PublishedMay 1, 2013

Schumer Proposes Expansion of Covered Business Method Program

Today Senator Schumer announced a proposal to expand the “covered business method” program instituted at the U.S. Patent and Trademark Office by the 2011 America Invents Act (AIA).  That initiative, which took effect in September of last year, led to new rules to allow threatened businesses to formally challenge the validity of dubious patents before the Patent Office.  However, it applies only to certain, defined subject matter in financial products and services industries.

By providing more effective methods for reexamining abstract, low-quality patents, the Schumer proposal is another tool to put into the mix as the patent reform conversation continues.

Senator Schumer’s bill helpfully focuses on prompt action by the PTO, telling TechCrunch in an interview, “if you have a legitimate case it will go forward in a month.”  A continuing problem with re-examining patents is that litigation can proceed apace even if doubts have been raised as to the legitimacy of the patents at issue.  Many non-lawyers find it baffling that when Blackberry-maker RIM settled NTP’s patent infringement claims against it in 2006 for $612 million, all of the plaintiffs patents had been preliminarily rejected by the U.S. Patent and Trademark Office.  How could a plaintiff prevail on invalid patents?  The answer is that federal litigation is independent from the PTO and its processes.  In many cases, courts have refused to stay litigation notwithstanding doubts about the patents at trial.  Moreover, the options for re-examining patents at the USPTO are limited and the process is slow.  Even in cases where, like RIM, a defendant can point the agency to prior art, it is entirely possible that action may come too late.

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Matt Schruers

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