IS THE PATENT SYSTEM BROKEN?

Should the arrangement of furniture and equipment, including the provision for a “kid’s area,” in the branch office of a bank receive patent protection? It did in Patent No. 6,681,985, issued January 27, 2004.

Should a search request in the form of “a string of words” in a computerized investment research delivery system receive patent protection? It did in Patent No. 5,502,637, issued March 26, 1996.

Should a “computer program product storing computer instructions therein for instructing a computer to perform a process of at least one of ranking and indexing enterprises with respect to at least one of each other and predetermined criteria to be used in at least one of investment decision making and enterprise decision making” receive patent protection? Whatever it means, it did in Patent No. 6,154,731, issued November 28, 2000.

Such patents may not be evidence of a broken patent system, but they certainly suggest to some that the system needs overhauling. After a stint of a little more than a month as a patent examiner trainee, the Cranky Old Guy is one of those some.

Cranky is a retired federal government employee who is not ready to leave the workforce completely and who needs to pad his pension to pay those lovely Northern Virginia real estate taxes. To handle an avalanche of new patents, the Patent Office is trying to expand by over 1,000 examiners a year. It seemed a good match. Examining patent applications might prove interesting and challenging, and the Patent Office certainly seems to need warm bodies, ideally warm bodies with a little experience, particularly legal experience.

Why does the patent office need new examiners? Between fiscal years 2000 and 2006, the number of utility patent applications, the most common type, filed each year increased from just under 300,000 to over 400,000. At year end for fiscal years 2000 and 2006, the number of applications pending soared from approximately 485,000 to over 1 million. Some applications have been pending for five years or more.

And what is behind those numbers? Two related factors are among the causes of growth. First, in 1998 the U.S. Court of Appeals for the Federal Circuit issued the State Street decision that significantly bolstered the concept of business methods patents (State Street Bank & Trust Company v. Signature Financial Group, Inc.). The decision led to a substantial increase in applications for this type of patent.

Second, and more far-reaching, computers and the digital age have dramatically lowered the costs of innovation and invention in a number of fields, including the business methods field. Using computers, incremental changes to patented items can be investigated and simulated with relative ease. In addition, many so-called inventions today are little more than data-in, data-out manipulations of data. Some broad ill-defined data inputs are run through some sort of computer program or programs the output of which is some broad ill-defined rating, or score, or advice. This soft, fuzzy center is camouflaged by much description of computer hardware and by detailed diagrams and flow charts, but the essence of the so-called inventions is simply the manipulation of data. In the business methods field, a business or finance student on a slow afternoon at the computer can come up with an “invention,” and maybe eventually a patent.

Why is this bad? Because in the hands of a litigious “inventor,” or more likely a litigious collector of patented incremental alterations in existing processes, a patent becomes a tool of extortion and a burden on legitimate commerce. The desirable public policy of rewarding the efforts of a long-tolling inventor falls flat: the efforts were minimal and the tolling was not long.

Currently, the main tool of patent examiners in the rejection of patent applications is known by the term “prior art.” Prior art refers to an invention identical or similar to the one in the pending application. Most prior art is found in patents that have already been issued. In the business methods area, however, many practices have never been patented, indeed were until recent years never considered the proper subject of a patent. Thus even though a method or something very similar has long been in use, no patent covers it. The search then turns to what is called nonpatent literature, but searching nonpatent literature can be very time-consuming and in some cases unproductive. Many long-established, widely-used practices in business are so commonplace that they are not the subject of much publicly available literature.

What is needed in the business methods field, and in other fields, is a more fundamental look at the patent laws, a look that would take into account the ease with which “inventions” can be made in the digital age. Under current law, a utility patent, the most common type, can be granted for any “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.”

Note there is no specific mention of “product.” Nevertheless, the patent system, which was established in 1793, has long been operated on the premise that a product falls somewhere in the categories of machine, manufacture, or composition of matter. Indeed, the Supreme Court has stated the expansive view that the patent system covers “anything under the sun that is made by man.”

Prior to 1952, the list of patentable categories began with the word “art.” In that year, art was replaced by “process.” But process has a rather odd, somewhat redundant, and expansive definition of its own in the statute. Process means “process, art, or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.”

Somewhere out of this history, process evolved to cover a lot that was not likely envisioned in 1952, when computers were just massive number crunchers in the hands of a few scientists and engineers. Whether the term as adopted in 1952 was meant to include the largely intangible data-in, data-out situations that are common today, or indeed any methods that did not involve tangible, physical processes to a substantial degree, is certainly arguable. Perhaps it is time for the courts, Congress, or the Patent Office itself to narrow the definition of process.

“New” and “useful” are two other words that should be revisited. Each has come to have very little limitation upon what may be patented. Indeed, the presumption in many corners of the Patent Office is that an application would not have been submitted unless the contents described something new and useful. The current interpretations of new and useful become even less helpful when the so-called invention is just an incremental change to an existing invention.

For example, in a computerized investment advice process, does the addition of one more input variable, such as the size of a chief executive officer’s salary, create something new enough to be awarded a patent over an existing patent for providing investment advice? And from a broader perspective, just how useful is investment advice anyway? Your brother-in-law’s shoot from the hip approach may well be as useful as any fancy computerized investment advice program available through a brokerage firm.

In short, “new” and “useful” currently are of little help in deciding what deserves a patent and what does not. One consequence is that too many marginal improvements may be receiving unwarranted patent protection.

Other provisions of the patent laws could also be revisited to give patent examiners more powerful tools. For example, an invention must be described in sufficient detail to enable others “skilled in the art” not only to understand it but also to make it themselves. The limits of an invention must be clear. Judicial decisions and Patent Office interpretations, however, have diluted much of the power of these requirements. Particularly with regard to “inventions” in business methods and related intangible and semi-tangible fields, precisely defining what has been invented, how it is to be used, and how it could be replicated by others are requirements to which little more than lip service is often paid.

Finally, regarding business methods patents, of the world’s patent systems the United States system goes the furthest in according them legitimacy. They may be found in other patent systems, but not to the extent and not as explicitly as they are found in this country. Maybe the U.S. patent system has something to learn from the rest of the world.

The state of the patent system is not all gloom and doom. Although a thorough overhauling would likely require a reworking of the patent laws by Congress, other adjustments are taking place.

For many decades, the courts took an expansive view of the scope of the patent laws, a view that the Patent Office was more or less forced to adopt. The courts may be rethinking the matter, however. Recently, for example, the Supreme Court issued a decision (KSR International Co. v. Teleflex Inc.) that in some circumstances will likely make it more difficult to get a patent.

The Patent Office itself has made admirable efforts on several fronts, including the field of business methods patents. The approval rate of those patents is relatively low, probably no higher than 30 percent. Still, examination of business methods applications requires considerable resources, and the danger that an egregiously absurd business method patent will sneak through the examination and review processes is always a threat.

Among other initiatives, the Patent Office is considering limiting the number of claims, or at least major claims, that a patent application may contain. Claims are the heart of a patent, the words that define exactly what the invention is and what is covered by the patent’s legal umbrella. A common practice among patent applicants is to describe the same invention is several different ways.

The invention may be described as a product consisting of a number of components. Then it may be described again as a method of doing something, the method consisting of steps that are just the components of the previously described product. And then it may be described again as a system, and so on. The result is that a patent application, and an allowed patent, may contain numerous claims: 20, 40, 60, even more. Stating the same invention in several different ways increases significantly the time required for a patent examiner to examine the application. A limitation on claims would reduce the examination burden.

These judicial and regulatory initiatives, however, are probably not enough to cure fully what ails the patent system. The fundamental problem is the expansive definitions that terms in the patent laws have acquired over the decades, and Congress is the best fixer of that problem.

As for Cranky's career as a patent examiner? Well, he's always had a problem playing with others. That plus the growing feeling that he was on the bottom rung of a system in need of serious overhaul led him to pull the plug late one afternoon in early June. In fact, he's thinking of applying for a business methods patent for his method of exit. In the peculiar wording and terminology of the patent world, the claimed invention would be as follows:

“A method of resigning from a position comprising the steps of handing one’s security badge to the security guard at the exit with the comment, ‘I ain’t coming back,’ having the security guard respond with a chuckle, ‘Bad day, huh,’ and in turn responding, ‘Bad month.’”