Poorly presented arguments on patent reform

The Concord Monitor on Nov. 30 has a particularly poor letter to the editor concerning patent reform:

I recently read that since 1998, the U.S. Patent Office has been approving patents for "business methods" that companies had used for years, and those businesses are now being sued for licensing infringements.

The U.S. Senate is considering a bill that would guard our companies here in New Hampshire from these types of dubious lawsuits. The Patent Reform Act of 2007 would protect our small manufacturing and technology companies from having to spend large amounts of time and money in court, and allow them to focus on innovation and job creation. I urge Sens. Sununu and Gregg to vote for the Patent Reform Act. [by PETER B. CROWELL]

Contemplate the facts. In 1998, the CAFC issued the State Street v. Signature decision, 149 F.3d 1368, which reversed a district court decision (United States District Court for the District of Massachusetts) granting summary judgment of invalidity of Signature's U.S. Patent No. 5,193,056. The '056 patent was issued by the United States Patent Office [USPTO] March 9, 1993 on an application filed 11 March 1991.

Claim 1 stated:

1. A data processing system for managing a financial services configuration of a portfolio established as a partnership, each partner being one of a plurality of funds, comprising:

(a) computer processor means [a personal computer including a CPU] for processing data;

(b) storage means [a data disk] for storing data on a storage medium;

(c) first means [an arithmetic logic circuit configured to prepare the data disk to magnetically store selected data] for initializing the storage medium;

(d) second means [an arithmetic logic circuit configured to retrieve information from a specific file, calculate incremental increases or decreases based on specific input, allocate the results on a percentage basis, and store the output in a separate file]

for processing data regarding assets in the portfolio and each of the funds from a previous day and data regarding increases or decreases in each of the funds, [sic, funds'] assets and for allocating the percentage share that each fund holds in the portfolio;

(e) third means [an arithmetic logic circuit configured to retrieve information from a specific file, calculate incremental increases and decreases based on specific input, allocate the results on a percentage basis and store the output in a separate file] for processing data regarding daily incremental income, expenses, and net realized gain or loss for the portfolio and for allocating such data among each fund;

(f) fourth means [an arithmetic logic circuit configured to retrieve information from a specific file, calculate incremental increases and decreases based on specific input, allocate the results on a percentage basis and store the output in a separate file] for processing data regarding daily net unrealized gain or loss for the portfolio and for allocating such data among each fund; and

(g) fifth means [an arithmetic logic circuit configured to retrieve information from specific files, calculate that information on an aggregate basis and store the output in a separate file] for processing data regarding aggregate year-end income, expenses, and capital gain or loss for the portfolio and each of the funds.

In making its decision, the CAFC relied on precedent of the US Supreme Court: After Diehr and Chakrabarty, the Freeman-Walter-Abele test has little, if any, applicability to determining the presence of statutory subject matter. [One notes that the US Supreme Court declined cert on the State Street decision.]

Of the business-method "exception", the CAFC wrote: The business method exception has never been invoked by this court, or the CCPA, to deem an invention unpatentable. 11 Application of this particular exception has always been preceded by a ruling based on some clearer concept of Title 35 or, more commonly, application of the abstract idea exception based on finding a mathematical algorithm. Illustrative is the CCPA's analysis in In re Howard, 55 C.C.P.A. 1121, 394 F.2d 869, 157 USPQ 615 (CCPA 1968), wherein the court affirmed the Board of Appeals' rejection of the claims for lack of novelty and found it unnecessary to reach the Board's section 101 ground that a method of doing business is "inherently unpatentable." Id. at 872, 55 C.C.P.A. 1121, 394 F.2d 869, 157 USPQ at 617. 12

Any application for a patent must meet the tests set forth in 102, 103, and 112. Patents would not be granted for "business methods" that companies had publicly used for years.

Crowell entirely missed the problem with post-grant oppositions when he wrote: --having to spend large amounts of time and money in court--. The creation of a post-grant opposition procedure would generate a mechanism wherein patent opponents could force patentees to spend large amounts of time and money in administrative proceedings costing hundreds of thousands of dollars. Not surprisingly, many small businesses, including many New Hampshire businesses, have vocally opposed the post-grant review procedure. Crowell should check the record.

Senators Sununu and Gregg should oppose the bill on patent reform.

[William L. Patton of Ropes & Gray was the losing attorney in the State Street case.]

See also

http://ipbiz.blogspot.com/2006/08/nytimes-on-patents-in-financial.html

http://ipbiz.blogspot.com/2006/06/legal-academics-on-ebay-v-mercexchange.html