[Congressional Record Volume 157, Number 173 (Monday, November 14, 2011)]
[Senate]
[Pages S7413-S7414]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BUSINESS-METHOD PATENTS
Mr. KYL. Mr. President, I ask unanimous consent to have printed in
the Record a letter concerning section 18 of the America Invents Act,
sent to me and others by the chairman of the House Judiciary Committee.
House of Representatives,
Committee on the Judiciary,
Washington, DC September 8, 2011.
Hon. Jon Kyl
U.S. Senate,
Washington, D.C.
Hon. Charles E. Schumer,
U.S. Senate,
Washington, D.C.
Hon. Patrick Leahy,
U.S. Senate,
Washington, D.C.
Hon. Chuck Grassley,
U.S. Senate,
Washington, D.C.
Dear Senators Kyl, Schumer, Leahy and Grassley: I am
writing to discuss further the importance of the transitional
program for business method patents as included in H.R. 1249,
the Leahy-Smith America Invents Act. As you know, this
provision enables the U.S. Patent and Trademark Office
(`USPTO') to correct egregious errors that were made in the
granting of a wide range of business method patents.
Business methods were generally not patentable in the
United States before the late 1990s, and generally are not
patentable elsewhere in the world. The Federal Circuit,
however, created this new class of patents in its 1998 State
Street decision. In its 2010 decision in Bilski v. Kappos,
the U.S. Supreme Court clamped down on the patenting of
business methods and other patents of poor quality. It is
likely that many or most of the business method patents that
were issued after State Street are now invalid under Bilski.
There really is no sense in allowing expensive litigation
over patents that are no longer valid in light of the Supreme
Court's clarification of the law. The new transitional
program included in the House bill creates an inexpensive and
speedy alternative to litigation--allowing parties to resolve
these disputes more efficiently rather than spending millions
of dollars in litigation costs. In the process, the
proceeding will also prevent nuisance litigation settlements.
Moreover, the new administrative proceeding allows business
method patents to be reviewed by the experts at the USPTO
under the correct (Bilski) standard. To use this proceeding,
a challenger must make an up-front showing to the USPTO of
evidence that the business method patent is more likely than
not invalid. This is a high standard. Only the worst patents,
which probably never should have been issued, will be
eligible for review in this proceeding.
This program provides the Patent Office with a fast,
precise vehicle to review low-quality business method
patents, which the Supreme Court has acknowledged are often
abstract and overly broad.
Specifically, the bill's provision applies to patents that
describe a series of steps used to conduct every-day business
applications in the financial products and retail services
sectors. These are patents that can be and have been asserted
against all types of businesses--from community banks and
credit unions to retailers and businesses of all sizes and
from all industries.
The provision is, indeed, limited to patents that are non-
technological in nature (i.e., business methods) and that
involve a process or related apparatus used in the practice,
administration, or management of a financial product or
service. The program's exception for ``technological
inventions'' precludes review of patents for inventions based
on application of the natural sciences or related engineering
or inventions in computer operations. And by requiring that
the covered patents be applicable to a financial product or
service, the proceeding in the House bill ensures that the
patents eligible for review will generally include only those
that have some business or commercial orientation.
Nothing in the bill, however, limits use of the proceeding
to one industry; rather, it applies to non-technological
patents that can apply to financial products or services. Any
business that sells or purchases goods or services
``practices'' or ``administers'' a financial service by
conducting such transactions. Most business-method patents
are fairly plastic in nature and could apply to a whole host
of business activities. See 157 Cong. Rec. 1363, 1365 (daily
ed. March 8, 2011) (statement of Sen. Schumer) (``To meet
this requirement, the patent need not recite a specific
financial product or service. Rather the patent claims must
only be broad enough to cover a financial product or
service.''). To be sure, the fact that a patent has been
asserted against a financial institution with respect to
products or processes that are unique to such institutions
will be a fairly clear indicator that the patent applies to a
``financial product or service,'' and should provide guidance
to the USPTO in administering the program. See 157 Cong. Rec.
1368, 1379 (daily ed. March 8, 2011) (statement of Sen. Kyl).
The transitional program can be used to review patents for
``a method or a corresponding apparatus.'' The distinction
between a ``process'' and a ``machine'' (two of the terms
used in section 101 of the patent code to define what is
patentable) is not a firm one, and many inventions can be
characterized either way. A ``corresponding apparatus'' for a
business method would include, for example, a computer that
was programmed to carry out the business process. Wary of the
stigma that attaches to business-method patents, many
applicants try to obscure the nature of these patents by
characterizing a computer that has been programmed to execute
the process as the invention, and thus asserting that the
process is really a ``machine'' or a ``system.''
The program's definition of ``covered business-method
patent'' includes a ``corresponding apparatus'' in order to
prevent such obvious evasions. Any other approach would
elevate claim-drafting form over invention substance.
Finally, any ``apparatus'' that is subject to review under
the program would need to be used to implement or effect a
business method. Legitimate inventions in technological
fields will not be subject to review under this program.
The transitional program also extends to privies of parties
charged with infringement. This was done specifically to
prevent downstream customers or users from being dragged into
frivolous litigation over suspect or improperly granted
patents. H.R. 1249 also extends the time frame for the
transitional program. This change is important to prevent
patent trolls from waiting out the program. This issue of
folks ``lying in wait'' may actually be a significant
argument for extending or making permanent this program in
the future. Similarly, the program's definition was expanded
in H.R. 1249 so that it is not limited to class 705 patents.
This change is key to the program's success, because many
business method patents are assigned to classes other than
705, and it makes no sense to exclude them because of the
quirks of USPTO's classification regime.
This program is not tied to one industry or sector of the
economy--it affects everyone. The provision as developed in
the Senate and later perfected in the House will ensure that
the vast majority of non-technological business method
patents will be eligible for review under this program. As
the USPTO had a presumption to grant many of these erroneous
patents, they should now have a presumption to allow most
non-technological
[[Page S7414]]
business method patents that have a commercial nexus into
this new program for review. This program was designed to be
construed as broadly as possible and as USPTO develops
regulations to administer the program that must remain the
goal.
The strength of our patent system relies on not simply the
mechanical granting of a patent, but the granting of strong
patents, ones that are truly novel and non-obvious
inventions, that are true innovations and not the product of
legal gamesmanship. This provision is an integral component
of H.R. 1249 and will not only help correct past mistakes but
ensure a stronger U.S. patent system going forward.
Sincerely,
Lamar Smith,
Chairman, Committee on the Judiciary,
House of Representatives.
____________________