Business Method and Software Patents After State Street Bank. Issues Related to Intellectual Property Protection on the Internet Maria Eliseeva Schwegman Lundberg Woessner & Kluth Jerusalem-Tel Aviv, March 28, 2000

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998) State Street Bank and Signature Financial are in the business of being custodians and accounting agents for certain funds. Signature Financial had a patent (US 5,193,056) for a data processing system. Negotiations broke down and State Street filed a declaratory judgment action of invalidity, non-infringement and unenforceability of the 056 patent.

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998) One of the grounds for challenging the validity of the patent was that it was directed to a mathematical algorithm and to a method of doing business, which are not, as State Street asserted, subject matter patentable under US patent law. The patented system was directed to a data processing system facilitating a structure in which mutual funds (Spokes) pool their assets in an investment portfolio (Hub)

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998) The system provides a way to allocate daily the assets of two or more Spokes invested in the same Hub (investment portfolio) Each Spoke sells shares to the public, and the price of those shares is based on the Spokes percentage interest in the portfolio. Often a fund administrator is required to calculate the price of the shares to the nearest penny right after the market closes. A computer with the appropriate software is a necessity in such a situation.

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998) The case reconfirmed that a mathematical algorithm, formula or calculation which produces a useful, concrete and tangible result is patentable subject matter. Software-related inventions producing a useful, concrete and tangible results are capable of protection by a patent.

State Street Bank v. Signature Financial Group, 47 USPQ2d 1596 (Fed. Cir. 1998) This case reconfirmed that the transformation of data resulting in a calculation of a share price, constitutes a practical application of a mathematical algorithm, which is a useful concrete and tangible result. If a computer related invention produces a concrete and useful result, it is patentable subject matter, provided that other conditions for patentability are satisfied.

Patentability of methods of doing business The State Street court concluded that claims should not be categorized as methods of doing business. Instead, they should be examined as any other process claims.

Forms of protection compared Patents -- expensive but powerful even against independent creation ($5-10K for filing depending on the complexity of the subject matter) Trademark registrations -- modest cost (<$1K per filing). (TEAS and TARR) Copyright registrations -- minimal cost and offer great benefits (<$300 per filing)

The importance of obtaining trademark registrations Even without the Internet, it would be important to obtain trademark registrations Your enforcement position is stronger if you have a trademark registration It is much more difficult for others to question your use of a name if you have a trademark registration

How to file for a trademark registration The law permits you to do it yourself Application prepared by counsel has modest cost (likely <$1K) $325 per trademark class, plus professional fees likely $ per application

Policing the Web for trademark violations Use search engines to look for overt and covert (meta-tag) uses that take advantage of your good name Even if the web site is for a foreign company, there is the chance you can get remedies against it in the US. Their DNS, or web site hosting service, or service provider, may be in the US, for example

Policing the Web for trademark violations Be aware of risks of sending cease-and- desist letters. The recipient of the letter might bring a declaratory judgment action against you Risk of negative publicity The court of public opinion

Domain name issues You should get trademark registrations New anti-cybersquatter legislation -- several cases have been brought, a few decided The new ICANN Uniform Dispute Resolution Policy -- about a dosen of cases decided as of now. Decisions are reported at

The importance of obtaining copyright registrations You can elect statutory damages (up to $150,000 per work infringed) You can collect attorneys fees Enforcement is much more likely to succeed if you have a registration Cease and desist letters are more potent

Filing a copyright application It is easy and inexpensive to do The law permits you to do it yourself Government fee is $30 per application Professional fees likely to be $200 or so per application

Policing the Web for copyright violations Watermarking of images(expand) Text searches for improperly copied matter

Patents and the Internet A new emphasis on Internet, software, and business method and business model patents The law is in fact unchanged since at least ten years ago Despite this, such patents have been much more visible in the media lately. The highly publicized cases made such patents more visible. All that changed is that now everyone knows it can be done

Claiming strategy When patents are analyzed for the purpose of licensing, infringement, litigation, the advantage of having a lot of independent claims of varying scope is more evident. In litigation, the more independent claims a patent has, the more difficult and expensive it is to analyze and attack the patent. In licensing, a greater number of independent claims makes it more likely that the patent coverage is complete.

Some recent Internet patents and related lawsuits Amazon.com obtained a patent on its 1- click ordering method, sued Barnes and Noble, obtained a preliminary injunction. Priceline.com obtained a patent on reverse auction of airplane tickets and sued Microsoft. Amazon.com also now has a patent on referral sales commissions.

Getting patent protection Getting patent protection is important even if you don't think you would ever use the patent offensively Cost to prepare and file, for complex subject matter, is likely to be in the range of $5K to $10K. The law permits you to do this yourself. There are, however, many reasons to consider hiring a patent firm

Waiting too long to file It is important to file promptly after inventing, and before public disclosure or sale US grace period of one year does nothing to excuse delay with respect to non-US patent rights Keep lab notebooks and reward inventors

Where to find these slides I will post them at patentbar.com/il.ppt when I get back.