House Panel Probes Covered Business Method Patent Challenges (1)

Access practice tools, as well as industry leading news, customizable alerts, dockets, and primary content, including a comprehensive collection of case law, dockets, and regulations. Leverage...

By Malathi Nayak

A House subcommittee is weighing whether to continue a Patent and Trademark Office program that allows for challenges of covered business method patents often involving financial or e-commerce-related processes.

The House Judiciary Courts, Intellectual Property and the Internet Subcommittee held a March 20 hearing to discuss specialized challenges under the program, created under the America Invents Act of 2011, that are set to expire in 2020.

Financial services industry lobbying groups have said the covered business methods program helps stem abusive patent infringement lawsuits that assert broadly defined patents. But some software industry trade groups, such as BSA|The Software Alliance, argue that the CBM process hurts U.S. innovation by making it easier for parties to challenge and kill software-related patents.

The subcommittee discussed a recent Government Accountability Office report assessing the CBM program as it weighs whether Congress should amend or extend the program.

“With the sunset date of the program approaching, the GAO’s report is timely because the Committee is faced with the decision of whether to renew the program, Judiciary Committee Chairman Robert Goodlatte (R-Va.), said.

From Sept. 2012 to Sept. 2017, 524 petitions challenging the validity of 359 CBM patents were filed under the program, leading to the cancellation of nearly a third of the patents, the GAO report shows.

The transitional program has helped weed out numerous low-quality business method patents and provided a cheaper alternative to district court litigation to challenge such patents, House Judiciary Courts, Intellectual Property and the Internet Subcommittee Chairman Darrell Issa (R-Calif.) said. Congress will consider the need for legislation to revise, extend, or let the program expire, Issa said.

Temporary Program

Congress designed the program as temporary to help facilitate validity challenges to patents thought to have been improperly issued by the PTO in the late 1990s and early 2000s. John Neumann, GAO director, natural resources and environment; David Hale, chief privacy officer and deputy general counsel at TD Ameritrade; and Aaron Cooper, vice president, global policy at BSA|The Software Alliance, testified before lawmakers.

TD Ameritrade’s Hale told lawmakers the CBM process has helped financial technology companies and startups and should be made permanent.

The CBM program provides protection against low-quality patents, but tens of thousands of such patents are still being issued each year, he said. “Today, there are no existing viable alternatives to the CBM program to rid the system of weak business method patents,” Hale said.

The program, in some instances, has been applied to cybersecurity and complex data management technology, even though it was meant to cover a narrow set of financial products, BSA|The Software Alliance’s Cooper said.

The CBM program is putting all software-related inventions, including those in emerging technology areas such as artificial intelligence and blockchain, at greater risk, Cooper told Bloomberg Law. “The CBM program discriminates on the basis of the type of technology,” he said.

CBM Use Declining

Alleged infringers filed only 34 petitions challenging covered business method patents at the PTO last year, down from 91 in 2016, Bloomberg Law data show. Only 10 CBM petitions were filed in the last six months of 2017, suggesting next year’s volume may be even lower.

The GAO recommended the PTO develop guidance, such as documented procedures, for judges reviewing PTAB rulings and the decision-making processes on CBM challenges.

The PTAB does not have guidance to ensure its decisions are consistent and has begun taking steps in response to the GAO recommendation, Neumann said.

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bloomberglaw.com

To contact the editor responsible for this story: Keith Perine at kperine@bloomberglaw.com

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Intellectual Property on Bloomberg Law