Mark Nowotarski

Mark Nowotarski is a retired US patent agent.

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If You Want to Protect Your Business Method, Reframe It as a Technical Invention

The most effective way to protect an inventive business method is with a patent on a technical invention. Ever since the U.S. Supreme Court’s 2014 Alice decision, the U.S. courts and the U.S. Patent and Trademark Office (USPTO) have consistently held that you can’t patent a business method by itself. The Alice decision overturned several related business method patents as being nothing more than an attempt to patent a fundamental economic process. Lower court decisions have since affirmed that “no matter how groundbreaking, innovative or even brilliant” a business method might be, you still can’t patent it. The only way to use patents, therefore, to protect business method inventions, is to patent the technological inventions required to make the business methods work. These inventions will be patentable since they will “improve the functioning of the computer itself.” See Buysafe, Inc., v. Google, Inc. 765 F.3d 1350 (2014) citing Association for Molecular Pathology v. Myriad Genetics, Inc., ___ U.S. ___, 133 S.Ct. 2107, 2116, 186 L.Ed.2d 124 (2013).

Forging Ahead After Losing an Alice Appeal

It’s tough to fight on after losing an Alice appeal, but that’s just what most applicants are doing. An “Alice appeal” is an appeal of a patent rejection under 35 U.S.C. 101 for lack of statutory subject matter. The major field of these patents is business methods (class 705). More than half of business method applicants that are losing Alice appeals are taking action to keep their applications alive. The reasons for renewed hopes include the new 2019 Subject Matter Eligibility Guidance that came out in January, as well as the current movement in Congress to clarify 35 U.S.C. 101. With hope on the horizon, now is not the time to give up. The table below gives some recent examples of how both large and small applicants are continuing to prosecute their patent applications after losing an Alice appeal.

Business Method Patents Recover Under USPTO Guidance

Business method patents have recovered under the new 2019 Revised Patent Subject Matter Eligibility Guidance. As the graph above shows, allowances per office action (APOA) dropped from 17% before the 2014 Alice decision to 4% right after the Alice decision. APOA then increased to about 11% in 2017 when a new business method director, Tariq Hafiz was appointed. Tariq made a special point of encouraging examiners to allow cases if they genuinely felt the claims met the 101 guidelines set forth by the patent office. APOA rose to 17% in 2019 after the new 2019 Guidance came out in January. It is now back at its pre-Alice level of 17%. It’s still not easy to get a business method patent. An APOA of 17% implies that, on average, an applicant will have to respond to five rejections before getting an allowance. Nonetheless, it is now at least a realistic possibility to get a business method patent in a reasonable amount of cost and time.

AI Patents Make a Comeback at USPTO, Finance Patents Are Still Struggling

Artificial Intelligence (AI) patents have made a strong comeback under the new 2019 Revised Patent Subject Matter Eligibility Guidance. As the first graph above shows, allowances per office action have gone from an average of 15% before the guidance to 38% after the guidance. The increase occurred almost immediately after examiners were trained on the new guidance in January. For AI inventors concerned about the impact of the old Alice guidelines on the examination of AI-related applications, it looks like more hopeful times are ahead. The situation is grimmer for finance patents. The new guidance has not had any significant effect on allowances per office action. I reviewed a number of recent office actions under the new guidelines to see where the problem might be. It appears that most examiners in the finance art units 3691 to 3697 consider any improvement to a computer implemented financial process to be nothing more than an abstract idea. It doesn’t matter how novel or sophisticated the algorithms might be. The Patent Trial and Appeal Board has been backing up this examiner perspective, with the affirmance rate for related appeals being more than 90%.

Surviving Alice: Counseling the Client

In accordance with the above discussion, particularly point (a), the client should be apprised of the necessity of fully fleshing out the inventive aspects of the technical implementation (i.e. the fuzzy logic). The client, however, may not know what the technical implementation is or what technical problems may need to be overcome. At this point, there may be no harm in filing a provisional patent application to capture the earliest priority date for the client. The next step under point (b) is to work with the client to develop a plan for implementation. Actual technical implementation can be expensive, but it is a very effective way to reveal technical problems that have to be solved. Technical implementation always (in our humble experience) reveals unforeseen technical problems. At some point, what is readily available may need to be modified or customized to serve the specific needs of the new business application, particularly as that application is scaled up. This is where patentable innovation occurs.

An International Economy Means I Need An International Patent, Right?

Before selling your product outside the United States, you need to take into account the vastly different cultural and market preferences outside the country. As anyone who has ever gone into an international supermarket knows, packaging, taste and product selection can differ greatly from what is available on shelves in the U.S. You need to conduct some market research to ascertain the depth of product demand before making the leap. Some countries may be culturally similar to the United States, and your product would only require minor modifications. Additionally you will need to develop relationships with local distributors, which can be another substantial hurdle to overcome. Before investing millions in manufacturing your product for an international market, you will want to conduct this extensive research.

How to Know When You’re Ready to File a Nonprovisional Patent Application

Holding a provisional patent application pending, but failing to file a nonprovisional patent application by the one year deadline, means you lose the right to that filing date, and could potentially lose ownership rights to the invention. This outcome is fine if you have done your research and determined that the invention cannot support a viable business. It’s not fine if you haven’t completed all of your research prior to the deadline. Unfortunately extensions are not possible.

Are you Ready to File a Provisional Patent Application?

Your goal in patenting an invention is to make money by turning it into a real product. It won’t do you any good to file a provisional application for something that isn’t in a viable commercial market. If you’re considering filing a provisional, it means that you’re ready to talk to some manufacturers, begin to raise additional capital, and essentially start telling strangers about your idea.