Thursday , March 28, 2024

New Patent Review Process Brings Relief to Defendants in Infringement Cases

Payments and other financial-services executives have long complained about what they call patent trolls, typically individuals who gain a patent on what some regard as a longstanding business method and then sue practitioners for infringement. In some instances, these cases have succeeded in wringing large settlements out of banks and processors unwilling to try the matter to a verdict.

But now defendants and potential defendants in such cases are starting to see some relief, thanks to a new procedure called the covered business method review, according to Bret T. Winterle, a patent attorney in the Dallas office of Fish & Richardson P.C.

The new review, which came into being as part of the 2011 America Invents Act, allows companies whose practices are challenged for infringement to present a case before a special tribunal of the U.S. Patent and Trademark Office called the Patent Trial and Appeal Board. This process is typically less onerous than what are often lengthy and expensive trials, Winterle told an audience of bank executives this week at a payments conference in Phoenix.

“The covered business method review is much faster and much cheaper than challenging a patent in district court,” he said.

In its short history, the CBM review process has started to yield results. The number of petitions for review filed each year has grown from eight in fiscal 2012 to 177 last year, according to numbers presented by Winterle. The PTAB’s fiscal year runs from Oct. 1 until Sept. 30. The number of petitions granted by the board ballooned from 17 in 2013 to 122 last year. In the four months plus from Oct. 1, 2014, until mid-February, 154 petitions were filed and 103 granted. “We’re seeing a large number of petitions being granted,” Winterle said.

So far, the board has issued some 32 final written decisions. Of these, 26 decisions have invalidated all claims in the patents challenged by the petitioners. In the other six cases, at least some of the claims were voided.

The CBM review appeals to financial institutions and non-bank payments players because it allows them to challenge infringement claims in a streamlined fashion, relieving much of the pressure to settle. Cash settlements can help fund further suits by patent holders in what some see as chain-reaction movement against a series of alleged infringers. The board, indeed, is directed to render a decision within 12 months of a petition being filed.

A company can initiate a CBM review only after receiving notice of a lawsuit for infringement or a cease-and-desist letter. They are also applicable only to patents related to financial services.

But petitioners have wider latitude than they would in court to present what is known as prior art, or evidence that a patented process is in fact not novel or original to the patent holder. In court, such prior art would be restricted to previous patents or methods spelled out in printed publications. But before the PTAB, “many types of prior art” may be presented, including “systems, services, or products known to be used or to be on sale in the United States,” Winterle told bankers at the Bank Administration Institute’s Payments Connect conference.

Petitioners may also challenge patents whose language may be too vague. “You can challenge if the patent is difficult to understand or is inadequately described,” Winterle said. Challenges are also possible in cases where the petitioner regards the idea spelled out in a patent to be “abstract.” A challenge on this basis is “useful when there is no prior art,” Winterle said.

As things stand now, however, the CBM review program, runs only until 2020. “You can only file CBM reviews until then,” said Winterle.

A sweeping revision of the U.S. patent system, the America Invents Act was signed into law by President Barack Obama in September 2011 and took effect in September 2012 and March 2013. At the time it was debated, proponents argued the legislation would help discourage suits by patent holders whose inventions merely replicated processes that had already been in use. Opponents said the law would discourage innovation by weakening patent protection and making it harder for innovators to attract capital.

Banks and processors in recent years have defended a number of prominent infringement cases over patents for business methods, usually software-related processes that became patentable in the late 1990s.

Perhaps the most publicized of these cases was that of DataTreasury Corp., a small company that held two patents covering the storage and transmission of check images. In 2007, its patents were upheld in a USPTO reexamination, and in 2010 the company won a jury trial in an infringement case against US Bancorp, The Clearing House Payments Co. LLC, and Viewpointe Archive Services LLC.

Check Also

Buying Groups Might—or Might Not—Give Merchants More Negotiating Power with the Card Networks

Card-acceptance costs and network rules weren’t the only subjects covered by the sweeping settlement revealed …

Digital Transactions