Sent: July 21, 2003 Department of Correction (or at least Amplification) Dear Editor: Concerning James Surowiecki's piece about business method patents and the 1998 State Street decision (July 14 & 21, 2003, page 36), I don't know with whom Surowiecki talked (probably nobody able to communicate substantive knowledge) or what he read (other newspaper accounts, at best, I'd imagine) but his piece needs some correction. Did _State Street_ change the law, and SUDDENLY make business methods patentable where they had never been patentable before? Hardly. The 1998 decision certainly changed the _lore_ (as Surowiecki's piece attests yet again), but did not change the law. Of course, the lore is often more important than the law in shaping people's actions and omissions. _State Street_ certainly captured the imagination of the media, and some people who heard about it undoubtedly did things differently than they might have otherwise done. But to return to Surowiecki's statement ("[_State Street_] did away with that principle," the principle being that "a business method was considered to be an idea ... and ideas of this sort were not patentable"), it is false both literally and in its implications. Let's address second things first -- business methods were not patentable until _State Street_ -- and first things second -- "ideas" are not patentable. _State Street_ was a patent infringement suit: Signature had a patent, and State Street wanted to invalidate it. (This is what is known as a declaratory judgment suit: the plaintiff and defendant roles are reversed from the usual situation.) Was Signature's patent the first one ever to slip through the Patent Office? Hardly. There had been quite a few other patents litigated over the years and accused of being "mere business methods." Were they the only ones to slip through? No. The fact is that the statement "you can't patent a method of doing business" was a trap, not so much for the unwary as for the unpersistent and unclever. If you knew how to draft claims, you could patent a business method, and plenty of people did. Signature had done it (hence the litigation in question) and so had all the others whose patents were litigated on the business method issue, as well as many, many inventors whose patents were not litigated at all, or were litigated on other (and more solid) issues. Second, as the _State Street_ decision itself mentions, the Patent Office had quietly removed from its own internal rules (a thick 2-volume book called the Manual of Patent Examining Procedure (MPEP)) the statement suggesting that there might be a problem with trying to obtain a patent on a business method. I use that convoluted construction on purpose: the weasel words in the MPEP were remarkable: "Though _seemingly_ within the category of process or method, a method of doing business _can be_ rejected as not being within the statutory classes." (emphasis mine). Processes or methods are, of course, patentable. (They have not always been unequivocally so: there was plenty of patent litigation two hundred years or so ago where alleged infringers argued that patents could only be on devices, not the processes they performed nor the methods by which they worked.) But in any case, this masterpiece of prose disappeared from the MPEP with the September 1995 revision pages, some 3 years BEFORE the decision in _State Street_, and 4 1/2 years AFTER the Signature patent had been applied for, and 2 1/2 AFTER it had been issued by the Patent Office. The reason for the peculiar language of the MPEP's business method prohibition was that the case law cited to support this proposition did not, in fact, support it. Over the years, courts and the Patent Office appeals board had certainly made noises about not liking business methods. But whenever they actually threw out a patent (or refused to issue a patent in the first place), the reason was the standard one for all patents: there was "prior art" that showed that the invention was not NEW. My personal favorite among the cases cited for, but not really supporting, the business method prohibition, is Fowler v. City of New York, a decision of the Second Circuit (federal appeals court for the New York region) that had its 100th birthday five months ago. It was handed down on February 25, 1903. Fowler's patent involved a method for handling rail passenger traffic. The inventor described what he called a "bitransit system": a rail system having express and local trains. The problem he solved comes about at the "express" stations. His system included placing the local and express trains in each direction across an "island" platform, and putting stairways in appropriate places for passengers wishing to exit or switch directions. No 4-track prior art was found, but the "island" configuration for 2-track stations was known, and the extrapolation to 4-tracks was held to be obvious. Thus the patent was declared invalid. Its utility can not, however, be questioned: Anyone familiar with the New York City subway system knows that changing between the local and the express westside IRT at W. 34th Street (the 1-2-3 and 9) is a nightmare precisely because Fowler's method is not used, and the 2-track version is. Fowler lost not because he had a business method, but because his idea was held to be obvious over the prior art. What is curious is that people were saying BOTH that business methods were not patentable AND that the case law did not support this proposition for years, and yet the case law never got any better. For example, in a 1921 article from the Journal of the Patent Office Society entitled "Methods of Doing Business," Frank W. Dahn (possibly a patent examiner at the time, who was in private practice in later years) said: "[The] precept ... to the effect that methods of doing business are unpatentable ... is generally assumed to be supported by an imposing line of decisions, and rejections based thereon are believed to be very generally acquiesced in by the patent bar. [Dahn then reviewed several cases, including _Hotel Security_, one of the cases cited in the MPEP until 1995.] *** [T]he decisions ... were not based on a holding that methods of doing business are not patentable but in each instance on a holding that the particular method was unpatentable because it was old or did not possess sufficient novelty to sustain a patent." The fact is that patent lawyers are happier arguing, and judges are happier deciding, against a patent on the basis of lack of NOVELTY, rather than on how you might characterize the invention. And personally I think that is to the good. New ideas should get protection, old ones should not, and arguing over pigeonholes is for the birds. There is one gloss on this of course, one that I and I think society are happy with, and it is suggested by Surowiecki's statement about "ideas." People who know no patent law will tell you that "ideas can't be patented." Horsefeathers. What can not be patented are ideas the inventor has no clue how to make work. There is another requirement of the patent law called "enablement": an inventor must ENABLE people who have merely ordinary skill in whatever field is involved to MAKE AND USE the invention. That does not mean the inventors have actually DONE it, only that they have sufficient understanding and expertise to give instructions that would make it possible to do it. The classic example that one of my favorite mentors, Allen Krass, always gave was that "you can't patent the idea of shirts that never need ironing, but you can patent 'permanent press' material, or the process for making material 'no-iron.'" Granted that patent examiners may not always be in the best position to determine whether or not an inventor has properly "enabled" the invention, but the courts are available to give teeth to the enablement requirement, and people who draft patent applications take it quite seriously. The aspect of a patent that is enforceable in a court is found in the claims. It is not all the talk at the beginning of the patent, and it is not the diagrams. It is definitely not the 'idea.' Claims are an attempt to put into language something that is often best understood as a diagram or a 3-d object. They are very hard to read at one go, and require thought and analysis and often "interpretation" in light of the rest of the patent -- the specification and the drawings -- as well as an understanding of the art involved. Thus, although I do not know what question James Boyle, the Duke professor, was answering, NOBODY can be accused of 'copying a concept' in a patent infringement suit. If the inventor who has sued eBay obtained claims with so few limitations that they really only claim a 'concept,' Prof. Boyle could be right in spirit. But then there are other ways to attack that patent besides squawking about business methods. The best, of course, is to go through the words of the claim and see whether or not they present something that is _new_. In the language of patent law, this is called seeing if the claims "read on" the prior art. If you can make a 2-column chart where the language of the claim is one side, and things that were known at the invention date are on the other, and you can get a 1:1 correspondence, the patent is invalid. (This is an oversimplification, but the basic idea is not wildly misleading.) I would also like to take issue with Surowiecki's blanket statement "All patents, of course, stifle competition." That's a half-empty glass, if ever there was one. (Engineers, of course, say the glass was wrongly designed for the fluid involved, but that is a different argument.) Patents encourage competition by encouraging would-be competitors who do not want to license the patent to come up with a different way of doing things, either one that does not infringe the claim language of the patent, or one that is so good that the prior inventor would have to do the new version in order to compete, thus giving the second inventor a better patent as well as a first-to-market advantage. Patents also educate the competition. Patents are public record and, because of the enablement requirement, the person who wants a patent must be willing to share the idea, including how to make and use it, with the public. Some wonderful ideas - enabled well or not - are patented but never commercialized. If the maintenance fees are not paid, then the patent does not even get as much of its short (compared to copyright, or any middle-aged person's idea of time) life as the law would have permitted. If the fees are paid, the patent still expires 20 years from the original application (or 17 years from issuance, if that is longer or the patent is old -- but that's another wrinkle we can leave out for now). In any case, the information is there in a wonderful, searchable repository (and it was searchable even BEFORE the internet existed), providing inspiration and education to the public for free. The nature of human endeavor is that you can never run the experiment a second time, but patents have existed for centuries and competition seems to have been stifled, or not, by many business methods (whether they were trusts, fraud, government corruption or manipulation or even well-meaning programs, etc., etc, etc.) regardless of patents. Very truly yours, Roberta J. Morris PS If you are interested in something on this subject but would like it to be shorter (or longer) I am happy to oblige with cuts or further clarification. -------------------------------------------------------- Roberta J. Morris Adjunct Professor, Patent Law University of Michigan Law School 904 Legal Research Bulding Ann Arbor, MI 48109-1215 Voice 734-647-4037 Fax 734-764-8309 AB Brown University 1971 summa cum laude JD Harvard Law School 1975 Ph.D. Columbia University 1986 (Physics) -------------------------------------------------------- Typographical errors corrected. Last modified 9/30/03.