Good News for Innovation

Every so often, Congress enacts a reform that works as intended. One of these it appears, is the America Invents Act of 2011, which among other things made it a bit easier for established financial-services companies to challenge patent holders that accuse them of infringement.

The law set up within the U.S. Patent and Trademark Office a Patent Trial and Appeal Board and a process called the covered business method review. When a bank or processor is slapped with an infringement suit, or receives a cease-and-desist order, it may petition the new board for a CBM review.

As of early March, the PTAB had issued some 32 final written decisions after a review. Of these, 26 decisions had invalidated all claims in the patents challenged by the petitioners. In the other six cases, at least some of the claims were voided.

The new process is typically much shorter, and less expensive, than a trial. In a CBM review, a petitioner may present a wider range of what is known as prior art, or evidence that a method pre-existed the patent grant. In court, such prior art would be restricted to previous patents or methods spelled out in printed publications. But before the PTAB, petitioners may present other examples, including systems, services, or products that are known to be used or to be on sale in the United States.

Petitioners may also challenge patents whose language may be too vague or where the idea spelled out in a patent is abstract.

The new process is restricted to financial-services companies—which face quite a thicket of business-method patents—and more and more of them are taking advantage of it. 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.

So why is this good news for innovation? Doesn’t it just make it easy for big-money infringers to steal ideas from the little guy? For one thing, by cutting costs, the CBM review process allows companies to mount a full defense rather than simply settle. If the defense fails, so be it, but at least it may be determined who really invented a method and when. And to allocate the rewards appropriately.

For another, the new process is likely to clear the air for inventors. A patent that survives a review will be all the more likely to prevail over challengers who say, “We’ve been doing that method for years. We just never thought of patenting it.”

— John Stewart, Editor, john@digitaltransactions.net