Junk Patents and Computer Business Methods

Introduction

I have written several posts pertaining to USPTO procedures intended to correct the issuance “junk patents”.  By junk patents, I mean patents issued for claimed developments which were, in fact, not innovative.  One often cited example are patents for computers performing tasks that have routinely been performed by individuals in business or commerce, i.e., computer business methods.  Activities that merely digitize or computerize the performance of accounting and financial tasks are not patentable.  To address this issue, the AIA introduced the Covered Business Method review procedure.

The American Invents Act (AIA) enacted in 2012 attempted to accomplish many things.  One goal was to provide remedies or procedures for parties harmed by the issuance of patents for non “developments”.  I have already discussed the creation of the Post Grant Review and the Inter Party Review.

Discussion

One “boogey man” of “patent deniers” has been the attempts to monopolize the market for computer performance of tasks long manually performed by individuals, particularly task performed in the conduct of business.  A ready example of computerization of a financial/business task previously performed by individuals is the computerize trading of stocks, securities and commodities.

For a time, computer software used to perform financial business methods were recognized as patentable subject matter, provided they resulted in a “concrete or tangible result”.  This was the position once taken by the Supreme Court in the 1988 decision of State Street Bank v. Signature Financial.  The weight of the State Street Bank case, however, was later eroded by the Court’s decision of Bilski v. Kapposand its progeny.  

The patentability of business methods has been a subset of the issue of whether computer software was patentable.  This has become intertwined with issues of “abstract ideas” under 35 U.S.C. section 101.  I have also discussed this in earlier blogs.

The issue of patentability of software has been amorphous.  

To return to the theme of this post, the AIA sought to create a mechanism to address the patentability of computerized/software controlled methods of performing business and financial tasks.  This is the procedure for review of “covered business methods”.

Briefly, the procedure allows a third party to initiate the review of a granted patent by the Patent Trial & Appeals Board (PTAB), a panel comprised of administrative law judges sitting in review of the USPTO examiners.  Under the procedures allowing review of “covered business methods, the grounds for reviewing an issued patent are very broad, certainly broader than permitted for Inter Party Review (IPR).  A review under the Covered Business Method (CBM) procedure may be initiated 9 months after the issuance of the patent.  Recall a Post Grant Review (PGR) must be initiated before the expiration of 9 months after patent issuance.  

The breadth and scope of permitted CBM review has been popular.  But it is explicitly intended to cover business methods and NOT technical advances in computing.  The definition of a covered business method under the AIA is:   

“a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service . . . except that the term does not include patents for technological inventions.”

Like most things within the legal environment, the definition of a covered business method has been confused.  The PTAB has broadly interpreted the definition to fit many patents under the CBM umbrella, that is to say, the administrative law judges were willing to broadly interpret the mandate, thereby increasing the number and scope of patents that could be challenged in the CBM procedure.  The Court of Appeals for the Federal Circuit (CAFC) has not shared this expansive vision and periodically stated that PTAB lacked jurisdiction to determine the validity of an issued patents since the patent did not, in fact, fall under the definition of a “covered business method” as defined by the AIA. 

The CAFC very recently determined that patents covering computer software interfaces, used primarily in computer operation of business methods, were “directed to a specific improvement to the way computers operate”.  A patent that covers software or programing that improves computer operation was not limited to “operations used in the practice, administration, or management of a financial product or service” but rather comprised a patent for a technological invention. Therefore, the PTAB could not entertain the third party challenge to the patent under the broad CBM procedure. Note Inter Party Review would remain, however, available to the third party.

This would appear to create a defense for the patent holder.  The patent holder could seek to throw out the proceeding by showing the development was directed to improving computer or other technological function.  The success of this approach will be a function of the wording/contents of the patent specification as well as the claims. (This is another example that the creation of the specification, as well as creation of the claims, requires care and forethought.) 

Conclusion

I will describe the function and procedures of the CBM patent review procedure in an upcoming post.  However I wanted to draw attention to a very broad (and apparently very popular) mechanism for attacking “junk patents”.  

As a further note, the CBM procedure is subject to a sunset provision, i.e., the procedural mechanism is scheduled to end in September of 2020.  This sunset provision has been described as an “oddity”.  It seems to assume that the USPTO will stop issuing patents for “non-developments” or otherwise ineligible subject matter.  

Copyright David McEwing, 2019