Vol. 12, No. 6, Pg. 18. E-Commerce Patents: Moving at the Speed of Light.

Author:By Richard M. Moose and John E. Vick Jr.

South Carolina Lawyer


Vol. 12, No. 6, Pg. 18.

E-Commerce Patents: Moving at the Speed of Light

18E-COMMERCE PATENTS: Moving at the Speed of LightBy Richard M. Moose and John E. Vick Jr.Patents are changing. Until recently, patents covered primarily the nuts-and-bolts world. Patents have always been available for new compositions, electronics and the like (i.e., the physical universe). But, changes in law and patent policy in the late 1990s saw patents flex into the field of business methods. This sharp evolution beyond the more physical world and boldly into the "new economy" has resulted in a flood of new patent applications for business methods. A number of recent patents are directed to business software and Internet-based methods of accomplishing what was previously done manually or, in some cases, not at all. Clearly, the patent landscape has changed at cyber speed.

Recently proposed legislation seeks to limit the proliferation of such patents, in part by establishing a presumption against patentability for computer implemented business methods. The legislation, if enacted, would lower the burden of proof required in court

19to challenge such patents if issued. Congress may step in to render such business method patents both harder to get and more difficult to enforce in court.


Business method patents exploded into the headlines recently in several notable cases, including Amazon. corn's lawsuit against Barnes & Noble over the "one-click" Internet ordering system. In yet another patent infringement suit, Priceline.com charged that the use by Microsoft of Priceline's "name your price" business method (a so-called "reverse auction" decisional engine) of selling travel services over the Internet violated its patent. Some argue that patents on such business methods provide an unfair monopoly on sales practices that have been used by businesses for years. Critics complain that adaptation to the Internet of such selling methods is obvious and therefore unpatentable.

Now Congress may enter the fray. The first shots have been fired in the battle to restrict the patenting of business method inventions, such as those described above. On April 3, Rep. Berman of California introduced for the second time a Bill (H.R. 1332) with the stated goal of

20addressing (and also limiting) the proliferation of the controversial business method patent. One day later, experts testified to a House panel that the U.S. Patent and Trademark's Office's (PTO) controversial practice of awarding patents to such business processes have been improved by internal reforms-and should not be stopped. The debate rages on.

At one time, it was fairly well settled that per se methods of doing business were not patentable, even if new and non-obvious. In 1998, however, the Federal Circuit ruled in State Street Bank v. Signature Financial,149 F.3d 1368 (Fed. Cir. 1998), that a computerized system for managing and updating mutual fund investments was indeed patentable-thereby validating business method patents. The State Street decision opened the door to an entire area of patent activity, and it has spawned many new patents and applications for patents in the last two or three years relating to e-commerce and Web-based technologies. Activity at the typically stodgy PTO has been so intense that a separate "business methods Web page" has been established on the PTO Web site.

For an invention to be patentable, it must be useful, new and non-obvious. After a patent application is prepared and filed, a patent examiner reviews the application, including the claimed invention. The examiner performs a search for the closest "prior art" (publications, previously issued patents, etc.). The examiner then compares the claimed invention to the prior art to determine if the defined invention is new and non-obvious.

Recently, the PTO has unexpectedly revoked patents soon after they were granted. For example, Mercata is the online retailer that pioneered group buying and was backed by Microsoft Co-founder Paul Allen. Mercata...

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