The Software IP Report

Business Methods Patents Still Being Asserted in Litigation

By Charles Bieneman

Categories: Patent Eligibility, Software Patents, The Software IP Report

Business methods patents are alive and well, based at least on an anecdotal review of recent court filings.  Consider, for example, a case that I have selected more or less at random, Phoenix Licensing LLC v. Nationwide Mutual Insurance Company, filed on April 16, 2012, in the Eastern District of Texas.  Phoenix Licensing, which Internet searching reveals is no stranger to asserting and litigating patents, has asserted three patents, U.S. 7,890,366 ( “Personalized communication documents, system and method for preparing same”), 6,999,938 (“Automated reply generation direct marketing system”), and 5,987,434 (“Apparatus and method for transacting marketing and sales of financial products”).

The patent titles alone are suggestive.  I won’t reproduce the claims here (you might want to peruse them from the above links), but they also bespeak a particular patent genre that has recently been accorded suspect status.  For example, consider independent claim 52 of the ‘938 patent, which recites “[a] method for automatically preparing customized communications for a plurality of consumer entities, and replying to responses from consumer entities with customized replies.”  Is this a business method claim?  True, the claim does recite that various steps are performed “automatically.”  However, the claim as a whole is directed to preparing and customizing a document to be used in a mass marketing campaign.

More generally, some of the claims in the three patents are apparatus claims, and even many of the method claims recite steps performed “without human intervention,” “with a computing system,” or using “a computer-accessible storage medium,” “a central processing unit,” or other hardware elements.  But haven’t Bilski and its progeny been clear that, while business methods are not, supposedly, per se patent ineligible, the inclusion of a machine in a claim must somehow meaningfully limit the claimed subject matter, and perhaps even be the basis for novelty, in order to confer patent eligibility.  Is that the case here?

Even if the plaintiff can colorably maintain, at least for purposes of Federal Rule of Civil Procedure 11, that at least some of the claims in each patent are valid under 35 U.S.C. § 101, surely there must be, at the outset of the lawsuit, serious questions about the patent eligibility of any claims the plaintiff will choose to assert (and that, as anyone who has litigated in the Eastern District of Texas knows, will be a limited number).  Are the claims patent-eligible like those in the recent Feceral Circuit case of Ultramercial, LLC v. Hulu, LLC, or are they more akin to the business methods claims of Dealertrack, Inc. v. Huber, or the claims of CyberSource Corp. v. Retail Decisions, Inc., which were invalid under Section 101 even though reciting use of a computer and, in the case of CyberSource, directed generally to the Internet?

Moreover, consider the majority view in MySpace, Inc. v. Graphon Corp. that analyses of patent eligibility should be deferred until all other validity analyses have been performed.  That view was subsequently rejected by the Supreme Court in  Mayo Collaborative Services v. Prometheus Laboratories, Inc.  Nonetheless, while courts sometimes do dispose of cases via early summary judgment, or even on the pleadings, sometimes they don’t.  But if there is a good chance that asserted claims are patent ineligible (and let me stress I am only noting the possibility, and am not drawing the conclusion), should the court entertain an early dispositive motion on Section 101 grounds?

I am not the first to note that the Section 101 cases following Bilski do not present a model of consistency.  Those cases cannot be applied to the present claims to predict too reliably how a court would rule (I might make a prediction but, under current case law, I would also predict that under some judges a different outcome would result).  Perhaps, though, as enough cases like this one work their way through the post-Bilski federal courts, what are now nascent patterns will emerge as trends that parties can apply to most if not all patent claims asserted in litigation.  Perhaps — yet in the meantime, Nationwide and many other defendants have no choice but to litigate under a cloud of Section 101 uncertainty.