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Special Post-Grant Review for Business Method and Software Patents

Congress is currently on the verge of passing patent reform legislation.  Portions of this proposed legislation especially impact patents directed to financial products or services and may also impact some software patents.  Many observers believe that the version of the bill to be signed by President Obama will closely resemble H.R. 1249, which was passed by the House of Representatives on June 23, 2011.  If enacted, Section 18 of H.R. 1249 would establish a "transitional post-grant review proceeding" for reviewing the validity of "covered business method patents."  While the language of §18 indicates that Congress' intent is to target patents directed to financial products or services, ambiguities in the bill could potentially expose other software patents to a "business method" post-grant review proceeding.

Who can file a Business Method Post-Grant Review Proceeding?

Under H.R. 1249, all patents are subject to a petitioner's request for a "post-grant review" proceeding nine months after grant of the patent.  For most patents, once this nine-month period of time has elapsed, post-grant review is no longer available, and a requester seeking to invalidate a patent via a PTO proceeding must instead file a petition for inter partes review. 

However,  §18 gives defendants charged with patent infringement of a "covered business method patent" the option to file a petition for a "transitional post-grant review proceeding" in an 8-year window of time beginning one year after the enactment of the act.  Thus, petitioners of this proceeding do not have to satisfy the additional requirements imposed for inter partes review, including showing "reasonable likelihood that the petitioner would prevail."

This proceeding can be used as a ground to stay a civil action, and petitioners of this proceeding are only prevented from raising, at trial, issues that wereactually raised in the proceeding (rather than all issues that "could have been raised").  The provisions of §18 will expire after the eight year window described above takes effect unless they are renewed by Congress.

Prior Art Available in a Business Method Post-Grant Review Proceeding

Section 18 provides a special class of prior art available in a business method post-grant review proceeding.  Under §18, eligible prior art includes art showing that the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent (§102(a) before patent reform).  Eligible prior art also includes prior art that discloses the invention more than 1 year before the filing date of the patent and which would be eligible under the above qualifications if the disclosure had been made by another before the invention thereof by the applicant for patent. 

The language used by the statute is somewhat ambiguous, but eligible prior art in this new proceeding appears to include prior art that would be fall under §102(a) of the current law,  as well as prior art by the applicant (i.e., not "by another") or intervening art that describes the invention more than one year before the filing date of the application.  Other interpretations of the language used in §18 may further broaden the pool of prior art available in this proceeding.

In light of the above, business method post-grant review proceedings allow a petitioner to cite some prior art that would not be available in an inter partes review proceeding.  For example, inter partes review proceedings are limited to patents and printed publications.  Section 18 includes no such limitations.  Thus, other evidence, such as non-published evidence of knowledge or use prior to the alleged invention, can be used in a business method post-grant review proceeding.

"Covered Business Method Patents"

One of the biggest ambiguities in §18 is exactly which patents qualify as "covered business method patents" susceptible to this new proceeding.  According to the language of §18, "covered business method patents" are those patents that: (1) "clai[m] 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"; and (2) are not"technological inventions."  Section 18 instructs the Director of the PTO to issue regulations for determining whether a patent is "for a technological invention."

As we have seen in the past, attempts to impose restrictions on "business method" patents often impact other patents as well (especially software patents).  Because many patents include claims that could potentially encompass some financial applications, the scope of patents that are subject to "business method" post-grant proceedings could be very large.

Further, prior attempts to define "technological" inventions have not been very successful.  One route the PTO might take is to distinguish between "technological" and "non-technological" inventions on the basis of their subject matter classifications (e.g., patents classified in class 705 may be defined as "non-technological").  Another possibility would be to issue a set of factors weighing in favor of finding that a claim recites a technological invention, as well as a set of factors weighing against such a finding, similar to the factors used in a statutory subject matter analysis.  For example, claim language relating to monetary values or business data may weigh against finding that the claim recites a technological invention.  We expect that the PTO will have difficulties defining bright line rules in this area.  

Potential Strategies

Patent owners seeking to enforce a business method patent (and/or some software patents) should be mindful of the possibility for an alleged infringer to petition for this special post-grant proceeding if a bill enacting the provisions of §18 is passed by Congress. 

Before asserting a patent, some patent owners may wish to conduct a search to ensure that their patent would be patentable over art cited in a potential business method post-grant review proceeding.  As discussed above, under §18, this search may need to be broader than a typical novelty or obviousness search, as potential art available in a business method post-grant review proceeding can include art that is known or used in the industry, in addition to patents and printed publications.  Additionally, some patent owners may wish to wait until the Director of the PTO has issued regulations clarifying what inventions the PTO will consider as "technological" (and thus not subject to this proceeding) before asserting software or financial services-related patents.  

From the patent applicant's perspective, one strategy for avoiding a business method post grant review proceeding may be to draft some claims as being specific to a certain (non-financial) industry.  Another potential strategy may be to include at least one independent claim directed to a "non-financial" apparatus or "non-financial" operations as "insurance" against this proceeding. 

From the potential petitioner's perspective, one strategy for utilizing the transitional post-grant proceeding is to review any patents on which the potential petitioner has been sued or has been threatened with suit.  If any claim can be read as being directed to the financial services industry, this proceeding may be available. 

 In any event, such a proceeding will not be available for a year after passage of the bill. We expect to see significant debate over the definition of "covered business method patents" if a patent reform bill including this language is passed. 

© 2021 Sterne KesslerNational Law Review, Volume I, Number 253

About this Author

Michelle K. Holoubek, Patent Prosecution Attorney, Sterne Kessler, law firm

Ms. Holoubek is a director in the Electronics Group.  She focuses on the preparation and prosecution of patents, including reissues and reexaminations.  She has provided infringement and invalidity analysis in opinions for business method, software, medical and telecommunications patents.  She is active in many aspects of patent portfolio valuation and development of IP strategy, and has prepared reexaminations of patents as part of an overall litigation strategy in a variety of technologies, including biomedical and software technologies. 

William P. Ladd, Patent Prosecution Attorney, Sterne Kessler, law firm

Mr. Ladd is an associate in the Electronics Group.  He assists in the preparation and prosecution of patent applications in a broad variety of technical fields including computer software, Internet applications, business methods, electronic circuits, and security.

Mr. Ladd has experience in a wide range of patent prosecution areas including inter partes reexamination and ex parte reexamination (representing both the patent owner and the third party requester) and reissue.