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Patent
Law: Part II
Business Method Patents
Practical Legal Issues In e-Commerce
GENERAL OVERVIEW
A "business method" patent can be thought of as many things,
including:
(1) a U.S. utility patent whose subject matter, or the nature of the invention
for which a patent has been granted, is "a method of doing or conducting
business,"
(2) a patent for subject matter that only recently has been held to be
patentable by the U.S. Court of Appeals for the Federal Circuit,
(3) the form of legal protection that many e-Commerce merchants and other
service providers are electing to seek in order to try to give themselves
a limited-duration monopoly for the practice of their recently developed,
novel and nonobvious methods of doing business,
(4) an alternative to trade secret protection, the traditional means for
protecting proprietary business methods --- but a means which does not
offer as much potential protection as a "business method" patent
because it is possible that a second, independent inventor of the same
method could obtain a patent for it and then license it to many others,
thereby diminishing or destroying any economic advantage that the method
might have been providing to its first inventor,
(5) a potential threat to many e-Commerce merchants and other service
providers who could soon find that many vital methods for improving and
practicing various aspects of their businesses are only available to them
at great costs - the price of taking one or more licenses from the owners
of such "business method" improvement patents,
(6) a great opportunity and means for creative individuals and business
entities to develop and exploit potentially, very valuable forms of intellectual
property,
(7) a grant from the United States government to the owner of such a "business
method" invention of the right, which is enforceable in a federal
court, to exclude all others in the U.S. from making, using or selling
the invention for a limited time (i.e., the life of a utility patent extends
from its issuance date until twenty years after the date on which the
application seeking the patent was filed, provided that maintenance fees
are paid at 3.5, 7.5 and 11.5 years from date of the patent's issuance),
and
(8) a document, that is crafted from the information contained in the
inventor's patent application and published by the U.S. government, which
reveals to one skilled in the technology of the invention how to make
and practice the invention, which is itself a new and useful process whose
public disclosure contributes to the U.S. knowledge base, thereby promoting
the progress of science and the useful arts.
These various characterizations of a "business method" patent
are provided as both an introduction and an overview of the matters to
be discussed below.
A patent is a grant from the United States government to the owner of
an invention of the right to exclude all others from making, using or
selling the invention for a limited time (i.e., assuming maintenance fees
are paid to the USPTO, the life of a patent can extend for up to twenty
years from the earliest effective filing date for the invention). In exchange
for these patent rights, the inventor is required to disclose the invention
in enough detail to allow other people to use the invention after the
monopoly expires and to learn from the invention so as possibly to enable
them to build upon the ideas contained in the invention's disclosure --
thereby promoting the progress of science and the useful arts.
THE PATENT ACT
The Patent Act is broad and general in its language describing
the proper subject matter for a patent:
"Whoever invents or discovers any new and useful process, machine,
manufacture, or composition of matter, or any new and useful improvement
thereof, may obtain a patent therefor, subject to the conditions and requirements
of this title.... 35 U.S.C. § 101
.... unless the invention was ...... in public use .... in this country,
more than one year prior to the date of the application for patent in
the United States ... 35 U.S.C. § 102(b)
.... A patent may not be obtained, ..., if the differences between the
subject matter sought to be patented and the prior art are such that the
subject matter as a whole would have been obvious at the time the invention
was made to a person having ordinary skill in the art to which said subject
matter pertains....", 35 U.S.C. § 103(a).
V. Non-Statutory Subject Matter
However, since Congress included in patentable subject matter only those
things that qualify as "any ... process, machine, (article of) manufacture
(i.e., product), or composition of matter, or any ... improvement thereof
...", the courts often have been faced with the task of trying to
find the right words to define those things that are to be excluded as
non-statutory subject matter.
Novelty Search
Because patent protection is only available for new, useful and nonobvious
inventions, and because the legal expenses associated with applying for
a patent can be significant, it is often advisable to first make a relatively
low-cost assessment as to whether it is likely that a patent will issue
for the invention. This usually involves searching the U.S. patent files
to investigate technology similar to the proposed invention in order to
determine the state of the art in the area of the invention and what,
if any, scope of patent protection may be available for the invention.
Preparation and Filing of the Patent Application
The patent application has two primary sections: the specification and
the claims. The specification is essentially a detailed description of
the invention, including drawings if necessary, showing what the invention
does, how it works, and disclosing its advantages over prior art. The
description of the invention must meet certain legal requirements, including
that it: (a) be thorough enough to allow a person skilled in the invention's
field of technology to make and use the invention, (b) identify the invention's
best mode of operation, and (c) provide a basis for and explanation of
the terminology that is used in the following claims.
The claims of the patent application are carefully worded, legally structured
sentences that vary in definitiveness, with each of these sentences attempting
to distinctly define more closely than the others the patentable novelty
of the invention. Thus, while one ideal claim might suffice, the patent
application almost always contains claims that range from broad ones (which
define the invention with the fewest details possible) to narrow ones
(which set forth in more detail the specific elements of the invention).
For the USPTO to examine a patent application, a required filing fee must
be paid at the time the application is submitted. For a small entity (independent
inventors, small businesses {<500 employees}, and non-profits) inventor,
this filing fee is now typically $345, which is half of the fee paid by
the larger, non-small-entity applicants. Typical legal fees for the drafting
of a patent application and its supporting paperwork are $4,000 to $10,000,
depending upon the complexity of the invention.
The Examination Process At The USPTO
After the patent application has been filed with the USPTO, a patent examiner
carefully reviews the application in order to determine the invention's
patentability. The examination workload and staffing of the USPTO are
such that this examination process usually extends over a period of 12
to 18 months.
To be patentable, an invention essentially must
be:
(1) useful,
(2) novel, and
(3) nonobvious.
The novelty requirement is often consider to be the threshold
test for patentability. It generally is satisfied unless:
(i) prior to the inventor's invention date, the invention
was actually reduced to practice or an application disclosing it was filed
by one still diligently pursuing it, or it was patented by another or
published anywhere in the world by others or publicly known or used in
the U.S. by others, or
(ii) prior to one year before the filing date of the
inventor's patent application, the invention was patented or published
anywhere in the world or in public use or on sale in the U.S. as a result
of the acts of the inventor or others (Note: This effective one-year grace
period for such acts of the inventor is unique to the U.S. patent laws;
in most foreign countries, such acts of the inventor would bar the inventor
from obtaining a patent).
The probably more demanding, nonobviousness requirement is harder to objectively
define. The typical way that an examiner shows obviousness is to cite
a number of prior art references that, when combined as suggested by possibly
another prior art reference, contain all of the elements of the applicant's
invention. The applicant generally challenges the logic of the combination
and identifies certain secondary considerations that suggest that the
invention was not obvious (e.g., long duration of well recognized need
for the invention, prior unsuccessful efforts of others to develop such
an invention, degree of commercial success of the invention).
When the examiner has made his/her initial patentability determination,
the USPTO responds by sending the applicant what is known as an "Office
Action" containing its determination and the reasons for it. If the
Office Action contains a rejection of the claims (which occurs on the
first Office Action about 80% of the time) and there exist arguable grounds
for contesting the examiner's determination, one typically files a "Response,"
usually in the form of an Amendment, to overcome the rejection. There
are usually only two Office Actions and Responses before a final determination
is made by the examiner as to the invention's patentability. If this determination
is detrimental to the applicant's interests, it can be appealed -- a time
consuming and expensive process. (Typical legal fees for responding to
Office Actions are $1,000 to $3,000, depending upon the complexity of
the arguments).
Fees for the Issuance and Maintenance of the
Patent
After the examiner has agreed to allow the application to issue as a patent,
the small entity inventor presently must pay the USPTO a patent issuance
fee of $605, which is, in part, to pay for the expenses associated with
preparing the application's contents for publication. Periodically during
the life of the patent (up to 20 years from the date of filing for those
applications filed on or after 6/8/95), the inventor must pay USPTO maintenance
fees in order to allow his/her patent rights to continue to be in effect
. These come due at times that are measured from the patent's date of
issuance. Their amounts increase with time under the assumption that the
inventor will realize greater profits on the invention the longer that
it has been in existence. For the small entity inventor, these maintenance
fees and their due dates are: @3.5 years: $415, @7.5 years: $950 and @11.5
years: $1,455.
Constructive Notice To Potential Infringers
Once a patent is granted, its number should be placed on the invention
(i.e., Pat. 6,000,000) in order to give a potential infringer constructive
notice of one's patent rights. Otherwise, the patentee will only be able
to recover damages from an infringer from the day the infringer had actual
notice of his/her infringement, rather than from the day the patentee
began marking the invention.
Foreign Patent Coverage
To obtain foreign patent coverage, within twelve months of filing a U.S.
patent application (i.e., one's priority date), one needs to start applying
for his/her foreign patent rights, this process typically includes the
following steps:
i) Preparation and Filing of a PCT International
Patent Application that is based on the U.S. application (Typical
Legal Fee of $1,000 to $2,000, Filing Fee of approximately $2,300 or $3,100,
depending upon whether one designates the USPTO or the European Patent
Office (EPO) for one's international novelty search),
ii) Assuming that the results of the international search report are favorable
and that one would like to postpone, from the 20th to the 30th month,
from one's priority date, the expensive step of entering the "national
stage" of this process and the filing of the required applications
in the specific foreign countries where one is seeking foreign patent
rights, before the end of the 19th month from one's priority date, one
will want to exercise his/her option to have the PCT authorities perform
a preliminary patentability examination; this requires the filing of the
necessary papers to "Demand" the preliminary patentability examination
(Typical Legal Fee of $1,000 to $2,000, assuming no Preliminary Amendment
is necessary, with a Filing Fee of $900 or $2,200, depending upon whether
the USPTO or the EPO performs this examination),
iii) Before the end of the 30th month from one's priority date and assuming
that the PCT preliminary examination report is favorable, one has to decide
in which foreign jurisdictions he/she will actually file for national
patent rights. The costs involved at this step include individual, national
filing fees (e.g., approximate fees: Canada - $1,150, EPO - $4,900, Japan
- $3,700), possible translation costs, foreign patent agent filing fees,
continuing legal fees for a U.S. patent attorney to supervise this work,
and possible later fees involved with making any necessary amendments
to the various foreign patent applications. These "national stage"
fees are by far the most expensive step in this process, and it usually
is suggested to postpone them until the 30th month in order to give the
inventor the maximum possible period of time to assess the marketability
of the invention so that he/she can better determine as to whether these
final expenses can be cost-justified.
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