 F.3d 1352 (Fed. Cir. 1999); cert. denied 120 S. Ct. 368 (1999).
89. U.S. Patent No. 5,333,184 ("Call Message Recording for Telephone Systems," issued July 26, 1994).
90. AT&T Corp. v. Excel Communications, Inc., 1998 U.S. Dist. LEXIS 5346 (D. Del. Mar. 27, 1998).
91. More specifically, the '184 patent describes a message record for long-distance telephone calls that adds a primary interexchange carrier (PIC) indicator, the additional data element. The PIC permits differential billing treatment for subscribers, depending on which among several potential long-distance service providers the caller has selected as the primary service provider. The long distance system architecture may be described as follows: Architecture of Direct Dialed Long Distance Call - The success of long distance calls depends on cooperation and physical or electronic interconnectivity among several entities: (i) a local exchange carrier (LEC) for the customer at the call originating end, (ii) a long-distance carrier (service or interexchange carriers (IXC)) and (iii) another LEG for the customer at the call terminating (receiving) end. All customers for both landline and wireless local service have an LEC for local service and each selects an IXC as their PIC for their primary long distance service. LEC companies like AT&T own all their inter-city connection lines and switching (inter-connection) facilities. Companies like MCI or Sprint own some of their facilities but must lease others. Companies like Excel, also known as resellers or resale carriers, must purchase all of their facilities in the wholesale market, usually in lease transactions with other ICX's. Secondary or credit card ICX's can be accessed through "1-800" or "10-10 . . . " numbers. As wireless LEC's have grown, they increasingly provide some of the long distance service. Call Connection Process - A three-step process executes when a caller makes a direct-dialed (1 +) long-distance telephone call: (i) the call is transmitted over the LEC's network to a switch, the LEC identifies the caller's PIC and then automatically routes the call to the facilities used by the caller's PIC; (ii) PIC facilities carry the call to the call recipient's LEC; and (iii) the call recipient's EEC delivers the call locally to the recipient's telephone. Call Recordkeeping/Billing Process - Physical and computer switches monitor and record call data to generate an "automatic message account" (AMA), essentially an electronic message record containing several information fields (e.g., originating and terminating telephone numbers, time length of call, time/date stamp, and PIC data under the '184 patent). These message records are essential to accurate billing. AMA's are transmitted from the switch to a message accumulation system for processing. These AMA's are usually translated into the industry-standard "exchange message interface" format, then forwarded to a rating system and ultimately to a billing system in which the data resides until processed to generate "hard copy" bills that can be physically mailed to subscribers (perhaps mailed to the customer electronically or transmitted to a credit card company).
92. Excel, 172 F.3d at 1355 (citing Diamond v. Diehr, 450 U.S. 175, 185 (1981)).
93. Id. at 1356.
94. Id. at 1357.
95. Id. (citing State Street v. Signature Fin. Group, 149 F.3d 1368, 1373 (Fed. Cir. 1998)).
96. Id.
97. Excel, 172 F.3d at 1358-59 (quoting Diehr, 450 U.S. at 192).
98. Id. at 1358-59.
99. Id. at 1359.
100. Id. at 1361.
101. AT&T Corp. v. Excel Communications, Inc., 52 U.S.P.Q.2d (BNA) 1865 (D. Del. Oct. 25, 1999) ("Every limitation of the [the '184 patent] is literally met by . . . the accused [method].").
102. Id. at 1880 (stating that "the asserted claims of the '184 patent are anticipated by the MCI Friends & Family program"). See 35 U.S.C. § 102 (1994).
103. Id. at 1882 (opining that "there are very few differences between the prior art and the claimed subject matter of the '184 patent. . . . The court concludes that the claimed invention, if not anticipated, is obvious in light of the prior art.").
104. 927 F. Supp. at 506. "[T]he question whether computer-related inventions driven by mathematically-based software deserve the market protection afforded under federal patent law has vexed both theorists and practitioners since computers entered the marketplace some thirty years ago." (citing John A. Burtis, Towards a Rational Jurisprudence of Computer-Related Patentability in Light of In re Alappat, 79 MINN. L. REV. 1129, 1129 (1995)). "It is into this jurisprudential quagmire that the Court must dive." Id.
105. Excel Communication, Inc. v. AT&T Corp., 120 S. Ct. 368 (1999) (Stevens, J.). In denying the petition for writ of certiorari, Justice Stevens argued that "[t]he importance of the question presented in this certiorari petition makes it appropriate to reiterate the fact that the denial of the petition does not constitute a ruling on the merits." Id. (citing Carpenter v. Gomez, 516 U.S. 981 (1995) (Stevens, J., discussing denial of certiorari) and Maryland v. Baltimore Radio Show, Inc., 338 U.S. 912, 917-19 (1950) (Frankfurter, J., respecting denial of certiorari)).
106. Excel, 172 F.3d at 1361.
107. See generally, Lester Thurow, Needed: A New System of Intellectual Property Rights, HARV. BUS. REV., Sept.-Oct. 1997, at 95, 96. The current accounting practice severely limits financial recording of IP assets unless it is the subject of an identifiable transaction.
108. U.S. Patent and Trademark Office, Formulating and Communicating Rejections under 35 U.S.C. 103 for Applications Directed to Computer-Implemented Business Method Inventions (visited Aug. 9, 2000), available at 〈http://www.uspto.gov/web/menu/busmethp/busmeth103rej.htm〉 [hereinafter PTO's MoDB §103 Rejections].
109. Id.
110. The USPC is updated regularly to better categorize patented technologies. As these definitions are updated, all existing U.S. patents granted since 1790 are reclassified to reflect these classification updates. U.S. Patent and Trademark Office, Manual of U.S. Patent Classification as of June 30, 2000, available at 〈http://www.uspto.gov/web/offices/ac/ido/oeip/ taf/moc/index.htm〉.
111. Manual of Classification, Class 345, "Computer Graphics Processing, Operator Interface Processing and Selective Visual Display Systems," available at 〈http://www.uspto.gov/ web/offices/ac/ido/oeip/taf/def/345.htm〉.
112. Manual of Classification, Class 707, "Data Processing: Database and File Management, Data Structures, or Document Processing," available at 〈http://www.uspto.gov/web/ offices/ac/ido/oeip/taf/def/707.htm〉.
113. Manual of Classification, Class 709, "Electrical Computers and Digital Processing Systems: Multiple Computer or Process Coordinating," available at 〈http://www.uspto.gov/ web/offices/ac/ido/oeip/taf/def/709.htm〉.
114. Manual of Classification, Class 902, "Electronic Funds Transfer," available at 〈http:// www.uspto.gov/web/offices/ac/ido/oeip/taf/def/902.htm〉.
115. Manual of Classification, Class 705, "Data Processing & Financial, Business Practice, Management, or Cost/Price Determination," available at 〈http:www.uspto.gov/web/offices/ ac/ido/oeip/taf/def/705.htm〉. Class 705 was largely devoted to computerized postage metering and cash registers before State Street. See USPTO White Paper, Automated Business Methods, Section III, Class 705, available at 〈http://www.uspto.gov/web/menu/busmethp/ class705.htm〉 (noting that Pitney-Bowes proportion of Class 705 has dropped steadily in the late 1990s).
116. Manual of Classification, Class 705, "Data Processing & Financial, Business Practice, Management, or Cost/Price Determination," available at 〈http:www.uspto.gov/web/offices/ ac/ido/oeip/taf/def/705.htm〉. Class 705 was largely devoted to computerized postage metering and cash registers before State Street. See USPTO White Paper, Automated Business Methods, Section III, Class 705, available at 〈http://www.uspto.gov/web/menu/busmethp/ class705.htm〉 (noting that Pitney-Bowes proportion of Class 705 has dropped steadily in the late 1990s).
117. The USPC imposes limits on the scope of most MoC classes. These appear to prohibit classification of inventions without "significant claim recitation of the data processing system or calculating computer and only nominal claim recitation of any external art environment." Id. Apparently reluctance persists to patenting business process inventions outside an embodiment in an apparatus or in software. The PTO insists that: However, it must be noted that most patent applications being examined in Class 705 still strongly reflect the implementing or enabling engineering . . . used to carryout the practical application being claimed. Databases, communication systems, circuits, and wires (i.e. electrical and computer engineering) will continue to be a dominant feature of business data processing for generations to come. A business data processing method is implemented on a data processing machine which is still reflected in the patent application. The USPTO will also continue to grant patent protection for the business data processing machine itself. USPTO White Paper, Automated Business Methods, Section IV, Resources in Transition, available at 〈http://www.uspto.gov/web/menu/busmethp/transition.htm〉. See also Rochelle Cooper Dreyfuss, Are Business Method Patents Bad for Business?, 16 SANTA CLARA COMP. & HIGH TECH. L.J. 263, 280 (May 2000) (concluding that "we are keeping the bath water [business method patents] when all we really need or want is the baby [patents on software]"). These positions would appear to conflict with the Federal Circuit's Excel decision holding that a software implementation was always just an example and not an exclusive requirement, see supra notes 82-100 and accompanying text.
118. The USPC imposes limits on the scope of most MoC classes. These appear to prohibit classification of inventions without "significant claim recitation of the data processing system or calculating computer and only nominal claim recitation of any external art environment." Id. Apparently reluctance persists to patenting business process inventions outside an embodiment in an apparatus or in software. The PTO insists that: However, it must be noted that most patent applications being examined in Class 705 still strongly reflect the implementing or enabling engineering . . . used to carryout the practical application being claimed. Databases, communication systems, circuits, and wires (i.e. electrical and computer engineering) will continue to be a dominant feature of business data processing for generations to come. A business data processing method is implemented on a data processing machine which is still reflected in the patent application. The USPTO will also continue to grant patent protection for the business data processing machine itself. USPTO White Paper, Automated Business Methods, Section IV, Resources in Transition, available at 〈http://www.uspto.gov/web/menu/busmethp/transition.htm〉. See also Rochelle Cooper Dreyfuss, Are Business Method Patents Bad for Business?, 16 SANTA CLARA COMP. & HIGH TECH. L.J. 263, 280 (May 2000) (concluding that "we are keeping the bath water [business method patents] when all we really need or want is the baby [patents on software]"). These positions would appear to conflict with the Federal Circuit's Excel decision holding that a software implementation was always just an example and not an exclusive requirement, see supra notes 82-100 and accompanying text.
119. Sec. 2 Definitions. (f) The term "business method" means - (1) a method of - (A) administering, managing, or otherwise operating an enterprise or organization, including a technique used in doing or conducting business; or (B) processing financial data; (2) any technique used in athletics, instruction, or personal skills; and (3) any computer-assisted implementation of a method described in paragraph (1) or a technique described in paragraph (2). H.R. 5364, 106th Cong. § 2 (2000). H.R. 5364 provides another definitional layer, to be codified as 35 U.S.C. § 100(g), which triggers the quality control consequences required by the bill: (g) The term "business method invention" means - (1) any invention which is a business method (including any software or other apparatus); and (2) any invention which is comprised of any claim that is a business method. Id. § 2(g).
120. 447 U.S. 303 (1980).
121. Id. at 308.
122. 35 U.S.C. § 154 (1994 & Supp. IV 1998).
123. The right to exclude, however, is not a right to exclusively use the invention. See, e.g., Atlas Powder Co. v. E.I. Du Pont de Nemours, 750 F.2d 1569, 1580-81 (Fed. Cir. 1984) (holding that others' patents dominate the patent); Patterson v. Kentucky, 97 U.S. 501, 505 (1878) (opining that valid government regulation can prohibit producing or selling invention).
124. Increasingly patent data search and retrieval is digititalized by the PTO and by some commercial entities (IBM, Lexis, Westlaw). In the past, the sole method for patent prior art review was the paper-based indexing of the USPC. The digititalization of patent text and graphics (e.g., drawings, schematics), however, means that retrieval methods need not rely solely on traditional forms of indexing. Just as search and retrieval of legal research started migrating to digitized databases since the late 1970s, patent search increasingly employs key words in context techniques. These are essentially an alphanumeric string search of electronic database contents, supplemented by Boolean text search that narrows the scope of electronic database searches.
125. Pub. L. 106-113 § 4302(a), 1999 U.S.C.C.A.N. (113 Stat.) 1501(a)-55 (codified as 35 U.S.C. § 273).
126. 35 U.S.C. § 273(b)(1).
127. See, e.g., Lawrence M. Sung & Jeff E. Schwartz, Business Method Defense, NAT'L. L.J., B8 (April 10, 2000).
128. H.R. 5364, 106th Cong. § 3 (2000). See supra note 9.
129. AMERICAN HERITAGE DICTIONARY 826 (Houghton-Mifflin 1979).
130. Id.
131. BALLENTINE'S LAW DICTIONARY 796 (3d ed. 1969).
132. Huntington Sec. Corp. v. Busey, 112 F.2d 368, 370 (6th Cir. 1940).
133. 35 U.S.C. § 100 (1994).
134. See H.R. REP No. 82-1923 (1952) (clarifying that the term "art" was used in other parts of the Act to signify a technical discipline and that the term "process" is more appropriate in the context of statutory subject matter).
135. AMERICAN HERITAGE DICTIONARY at 1043 (Houghton-Mifflin 1979).
136. 35 U.S.C. § 100(b) (1994).
137. U.S. Patent No. 5,960,411 ("Method and System for Placing A Purchase Order via a Communications Network," issued Sept. 28, 1999).
138. U.S. Patent No. 5,794,207 ("Method and Apparatus for a Cryptographically Assisted Commercial Network System Designed to Facilitate Buyer-Driven Conditional Purchase Offers," issued Aug. 11, 1998).
139. William A. Sahlman, How to Write a Great Business Plan, HARV. BUS. REV., July-Aug. 1997, at 99.
140. See, e.g., Amazon.com v. Barnesandnoble.com, Inc., 73 F. Supp. 2d 1228 (W.D. Wash. 1999) (granting preliminary injunction against Barnesandnoble.com's alleged infringement of Amazon.com's U.S. Patent No. 5,960,411 (the "one-click" patent) on several claims including Barnesandnoble.com's "Express Lane" feature infringing Amazon.com's Internet purchase order execution procedure using one mouse click).
141. See, e.g., Robert P. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform, 14 BERKELEY TECH. L.J. 577 (1999); Bradley C. Wright, Patent Law: Business Methods, NAT'L. L.J., November 22, 1999, at B9.
142. See, e.g., Robert P. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform, 14 BERKELEY TECH. L.J. 577 (1999); Bradley C. Wright, Patent Law: Business Methods, NAT'L. L.J., November 22, 1999, at B9.
143. James Gleick, Patently Absurd, N.Y. TIMES MAG., Mar. 12, 2000, at 44.
144. 35 U.S.C. § 102 (1994).
145. Scott Thurm, Amazon.com Chief Executive Urges Shorter Duration for Internet Patents, WALL ST. J., March 10, 2000, at B3.
146. 35 U.S.C. § 103 (1994 & Supp. IV 1998).
147. The public domain is comprised of all those "[l]iterary, musical, or dramatic compositions so dedicated to the public as not to be subject to copyright. A device or process so well known and in such common use as not to be patentable." BALLENTINE'S LAW DICTIONARY 1021 (3d ed. 1969). In the MoDB context, the public domain also includes the elements of all relevant arts and sciences, no longer protected under IP law, e.g., expired or invalidated patent claims or the absence of secrecy over the subject matter of a trade secret.
148. See Lawrence Lessig, Online Patents: Leave Them Pending, WALL ST. J., Mar. 23, 2000, at A22 (arguing patent system is "a form of regulation . . . imposed by the government saying who may use what ideas, and for how long").
149. Tim O'Reilly, Stallman on the Harm of Patents (visited Aug. 8, 2000), available at 〈http:// www.oreillynet.com/pub/a/patents/2000/03/09/stallman.html〉 (Interview of Richard Stallman, Founder of the GNU Project & Free Software Foundation, by Tim O'Reilly).
150. See, e.g., Gregory J. Maier, From the Chair: Patents as Government Regulation?, ABA Section of Intellectual Property Law Chair's Bulletin (May 2000).
151. Jeff Bezos, An Open Letter From Jeff Bezos on the Subject of Patents (visited Aug. 5, 2000), available at 〈http://www.amazon.com/exec/obidos/subst/misc/patents.html/〉.
152. This argument resembles the definition of "public goods," these are public facilities that attract insufficient public investment for optimal societal welfare; each marginal user's consumption does not diminish the supply to other consumers, consumers are free-riders. See HENRY G. MANNE, THE ECONOMICS OF LEGAL RELATIONSHIPS, READINGS IN THE THEORY OF PROPERTY RIGHTS 378 (1975). This argument also has strong conceptual similarity to the "essential facilities" doctrine of antitrust law. See United States v. Terminal Railroad Ass'n., 224 U.S. 383, 388 (1912).
153. Letter from Tim O'Reilly, Founder, O'Reilly Network, to Jeff Bezos, CEO, Amazon.com, Jan. 5, 2000 (visited Aug. 8, 2000), available at 〈http://www.oreillynet.com/ask _tim/amazon_patent.html〉.
154. Gleick, supra note 134.
155. Maier, supra note 141.
156. Id.
157. This telephony example actually supports some form of limitation on the scope of MoDB patents. Telecommunications is a form of common carriage regulated under the Communications Act of 1934, Pub. L. No. 73-416, 48 Stat. 1064 (codified as amended at 47 U.S.C. §§ 151-700 (Supp. IV 1998)). Telecom regulation created a duty to furnish service upon reasonable request and prohibited unjust or unreasonable discrimination in charging for service. The analogy of telephony to Internet business methods patents is that each can be seen as essential infrastructure for the progress of business. Telephony was regulated to assure reasonably-priced access for all. This is an argument similar to that made by critics of MoDB patents.
158. See, e.g., Victoria Slind-Flor, Bar Reacts to Bezos Patent Reform Plan, NAT'L. L.J., Mar. 27, 2000, at A1.
159. Todd Voeltz, Its All in the Claims, PTO TODAY, Jan. 2000, at 10, 11.
160. Pub. L. 106-113 § 4102, 1999 U.S.C.C.A.N. (113 Stat.) 1501(a)-552 (codified as 35 U.S.C. § 297). Earlier Senate versions of the AIPA would have required the General Accounting Office to conduct an independent study of MoDB patent quality. S. 1798, 106th Cong. (1999). No such provision survived in the final version signed by President Clinton on Nov. 29, 1999. Section 303 of S. 1798 would have required an independent study that would clearly be useful in the MoDB patentability debate: SEC. 303. STUDY AND REPORT ON BUSINESS METHODS PATENTS. (a) IN GENERAL- No later than 120 days after the date of the enactment of this Act, the General Accounting Office, in consultation with the Patent and Trademark Office, shall conduct a study and submit a report to the Judiciary Committees of the Senate and House of Representatives on the effect on innovation, competition (foreign and domestic), and American businesses (including electronic commerce) of the quality of patents being issued on business methods by the Patent and Trademark Office. (b) CONTENTS- The study conducted under this section shall include - (1) an examination of the number of applications received for patents on methods of doing business, including recent trends and forecasts, and the number of patents granted based on such applications; (2) an examination of the nature of the applicants filing for and receiving such business methods patents, including by industry sectors, the extent to which such applicants have filed for patent protection for such business methods in foreign countries, and the nature of the technologies or business models represented in such patents and patent applications; (3) an evaluation of the database of patents, publications, and other information used by the Patent and Trademark Office to examine applications for patents on methods of doing business; (4) an analysis of the types of skills needed by patent examiners to adequately examine applications for patents on business methods, whether there are a sufficient number of examiners handling these applications with the requisite skills, and what types of training, if any, may be called for to augment these skills; (5) an analysis of the economic and competitive impact of patents issued on business methods on American businesses, particularly on businesses involved in electronic commerce, including the effect of such patents on companies' abilities to raise investment capital, compete in their relevant markets, and innovate in emerging markets and technologies; and (6) the extent, outcome, and effects on American business, competition, and innovation of litigation surrounding approved business methods patents. S. 1798, 106th Cong. § 303 (1999).
161. United States Patent and Trademark Office, Business Methods Patent Initiatives: An Action Plan (visited Aug. 9, 2000), available at 〈http://www.uspto.gov/web/offices/com/sol/ actionplan.html〉.
162. Id. Industry outreach efforts include: (i) "Customer Partnership with the software, Internet and electronic commerce industry similar to that in place with the biotechnology industry. The Partnership will meet quarterly to discuss mutual concerns, share USPTO plans and operational efforts;" (ii) a Roundtable Forum (hearing) held July 27, 2000; and (iii) Industry Feedback to expand prior art resources. Id.
163. PTO's MoDB § 103 Rejections, supra note 102.
164. "All [Class 705] work by a non-Primary Examiner must be reviewed and signed by a person with signatory authority." PTO's MoDB White Paper, supra note 59.
165. PTO's MoDB § 103 Rejections, supra note 102. When determining the field of search, three reference sources must be considered -domestic patents, foreign patent documents, and nonpatent literature (NPL). None of these sources can be eliminated from the search unless the examiner has and can justify a reasonable certainty that no references, more pertinent than those already identified, are likely to be found in the sources(s) eliminated. The field of search should be prioritized, starting with the area(s) where the invention would most likely be found in the prior art. Id.
166. See, e.g., PTO's MoDB White Paper, supra note 59.
167. See id. PTO examiners apparently emphasize patent prior art over NPL, a point inferred from the PTO's acknowledged shift to greater emphasis on NPL in the White Paper.
168. Id.
169. The scholarly academic journals in business emphasize the building and refutation of theoretical relationships more than the design or discovery of practical decision making techniques.
170. See, e.g., PTO's MoDB White Paper, supra note 59 (Prior art references can be found in many diverse sources (e.g. an Internet web site, a sales brochure, or a 120-year-old textbook). There is poor tabulation of all the available references for a particular topic (e.g. not all the insurance prior art is found in one location)).
171. H.R. 5364 would add 35 U.S.C. § 321(b) requiring the PTO to publish all MoDB applications promptly after 18 months from filing. Proposed 35 U.S.C. § 321(b)(3) invites public participation to find claims in the application covering techniques already in the public domain. Proposed 35 U.S.C. § 322 would create a new "Administrative Opposition Panel" that would review challenged patentability of MoDB patents.
172. H.R. 5364 would add 35 U.S.C. § 324 lowering the burden of proof from the clear and convincing evidence standard to the preponderance standard to prove invalidity or ineligibility in a variety of legal challenges, including reexamination, interference, opposition, or other civil action. H.R. 5364 would add 35 U.S.C. § 103(d)(1) to create a presumption of obviousness when one or more prior art references are combined or modified such that the claimed invention differs only as a computer implementation. Finally, the PTO is directed by H.R. 5364 to promulgate rules, enforced by appropriate penalties, requiring MoDB applications to disclose the extent to which the applicant searched for prior art. Clearly, H.R. 5364 imposes new consequences when an application is determined to be a "business method invention." Proposed 35 U.S.C. § 321(b)(1)(C) would permit the applicant to respond to such a determination by amending or withdrawing the application or otherwise. The PTO appears to respond quickly to criticism implicit in proposed or forthcoming legislation. Several aspects of § 303 of S. 1789, 106th Cong. (1999), an early version of the AIPA, were dropped upon final passage. See supra note 151. Nevertheless, the PTO implemented similar provisions as internal guidelines, e.g., MoDB tabulations and classification, NPL prior art, business skills enhancement for examiners. This pattern is again evident in regulations recently promulgated by the PTO, 65 Fed. Reg. 54,604 (Sept. 8, 2000). This is the PTO's "Patent Business Goals," a major revision of its rules. Specifically, a new rule, 37 C.F.R. § 1.105, gives PTO examiners or other PTO personnel authority to require additional information from applicants in any area of technology, not solely from MoDB applicants as proposed in H.R. 5364. The new rule implements the PTO's inherent authority to require applicants to provide information such as potentially relevant commercial databases, 37 C.F.R. § 1.105(a)(1)(i); certification that the applicant made a prior art search, 37 C.F.R. § 1.105(a)(1)(ii); NPL prior art known to the applicant, 37 C.F.R. § 1.105(a)(1)(iii); NPL prior art used in drafting the application, 37 C.F.R. § 1.105(a)(1)(iv); or NPL prior art used in the design process, 37 C.F.R. § 1.105(a)(1)(v).
173. The PTO has traditionally required technical credentials from the natural sciences for patent lawyers, patent agents and PTO examiners. General administrative law authorizes agencies to admit professionals for practice before the agencies under 5 U.S.C. § 500 (1994) but exempts the PTO. The patent law more specifically authorizes the PTO to define the qualifications for patent practice to those who "are of good moral character and reputation and are possessed of the necessary qualifications to render to applicants or other persons valuable service." 35 U.S.C. § 31 (1994). The PTO interprets this as requiring "legal, scientific, and technical qualifications." 37 C.F.R. § 10.7(a)(2)(ii) (1999). The breadth of qualifications narrows significantly in the PTO's interpretation of 37 C.F.R. § 10.7, by requiring undergraduate degree or the equivalent in one among a very specific listing of natural science or engineering sub-disciplines, e.g., biology chemistry, electrical engineering, or accredited computer science. United States Patent and Trademark Office, General Requirements Bulletin, Recognition of Attorneys and Agents, available at 〈http://www.uspto.gov/web/offices/ dcom/olia/oed/grb0010.pdf〉. Under exceptional circumstances, the PTO Director (soon to be Commissioner) may admit applicants with non-listed credentials to practice under 37 C.F.R. § 10.7(a)(2)(iii) (if "otherwise competent"). There is criticism that the PTO qualifications requirements should not be enforced as law until properly promulgated. See Michelle J. Burke & Thomas G. Field, Jr., Promulgating Requirements for Admission to Prosecute Patent Applications, 36 IDEA 145 (1995).
174. The PTO has traditionally required technical credentials from the natural sciences for patent lawyers, patent agents and PTO examiners. General administrative law authorizes agencies to admit professionals for practice before the agencies under 5 U.S.C. § 500 (1994) but exempts the PTO. The patent law more specifically authorizes the PTO to define the qualifications for patent practice to those who "are of good moral character and reputation and are possessed of the necessary qualifications to render to applicants or other persons valuable service." 35 U.S.C. § 31 (1994). The PTO interprets this as requiring "legal, scientific, and technical qualifications." 37 C.F.R. § 10.7(a)(2)(ii) (1999). The breadth of qualifications narrows significantly in the PTO's interpretation of 37 C.F.R. § 10.7, by requiring undergraduate degree or the equivalent in one among a very specific listing of natural science or engineering sub-disciplines, e.g., biology chemistry, electrical engineering, or accredited computer science. United States Patent and Trademark Office, General Requirements Bulletin, Recognition of Attorneys and Agents, available at 〈http://www.uspto.gov/web/offices/ dcom/olia/oed/grb0010.pdf〉. Under
175. See PTO's MoDB White Paper, supra note 59.
176. United States Patent and Trademark Office, Examination Guidelines for Computer-Related Inventions, available at 〈http://www.uspto.gov/web/offices/com/hearings/software/analysis/computer. html〉.
177. See Jared Earl Grusd, Internet Business Methods: What Role Does and Should Patent Law Play?, 4 VA. J.L. & TECH. 9 ¶ 71 (1999).
178. See 35 U.S.C. § 283 (1994 & Supp. IV 1998). Generally, the traditional four-factor test is applied for preliminary injunctions, permanent injunctions, and stays pending appeal of the injunction. These factors are: (i) probability of success on the merits; (ii) irreparable harm; (iii) balancing the injury; and (iv) consideration of the public interest. There is no requirement for a particular weighting or for equal weighting of these four factors. See Chrysler Motors Corp. v. Auto Body Panels of Ohio, Inc., 908 F.2d 951, 953 (Fed. Cir. 1990).
179. 35 U.S.C. § 284 (1994 & Supp. IV 1998).
180. Injunctive relief follows principles of equity in patent infringement cases. 35 U.S.C. § 283 (1994 & Supp. IV 1998). The standards for preliminary injunctions were formerly more stringent in patent cases, requiring proof of the patent's validity and the infringement "beyond question." See, e.g., Rosenberg v. Groov-Pin Corp., 81 F.2d 46 (2d Cir. 1936). There are more recent Federal Circuit cases that have relaxed this tougher standard to a reasonable likelihood of success on the merits. See H.H. Robertson, Co. v. United Steel Deck, Inc., 820 F.2d 384, 387 (Fed. Cir. 1987); Atlas Powder Co. v. Ireco Co., 773 F.2d 1230, 1234 (Fed. Cir. 1985).
181. Standard Havens Prod., Inc. v. Gencor Indus. Inc., 897 F.2d 511, 515 (Fed. Cir. 1990). Of course, "One who elects to build a business on a product found to infringe cannot be heard to complain if an injunction against continuing infringement destroys the business so elected." Windsurfing Int'l, Inc. v. AMF, Inc., 782 F.2d 995, 1003 n.12 (Fed. Cir. 1986), cert. denied 477 U.S. 905 (1986). Nevertheless, trial judges may exercise less restraint than in traditional injunctive practice in issuing stays on such injunctions pending appeal because "likelihood of success in the appeal is not a rigid concept. . . . When harm to the applicant is great enough, a court will not require 'a strong showing' that applicant is 'likely to succeed on the merits."' Standard Havens, 897 F.2d at 512-13.
182. See Andrew J. Frackman & Robert M. Stern, Patent Law: E-commerce damage awards, NAT'L L.J., July 3, 2000, at B10.
183. Grain Processing Corp. v. American Maize-Prod. Co., 185 F.3d 1341, 1350 (7th Cir. 1999) (applying Aro Mfg. "but for" causation rule to process patent infringement claims for lost profits limiting damages to reasonable royalty where acceptable substitute process exists; reasonable royalty rate based on hypothetical agreement limited by findings of cost savings of patented process over available inferior substitute).
184. See Del Mar Avionics v. Quinton Inv. Co., 836 F.2d 1320, 1326-28 (Fed. Cir. 1987) (reasoning that "the purpose of this [reasonable royalty] alternative is not to provide a simple accounting method, but to set a floor below which the courts are not authorized to go. [The Reasonable Royalty method is] suited to circumstances where there is an established royalty or licensing program, or if the patentee is not itself in the business, or if [lost] profits are too speculative to estimate.").
185. See 35 U.S.C. § 284 (1994 & Supp. IV 1998). The other significant components include interest, costs, and the potential for treble damages in cases of willful infringement.
186. See Yale Lock Mfg. Co. v. Sargent, 117 U.S. 536 (1886).
187. Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978).
188. 35 U.S.C. § 284 (1994 & Supp. IV 1998).
189. See Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507 (1964).
190. See Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1579 (Fed. Cir. 1992).
191. See King Instruments Corp. v. Perego, 65 F.3d 941, 953 (Fed. Cir. 1995).
192. See Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1550 (Fed. Cir. 1995) (en banc).
193. See Paper Converting Mach. Corp. v. Magna-Graphics Corp., 745 F.2d 11, 22 (Fed. Cir. 1984).
194. Yale Lock Mfg. Co. v. Sargent, 117 U.S. 536 (1886).
195. Aro Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507 (1964).
196. Panduit Corp. v. Stahlin Bros. Fibre Works, Inc., 575 F.2d 1152, 1156 (6th Cir. 1978).
197. Grain Processing Corp. v. American Maize-Prod. Co., 185 F.3d 1341, 1350 (7th Cir. 1999).
198. Id.
199. Id.
200. See, Andrew J. Frackman & Robert M. Stern, Patent Law: E-commerce damage awards, NAT'L L.J., July 3, 2000, at B10.
201. The first mover advantage can be provisionally described as the near monopoly profitability enjoyed by the first firm to adopt a unique business model, before competitors enter the market with similar or improved business models.
202. The bubble in Internet stock market prices during in the first quarter of 2000 illustrates the market's heightened expectations for some exclusive factor such as unique IP, brand image, and/or customer loyalty converging into the first mover advantage. See, e.g., Holman W. Jenkins, Jr., Busting the Intellectual Property Bubble, WALL ST. J., Mar. 29, 2000, at A23.
203. Frackman & Stern, supra note 190 (discussing role of first mover's competitive advantage as exemplified by high visibility Internet start-ups like Priceline.com and Doubleclick).
204. See, e.g., HAL VARIAN & CARL SHAPIRO, INFORMATION RULES (1999).
205. This may be the most potent argument for acceptance of the patentability of business methods, although it does not clearly support a full twenty-year term for business method patents. Proposals have been made to limit business method patent terms to a "reasonable" period for incubation of the firm, about three to five years.