Business Method Patents
Revised plan: Fisher to talk on Patent law for first hour.
 
Most other countries in world are hestitating to follow American path on these patents.
 
5 million patents in world, 82% held in US, Japan and Europe
 
Will describe pertinent features of American law with some splash of differences found in Europe.
 
Utility Patents – 95% of US patents

Founded on section 101 – Inventions patentable
Discovery useful process or product
(there is a process patent on a cat exerciser – wiggling a laser point in front of a cat)
Also describes product-by-process patent (a fine sub-group of products)
Plant Patents

Eli Lilly explores effect of Rosy Periwinkle on diabetes
Ineffective there – but effective on leukemia
Increases remission rate on childhood leukemia
Doesn’t get patents – as property
Another extension

Plant Protection Act of 1930
Plant Variety Protection Act of 1970
1981 case (US Sup Ct) – said animal developed to eat oil – is patentable
2001 Pioneer Hi-Bred – now patentable under general utility patents
One backing away

Nuclear weapons were not patentable
 
Design Patents
 
Example of how extension process workes
            Surgical procedures
·        tradition
o       Can patent drugs
o       diagnostic and surgical procedures not patentable
·        change
o       Patent office started patents
o       New technique for cataract surgery
o       Doctor discovered non-linear cuts in line with shape of eyeball (ascertained optimal radius of curve) and sought patent protection
o       He asked for fee to educate others
§         But doctors are immunized for liability, device makers liable (?? Need to rework)
Business Method Patents
·        Most of 20th century, couldn’t patent business methods
·        1990’s PTO starts granting BMP
·        State Street Bank case challenged patentability of bm
o       Pool mutual funds into partnership for tax benefits
o       Have to track relative magnitude of shares
o       So, sw program relatively tracked value
o       And got patent
o       Competitor sought declaratory judgement action
§         Court of Appeals
·        Machine calculation as application of algorithm is patentable
·        Repudiated business-methods exception to patentability
§         Thus, surge in patents
§         Drop off in rate since 2001
o       Famous patents
§         Priceline
§         Single click shopping
·        Amazon v. Barnes & Noble
§         Behavioral programming
·        i.e. customizing web experience based on prior use – targeted ads
·        Backlash
o       Bounties
§         Bountyquest – rewards on prior art
o       Litigation
§         Patent Requirements
·        Subject-matter coverage
·        Novel
·        Non-obviousness
·        Utility
·        Enablement
§         Point of non-obviousness is point of difference in jurisdiction
·        1850 Hotchkiss case established that doctrine
·        Cuno Brothers case (1941) “invention must show a flash of creative genius”
·        After 1966 (graham) interpretation unstable
·        Court of Appeals takes over in 1975 and stabilizes interpretation
·        Across Europe and US standards of this doctrine are converging
·        Tests
o       What is scope and content of the prior art
o       Differences between the prior art and claims
o       Level of ordinary skill in the prior art
o       Secondary (“objective”) factors
§         Commercial success
§         Long-felt, unsolved needs
§         Failure of others
§         Industry acquiescence
§         Suggestions in prior art
§         Fact that defendant chose to copy
·        Apply Amazon
o       E-commerce limited to shopping carts (scope and content)
o       Dramatic step fwd (diff between prior art and claims)
o       Very popular (success)
o       Prior art taught against it
o       Barnes copies
o       Tightening standards
§         AIPA
·        Prior use defense
·        Study of BM by GAO
§         2000 PTO guidelines
·        hire more examiners
·        updated databases
·        mandatory second exam
§         proposed BM patent improvement act
·        Formal opposition procedure
·        Invalidity requires only preponderance of evidence
·        Missed last 3
o       European Initiatives
§         EPC articles prevent patenting BM
·        Case law : BMs with a “technical aspect” or that solve a “technical problem” are patentable
§         Fall 2000: member countries decline to revise
·        Power of Eurolinux alliance
§         Individual country consultations
§         You can get BMP in Europe
o       Japan
§         Limits to industrially applicable
§         Limits  patents liable to contravene public order, morality or pblic health
§         Firm on inventive step requirement
·        Easiest to obtain in US – harder in other two
 
Theory
            BMP are bad idea
            Economic Perspectives
·        Reward Theory
o       Refer to responses to character of innovation from yesterday
o       Suppose you invent new mousetrap
§         In absence of patent, copying and competition wil drive the price down close to marginal cost
§         w/o patent, you can price mouse trap – whatever you want
·        ideally – perfect price discrimination (each use right at the point they would walk away)
·        rational profit maximizing output strategy
o       consumer has surplus in perceived value
o       Those that will not pay that price – lose out
o       Significance – some relatively poor people don’t get mouse traps (in terms of AIDS – millions die)
o       Disadvantages of IPRS
§         Admin costs
§         Impede cumulative innovation
§         Deadweight loss associated with loss of consumer surplus
·        Cumulative Inventions
o       Primary invention
o       Others build, improving on first
§         When reg’d by patents the problem of Rent dissipation (i.e. more people than socially optimal rush to reach the patent first)
·        E.g. Social welfare perspective says pay one good team to focusing on that task
·        Reward has multiple teams pursuing
·        Happens at primary and secondary level as well as alternative technologies
§         Some economists offer alternatives to reduce this multiplicity
·        Kitch proposal
o       Grant to pioneering inventions – broad scope – enabling pioneers the process of building improvements
·        Mergess
o       Broad patents create
§         Satisficing behavior
§         Broad patent for pioneer will exacerbate rush to pioneer
§         So, narrow patents
o       But that creates rent dissipation at secondary level
 
Now, back to BMP
            Why bad? (another form of government regulation)
·        Little evidence that patents stimulate business method innovation
o       You do it to get ahead of competition
·        Has serious disadvantages
o       High transaction costs
o       Consumers blocked out
o       Impediments to innovation
·        BMP should be repudiated
 
Audience: BMP seems to be non-rivalrous in a market sense.  You would be more efficient in that business without protection – you don’t take away their market – you simple allow the entire market to become more efficient
 
[…]
 
Netflix got a patent on method for cd rental via mail.  But ebay lost their case defending their auction methods.
 
But how do you define a business method patent
            Roughly PTO section 705 – but that is clumsy
            Would have to return to position before states v. bank
            Case by case to test
 
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