Revamping Patent Law: What it Means for Business Method Patents


The Senate and House of Representatives recently passed legislation that revamps patent law by updating the process for challenging patents and awarding a patent to the first inventor to file a specific claim.Of particular interest to our readers, the “American Invents Act” (S. 23 and H.R. 1249) creates a new post-grant review procedure that applies to all patents and a special one (section 18) that applies only to business method patents relating to financial services. The Transitional Program for Covered Business Method Patents (section 18) differs from the more general post-grant provision by, among other things, allowing challenges to older patents.The American Invents Act is an administrative program for review of business-methods patents, bans all issuance of tax-strategy patents, limits false-marking lawsuits to only those parties having suffered actual competitive harm, and creates a post-grant review process.


Upon committee passage of the Act, House Judiciary Committee Chairman Lamar Smith (R-Texas) stated, “H.R. 1249 brings our patent system into the 21st century, reducing frivolous litigation while creating a faster and more efficient process of the approval of patents.”


Critics, however, claim that the legislation would allow banks to avoid paying for certain business method patents.Specifically, critics claim that the post-review process would allow challenges to patents that have been already been found valid by the U.S. Patent and Trade Office and in Federal Court.


Commenting on the post-grant review process, Robert Barr, Executive Director of the Berkeley Center for Law & Technology, stated that “the provision does not allow banks to avoid paying for business method patents, but it does create a special post-grant review procedure for a rather vaguely defined category of so-called ‘business method patents.’”


Moreover, Barr stated that the provision “could reflect a concern that the business method patents were not properly examined before they were issued, or it could simply be a result of effective lobbying by the financial service industry.Regardless, it sets a dangerous precedent by treating a category of patents differently from others, especially since the Supreme Court recently declined to create an exemption from patentability for business method patents.”


Critics further argue that the proposed administrative procedure for challenging the validity of patents—the post-grant review process—undermines property rights.


In a recent four-series essay analyzing the pending legislation, F. Scott Kieff, a Ray and Louise Senior Fellow at the Hoover Institution at Stanford University, criticized the new post-grant review process.“This proposed new form of post-grant review subjects [business method patents] to ongoing invalidity challenges even after their validity has been thoroughly tested in the existing administration reexamination proceedings as well as in full civil litigation before a court,” wrote Kieff.In his essay, he also warned that “these new procedures can reach any patentee who owns a patent that is sufficiently related to business that it can be called a ‘business method patent’.”

Note: Different versions of the “American Invents Act” have been passed by each house of Congress and it is awaiting reconciliation before enactment.

Angélica Salceda,Revamping Patent Law: What it Means for Business Method Patents,Berkeley Bus. L.J. The Network (August 8, 2011),