Mathematical Algorithms
The Patent Act, 35 U.S.C. ' 1 et seq., defines what may be patented. Known as statutory subject matter, it encompasses: "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." In recognition of the expansive nature of this language, the Supreme Court declared in 1981 that only "laws of nature, natural phenomena, and abstract ideas" are excepted from the definition of statutory subject matter. Diamond v. Diehr, 450 U.S. 175 (1981).
In In re Alappat, 33 F.3d at 1545, the United States Court of Appeals for the Federal Circuit (the "CAFC") held that a "useful, concrete, and tangible result" occurred as a result of conducting a series of mathematical calculations on electronic data -- representing a physical display signal -- to produce a smooth waveform on a rasterized monitor -- thus improving the quality of the resulting display. Notably, the data being transformed through mathematical calculation represented a measurable physical condition, as was the data output from an electrocardiogram in Arrhythmia Research Technology, Inc. v. Corazonix Corp., 958 F.2d 1053 (Fed. Cir. 1992).
State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 119 S. Ct. 851 (1999), differed from In re Alappat and Arrythmia Research was in its discarding of the need for the data to represent a measurable physical condition. State Street Bank held that the mathematical manipulation of data representing an abstraction - a quantity of money - may constitute a useful, concrete and tangible result. Thus, a mathematical algorithm applied to a general purpose computer to transform data from one form to another is statutory subject matter, so long as the patent specification explains the utility of the transformation.
Business Method Exception
The CAFC noted that the PTO's prohibition on business method patents had been removed in the latest edition of the Manual of Patent Examining Procedure and replaced with instructions to treat methods of doing business like any other process. The court affirmed the correctness of this change.
Businesses are making two adaptations to deflect the danger from business method patents. Increasingly, businesses are making patents a principal agenda item hoping to protect proprietary aspects of their business. And businesses are increasingly conducting patent searches, lest they unintentionally run afoul of a blocking patent. Most businesses prefer to avoid litigation where possible. Unfortunately, The American Inventor Protection Act of 1999 will make this avoidance all the more difficult.
The American Inventor Protection Act (AIPA) of 1999
The AIPA ushers in pre-grant publication to the U.S. patent system. Long a staple of European and Japanese patent practice, beginning with applications filed on November 29, 2000, pre-grant electronic publication will take place eighteen months after an application is filed whenever it is accompanied by the filing of a corresponding foreign or international application. Pre-grant publication will bring with it enormous change.
Pre-Grant Publication
The filing of a utility or plant patent application in the United States is now subject to publication eighteen months later, whenever the applicant files a corresponding foreign or PCT international application. The only exceptions are provisional applications, design applications, and applications no longer pending at the eighteen month mark.
Applications that claim the benefit of a filing date of a parent, provisional application, or foreign application will measure their publication date from the earlier filing date. As a result, many applications will be published almost immediately after filing.
All published applications will be available to the public on the Internet together with information on the status of the application. The PTO will make copies of the contents of the file history of an application available on request.
Third Party Submission of Prior Art
Upon publication of an application, the public has two months to submit up to ten patents or other publications to the PTO for consideration by the patent examiner, unless a Notice of Allowance is sent to the applicant before the two month deadline. The sending of the Notice of Allowance terminates the right of the public to submit prior art. Although no comments may be included with the submission, this right constitutes a significant opportunity for a business to prevent the allowance of untoward patents. Likewise, however, it has the potential to offer the competitors or customers of a business a similar opportunity, to hinder or limit the protection of an otherwise proprietary technology.
Provisional Rights
Once a patent application that has been published matures into a patent, the owner of the resulting patent is entitled to obtain a reasonable royalty from any infringer of the published claims during the post-publication period, so long as the infringer receives actual notice of the published application and the claims of the patent are substantially identical to those of the published application.
This provision is amplified by additional rights provided to the applicant permitting voluntary publication at any time, including before eighteen months have passed, re-publication after the application has been initially published, thereby permitting re-publication after substantial changes have been made to the claims, and voluntary publication of applications not otherwise subject to the publication requirement. The net effect of these provisions is to permit an applicant to establish rights well in advance of receiving a patent, especially where contested claims go through several examinations before allowance. In this way, vigilance is rewarded and thus strongly encouraged. If an applicant learns that a competitor is copying a product for which patent protection is being sought, the applicant can request early publication and immediately issue a cease and desist letter.
Prior Use Defense
A defendant in a patent infringement action on a business method patent may now assert commercial use in the United States as a complete defense so long as the defendant had reduced the method to practice at least one year prior to the filing date of the patent application and had actually used the method before the filing date. In this way, Congress has protected businesses from being sued for using what in effect were their trade secrets before some other business patented them.
Conclusion
In assessing future patent portfolio strategies, management will need to address several specific issues:
- With respect to specific patent applications, should the business file corresponding applications in other countries, thereby causing the eighteen month publication of the U.S. application?
- With respect to those applications where the business elects not to file corresponding applications, should an election be made to publish the application anyway?
- If the election is made to publish the application, when should it be published? The sooner it is published, the sooner the technology becomes prior art to other patent applications and the sooner management can call the technology to the attention of competitors who may be copying commercialized products.
- Once an applicant makes substantial changes to claims in a published application, should the application be republished, thereby enabling the re-published application to become the basis for a cease and desist letter to a competitor engaged in copying?
- Should business increase the frequency of pre-filing searches and should those searches include the electronic database of published applications?
- Should business monitor published applications in targeted technologies in order to obtain an early lead on new developments and avoid copying technologies that are likely to become patented?
- If a business learns of the publication of a competitor's application, should the business elect to submit prior art that the PTO examiner might otherwise not consider in examining the application, or should the business save such prior art in the event of a later lawsuit charging patent infringement?
- What if any attempt should be made to document trade secrets if a business learns of the publication of a competitor's application or the grant of a patent that may cover a business method currently in use by the business?
The answers to these and similar questions are likely to have a significant impact on a business' patent portfolio.