Subject Matter: Overview § 101 Categories Process Machine Manufacture Composition of Matter Improvements

Computer Software 1972 Gottschalk v. Benson S Ct rejects patent that would wholly preempt an algorithm Diamond v. Diehr Calculation + post- solution activity patentable Gradual Liberalization of patent standards PTO Guidelines Adobe case BCLT/FJC © 1999 Menell/Merges 1960s PTO rejects software patents: mental steps doctrine

Software Patents Issued Approx

Business Method Claims 1983 State Street Bank (data processing system for portfolio management) BCLT/FJC © 1999 Menell/Merges Paine, Webber (system for managing a margin brokerage account) Hotel Security Checking Co. (a method for maintaining restaurant records so as to prevent fraud by waiters) Patent 4,839,804 (certificate of deposit for hedging against college tuition costs) 1988

State Street Bank HUB (Pooled fund) MF

Computer software: method of doing business

Prior User Rights P. 172 Requirements and Limitations

What’s not patentable under State Street? System for implementing dependency recovery process 5,980,447 An interactive multi-media computer system for providing support and guide to an individual undergoing recovery from a substance or emotional dependency. 5,905,975 Computer implemented system & method of executing an auction Assignee: onsale.com 5,897,620Method & Apparatus for the sale of airline- specified flight tickets Assignee: priceline.com 5,982,303Method for entering alpha- numerical data

More! 6,029,141: Amazon Affiliate Program 6,681,985: System for Providing Enhanced Systems Management, Such as in Branch Banking –Washington Mutual

Two Primary Types of Patent E-commerce Financial services

Internet Coupons - Case Study I U.S. Patent 5,761,648 Has Sued 9 Companies for Infringement A few Have Settled

Internet Coupons (cont.) 5 Companies Have Filed Law Suits Against Coolsavings Planet-U Bought A Patent (U.S. Patent 5,907,839) and Sued Coolsavings Coolsavings’ S-1 indicates Brightstreet.com has Filed an Interference Against Coolsavings

Catalina Mktg v. Coolsavings.com Catalina Mktg Patent: 4,674,041 –Primary embodiment: in-store coupon- dispensing machine –Coolsavings.com: web-based coupon distribution

Catalina Marketing Primary Embodiment

Catalina Mktg. ‘041 Patent 1.A systen [sic] for controlling the selection and dispensing of product coupons at a plurality of remote terminals located at predesignated sites such as consumer stores wherein each terminal comprises: [a] activation means for activating such terminal for consumer transactions; [b] display means operatively connected with said activation means... [c] selection means...; [c] print means; and [d] control means....

‘041 Patent cont’d 25. A system for controlling the selection and dispensing of product coupons at a plurality of remote terminals located at predesignated sites such as consumer stores, comprising: a plurality of free standing coupon display terminals located at predesignated sites such as consumer stores, each of said terminals being adapted for bidirectional data communication with a host central processing unit...

Catalina v. Coolsavings, 289 F.3d 801, 62 U.S.P.Q.2d 1781 (Fed Cir 2002) Rader, Circuit Judge, held that: (1) phrase "located at predesignated sites such as consumer stores" was not a limitation on claim in which it was only part of preamble, but did limit separate claim in which it appeared in both preamble and body of claim; (2) phrase in question required designation of the physical site of the terminal before location of the terminal at a point of sale location; (3) district court's improper construction of first claim required vacatur of judgment of no literal infringement; (4) web- based system did not literally infringe second claim that did contain limitation...

Rader opinion “Whether to treat a preamble as a limitation is a determination ‘resolved only on review of the entire[ ]... patent to gain an understanding of what the inventors actually invented and intended to encompass by the claim.’”

Rader opinion (cont’d) “In this case, the claims, specification, and prosecution history of the '041 patent demonstrate that the preamble phrase "located at predesignated sites such as consumer stores" is not a limitation of Claim 1. The applicant did not rely on this phrase to define its invention nor is the phrase essential to understand limitations or terms in the claim body.” – 289 F.3d at 810

Walker Digital (of Priceline Fame) Allegedly has over 200 Patent Applications Filed for E-Commerce Business Methods

AS MANY AS SIX IMPOSSIBLE PATENTS BEFORE BREAKFAST: PROPERTY RIGHTS FOR BUSINESS CONCEPTS AND PATENT SYSTEM REFORM, 14 BTLJ 577 (1999) By Robert P. Merges †† ABSTRACT In this paper, Professor Merges describes the emergence of patents for business "methods" or concepts, such as Internet airplane ticket purchase systems. Professor Merges is agnostic about whether these patents are worthwhile. Nevertheless, he argues that the increased volume of patent applications stemming from this newly patentable subject matter has pushed the patent system into crisis.

Practical Advice Consider Broad System/ Method Patents New Functions New Features (e.g., One- Click Buy)

Case Study II: Financial Services U.S. Patent 6,681,985 to Curtin et al Assigned to Washington Mutual Criticized in Wall Street Journal, 8/23/04 p. B1

United States Patent 6,681,985 Curtin, et al. January 27, 2004 System for providing enhanced systems management, such as in branch banking Abstract... One embodiment includes an entrance, a concierge desk, two or more teller towers, and a teller cash dispenser. The teller towers may contain a teller computer, a top surface, one or more cash slots, and a cash box. A bank employee at the teller tower performs transactions for a customer, such as depositing cash, performing account inquiries, etc. In one embodiment, the teller cash dispenser receives information regarding a withdrawal transaction and dispenses cash to a customer or the customer receives a printed receipt to receive cash from the cash dispenser. In another embodiment, the teller towers are arranged in a circle, semicircle, elongated circle, or oval. Inventors: Curtin; Karen (Bellevue, WA) [et al] Assignee: Washington Mutual, Inc. (Seattle, WA) Appl. No.: Filed: October 5, 2001

The Uninvited Guest: Patents on Wall Street by Robert P. Merges Federal Reserve Bank of Atlanta Economic Review Fourth Quarter 2003, Volume 88, Number 4

Before the advent of patents, several “appropriability” mechanisms protected financial services innovation: “first mover” advantages, complementary or “cospecific” assets, and trade secrecy. Evidence suggests that, in the immediate post-patent era, financial firms’ first order of business was to protect these traditional appropriability practices. This explains the early push to secure a “prior use rights” defense to protect established firms against patent claims by upstart outsiders.

Although patents may increase the costs of interchanging innovative ideas, they may bring some unintended benefits as well – by fostering spin-offs and facilitating entry by startups, for example.