Business Method Patents

The “spokes” were mutual funds that pool their assets in a central “hub.” The State Street bank court held that an invention was eligible for patent protection if it produced a “useful, concrete, and tangible result.” (Note that this is no longer valid law.) It has been pointed out that the patent claim recited means for performing steps that are the requirements specified in an Internal Revenue Service regulation for avoiding taxes on a partnership. However, when referring to patent eligibility, we are not considering whether the invention is new and non-obvious. That is a separate hurdle to be overcome only if the subject matter is capable of being patented at all. In 1999, a case known as AT&T vs. Excel opened the doors wider to business method patents.

This case involved U.S. Patent No. 5,333,184, which describes a method to take advantage of adding more data into a message record in order to provide appropriate billing for subscribers, based on whether or not the subscriber and call recipient subscribe to the same long-distance carrier. The court held that when a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e. g., transforming or reducing an article to a different state or thing), then the claim is patent-eligible.

More recently, the pendulum has swung back strongly against business method patents but they have not been forbidden. In a case known as Bilski vs. Kappos, the U.S. Supreme Court rejected the State Street “useful, concrete, and tangible result” test. Bilski’s patent application describes a method for providing a fixed bill energy contract to consumers. Under fixed bill energy contracts, consumers pay monthly prices for their future energy consumption in advance of winter based on their past energy use. The claims were rejected on the grounds that “the invention is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.” The Supreme Court upheld the rejection but also refused to adopt a test that barred all business method patents. A”machine-or-transformation” test was held to be a useful and important test though it may not be the only test.

There has been precedent for the fact that when a computer has been programmed, it is transformed to a specific machine; however, the U.S. Patent and Trademark Office has recently handled a case under a new “covered business method review procedure” of the America Invents Act. This procedure allows asserted business method patents to be challenged if the person requesting the review has been sued for infringement of the patent in question; the patent claims are directed to “financial products or services”; and the patent claims do not recite a “technological invention.”

SAP America, Inc. v. Versata was the very first case brought under the U.S Patent and Trademark Office’s Covered Business Method review procedure. The Patent Trial and Appeal Board held that the patent claims did not recite a technological invention. In that regard, the patent owner had argued that its patent was sufficiently technological because the “patent discloses and claims a software invention.” The PTAB disagreed, and held that the claimed subject matter as a whole neither recited a technological feature nor solved a technical problem using a technical solution, because no specific, unconventional software, computer equipment, tools or processing capabilities are required.” The PTAB noted that, to the contrary, the patent “states that its invention may be implemented in any type of computer system or programming or processing environment.”