INVENTIVE STEP

The America Invents Act set up a transitional program for reexamination of business method patents.  These patents can be challenged on prior art grounds of novelty and non-obviousness, but also on grounds that they are not directed to patentable subject matter.  So, what exactly is a business method patent?

Section 18 of the America Invents Act is a special transition program for challenging business method patents. The section defines “business method patents” 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 law directed the PTO to issue regulations as to what a “technological invention” is. The PTO has proposed a definition:

whether the claimed subject matter as a whole recites a technological feature that is novel and unobvious over the prior art; and solves a technical problem using a technical solution.

This determination is to be made on a case-by-case basis. The PTO supports this definition by reference to the legislative history of the AIA. Unfortunately, this does not help very much. What is a “technical problem”?  What is a “technical solution”?

Versata v. USPTO

Given these extremely broad and imprecise definitions, it comes as no surprise that it will need to be settled by the courts.  IP360 (subscription service) is reporting that Versata Software, Inc. has sued the PTO and is arguing that the PTO’s definition suggests that any patent related to money falls within the program.  The statute, by contrast, indicates that only patents related to “financial products or services” should be covered by the program.

Versata’s competitor, SAP America Inc., filed a petition in September to have Versata’s U.S. Patent No. 6,553,350 reviewed.  A $391 million infringement verdict had been awarded to Versata based on SAP’s infringement of the patent.

In January, the Patent Trial and Appeal Board rejected Versata’s arguments.  ”We do not interpret the statute as requiring the literal recitation of the terms ‘financial products or services.  The term ‘financial’ is an adjective that simply means relating to monetary matters.”  The Board has set an April 17 hearing date for the case.

Do the claims of the ’350 patent fall within the definition set forth in the statute?  Several representative claims from the patent:

1. A method for determining a price of a product offered to a purchasing organization comprising: identifying one or more organizational groups, Within a hierarchy of organizational groups, of which the purchasing organization is a member, wherein pricing information is (i) stored in a data source and (II) associated with one or more of the organizational groups; retrieving from the data source the pricing information applicable to the one or more identified organizational groups; identifying one or more product groups, within a hierarchy of product groups, of which the product is a member, wherein pricing information is (i) stored in a data source and (ii) associated with one or more of the product groups; retrieving from the data source the pricing information applicable to the one or more identified product groups; sorting the retrieved pricing information applicable to the one or more identified organizational groups and the one or more identified product groups according to pricing types, the hierarchy of product groups and the hierarchy of organizational groups; and eliminating any of the pricing information that is less restrictive for the same pricing type; and determining the price of the product using the sorted pricing information that is not eliminated.

29. An apparatus for determining a price of a product offered to a purchasing organization comprising: a processor; a memory coupled to the processor, wherein the memory includes computer program instructions capable of: retrieving from a data source pricing information that is (i) applicable to the purchasing organization and (ii) from one or more identified organizational groups, within a hierarchy of organizational groups, of which the purchasing organization is a member; retrieving from the data source pricing information that is (i) applicable to the product and (ii) from one or more identified product groups, within a hierarchy of product groups, of which the product is a member; and receiving the price of the product determined using pricing information applicable to the one or more identified organizational groups and the one or more identified product groups according to the hierarchy of product groups and the hierarchy of organizational groups.

When the America Invents Act is fully implemented on Saturday, the scope of prior art will be greatly expanded, even beyond prior art in the rest of the world.

In Europe and the majority of the rest of the world, the universe of “prior art” that may be used to show that an invention is obvious or does not possess inventive step is closed as of the filing date of the application.  This means that anything that has published or any public activity or disclosure that would render the invention obvious is known as of the filing date.  And the EPO only uses European applications in this regard.  The America Invents Act, by contrast, will use applications filed anywhere in the world.

Patent applications are generally published 18 months after their earliest priority date.  This means that there is an 18 month delay between the time that an application is filed and the time its contents become available and known to the public.  During this intervening time, the application is held by the patent office in secrecy.

Once a patent application is published or issues, it becomes prior art as of its filing date.  Thus, an application that was secret for 18 months suddenly becomes prior art as of 18 months ago.  This can be a problem for patent applications filed during the 18 month interval when the application is kept secret.

In most countries, the application is only prior art for novelty or anticipation purposes.  It is only prior art if the published application contains disclosure that it identical and anticipates the later-filed application.  In the US, by contrast, the published application can also be prior art for obviousness purposes, such as when combined with another reference.  This is the problem of “secret prior art.”

Under the America Invents Act, the secret prior art may only be disqualified if it is the inventor’s own disclosure or a disclosure from someone who obtained the subject matter from the inventor.  This is the reduction of the grace period which currently applies to any inventor and third party activity, but will be reduced by the America Invents Act to only inventor activity during the year prior to patent application filing.  Thus, the America Invents Act expands secret prior art beyond current US law which is already more extensive than other countries.

If one of the avowed reasons for the change in law is to harmonize US law with other countries, this amendment actually moves US law farther away rather than closer to them.

Last week, President Obama appeared on Google + Hangout to review topics he covered in his State of the Union address.  One big topic that he addressed was the need for more patent reform.

Specifically, he castigated patent trolls.  They don’t actually produce anything, but are “just trying to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them.”

He called on Congress to pass additional patent reform legislation.  The AIA “only went about halfway to where we need to go.”  He called for involvement from more stakeholders to build consensus on “smarter” patent laws.

The president also addressed internet issues such as privacy and civil liberties and also called for high schools to become more “high tech.”  He did recognize the need for IP laws to promote innovation.