Later this week, the House is tentatively scheduled to bring H.R. 1249, the America Invents Act, a broad piece of patent reform legislation to the floor for a vote. This bill is similar to one that the Senate passed earlier this year.
Contained within this bill is “section 18,” which establishes a program at the United States Patent and Trademark Office (PTO), where business-method patents can be re-examined to assess their validity. This program applies only to business method patents, which are defined using suggestions proffered by the PTO.
Historically, traditional business methods and related systems to implement those business methods were not patented in any significant quantity. This was profoundly changed by a 1998 Federal Circuit decision when the court put to rest the business method exception to patentability. As a result of this decision, the U.S. patent system has seen an explosion in applications for business method patents. This proliferation of business method patents has, in turn, resulted in a flood of patent litigation in the financial services industry.
The purpose of section 18 is to deal with what are known as non-practicing entities, or NPEs, (known derogatorily as “patent trolls”) that exploit flaws in the current patent system. These NPEs have built an industry based on filing onerous lawsuits involving low-quality business method patents with the expectation of securing large settlements. These meritless lawsuits and settlements distort the marketplace and harm businesses and consumers by leaving financial firms, from the smallest community bank, local credit union or insurance agent, to the largest global companies, mired in meritless litigation over patents of dubious quality.
As this bill has begun moving through the legislative process, there has been a serious push by the Trial Bar to strip-out or water-down this provision in H.R. 1249. NAMIC, along with several others in the financial services sector, joined together and wrote a letter to House leadership opposing any changes to section 18. We have and will continue to push Congress to ensure that final patent reform legislation addresses the fundamental, and increasingly costly, problem of poor-quality business-method patents.
Please direct questions to Federal Affairs Manager Jonathan Bergner.