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Patents & the Financial Services Industry

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Federal Circuit Upholds Patent Eligibility of Claims Having Tangible Application


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September 9th, 2011
hilbergc No comments

A new article discusses Classen Immunotherapies, Inc. v. Biogen Idec, (Fed. Cir. 2011), which may have implications for business method and software-related patents on the §101 front: “Federal Circuit Upholds Patent Eligibility of Claims Having Tangible Application.”


~by Eric L. Sophir, Partner at SNR Denton


In a remand from the Supreme Court for further consideration in view of Bilski v. Kappos, the Court of Appeals for the Federal Circuit in Classen Immunotherapies, Inc. v. Biogen Idec, No. 2006-1634, -1649 (Fed. Cir. Aug. 31, 2011), upheld patent eligibility of two of three patents under 35 U.S.C. 101. The representative claims recited a method whereby information on immunization schedules and the occurrence of chronic disease is “screened” and “compared,” the lower risk schedule is “identified,” and the vaccine is “administered” on that schedule.


In granting a motion for summary judgment, the district court had found that there was a relation between childhood immunization schedules and the occurrence of chronic immune-mediated disorders. As a result, the claims were found to “describe little more than an inquiry of the extent of the proposed correlation between vaccines and chronic disorders.” So the district court held the claims were ineligible under section 101 as being an abstract idea directed to “thinking about” the risks of vaccination.


The Federal Circuit reasoned that although these steps could be considered “mental steps,” it is necessary to consider the application of the technology. . .

See complete article here.



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“Federal Circuit Invalidates Claims that Discuss Computers But Can Be Performed Without Them” (CyberSource Corp. v. Retail Decisions, Inc.)


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August 23rd, 2011
hilbergc No comments

A new article discusses CyberSource Corp. v. Retail Decisions, Inc., (Fed. Cir. 2011): “Federal Circuit Invalidates Claims that Discuss Computers But Can Be Performed Without Them


~by Eric L. Sophir, Partner at SNR Denton


In CyberSource Corp. v. Retail Decisions, Inc., No. 2009-1358 (Fed. Cir. Aug. 16, 2011), the Federal Circuit affirmed the Northern District of California’s grant of summary judgment of invalidity for two reexamined claims that are directed to detecting credit card fraud over the Internet. One claim recites a “method for verifying the validity of a credit card transaction over the Internet,” and includes steps such as “obtaining information about other transactions that have utilized an Internet address that is identified with the credit card transaction,” and “constructing” and “using” a map of credit card numbers based upon other transactions to determine if the transaction is valid.


The Federal Circuit held that the “mere collection and organization of data regarding credit card numbers and Internet addresses is insufficient to meet the transformation prong … and the plain language … does not require the method to be performed by a particular machine, or even a machine at all.” The Federal Circuit reiterated that “[data-gathering] step[s] cannot make an otherwise nonstatutory claim statutory.” Further, aside from the machine-or-transformation test, which is not the sole test for patent eligibility, this claim also failed to recite eligible subject matter because it was drawn to an unpatentable mental process. Obtaining information about an Internet address can be done by reading records in an existing database, and the map appears to be just a list of credit card transactions, so each step can be performed in the human mind…

See complete article here.



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Will Patent Reform Stop Patent Infringement Lawsuits Against Banks?


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June 30th, 2011
wilhelm No comments

By Richard A. Wilhelm
Richard A. Wilhelm, LLC
http://www.wilhelm-law.net/

In 1998 in its State Street v. Signature Financial decision, the Federal Circuit ushered in an era of patenting business methods. In the years since State Street, it has become common for financial services providers to be sued for patent infringement. Banks and other financial services providers have paid plaintiffs hundreds of millions of dollars defending these lawsuits. Financial services providers and others have repeatedly asked Congress for changes to the patent law to reduce defense costs. It now looks certain that patent reform legislation known as the Leahy-Smith America Invents Act will become law. Both the Senate and House have passed similar versions of the Act (S. 23 and H.R. 1249). While the differences between the versions still need to be resolved, the differences appear small and are likely to be resolved before the Summer Recess. It has been reported that President Obama is willing to sign a patent reform bill. After reviewing the legislation, one wonders if it should have been named the Business Method Patent Lawsuit Relief Act for Banks.

The legislation makes two big changes to U.S. patent law. First, it moves the United States to a “first-to-file” patent system. Unlike the rest of the world, the U.S. currently has a “first-to-invent” system. While “first-to-file” is not directed at criticisms of litigation, a second change that expands the power of the United States Patent and Trademark Office (PTO) to review the validity of issued patents will have a significant impact on litigation. Most challenges to patent validity are now handled by the courts. Patent litigation is slow and expensive. By expanding the PTO’s power to correct or nullify “poor quality” patents, the legislation aims to provide defendants with two new procedures that are faster and less expensive than litigation. One procedure is available for all types of patents. Another is only available for business method patents “for performing data processing or other operations used in the practice, administration, or management of a financial product or service.” Compared with the current procedures and the new procedure for all patent types, the “transitional” procedure for business method patents broadens the legal grounds for invalidating a patent and broadens the issue-time range of patents eligible for review. This should make it faster and cheaper for a financial institution that has been sued for infringing a poor quality business method patent to prove that the patent should never have been issued. Before describing the new procedure that is available for all types of patents and the new procedure for business method patents, the current procedures for reexamining issued patents and some of the changes the Act makes to the current procedures are first briefly reviewed.

Ex Parte Reexamination and Inter Partes Review
The idea of a relatively fast, inexpensive PTO procedure to reexamine an issued patent as an alternative to expensive litigation is not new. In 1980, Congress enacted a procedure now known as ex parte reexamination as way for a patent owner or a third-party to ask the PTO to review a patent in view of newly discovered prior art. In 1999 Congress enacted an inter partes reexamination procedure. While both may be requested at any time, they have been criticized and underutilized. The opportunity for a third party to participate in ex parte reexamination is limited, and a third party who requests inter partes reexamination is barred from asserting in litigation any ground that the third party raised or could have raised in the inter partes proceeding. Thus, inter partes reexamination creates a legal bar known as “estoppel.” In both reexamination proceedings, the only types of evidence the PTO may consider are patents and publications. The only legal grounds that the PTO may consider are sections 102 (anticipation) and 103 (obviousness) of the patent law. Under current reexamination procedures, the PTO may not consider testimony concerning prior use or public sales, and claims are not examined for compliance with sections 112 (non-enabling or indefinite specification) or 101 (lack of utility, ineligible subject matter).

The Leahy-Smith America Invents Act changes the name of inter partes reexamination to inter partes review and converts it from an examinational to an adjudicative proceeding. The Act makes changes to inter partes review designed to address the criticisms outlined above. The Act requires the PTO to issue regulations for inter partes reexamination within 1 year of enactment of the Act. The amendments to inter partes reexamination take effect 1 year after enactment of the Act.

Post-Grant Review
The Act creates a new procedure called post-grant review. The post-grant review is only available to “a person who is not the patent owner.” While it is not limited to business method patents, a request for post-grant review must be made within one year of date the patent is granted. In addition, a person may not request a post-grant review of a reissued patent more than 1 year after the patent was reissued. The grounds under which the PTO may cancel a claim in a post-grant review are broader than the grounds available in ex parte reexamination and inter partes review. A claim may be cancelled “on any ground that could be raised under paragraph (2) or (3) of section 282(b).” This means that the PTO may cancel a claim in a post-grant review under sections 101, 112, as well as 102, and 103.

A person may not request a post-grant review if he previously filed a lawsuit challenging the patent’s validity. And if he tries to get around this by filing a lawsuit after requesting post-grant review, the lawsuit will be automatically “stayed,” i.e., suspended until the post-grant review is complete. On the other hand, if a patent owner files a lawsuit alleging infringement within 3 months after the patent issues, a motion for a preliminary injunction by the patent owner may not be stayed on the basis that the defendant has requested post-grant review.

A person who requests a post-grant review that results in a final written decision may not assert in a lawsuit that a claim is invalid on any ground that she raised or reasonably could have raised in the post-grant review. Thus, post-grant review creates an “estoppel.” The “or reasonably could have raised” language appears only in the House version.

A post-grant review may be requested for any patent with an “effective filing date” on or after the effective date of the Act. The Act is effective 18 months after enactment. The Act requires the PTO to issue regulations for post-grant review within 1 year of enactment of the America Invents Act.

Business Method Patent Review
The reforms to inter partes reexamination and the addition of the new post-grant review should reduce the time required and cost to defend infringement lawsuits for all defendants. The “transitional post-grant review proceeding for reviewing the validity of covered business method patents” provides substantial additional relief to those defendants who are accused of infringing a covered business method patent. The transitional post-grant review proceeding, referred to here as the business method patent review, is described in Section 18 of H.R. 1249 and Section 18 of S. 23.

The business method patent review generally employs the standards and procedures specified for the new post-grant review. However, there are some significant differences. A person may not request a business method patent review unless that person has first been sued for or charged with patent infringement. In contrast, there is no requirement that a person be sued for or charged with patent infringement to invoke the post-grant review procedure. However, unlike the post-grant review, which must requested within one year of the patent grant, a business method patent review of a covered patent or reissued patent generally may be requested at any time. (For patents with an effective filing date after the Act becomes law, a business method patent review may only be requested after the 1 year period available for a post-grant review expires.) Even more important, the universe of patents eligible for business method patent review is significantly larger than that for post-grant review. A business method patent review may be requested for any patent with an “effective filing date” before or after the effective date of the Act. This makes all “covered business method patents” that have not expired, regardless of when issued, potentially eligible for review. For example, a defendant defending a lawsuit in 2013 that alleges infringement of a covered business method patent that issued in 2000 will be able to request a business method patent review.

A person who requests a business method patent review is not subject to the post-grant review requirement that he has not previously filed a lawsuit challenging the patent’s validity. Further, a request for a business method patent review does not automatically stay a lawsuit concerning the patent. Rather, a court decides whether to stay the lawsuit based on: (1) whether a stay would simplify issues and streamline trial; (2) whether discovery is complete; (3) whether a stay would unduly prejudice the nonmoving party or provide a clear tactical advantage to the moving party; and (4) whether a stay would reduce the burden of litigation on the parties and the court. One would expect lawsuits to be readily stayed once a defendant has requested a business method patent review.

A person who requests a business method patent review may not assert that a patent claim is invalid in a lawsuit on any ground that she raised in the business method patent review.

When a defendant requests a business method patent review to challenge the validity of a patent issued before the effective date of the Act, a special definition of prior art is used. Two alternative definitions are provided and either definition may be used to challenge the patent’s validity. First, the familiar definition of prior art in section 102(a) in effect before the effective date of the Act may be used. Second, the basis for a validity challenge may be prior art that: (1) “discloses the invention more than 1 year before the date of the application for patent in the United States,” and (2) “would be described by section 102(a) . . .in effect . . . before the effective date . . . [of the Act] . . . if the disclosure had been made by another before the invention thereof by the applicant.” While the second alternative is a confusing variation on the “old” definition of prior art in section 102(a), it is reasonable to assume that it is intended to broaden the old section 102(a) definition of prior art.

The Act defines a covered business method patent as:

“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.”

The PTO is instructed to issue regulations for determining whether a patent is for a technological invention.

While not directly related to business method patent reviews, the House bill includes a provision likely to benefit banks that may be sued for infringement of a covered business method patent. Generally, a defendant may be sued for patent infringement where the defendant has a regular and established place of business. The Act states that “an automated teller machine shall not be deemed to be a regular and established place of business.” This provision is not in the Senate version, but if it stays in the Act, it may help a bank to stay out of the Eastern District of Texas, a forum sometimes characterized as friendly to patent plaintiffs.

Finally, the business method patent review includes a sunset provision. In the House bill, the business method patent review procedure is repealed 8 years after PTO regulations establishing the program take effect. In the Senate bill, business method patent review sunsets in 4 years after PTO regulations become effective. The Act requires the PTO to issue regulations for business method patent review procedure within 1 year of enactment of the Act.

While the Leahy-Smith America Invents Act will not stop patent infringement lawsuits against banks, it will have a significant impact. It seems likely that financial service providers will increase their use of business method patent reviews once they become available. Because covered business patents issued at any time are subject to review on any legal ground available to a court, the business method patent review will be an attractive alternative to litigation for financial services providers.

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Bilski — A Financial Patent’s Waterloo?


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July 26th, 2010
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From Law360 (subscription required):

 

Bilski — A Financial Patent’s Waterloo?

Law360, New York (July 23, 2010) — Michael Lewis’ best-seller, The Big Short, reads like the best of Agatha Christie’s mysteries, chronicling the collapse of the subprime mortgage market and its infectious spread to the underpinnings of our credit system, methodically wiping out wealth measured in trillions of dollars.

 

 

On the heels of its two-year recovery, these markets are now confronted with a new and complex infrastructure of financial regulations that might even embarrass Carter Glass and Henry Steagall of Glass-Steagall fame. To this, now add the U.S. Supreme Court’s ruling in Bilski — a ruling many thought would remove patent protection from this industry. Did it?

 

. . .

 

When the Supreme Court issued its Bilski decision, a divided court rejected both the narrowing test of the Federal Circuit and an absolute bar to business method patents — a ruling that may preserve many of the business method patents in the financial world. No Waterloo today.

 

–By James M. Bollinger, Troutman Sanders LLP

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XPRT Brings Really, Really Big ($3.8 Billion) Patent and Trade Secret Claim Against eBay/PayPal


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July 20th, 2010
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 alg_ebayLast week XPRT Ventures filed a complaint against eBay and subsidiaries PayPal, StubHub, Bill Me Later and Shopping.com, alleging both patent infringement and trade secret theft.  XPRT (pronounced “expert”) seeks $3.8 billion in damages, and the case has already garnered substantial attention from the mainstream media, business journals, the tech world, and patent commentators.  See here, here, here, and here.

 

At the heart of the claim is XPRT’s assertion that eBay misappropriated various trade secrets from George Likourezos and Michael Scaturro that related to streamlining electronic payment systems when eBay acquired PayPal back in 2002 and began practicing Likourezos and Scaturro’s invention without their permission or authorization.  The complaint also alleges that eBay infringes various patents invented by Likourezos and Scaturro, which were assigned to XPRT in 2008, including U.S. Patents  7,483,856, 7,567,937, 7,627,528, 7,610,244, 7,599,881, and 7,512,563.  The patents generally relate to payment in electronic commerce transactions, particularly for electronic auctions, and it was pointed out to me that XPRT’s ‘937 patent was one out this site’s “Patent of the Week” when the patent issued last July.

 

According to the complaint, Likourezos contacted eBay’s in-house IP counsel in 2001 to inform him of patent applications filed by Likourezos and Scaturro and to offer eBay the chance to review the applications on a confidential basis.  The inventions disclosed in the patent applications purportedly would have improved upon eBay’s current processes for effecting payments for online auction transactions, which at that time were being performed by eBay’s Billpoint payment system, and Likourezos wanted eBay to review them to determine if the parties could enter into a business arrangement for the inventions.

 

Likourezos was eventually contacted by Andre Marais (then a partner at Blakely Sokoloff Taylor and Zafman LLP, now a shareholder at Schwegman Lundberg and Woessner, P.A.), who represented eBay and requested copies of the patent applications for review and analysis.  After receiving “assurances of confidentialities” from Marais, Likourezos sent him the patent applications that disclosed – according to the complaint – descriptions of additional revenue streams for eBay, particularly automatically transferring funds to an electronic auction payment account corresponding to a user of an electronic auction website and effecting payment between a user a another party, such as an electronic auction system operator.

 

eBay ultimately did not enter into an agreement with Likourezos, but several months later it announced its plans to acquire PayPal for “the purposes of integrating PayPal into its eBay.com platform . . . [and] such acquisition was done in order to modify PayPal and incorporate it into the eBay.com platform in the manner suggested by Mr. Likourezos.” Complaint para. 45 (emphasis added).  The complaint goes on to assert that eBay’s access to Likourezos’s “confidential information,” namely his patent applications, allowed eBay to “recognize the advantages it would realize by acquiring, modifying and integrating PayPal’s payment platform with eBay’s own e-commerce payment platform.” Complaint para. 46.

 

Other points of interest alleged in the complaint:

  • eBay filed its own patent application (App. No. 10/427,553) to cover the eBay-PayPal payment system after Likourezos disclosed his patent applications to eBay.
  • Andre Marais, who was the first outside counsel of eBay to communicate with Likourezos about the Likourezos-Scaturro invention and presumably see their patent applications, was the same practitioner who later drafted the eBay patent application and Marais continues to be the attorney or record for the eBay patent application.
  • Marais and others associated with the filing and prosecution of the eBay patent application 10/427,553 knew of Likourezos’ patent applications (now “the XPRT patents”) but failed to disclose the XPRT patents to the Patent Office, thereby violating their duty of disclosure to the USPTO. [Comment: eBay did file an IDS that identified one of the XPRT CIP patent applications before any examination of its 10/427,553 application occurred and eBay has since identified all of the XPRT patents in the still-pending 10/427,553 application]
  • Because the claims filed by eBay in its patent application “paralleled those of” the XPRT patents, eBay thereby “admitted the patentability of” Likourezos-Scaturro claims because eBay had a duty of candor before the USPTO to submit only patentable claims. Complaint para. 68.

 

This last assertion is particularly interesting.  Most patent attorneys excel at drawing distinctions between patent claims and other similar technologies.  Thus, given that the claims in the eBay application and the XPRT patents undoubtedly do not have identical language, we are likely to see eBay argue that its own claims are different enough from those in the XPRT patents to simultaneously allow eBay take the position that its own claims are patentable while XPRT’s claims are invalid and/or not infringed.

 

In sum, XPRT alleges infringement by eBay of six patents, misappropriation of trade secrets, and unjust enrichment by eBay for unauthorized use of XPRT’s inventions.  XPRT is seeking $3.8 billion for eBay’s alleged wrongful conduct plus treble damages.

 

The case poses some interesting questions, particularly because it asserts intertwined patent and trade secret misappropriation claims in a financial services-related intellectual property case.

 

As the case progresses, we can expect to see the outcome hinge on various fact-specific issues.  Here are a few possibilities.  On the trade secret side:

  • Whether Likourezos and Scaturro were employees of XPRT at the time of the initial communications with eBay in 2001 and 2002, and if not, whether and when XPRT acquired rights to Likourezos and Scaturro’s “confidential information”?
  • The precise language of the confidentiality agreement between Likourezos and eBay (according to the complaint, eBay unilaterally changed the effective date of the agreement).
    • It is not clear from the complaint whether eBay entered into a written NDA with Likourezos before Likourezos disclosed the first patent applications to eBay).
    • It is also not clear from the complaint whether eBay was bound to confidentiality if it learned of Likourezos and Scaturro’s “confidential information” independently through no improper means (according to the complaint, this “confidential information” was disclosed in patent applications that were published as early as 2002, and eBay certainly would have had legitimate access to the patent applications after they published, absent contrary language in the NDA).
  • Did the PayPal technology – as it existed prior to the acquisition by eBay – misappropriate the Likourezos/Scaturro “confidential information” disclosed in the Likourezos/Scaturro patent applications?  If not, precisely how did eBay modify PayPal and incorporate it into the its platform in a manner that misappropriated the Likourezos/Scaturro “confidential information” rather than just modify the PayPal technology through normal means to join PayPal to eBay.
  • According to the complaint, eBay began misappropriating the Likourezos/Scaturro “confidential information” beginning when it acquired PayPal, which occurred on July 8, 2002 and was public knowledge.  Why did Likourezos and Scaturro wait eight years to file a complaint for trade secret misappropriation? Delaware Statute of Limitations states: “An action for misappropriation must be brought within 3 years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.” 6 Del. C. § 2006.  The complaint may attempted to address this by indicating that certain aspects of eBay’s misappropriation were not implemented — and were therefore perhaps not discoverable – until 2008 (although, this may come back to the issue that the inventions were most likely publicly available as published by the PTO starting in 2002); also, “For the purposes of this section, a continuing misappropriation constitutes a single claim,” 6 Del. C. § 2006.

And on the patent side:

  • After eBay acquired PayPal, was the PayPal technology applied in a specific manner that reflected eBay’s knowledge of the Likourezos/Scaturro “confidential information,” or was the mere acquisition of PayPal by eBay sufficient to infringe the XPRT patents and misappropriate the Likourezos/Scaturro “confidential information”?
  • If the mere acquisition of PayPal by eBay was sufficient to misappropriate the Likourezos/Scaturro “confidential information,” whether eBay was considering acquiring PayPal before viewing Likourezos’ patent applications, which might demonstrate that eBay did not misappropriate if it can show it simply continued to proceed with an earlier business consideration – namely acquiring PayPal – notwithstanding its access to the “confidential information”?
  • The impact of the prosecution history on the Likourezos/Scaturro patents on XPRT’s assertion of “provisional rights” (i.e., whether the claim amendments changed the claims beyond “substantially identical” during prosecution and, if so, what is the earliest date provisional rights will flow for royalty purposes and how does that affect the $3.8 billion damages?

 

More to come as this huge case develops . . .

 

Categories: Business Method Patents, Litigation Tags:

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Bilski v. Kappos (Finally!!!) and What It Means For Financial Services Patents


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July 15th, 2010
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Introduction

Much has already been written about this long-awaited decision.  The important holding was simply that (1) the Federal Circuit’s machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible process,  and (2) Bilski’s claim* covering hedging risks in commodities trading was too abstract to be patent eligible.  To some, who were expecting a new test for patent-eligible subject matter, this decision may have been disappointing or at very least anticlimactic.

 

Justice Kennedy wrote for the majority, and two concurring opinions were offered, by Justice Stevens and Justice Breyer.  The Majority opinion was rather short, while Justice Stevens’ concurrence was much lengthier, and some have speculated that the Stevens concurrence was written as though it were drafted to be the majority opinion but which failed to garner a fifth vote (namely Scalia, who appeared to be the swing vote in this case), while Kennedy’s shorter majority opinion may have been written as a compromise after it was clear that Stevens was not going to get five votes.  In any event, the Stevens opinion is very informative to read.

 

Some points to know about the decision:

  • All nine Justices agreed that Bilski’s proposed patent covered an abstract idea, which (along with laws of nature and physical phenomena) is not patentable
  • Only 4 Justices voted to categorically find “business methods” not patentable; the majority did not agree, and therefore business methods are not per se unpatenable (e.g., Breyer concurrence: “This Court has never before held that so-called ‘business methods’ are patentable, and, in my view, the text, history, and purposes of the Patent Act make clear that they are not.”)
  • The majority probably barred any categorical exclusion of software patents, but not explicitly.  Indeed, the majority opinion did not even explicitly mention software much less expressly rule on the patentability of software, but it clearly expressed a desire to avoid categorical bars beyond abstract ideas, laws of nature, and physical phenomena.  (Kennedy discusses software briefly in his decision, but in a section not joined by Scalia and therefore this was merely a Kennedy concurrence and not signed by the majority)
  • The majority did not explicitly reject the “Useful, Concrete, and Tangible result” test of State Street, but both concurring opinions (5 Justices) explicitly rejected the UCT test.  Therefore, five Justices expressed the view that the State Street test is inconsistent with Supreme Court precedent
  • Absent a new or complementary test, the Benson-Flook-Diehr (BFD) cases are the “guideposts” to look towards when determining whether a claimed invention is “abstract.”
  • Insofar as most observers did not expect the S.Ct. to find Bilski’s claim patent-eligible, the decision can largely be seen as a victory for Bilski – as well as proponents of broad patent protection for financial services inventions – because the Court agreed with petitioners that (1) business methods are not excluded from patentability, (2) the Federal Circuit’s machine-or-transformation test is not the exclusive test for patent eligibility, thereby expanding the category of eligible subject matter beyond only that subject matter which passes the machine-or-transformation test, and (3) the ruling allows for the possibility that software and other business methods can be patented.

 

Now that we are back in a BFD world again, the focus going forward for financial services patents and applications will be these three S.Ct. cases and, particularly, what is and is not an “abstract idea.”

 

Abstract Ideas

Because the S.Ct., probably quite correctly, did not provide a new test for determining §101 patent eligibility, we are left with a §101 framework that affirms the MOT test as a useful clue – and any claims that satisfy this test are most certainly patentable based on S.Ct. precedents unless and until we find a claim that passes MOT but is nonetheless directed towards an abstract idea – while allowing that some claimed inventions may fail the MOT test but be patent-eligible if they are not abstract ideas.

 

The upshot of this framework is two-fold: (1) the S.Ct. in its decision did nothing to develop the MOT test further than it already has in the past, and (2) the S.Ct. did not do much more for explaining when an invention is an abstract idea.  It was already established that an invention that satisfies the MOT test is patent-eligible, but for inventions that fail MOT, the Court did not provide much guidance for distinguishing between those inventions that are simply abstract ideas and those that are not.  This aspect of the Bilski v. Kappos decision frustrated many practitioners because it is precisely in this realm of further defining what is or is not an abstract idea that would have provided more certainty with respect to §101.

 

It is not the case, however, that the S.Ct. provided no guidance whatsoever on what constitutes an abstract invention.  In its cursory discussion of why the Bilski claim was directed towards an abstract idea, the explained:

Read more…

Categories: Bilski Tags:

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“Patent” (well, sort of) of the Week (7/13/2010): Tekelec Awarded Patent for Performing Sales Transactions Using Mobile Communications Devices


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July 14th, 2010
admin 2 comments

mc9004398351Network solutions and mobile data management provider Tekelec was awarded U.S. Pat. 7,756,788 on July 13, 2010.  The patent is directed to performing sales transactions using a mobile devices without using the text messaging or paging capabilities.  The claim recites using a voice call from a mobile communications subscriber – rather than a text message or page –to verify and complete the transaction.

 

The day before the patent was to issue, the applicant filed a petition to withdraw the case from issue.

 

Also on July 13, 2010, another patent issued – this one to American Express Travel Related Services Company – by the same Examiner as the Tekelec patent and in the same field, namely performing transactions between parties at remote locations. U.S. Pat. 7,756,785.

Categories: Patent of the Week Tags:

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Variable Annuity Patent Not Infringed: Performing a Step Manually Can Avoid Infringement of a Computerized Method Claim


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June 25th, 2010
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logo_fpp1In Lincoln National Life Insurance Co. v. Transamerica Life Insurance Co. (Fed. Cir. 2010), after a jury found claim 35 of Lincoln’s patent, U.S. Pat. 7,089,201, infringed by Transamerica and not invalid and awarded Lincoln $13 million in damages, the CAFC reversed on infringement.

 

What is interesting about this case is not only the subject matter of the patent – a computer system for administering an annuity plan with a guaranteed minimum payment feature – but also the claim language itself, which includes one of the ever-troublesome contingency words, “if”.  It is not unusual for method claims to be drafted in the format, “performing step A if X, and performing step B if Y”, or some variation of this arrangement.  There are inherent deficiencies in this approach, but the contingency nature of the arrangement sometimes assists applicants with differentiating their inventions from the prior art.

 

One of the difficulties with this approach, however, is determining when such clauses are infringed.  Must both scenarios be performed?  Does the claim read on a process that performs one of the steps and is configured to perform the other step, even if that latter step is not actually performed?  What if a process performs one of the steps and the would-be infringer is obligated to perform the other step but has not yet done so?

 

Here, the language employed by the claim at issue is not quite identical to the format identified above, but the same issues arise:

 

Claim 35

A computerized method for administering a variable annuity plan having a guaranteed minimum payment feature associated with a systematic withdrawal program, and for periodically determining an amount of a scheduled payment to be made to the owner under the plan, comprising the steps of:

a) storing data relating to a variable annuity account, including data relating to at least one of an account value, a withdrawal rate, a scheduled payment, a payout term and a period of benefit payments;

b) determining an initial scheduled payment;

c) periodically determining the account value associated with the plan and making the scheduled payment by withdrawing that amount from the account value;

d) monitoring for an unscheduled withdrawal made under the plan and adjusting the amount of the scheduled payment in response to said unscheduled withdrawal; and

e) periodically paying the scheduled payment to the owner for the period of benefit payments, even if the account value is exhausted before all payments have been made.

 

Lincoln’s patent is directed to computerized methods for administering variable annuity plans, which is a contract that guarantees the payment of money to an annuitant upon certain intervals.  The claimed annuity plan entails an accumulation phase followed by a distribution phase, where during the latter the insurer makes periodic benefit payments to the annuitant from the account the annuity owner deposited money during the accumulation phase.  Under a variable annuity option, when there is a sufficiently poor fund performance, the dollar amount of the annuitant’s benefit payments could drop to zero.

 

One of the steps of Claim 35 requires “periodically paying the scheduled payment to the owner for the period of benefit payments, even if the account value is exhausted before all payments have been made.”  Transamerica sells and administers riders that guarantees policy owners the right to minimum payments regardless of market performance, thereby ensuring – at least theoretically – that the payments are made to annuitants “even if the account value is exhausted before all payments have been made.”  Transamerica argued that it did not perform step (e) because:

(1)          none of its policy owners has ever had an exhausted account and, therefore, that it has never made payments after an “account value is exhausted”;

(2)          it has not yet implemented a computer system that will make a payment in the event an account becomes exhausted.

 

The Federal Circuit rejected the first argument, finding that, per the district court’s claim construction, step (e) does not require actual exhaustion, only that Transamerica’s computerized method of administering riders must necessarily make a scheduled payment in the event of an exhausted account.  If a computerized system is configured such that it does not make a payment if an account is exhausted, step (e) is not performed and there is no infringement.

 

However, the Federal Circuit agreed with Transamerica on its second point: that, because Transamerica’s computerized system will not make payments if account value is exhausted  it does not perform step (e).  Rather, when a policy owner’s account value drops to less than the scheduled withdrawal amount, Transamerica manually produces and sends a check for the policy owner.

 

Two other interesting observations:

(1)  Legal Obligation to Perform Claimed Step.  Lincoln also argued that Transamerica was contractually obligated to practice the claimed method through its sale of riders, and Lincoln asserted that the riders require Transamerica to continue making payments to policy owners even in the event of account exhaustion.  The Federal Circuit disagreed that this was insufficient:

“More fundamentally, even if the GMWB riders did obligate Transamerica to perform the claimed method, this would not be sufficient to establish infringement. “The law of this circuit is axiomatic that a method claim is directly infringed only if each step of the claimed method is performed.” Muniauction, 532 F.3d at 1328 (emphasis added). A contractual obligation to perform an act is not performance; indeed, a party could avoid infringement simply by breaching its contract. To the extent the court’s instruction to the jury implied that Lincoln could establish direct infringement by relying on the terms of the GMWB riders rather than on Transamerica’s actual performance of the claimed steps, this instruction was erroneous.”

(2)  Contingency Language Such as “If.  Lincoln also argued that, because the district court construed the “even if” clause of step (e) to be a contingent limitation, that limitation need not be performed to support a finding of infringement unless the condition occurred (i.e., Transamerica had an exhausted account).  That is, Transamerica’s system infringed, even though the computerized system would not make payments to exhausted accounts, because the “even if” clause need not be performed unless account exhaustion occurs.  The Federal Circuit likewise rejected this line of argument:

Because Transamerica’s computerized system does not make a payment if an account is exhausted, the system does not make a guaranteed payment regardless of the account value. Therefore, Lincoln failed to prove that Transamerica performs step (e). The undisputed evidence of record shows that Transamerica’s computerized system for administering its . . . riders does not make a scheduled payment if an account is exhausted. Rather, Transamerica’s computerized system stops making payments when an account becomes exhausted and [Transamerica] provides a manual check to the policy owner.”

 

The Federal Circuit left the issue of patentable subject matter under §101 undecided, finding it moot based on its non-infringement holding.  That in itself is not particular interesting but a good reminder that we have a mere 3 days until the S.Ct. publishes its opinion in Bilski v. Kappos.  Let the fun begin!

 

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Federal Circuit Tackles Scope of Patent Prosecution Bars in Deutsche Bank Case


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June 2nd, 2010
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From Court House News Services:

     The Federal Circuit has clarified the circumstances under which courts may block attorneys from prosecuting certain patents to keep them from inadvertently disclosing confidential information gleaned in another case.
     The ruling marks the first time the Washington, D.C.-based court has outlined the standards and scope of patent prosecution bars, which prohibit attorneys from using confidential material exchanged during litigation for any other purpose.
     The decision stems from Deutsch Bank’s efforts to block attorneys for Island Intellectual Property from prosecuting any patents related to financial “deposit sweep services.”
     Island had sued the bank for patent infringement, and Deutsch was concerned that if Island’s lawyers gained access to its confidential documents, they might disclose that sensitive information while prosecuting Island’s patents in other cases…

See complete order here: In Re Deutsche Bank Trust Co. Americas

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U.S. Bank loses check-imaging patent verdict


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March 29th, 2010
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 From Bloomberg.com:

U.S. Bancorp, Minnesota’s largest bank, should pay $27 million for infringing patents related to digital checks owned by DataTreasury Corp., a jury in Texas said Friday.

The trial is the first of three on DataTreasury’s infringement claims that may lead to more than $1 billion in damages against the banking industry.

The patents relate to the imaging of checks, their transmission and their storage in a central repository.

U.S. Bancorp denied infringing the patents. The company’s lawyers had no comment on the verdict.

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