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The proliferation of electronic commerce patents: don't blame the PTO.


In the Dot Com world of today, many players are spending large sums on the acquisition of electronic commerce patents. Most of these E-commerce patents are a little bit software patent, a little bit business method patent, and likely invalid. There is indeed growing concern among commentators that the United States Patent Office (1) is issuing an ever-increasing number of invalid patents. Of course, this statement is legally incorrect because a patent once issued is presumed to be valid, (2) but the reality is that many patents that are not objectively valid are indeed emerging from prosecution and are enjoying the presumption of validity. In fact, there are many examples of business method and software patents that have been issued that likely are not valid, or that have been demonstrated to be invalid. (3)

For example, has received a United States patent on pricing, selling, and exercising options to purchase airline tickets. (4) This patent, however, apparently gives the exclusive right to what is known as a Dutch auction, (5) something that is hardly new or nonobvious. In fact, the patent acknowledges the use of options in other markets, before explaining in its specification that:
 Until now, however, there has been no acceptable way to minimize the risk
 of fluctuations in airline ticket prices. In particular, as far as we are
 aware, options to purchase airline tickets have never been sold. Moreover,
 no systems have been developed for determining prices for options on
 airline tickets, and keeping track of the sale and exercise of those
 options. (6)

Apparently the fact that this type of system had never been implemented makes this business method patentable in the minds of and its attorneys. (7) Patentability, however, is not so easy a question. The fact that it has not been implemented is perhaps entirely due to the fact that there existed no means for reaching individuals in real time to engage in such a Dutch auction with respect to purchasing airline tickets. The invention that allows the business method to work is the Internet, not any technological advancement by the inventors of the method for which the patent was issued. Therefore, it would seem that the advent of the Internet has enabled to obtain the exclusive right to a business method that has been within contemplation for quite some time.

In all fairness to the United States Patent Office, it is certainly not to blame for the explosion of E-commerce patents, and it is also not to blame for the number of invalid software and business method patents that are being issued. The Patent Office is attempting to engage in more rigorous examination of such patents, but these laudable improvements are falling short of the mark. One reason for this is that the patent examiners are simply too overworked and do not have the proper resources to examine patent applications in a manner likely to result in the weeding out of patents that ought not see the light of day.

The real problem can be summarized by a 1999 survey conducted by Greg Aharonian, which revealed that fifty percent of all patent applications cited no prior art at all. (8) Mr. Aharonian similarly estimates that somewhere between fifty percent and seventy percent of software patents would likely not issue if the examiners were to conduct prior art searches of both Patent Office archives and databases that are readily available but not accessible within the confines of the Patent Office. (9)

A change is necessary to ensure that USPTO issues only software and business method patents that justifiably deserve to enjoy the presumption of validity. The primary pieces of prior art considered in the examination process are previously granted United States patents. Unfortunately, however, the patenting of both software and business methods is a relatively new phenomena, which means that relatively few United States patents have been issued in this area. Moreover, with respect to business method patents, the bulk of the available knowledge resides mainly with the companies employing those methods. (10) This leads to the inescapable conclusion that there is very little prior art being considered when the examiners assess patentability of new software and business method patent applications.

With this in mind, this article will propose a modification to 37 C.F.R. [section] 1.56, commonly referred to as Rule 56, that would require those applying for a patent to conduct a patent search prior to filing for an application. It will also be proposed that Rule 56 return to the old definition of materiality, requiring applicants to divulge that information which a reasonable examiner would desire. Before exploring these proposed changes, however, it will first be necessary to examine the fundamentals of patent law and the patent system. Part II of this article, therefore, will explain the fundamentals of the patent law by exploring the patent grant, the role of the United States Patent and Trademark Office, and the basic requirements for patentability. Part III will then detail the history of software patents. Part IV will take a similar, albeit shorter, look at the history of business method patents. Part V will discuss the mechanics of Rule 56 and the applicable standards. Part VI will then explain the proposed modifications to Rule 56, which will be followed by a brief Conclusion in Part VII.


A. General Introduction to the Patent Grant

A patent is a legal right granted by the United States government to inventors of new, useful, and nonobvious inventions. (11) The authority to grant patents is bestowed upon the United States Congress, and stems from the Constitution, which gives Congress the power "[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (12) To patent attorneys this clause of the Constitution will forever be known as the Patent Clause. For attorneys specializing in copyright law this clause is known as the Copyright Clause. More important, perhaps, than the partisan nomenclature is the recognition that the Founding Fathers deemed intellectual property rights so fundamentally important to the success and stability of our new country that these rights were written into the Constitution, a document not generally known for its length and specificity.

Under the authority of the United States Constitution, Congress has from time to time enacted various laws relating to patents. The first Patent Act was enacted by the first Congress in 1790. The Patent Act, which has undergone several major revisions since its enactment, had its last major revision in 1952. More recently, the Patent Act was revised in several significant ways by the enactment of the American Inventors Protection Act of 1999, (13) which was enacted into law on November 29, 1999. (14)

The right conferred by the patent grant is, in the language of the statute and of the grant itself, "the right to exclude others from making, using, offering for sale, or selling" the invention in the United States or "importing the invention into the United States." (15) The patent owner enjoys this exclusive right for a term of twenty years from the date on which the patent application is filed in the United States Patent and Trademark Office. (16)

B. The Role of the United States Patent and Trademark Office (17)

The role of the United States Patent and Trademark Office (PTO), is to examine and, if appropriate, grant patents for the protection of inventions. The PTO is also charged with examining and registering trademarks. The PTO is split up into two offices, the Patent Office and the Trademark Office. In order to practice in front of the Patent Office, it is necessary to take and pass the Patent Bar Examination. Only those individuals with scientific education are allowed to sit for the examination. There is, however, no similar examination given by the Trademark Office. Attorneys admitted to practice in any state may practice before the Trademark Office.

The PTO serves the interest of inventors and businesses with respect to their inventions, corporate products, and service identifications. It also advises and assists the bureaus and offices of the Department of Commerce and other agencies of the Government in matters involving "intellectual property" such as patents, trademarks, and semiconductor mask works. Through the preservation, classification, and dissemination of patent information, the Office aids and encourages innovation and the scientific and technical advancement of the nation.

In discharging its patent-related duties, the Patent and Trademark Office examines applications and grants patents on inventions when applicants are entitled to them; it publishes and disseminates patent information, records assignments of patents, maintains search files of U.S. and foreign patents, and maintains a search room for the public to use in examining issued patents and records. It also supplies copies of patents and official records to the public. The office performs similar functions relating to trademarks

C. Patentable Subject Matter in General - 35 U.S.C. [section] 101

"Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title." (18) The legislative history of the 1952 Patent Act informs us that Congress intended the patentable subject matter referred to in [section] 101 to "include anything under the sun that is made by man." (19)

Given that Congress intended everything made by man to be patentable, it is sometimes more helpful when discussing patentable subject matter to identify that which cannot be patented. In this regard the United States Supreme Court has repeatedly and consistently stated that there are only three categories of subject matter for which one may not obtain patent protection: (1) laws of nature; (2) natural phenomena; and (3) abstract ideas. (20) In elaborating this point the Supreme Court has explained:
 [A] new mineral discovered in the earth or a new plant found in the wild is
 not patentable subject matter. Likewise, Einstein could not patent his
 celebrated law that E=[mc.sup.2]; nor could Newton have patented the law of
 gravity. Such discoveries are "manifestations of ... nature, free to all
 men and reserved exclusively to none." (21)

D. The Utility Requirement C 35 U.S.C. [section] 101

To satisfy the requirements of [section] 101 it is not only necessary to demonstrate that the subject matter of the invention is patentable, but the patentee is also required to demonstrate that the claimed invention is "useful" for some purpose. (22) The utility requirement has its foundation in the belief that an invention that is inoperative is not a "useful" invention within the meaning of [section] 101 and, therefore, does not deserve patent protection. (23) For a claimed invention to violate the utility requirement it must be "totally incapable of achieving a useful result." (24) Therefore, an invention that is at least partially useful passes muster under [section] 101 and the PTO will not issue a utility rejection. (25)

Notwithstanding the extremely low utility hurdle, claimed inventions can and do fail the utility requirement. An invention that fails the utility requirement does so for one of two reasons: (1) an applicant can fail to specify any particular utility for the invention or fail to disclose significant information concerning the invention such that its utility is not readily identifiable to those familiar with the technological field of the invention; or (2) the applicant's asserted utility for the invention may not be credible. (26) A good example of the latter is an invention claiming a perpetual motion machine. (27)

It is important to remember, however, that the PTO has the initial burden of challenging the applicant's assertion of utility because the assertion of utility in the disclosure is initially presumed to be correct. (28) "Only after the PTO provides evidence showing that one of ordinary skill in the art would reasonably doubt the asserted utility does the burden shift to the applicant to provide rebuttal evidence sufficient to convince [the PTO] of the invention's asserted utility." (29)

An assertion by the patentee regarding utility will be credible unless: "(A) the logic underlying the assertion is seriously flawed, or (B) the facts upon which the assertion is based are inconsistent with the logic underlying the assertion." (30) Thus, "[c]redibility as used in this context refers to the reliability of the statement based on the logic and facts that are offered by the applicant to support the assertion of utility." (31) For example, "[o]ne situation where an assertion of utility would not be considered credible is where a person of ordinary skill would consider the assertion to be incredible in view of contemporary knowledge" and where the applicant has not provided any information to counter that which the contemporary knowledge suggests. (32) Again, a perpetual motion machine is a good example.

E. The Novelty Requirement - 35 U.S.C. [section] 102

Not every invention is patentable. Section 102 sets forth the doctrine of anticipation by requiring novelty of invention. Section 102 states:

A person shall be entitled to a patent unless -

(a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patent, or

(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States, or

(c) he has abandoned the invention, or

(d) the invention was first patented or caused to be patented, or was the subject of an inventor's certificate, by the applicant or his legal representative or assigns in a foreign country prior to the date of the application for patent in this country on an application for patent or inventor's certificate filed more than twelve months before the filing of the application in the United States, or

(e) the invention was described in -

(1) an application for patent, published under section 122(b), by another filed in the United States before the invention by the applicant for patent, except that an international application filed under the treaty defined in section 351(a) shall have the effect under this subsection of a national application published under section 122(b) only if the international application designating the United States was published under Article 21(2)(a) of such treaty in the English language; or

(2) a patent granted on an application for patent by another filed in the United States before the invention by the applicant for patent, except that a patent shall not be deemed filed in the United States for the purposes of the subsection based on the filing of an international application filed under the treaty defined in section 351(a); or

(f) he did not himself invent the subject matter sought to be patented, or

(g)(1) during the course of an interference conducted under section 135 or section 291, another inventor involved therein establishes, to the extent permitted in section 104, that before such person's invention thereof the invention was made by such other inventor and not abandoned, suppressed, or concealed, or (2) before such person's invention thereof the invention was made in this country by another who had not abandoned, suppressed, or concealed it. In determining priority of invention under this subsection there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other. (33)

1. Anticipation Generally

A claim is said to be "anticipated" if comparison of the claimed invention with a prior art reference reveals that each and every element in the claim under attack is shown or described, organized, and functioning in substantially the same manner as in the prior art reference. (34) Anticipation is perhaps most easily understood as the converse of infringement: "That which infringes, if later, would anticipate, if earlier." (35) As one famous jurist has explained:
 No doctrine of the patent law is better established than that a prior
 patent or other publication to be an anticipation must bear within its four
 corners adequate directions for the practice of the patent invalidated. If
 the earlier disclosure offers no more than a starting point for further
 experiments, if its teaching will sometimes succeed and sometimes fail, if
 it does not inform the art without more how to practice the new invention,
 it has not correspondingly enriched the store of common knowledge, and it
 is not an anticipation. (36)

2. Anticipation Test

The standard for anticipation is a rigorous one; requiring that every element of the claimed invention, as arranged in the claim, be disclosed either specifically or inherently by a single prior art reference. (37) Every element of the challenged claim need not be expressly delineated in a single prior art reference, but may be inherently disclosed by prior art if "the prior art necessarily functions in accordance with the limitations" of the challenged claim. (38) However, if the court must go beyond a single prior art reference, the proper challenge is under [section] 103 for obviousness, not [section] 102 for novelty. (39) A reference will, however, anticipate a claim "if it discloses the claimed invention `such that a skilled artisan could take its teachings in combination with his own knowledge of the particular art and be in possession of the invention.'" (40)

F. The Nonobviousness Requirement - 35 U.S.C. [section] 103

The Nonobvious requirement of [section] 103 states in pertinent parts:

(a) A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.


(c) Patentability shall not be negatived by the manner in which the invention was made. Subject matter developed by another person, which qualifies as prior art only under one or more subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the invention was made, owned by the same person or subject to an obligation of assignment to the same person. (41)

1. Obviousness Generally

A patent may not be obtained if it contains only obvious differences from prior art. An invention is obvious if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made, as determined by a person having ordinary skill in the art to which the said subject matter pertains. "[T]he obviousness inquiry is highly fact-specific and not susceptible to per se rules." (42) Defendant cannot simply present evidence of anticipation and then say "ditto" to establish obviousness. (43) Nevertheless, for a patent to be nonobvious it must display "ingenuity beyond the compass" of a person of ordinary skill in the art. (44)

2. The Obviousness Factors - Factual Inquiry

The obviousness determination is based on four factual inquiries: (1) the differences between the prior art and challenged claims; (2) the level of ordinary skill in the field of the pertinent art at the time of plaintiff's invention; (3) what one possessing that level of skill would have deemed to be obvious from the prior art reference; and (4) objective evidence of obviousness or nonobviousness. (45) Notwithstanding these factual inquiries, objective evidence of obviousness or nonobviousness must also be considered before reaching a conclusion on obviousness. Objective evidence includes: "[1] the commercial success of the invention; [2] whether the invention satisfied a long-felt need in the industry; [3] failure of others to find a solution to the problem at hand; and [4] unexpected results." (46)

In determining what would have been obvious to a person of ordinary skill in the art, the decision-maker may examine the following factors: (1) type of problems encountered in the art; (2) prior art solutions to those problems; (3) rapidity with which innovations are made; (4) sophistication of the technology; (5) educational level of the inventor; and (6) educational level of active workers in the field. (47)

G. Description Requirement - 35 U.S.C. [section] 112

1. The Enablement and Best Mode Requirements C 35 U.S.C. [section] 112, 1st paragraph

The crux of the description requirement, which is embodied in 35 U.S.C. [section] 112, is the enablement requirement and the best mode requirement. Both the enablement and best mode requirements can be found in the first paragraph of ` 112, which states:
 The specification shall contain a written description of the invention, and
 of the manner and process of making and using it, in such full, clear,
 concise, and exact terms as to enable any person skilled in the art to
 which it pertains, or with which it is most nearly connected, to make and
 use the same, and shall set forth the best mode contemplated by the
 inventor of carrying out his invention. (48)

The enablement requirement requires the inventor to describe his or her invention in a manner that would allow others in the industry to make and use the invention. "Enablement looks to placing the subject matter of the claims generally in the possession of the public." (49)

The best mode requirement requires the inventor to disclose his or her preferred way of carrying out the invention at the time the patent application is filed. There is no requirement that the inventors preferred embodiment be updated as the patent application works its way through the PTO. Best mode looks to whether specific instrumentalities and techniques have been developed by the inventor and are known to him at the time of filing as the best way of carrying out the invention. (50)

Thus, the enablement requirement looks to the objective knowledge of one of ordinary skill in the art, while the subjective and factual best mode inquiry looks to the inventor's state of the mind.

2. Adequate Description Requirement - 35 U.S.C. [section] 112, 2nd Paragraph

The second paragraph of 35 U.S.C. [section] 112 states: "The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention." (51) This requirement is perhaps the most fundamental requirement of patentability. It is the claims that define the invention, and those claims must describe the claimed invention in adequate detail.


A. The Evolution Begins - Gottschalk v. Benson

Since the United States Supreme Court first addressed the patentability of computer software in Gottschalk v. Benson (52) the law surrounding the patentability of software has changed considerably. In Benson, the Supreme Court was faced with an invention that was described in the patent as being related to the "processing of data by program and more particularly to the programmed conversion of numerical information" in general-purpose digital computers. (53) The applicants for the patent claimed a method for converting binary-coded decimal numerals into pure binary numerals. "The claims in the patent application were, however, not limited to: [1] any particular art or technology; [2] any particular apparatus or machinery; or [3] any particular end use." (54) To the contrary, the claims of the patent application itself purported to cover any use of the claimed method in a general-purpose digital computer of any type. (55)

The Supreme Court began its analysis in Benson by recognizing that "while a scientific truth, or the mathematical expression of it, is not a patentable invention, a novel and useful structure created with the aid of knowledge of scientific truth may be." (56) The Benson Court also recalled the familiar and often cited language found in its decision in Funk Brothers Seed Co. v. Kalo Inoculant Co., (57) "[h]e who discovers a hitherto unknown phenomenon of nature has no claim to a monopoly of it which the law recognizes. If there is to be invention from such a discovery, it must come from the application of the law of nature to a new and useful end." (58) Nevertheless, although the patent claims were truly related to a process that employed a mathematical formula to achieve the end goal, the Court held that the mathematical formula involved had no substantial practical application except in connection with a digital computer. (59) Such a determination meant, in the opinion of the Supreme Court, that if the patent was valid it would completely "pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." (60) Therefore, this patent, a patent on the conversion of binary code into pure binary numbers, could not and did not stand. In essence, the Benson decision prevented the patenting of computer software, at least for the time being.

B. Rethinking Patentability - Diamond v. Diehr

Almost a decade after the Benson decision, the Supreme Court in Diamond v. Diehr (61) first recognized that a computer program may deserve patent protection. In this case, the patent claimed a method of operating a molding press during the production of rubber articles. (62) The inventors asserted that their method ensured that the articles would remain in the press for the appropriate length of time. In finding this software patentable, the Supreme Court explained:
 [A] claim drawn to subject matter otherwise statutory does not become
 nonstatutory simply because it uses a mathematical formula, computer
 program or digital computer.... [A] process is not unpatentable simply
 because it contains a law of nature or a mathematical algorithm. It is now
 commonplace that an application of a law of nature or mathematical formula
 to a known structure or process may well be deserving of patent protection.
 As Justice Stone explained four decades ago: "While a scientific truth, or
 the mathematical expression of it, is not a patentable invention, a novel
 and useful structure created with the aid of knowledge of scientific truth
 may be."


 [The equation used in the claimed method] is not patentable in isolation,
 but when a process for curing rubber is devised which incorporates in it a
 more efficient solution of the equation, that process is at the very least
 not barred at the threshold by Section 101. (63)

Consequently, the Diehr decision opened the door for the possibility that some computer programs were entitled to patent protection; it served as the first step toward the patentability of business method and electronic commerce patents.

C. The Freeman-Walter-Abele Test

For some time after the Diehr decision, the Court of Appeals for the Federal Circuit applied the Freeman-Walter-Abele test to determine whether a computer program is patentable pursuant to 35 U.S.C. [section] 101. The court in Arrhythmia Research Technology, Inc. v. Corazonix Corp. (64) succinctly stated the Free-Walter-Abele test as follows:
 It is first determined whether a mathematical algorithm is recited directly
 or indirectly in the claim. If so, it is next determined whether the
 claimed invention as a whole is no more than the algorithm itself; that is,
 whether the claim is directed to a mathematical algorithm that is not
 applied to or limited by physical elements or process steps. Such claims
 are nonstatutory. However, when the mathematical algorithm is applied in
 one or more steps of an otherwise statutory process claim, or one or more
 elements of an otherwise statutory apparatus claim, the requirements of
 section 101 are met. (65)

Several years after Arrhythmia, however, the Federal Circuit seemingly abandoned the Freeman-Walter-Abele test. Sitting en banc in In re Alappat (66) the Federal Circuit did not apply the Freeman-Walter-Abele test, rather opting for the mathematical subject matter exception. The Federal Circuit explained:
 [T]he proper inquiry in dealing with the so-called mathematical subject
 matter exception to Section 101 alleged herein is to see whether the
 claimed subject matter as a whole is a disembodied mathematical concept,
 whether categorized as a mathematical formula, mathematical equation,
 mathematical algorithm, or the like, which in essence represents nothing
 more than a "law of nature," "natural phenomenon," or "abstract idea." If
 so, Diehr precludes the patenting of that subject matter. (67)

Also of particular importance from Alappat is the Federal Circuit's attempt to explain prior U.S. Supreme Court decisions regarding software patents. In this regard the Federal Circuit stated:
 [A]t the core of the [Supreme] Court's analysis in each of these cases lies
 an attempt by the Court to explain a rather straightforward concept,
 namely, that certain types of mathematical subject matter, standing alone,
 represent nothing more than abstract ideas until reduced to some type of
 practical application, and thus that subject matter is not, in and of
 itself, entitled to patent protection. (68)

While the Alappat court may well have wished the Supreme Court decisions to be quite so simple, the truth of the matter is that previous Supreme Court decisions were not at all easy to reconcile. It seems clear that the Supreme Court addressed each case on a case-by-case basis, which did not lead to a cohesive and well thought out approach to dealing with software patents. The Federal Circuit, on the other hand, increasingly fine tuned its analysis and developed a coherent approach designed to lead to a consistent way in which to deal with the growing corporate desire to patent software.

Shortly after the full Federal Circuit implicitly eliminated the Freeman-Walter-Abele test in Alappat, a three-judge panel once again resorted to and applied the Freeman-Walter-Abele test in In re Trovato. (69) This controversial decision did not last long. The Federal Circuit, sitting en banc, withdrew the panel decision, (70) lending further support to the death of the Freeman-Walter-Abele test.

The Federal Circuit's holding in State Street Bank & Trust Co. v. Signature Financial Group, Inc. (71) further bolstered the belief that the Freeman-Walter-Abele test was fading into the background and becoming a thing of the past. The Federal Circuit first explained the so-called mathematical algorithm exception:
 The Supreme Court has identified three categories of subject matter that
 are unpatentable, namely "laws of nature, natural phenomena, and abstract
 ideas." Of particular relevance to this case, the Court has held that
 mathematical algorithms are not patentable subject matter to the extent
 that they are merely abstract ideas. In Diehr, the Court explained that
 certain types of mathematical subject matter, standing alone, represent
 nothing more than abstract ideas until reduced to some type of practical
 application, i.e., "a useful, concrete and tangible result."

 Unpatentable mathematical algorithms are identifiable by showing they
 are merely abstract ideas constituting disembodied concepts or truths that
 are not "useful." (72)

Subsequently, the Federal Circuit acknowledged that
 After Diehr and Chakrabarty, the Freeman-Walter-Abele test has little, if
 any, applicability to determining the presence of statutory subject matter.
 Ultimately the Federal Circuit held the business method software patentable
 because it constituted "a practical application of a mathematical
 algorithm, formula, or calculation, [that] produces a useful, concrete and
 tangible result ..." (73)

Shortly after the Federal Circuit's landmark decision in State Street Bank, the court once again addressed the issue of patentability of computer software. Rather than contract the breadth of the State Street Bank decision the court used the opportunity to broaden and solidify its position with respect to the patentability of software. In AT&T Corp. v. Excel Communications, Inc., (74) the Federal Circuit reaffirmed its decisions in State Street Bank and Alappat. The court stated:
 This court recently pointed out that any step-by-step process, be it
 electronic, chemical, or mechanical, involves an "algorithm" in the broad
 sense of the term. Because [section] 101 includes processes as a category
 of patentable subject matter, the judicially-defined proscription against
 patenting of a "mathematical algorithm," to the extent such a proscription
 still exists, is narrowly limited to mathematical algorithms in the
 abstract. (75)

The Court further explained that the Alappat inquiry, which is the relevant test in determining patentability if the claimed matter involves an algorithm,
 requires an examination of the contested claims to see if the claimed
 subject matter as a whole is a disembodied mathematical concept
 representing nothing more than a "law of nature" or an "abstract idea," or
 if the mathematical concept has been reduced to some practical application
 rendering it "useful." In Alappat, we held that more than an abstract idea
 was claimed because the claimed invention as a whole was directed toward
 forming a specific machine that produced the useful, concrete, and tangible
 result of a smooth waveform display. (76)

Any lingering doubt whether the Freeman-Walter-Abele test was dead was put to rest as a result of the Court's decision in AT&T Corp. v. Excel Communications, Inc. The death of the Freeman-Walter-Abele test is of particular importance because in order for software to be patentable under that test the mathematical algorithms in question were required to be applied to or limited by physical elements or process steps. Under the mathematical algorithm exception, no such requirement exists. The focus of the patentability inquiry, at least insofar as computer software is involved, is now on whether the mathematical algorithms, formulas, or calculations in question produce a useful, concrete and tangible result. This shift to a result-based inquiry should finally lay to rest the question of whether computer software is in fact patentable subject matter under 35 U.S.C. [section] 101.


In State Street Bank, (77) the Federal Circuit uncategorically and unceremoniously eliminated the former business method exception to patentability. The business method exception was a judicially created exception to patentability that rendered an invention unpatentable because the subject matter of the patent application covered a method of doing business. In casting away the business method exception, the Federal Circuit stated:
 We take this opportunity to lay this ill-conceived exception to rest. Since
 its inception, the "business method" exception has merely represented the
 application of some general, but no longer applicable legal principle,
 perhaps arising out of the "requirement for invention"--which was
 eliminated by [section] 103. Since the 1952 Patent Act, business methods
 have been, and should have been, subject to the same legal requirements for
 patentability as applied to any other process or method. (78)

In reality, however, the Federal Circuit did not lay to rest the business method exception in State Street Bank. To the contrary, the Federal Circuit went out of its way to explain that the business method exception had really never existed in the first place. The court explained that neither it nor its predecessor court, the CCPA, had ever applied the business method exception. (79) Furthermore, the court explained that the cases relied upon by the defendant, In re Maucorps (80) and In re Meyer, (81) were both rendered prior to the Supreme Court's decision in Diehr, and prior to the Federal Circuit's abandonment of the Freeman-Walter-Abele test. While the cases involved business method patents, the CCPA did not rely on the business method exception, but rather found the inventions unpatentable under the mathematical exception. (82) Finally, the court explained that even the case frequently cited as establishing the business method exception, Hotel Security Checking Co. v. Lorraine Co., (83) did not ultimately rely on that exception to deny patentability, rather finding the patent at issue invalid "for lack of novelty and `invention.'" (84) The undeniable truth after State Street Bank is that business methods are indeed patentable.


The doctrine of inequitable conduct stems from 37 C.F.R. [section] 1.56, which is commonly referred to simply as Rule 56. Rule 56 sets forth the duty of candor placed upon the inventors and any other individual substantially involved in the preparation or prosecution of the patent application. The current Rule 56(a) states:
 A patent by its very nature is affected with a public interest. The public
 interest is best served, and the most effective patent examination occurs
 when, at the time an application is being examined, the Office is aware of
 and evaluates the teachings of all information material to patentability.
 Each individual associated with the filing and prosecution of a patent
 application has a duty of candor and good faith in dealing with the Office,
 which includes a duty to disclose to the Office all information known to
 that individual to be material to patentability as defined in this section.
 The duty to disclose information exists with respect to each pending claim
 until the claim is cancelled or withdrawn from consideration, or the
 application becomes abandoned. Information material to the patentability of
 a claim that is cancelled or withdrawn from consideration need not be
 submitted if the information is not material to the patentability of any
 claim remaining under consideration in the application. There is no duty to
 submit information which is not material to the patentability of any
 existing claim. The duty to disclose all information known to be material
 to patentability is deemed to be satisfied if all information known to be
 material to patentability of any claim issued in a patent was cited by the
 Office or submitted to the Office in the manner prescribed by [subsection]
 1.97(b)-(d) and 1.98. However, no patent will be granted on an application
 in connection with which fraud on the Office was practiced or attempted or
 the duty of disclosure was violated through bad faith or intentional
 misconduct. The Office encourages applicants to carefully examine:

 (1) Prior art cited in search reports of a foreign patent office in a
 counterpart application, and (2) The closest information over which
 individuals associated with the filing or prosecution of a patent
 application believe any pending claim patentably defines, to make sure that
 any material information contained therein is disclosed to the Office. (85)

By its express terms Rule 56 requires all those substantively involved with the preparation and prosecution of a patent application to disclose to the Patent Office all information they are aware of that is material to the examination of the application. (86) According to Rule 56(c), those substantively involved with the prosecution of a patent are:
 (1) Each inventor named in the application; (2) Each attorney or agent who
 prepares or prosecutes the application; and (3) Every other person who is
 substantially involved in the preparation or prosecution of the patent and
 who is associated with the inventor, with the assignee or with anyone to
 whom there is an obligation to assign the application. (87)

What Rule 56 does not require, however, is perhaps more interesting than what it does require. Rule 56 does not mandate that the patentee, or anyone involved in the prosecution of the patent application, conduct a patent search and/or otherwise look for prior art. To be sure, Rule 56(a) does conclude with a description of what the Patent Office considers exemplary behavior, but its language is permissive rather than mandatory. The final sentence merely "encourages" those substantively involved in the patent prosecution to conduct prior art searches, the absence of which is indeed one of the problems plaguing the Patent Office with respect to business method and software patents. As previously noted, up to fifty percent of all patent applications do not contain a single prior art reference. (88) Additionally, because both software patents and business method patents are relatively new there are not many prior art references available to examiners. All of this adds up to an examination process that is hopelessly inadequate and doomed to result in the granting of invalid patents.

In its current form Rule 56(a), requires only the submission of information that is known to be material to patentability. (89) This current standard departs from the old Rule 56, which was in effect prior to 1992. The old Rule 56 required the disclosure of all information that a reasonable examiner would wish to have prior to determining whether an invention is deserving of a patent. (90) This old Rule 56, which embodies the reasonable examiner standard for determining the necessity of disclosure, is substantially different from the current standard, under which those who are substantively involved in the prosecution of the patent that determine whether a reference is material to patentability. Such a rule is the patent law equivalent of letting the fox guard the hen house.

For a court to find inequitable conduct and thereby hold a patent unenforceable, the alleging party must demonstrate by clear and convincing evidence that such conduct occurred. (91) Inequitable conduct can take one of the following forms: "affirmative misrepresentations of a material fact, failure to disclose material information, or submission of false material information, coupled with an intent to deceive." (92) Determining whether inequitable conduct has occurred requires a two-step analysis. "First, the trial court must determine whether the withheld reference meets a threshold level of materiality." (93) Then, it must "determine whether the evidence shows a threshold level of intent to mislead the PTO." (94)

The initial determination of whether the materiality and intent requirements exist is a question of fact. (95) If the threshold determination is made that they do exist, the court must balance materiality and intent in light of all circumstances to determine whether the conclusion is warranted that inequitable conduct occurred. (96) "The more material the omission, the less culpable the intent required, and vice versa." (97)

An allegation of inequitable conduct based on a failure to disclose material information to the PTO "must be proven by clear and convincing evidence off: (1) prior art that was material; (2) knowledge chargeable to an applicant of that prior art and of its materiality; and (3) failure of the applicant to disclose the art resulting from an intent to mislead the PTO." (98) After the defendant has proven the above three elements,
 [s]uch proof of inequitable conduct may be rebutted by a showing that: (a)
 the prior art was not material; (b) if the prior art was material, a
 showing that the applicant did not know of that art; (c) if the applicant
 did know of that art, a showing that the applicant did not know of its
 materiality; or (d) a showing that the applicant's failure to disclose the
 art did not result from an intent to mislead the PTO. (99)

It should also be noted, however, that there is no duty to disclose a reference to prior art that is less material than information already disclosed "or is merely cumulative to that considered by the examiner." (100) In other words, cumulative references to prior art are not "material" for purposes of determining inequitable conduct. (101) Of course, the prior art with the most relevant features must be disclosed, and a failure to do so may lead to a finding of inequitable conduct. (102)

The second element of inequitable conduct is the intent to mislead the PTO by withholding known prior art. Gross negligence alone, without culpable intent, does not provide a sufficient basis for a finding of inequitable conduct. (103) The "applicant's conduct in its entirety must `manifest[] a sufficiently culpable state of mind to warrant a determination that it was inequitable.'" (104) As is often the case, direct evidence is rarely available in proving the intent element of inequitable conduct. (105) Thus, "smoking gun" evidence is not required. Rather, intent can be "inferred from the facts and circumstances surrounding the applicant's conduct." (106) The court looks to the materiality of the undisclosed prior art, the knowledge of the applicant, and the surrounding circumstances, including any evidence of good faith in determining whether an intent to deceive existed. (107) "[I]t is most often proven by a showing of acts, the natural consequences of which are presumably intended by the actor." (108)


Some have described inequitable conduct as one of the major problems associated with patent litigation. This is true because a determination that inequitable conduct has occurred, a decision left to the sound discretion of the district court, renders the entire patent unenforceable. (109) Therefore, it is no great surprise that defendants allege inequitable conduct in virtually every case, even when there is little or no evidence to support such a claim. In the world of patent litigation inequitable conduct is the silver bullet, but rather than being used sparingly it is often used in a machine-gun-like fashion.

Under the current law of inequitable conduct, a failure to disclose is in and of itself insufficient to infer intent. (110) Likewise, materiality of the reference does not alone lead to a determination of intent. (111) Nevertheless, an inference of intent may be drawn where there exists a high level of materiality and clear proof that the applicant knew or should have known of the materiality. (112) This mens rea required for a finding of inequitable conduct can, however, only be achieved if a prior art search has occurred and results in the location of prior art that is material to patentability. The current inequitable conduct standard, however, does not place upon the patentee or anyone associated with the substantive prosecution of the patent a duty to search for prior art. Therefore, in essence, the United States government is awarding the opportunity to obtain monopoly profits, (113) but at the same time there is no requirement that the patentee engage in any form of search to justify the award of such an exclusive right.

To be sure, inequitable conduct rarely, if ever, arises within the Patent Office because the prosecution of a patent application is a non-adversarial proceeding. As such, the examiner is without the resources to discover whether inequitable conduct has occurred. This disadvantage experienced by the examiner is not, however, present when the patent is litigated. In the adversarial setting of a patent litigation, where high stakes and extremely litigious behavior is the norm, a massive amount of discovery is engaged in, and proving inequitable conduct, although difficult, is possible.

There are several ways to modify patent practice to address the problems presented by failure to conduct prior art searches, failure to cite references in applications and the growing number of troublesome patents. One solution would be to make the patent application process an adversarial system. This, however, seems like overkill and a poor choice at that. If the contentiousness of patent litigation is any indication, it would seem that making the patent application process adversarial would certainly lead to a standstill in the granting of patents, particularly those patents that are perhaps the most innovative and useful to industry.

The solution that makes the most sense is simply modifying Rule 56 to require that a patent applicant conduct a prior art search prior to filing a patent application. The imposition of such a duty is hardly onerous, and hardly a new concept for intellectual property practitioners. To be sure, there will be some question as to what level of search is required in order to fulfill this duty, but that is not a reason to forego such an alternative. In fact, trademark practitioners routinely acquire searches from such companies as Thompson & Thompson prior to filing a trademark application. A trademark search together with competent legal advice can be a defense to damages in a trademark infringement action. (114) A similar standard, could and probably should, be applied to determine whether a patent search is reasonable. In fact, this is not a new concept even for patent law. Currently, would-be defendants can escape liability for increased damages if they rely upon the opinions of competent counsel and they are told that their device does not infringe. (115)

In addition to placing upon the patent applicant an affirmative duty to conduct a prior art search, it may be advisable to also consider returning to the pre-1992 Rule 56 definition of materiality. In other words, I propose a return to the "material to the examination of the application" standard embodied in 37 C.F.R. [section] 1.56 (1991), rather than the current materiality standard, which asks whether the reference is "material to patentability." (116) To be sure, this latter suggestion may be unnecessary if the former proposal is adopted.


In the mind of the business person, a patent is nothing more than a barrier to entry. Any company that has a highly developed plan for unearthing, cultivating, protecting and exploiting intellectual property rights can build a patent portfolio that can and will make competitors think twice about entering their marketplace. What this means is that there are real societal costs associated with the granting of any patent. Our founding fathers, however, made the determination that in order to encourage innovation we must not only accept, but also embrace, some form of limited exclusive rights in the original inventor. (117) Therefore, we as a society are willing to accept the burdens placed upon us so long as we are able to derive benefits in the form of the patent quid pro quo.

Unfortunately, because a patent enjoys a presumption of validity once it is issued, even patents that are clearly invalid on their face act as barriers to entry. The fact that an invalid patent can prevent a start-up business from entering a marketplace is offensive and directly in contravention of the principles embodied in the "patent." As Professor Rochelle Dreyfuss explained: "[I]t must be said that Judge Rich never intended for known business methods to be patented. Indeed, he stressed - cautioned - that business methods must meet the other legal requirements for patentability, requirements that include novelty ... and nonobviousness ..." (118) Certainly, all patents must meet the five basic requirements to patentability. There is simply no support in the Patent Act, the legislative history or the cases to warrant an exception preventing the patentability of software patents, business method patents or E-commerce patents. Nevertheless, every invention must be examined against a backdrop that inquires into: (1) patentable subject matter; (119) (2) utility; (120) (3) novelty; (121) (4) nonobviousness; (122) and (5) adequate description. (123) If these five requirements are satisfied, a patent should be granted.

Something seems to be amiss in the Patent Office. It is indeed hard to understand how or why individuals are able to receive patents on inventions such as toast (124) or a peanut butter and jelly sandwich. (125) The problem of invalid patents seems to be growing, and despite the best efforts of the Patent Office, these patents are getting through. Patent applications and issuances are increasing and there is no relief in sight. Something needs to be done in order to assist the Patent Office to prevent unnecessary barriers to entry and in order to return to an open marketplace. It is my belief that statutorily-created or judicially-created exceptions to patentability are not wise, particularly when there are other alternatives that would be just as effective.

(1.) The formal designation for this agency is the United States Patent and Trademark Office. See 35 U.S.C. [section] 1 (1994).

(2.) 35 U.S.C. [section] 282 (1994).

(3.) For discussion of some suspect patents see Robert P. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform, 14 BERKELEY TECH. L.J. 577, 579-80, n.5 (1999); John R. Thomas, The Patenting of the Liberal Professions, 40 B.C. L. REV. 1139, 1161-62 (1999) (citing U.S. Patent No. 5,668,736 (issued Sept. 16, 1997)); Rochelle Cooper Dreyfuss, Are Business Method Patents Bad for Business?, 16 SANTA CLARA COMPUTER & HIGH TECH. L.J. 263, 268 (2000) (citing U.S. Patent No. 5,761,857 (issued June 9, 1998)); Seth Shulman, Software Patents Tangle the Web, (describing, for example, the Compton's New Media patent on multimedia, none of whose forty-one claims survived subsequent reexamination) at (last visited Oct. 11, 2001) (on file with the Rutgers Computer and Technology Law Journal).

(4.) U.S. Patent No. 5,797,127 (issued Aug. 18, 1998) ("[A]pparatus, method, and program for determining a price of an option to purchase an airline ticket, and for facilitating the sale and exercise of those options.").

(5.) For an explanation of how a Dutch auction works, please see the following helpful Web sites: Ebay, at (last visited Sept. 5, 2001); University of Michigan, at (last visited Sept. 5, 2001) (on file with the Rutgers Computer and Technology Law Journal); Agorics, Inc., at (last visited Sept. 5, 2001); IFCI Risk Institute, at (last visited March 19, 2001).

(6.) U.S. Patent No. 5,797, 127.

(7.) It is true that long-felt need in the industry is a consideration to be taken into account when determining obviousness. B.F. Goodrich Co. v. Aircraft Braking Sys. Corp., 72 F.3d 1577, 1582 (Fed. Cir. 1996); Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966). No amount of long-felt need, however, can override what is otherwise a clear case of obviousness. See generally Graham, 383 U.S. at 35-36 (explaining that prior art is used to determine the patentability of new patent applications).

(8.) See Shulman, supra note 3.

(9.) Id.

(10.) Dreyfuss, supra note 3, at 269.

(11.) 35 U.S.C. [subsections] 101, 103 (1994).

(12.) U.S. CONST., art. I, [section] 8, cl. 8.

(13.) Pub. L. No. 106-13, 113 Stat. 1999.

(14.) The United States Patent and Trademark Office maintains a Web site devoted to explaining this legislation and how it changed Title 35. The site also contains the full text of the enacted legislation, at (last visited Oct. 1, 2001) (on file with the Rutgers Computer and Technology Law Journal).

(15.) 35 U.S.C. [section] 154(a)(1) (West Supp. 2001) It states:
 Every patent shall contain a short title of the invention and a grant to
 the patentee, his heirs or assigns, of the right to exclude others from
 making, using, offering for sale, or selling the invention throughout the
 United States or importing the invention into the United States, and, if
 the invention is a process, of the right to exclude others from using,
 offering for sale or selling throughout the United States, or importing
 into the United States, products made by that process, referring to the
 specification for the particulars thereof.


35 U.S.C. [section] 271(a) (West Supp. 2001). It states:
 Except as otherwise provided in this title, whoever without authority
 makes, uses, offers to sell, or sells any patented invention, within the
 United States or imports into the United States any patented invention
 during the term of the patent therefore, infringes the patent.


(16.) 35 U.S.C. [section] 154(a)(2) (West Supp. 2001). It states:
 Subject to the payment of fees under this title, such grant shall be for a
 term beginning on the date on which the patent issues and ending 20 years
 from the date on which the application for the patent was filed in the
 United States or, if the application contains a specific reference to an
 earlier filed application or applications under section 120, 121, or 365(c)
 of this title, from the date on which the earliest such application was


(17.) The United States Patent and Trademark Office "is a non-commercial federal entity and one of 14 bureaus in the Department of Commerce (DOC). The office occupies a combined total of over 1,400,000 square feet, in numerous buildings in Arlington, Virginia. The office employs over 5,000 full time equivalent staff (FTE) to support its major functions - the examination and issuance of patents and the examination and registration of trademarks." Our Business: An Introduction to the PTO, at (last visited Oct. 11, 2001) (on file with the Rutgers Computer and Techonology Law Journal).

(18.) 35 U.S.C [section] 101.

(19.) S. REP. No. 82-1979, at 5 (1952); H.R. REP. No. 82-1923, at 6 (1952); see also Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980) (quoting the preceding Committee Reports).

(20.) Diamond v. Diehr, 450 U.S. 175, 185 (1981) ("Excluded from such patent protection are laws of nature, natural phenomena, and abstract ideas. `An idea of itself is not patentable.' `A principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.'") (citations omitted). See also Chakrabarty, 447 U.S. at 309.

(21.) Chakrabarty, 447 U.S. at 309 (citation omitted).

(22.) See MANUAL OF PATENT EXAMINING PROCEDURE [section] 2107.01 (8th ed. 2001) [hereinafter MPEP].

(23.) See MPEP [section] 2107.01 (II).

(24.) Brooktree Corp. v. Advanced Micro Devices, Inc., 977 F.2d 1555, 1571 (Fed. Cir. 1992).

(25.) See MPEP [section] 2107.01 (II).

(26.) See MPEP [section] 2107.01; Brenner v. Manson, 383 U.S. 519 (1966).

(27.) See MPEP [section] 2107.01; see also MPEP [section] 608.03 ("With the exception of cases involving perpetual motion, a model is not ordinarily required by the Office to demonstrate the operativeness of a device."); MPEP [section] 706.03(a).

(28.) In re Brana, 51 F.3d 1560, 1566 (Fed. Cir. 1995).

(29.) Id. (citing In re Bundy, 642 F.2d 430, 433 (C.C.P.A. 1981)); see also MPEP [section] 2164.07(I)(B).

(30.) See MPEP ` 2107.02 (III)(B).

(31.) Id.

(32.) Id.

(33.) 35 U.S.C. [section] 102 (2001).

(34.) In re King, 801 F.2d 1324, 1326 (Fed. Cir. 1986).

(35.) Knapp v. Morss, 150 U.S. 221, 228 (1893) (quoting Peters v. Active Mfg. Co., 129 U.S. 530, 537 (1889)).

(36.) Dewey & Almy Chem. Co. v. Mimex Co., 124 F.2d 986, 989 (2d Cir. 1942) (Hand, J.).

(37.) See Minnesota Mining & Mfg. Co. v. Johnson & Johnson Orthopaedics, Inc., 976 F.2d 1559, 1565 (Fed. Cir. 1992); Scripps Clinic & Research Found. v. Genentech, Inc., 927 F.2d 1565, 1576-77 (Fed. Cir. 1991); Lindemann Maschinenfabrik GMBH v. American Hoist & Derrick Co., 730 F.2d 1452, 1458 (Fed. Cir. 1984).

(38.) King, 801 F.2d at 1326; see also Standard Havens Prods., Inc. v. Gencor Indus., Inc., 953 F.2d 1360, 1369 (Fed. Cir. 1991).

(39.) See Scripps, 927 F.2d at 1577.

(40.) See In re Graves, 69 F.3d 1147, 1152 (Fed. Cir. 1995) (quoting In re LeGrice, 301 F.2d 929, 936 (C.C.P.A. 1962)); In re Donohue, 766 F.2d 531, 533 (Fed. Cir. 1985).

(41.) 35 U.S.C. 103 (2001).

(42.) Litton Sys., Inc. v. Honeywell, Inc., 87 F.3d 1559, 1567 (Fed. Cir. 1996).

(43.) See Hoover Group, Inc. v. Custom Metalcraft, Inc., 66 F.3d 299, 303 (Fed. Cir. 1995) (supporting the notion that evidence of anticipation does not equate with evidence of obviousness).

(44.) Kirsch Mfg. Co. v. Gould Mersereau Co., 6 F.2d 793, 794 (2d Cir. 1925).

(45.) See Graham v. John Deere Co., 383 U.S. 1, 17-18 (1966); B.F. Goodrich Co. v. Aircraft Braking Sys. Corp., 72 F.3d 1577, 1582 (Fed. Cir. 1996); Hoover Group, Inc., 66 F.3d at 303.

(46.) Hybritech, Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1380 (Fed. Cir. 1986); see also B.F. Goodrich, 72 F.3d at 1582.

(47.) Envtl. Designs v. Union Oil Co. of Cal., 713 F.2d 693, 696 (Fed. Cir. 1983).

(48.) 35 U.S.C. [section] 112.

(49.) Spectra-Physics, Inc. v. Coherent, Inc., 827 F.2d 1524, 1532 (Fed. Cir. 1987).

(50.) Id.; see also Chemcast Corp. v. Arco Indus. Corp., 913 F.2d 923, 927-28 (Fed. Cir. 1990).

(51.) 35 U.S.C. [section] 112.

(52.) Gottschalk v. Benson, 409 U.S. 63, 63 (1972).

(53.) Id.

(54.) Id.

(55.) Id.

(56.) Id. at 67 (quoting Mackay Co. v. Radio Corp., 306 U.S. 86, 94 (1939).

(57.) 333 U.S. 127 (1948).

(58.) Benson, 409 U.S. at 67 (quoting Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948)).

(59.) Id. at 71.

(60.) Id. at 72.

(61.) 450 U.S. 175 (1981).

(62.) Id. at 177.

(63.) Id. at 188 (quoting Mackay Co., 306 U.S. at 94).

(64.) 958 F.2d 1053 (Fed. Cir. 1992).

(65.) Id. at 1058.

(66.) 33 F.3d 1526 (Fed. Cir. 1994).

(67.) Id. at 1544 (emphasis in original).

(68.) Id. at 1543 (emphasis in original).

(69.) 42 F.3d 1376 (Fed. Cir. 1994).

(70.) In re Trovato, 60 F.3d 807 (Fed. Cir. 1995).

(71.) 149 F.3d 1368 (Fed. Cir. 1998).

(72.) Id.

(73.) Id. at 1373.

(74.) 172 F.3d 1352 (Fed. Cir. 1999).

(75.) Id. at 1356 (citation omitted).

(76.) Id. at 1357 (citation omitted).

(77.) 149 F.3d 1368 (1998).

(78.) Id. at 1375 (footnotes omitted).

(79.) Id. at 1475 (citing Rinaldo Del Gallo, III, Are `Methods of Doing Business' Finally out of Business as a Statutory Rejection?, 38 IDEA 403, 435 (1998)).

(80.) 609 F.2d 481 (C.C.P.A. 1979).

(81.) 688 F.2d 789 (C.C.P.A. 1982).

(82.) State St. Bank, 149 F.3d at 1476.

(83.) 160 F. 467 (2d Cir. 1908).

(84.) State St. Bank, 149 F.3d at 1376.

(85.) 37 C.F.R. [section] 1.56 (2000).

(86.) Critikon Inc. v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253, 1256 (Fed. Cir. 1997).

(87.) 37 C.F.R. [section] 1.56(c) (2000).

(88.) See Shulman supra note 3.

(89.) The definition of "material to patentability" is set forth in Rule 56(b), which states:
 Under this section, information is material to patentability when it is not
 cumulative to information already of record or being made of record in the
 application, and

 (1) It establishes, by itself or in combination with other information, a
 prima facie case of unpatentability of a claim; or

 (2) It refutes, or is inconsistent with, a position the applicant takes in:

 (i) Opposing an argument of unpatentability relied on by the Office, or

 (ii) Asserting an argument of patentability.

 A prima facie case of unpatentability is established when the information
 compels a conclusion that a claim is unpatentable under the preponderance
 of evidence, burden-of-proof standard, giving each term in the claim its
 broadest reasonable construction consistent with the specification, and
 before any consideration is given to evidence which may be submitted in an
 attempt to establish a contrary conclusion of patentability.

37 C.F.R. [section] 1.56(b) (2000).

(90.) The earlier version of Rule 56 required patent applicants to disclose to the examiner "all information they are aware of which is material to the examination of the application." 37 C.F.R. [section] 1.56(a) (1991). Rule 56 went on to define the term "material to the examination of the application" by explaining that "information is material where there is a substantial likelihood that a reasonable examiner would consider it important in deciding whether to allow the application to issue as a patent." 37 C.F.R. [section] 1.56(a). See LaBounty Mfg. v. U.S. Intern. Trade Comm'n, 958 F.2d 1066, 1074 (Fed. Cir. 1992).

(91.) Monon Corp. v. Stoughton Trailers, Inc., 239 F.3d 1253, 1261 (Fed. Cir. 2001).

(92.) Baxter Int'l, Inc. v. McGaw, Inc., 149 F.3d 1321, 1327 (Fed. Cir. 1998).

(93.) Id.

(94.) Id.; see also Halliburton Co. v. Schlumberger Tech. Corp., 925 F.2d 1435, 1439 (Fed. Cir. 1991).

(95.) Halliburton, 925 F.2d at 1439.

(96.) Id.

(97.) Id.

(98.) Elk Corp. of Dallas v. GAF Bldg. Materials Corp., 168 F.3d 28, 30 (Fed. Cir. 1999).

(99.) Id.

(100.) Id.

(101.) See Molins PLC v. Textron, Inc., 48 F.3d 1172, 1179 (Fed. Cir. 1995); see also Halliburton, 925 F.2d at 1440.

(102.) See LaBounty, 958 F.2d at 1075-76.

(103.) Kingsdown Med. Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 876 (Fed. Cir. 1988); Halliburton, 925 F.2d at 1439, 1443 n.3.

(104.) Halliburton, 925 F.2d at 1443 (citation omitted) (alteration in the original); see also Kingsdown, 863 F.2d at 876.

(105.) Elk Corp., 168 F.3d at 32.

(106.) Molins PLC, 48 F.3d at 1180-81. See also Elk Corp., 168 F.3d at 32.

(107.) See Kimberly-Clark Corp. v. Procter and Gamble Distributing Co., 973 F.2d 911, 918 (Fed. Cir. 1992).

(108.) Molins PLC, 48 F.3d at 1180.

(109.) Kingsdown, 863 F.2d at 877.

(110.) Braun Inc. v. Dynamics Corp. of America, 975 F.2d 815, 822 (Fed. Cir. 1992).

(111.) Halliburton, 925 F.2d at 1442.

(112.) FMC Corp. v. Manitowoc Co., 835 F.2d 1411, 1416 (Fed. Cir. 1987).

(113.) In reality, a patent is not a monopoly, or even a limited monopoly. Just because an inventor has been granted a patent does not mean that there will be a market for the patented product, and without a market there can be no monopoly. The patent only gives the patent owner the right to exclude others from making, using, selling and importing. See 35 U.S.C. [section] 154(a)(1) and 35 U.S.C. [section] 271. A patent carries with it no expectation for market success. Granted, if the product does have a market, a patent can be a significant barrier to entry that can insulate the patent owner from competition, but a patent in and of itself does not guarantee business success. It is better to think of a patent as a legal document that creates the POSSIBILITY of monopoly profits, but if and only if there are customers for the product and no suitable non-patented alternatives exist in the marketplace.

(114.) Nalpac, Ltd. v. Corning Glass Works, 784 F.2d 752, 753-55 (6th Cir. 1986).

(115.) Delta-X Corp. v. Baker Hughes Prod. Tools, Inc., 984 F.2d 410, 414 (Fed. Cir. 1993); Ortho Pharm. Corp. v. Smith, 959 F.2d 936, 944 (Fed. Cir. 1992).

(116.) Compare 37 C.F.R. [section] 1.56 (1991) with 37 C.F.R. [section] 1.56 (2000).

(117.) Of course, the original inventor may well not be the one exercising the exclusive right. In today's world it will likely be corporations of all shapes and sizes that control the exclusive right, but at least in the United States the exclusive right derives from the inventor.

(118.) Dreyfuss, supra note 3, at 268.

(119.) 35 U.S.C. [section] 101 (1999).

(120.) Id.

(121.) 35 U.S.C. [section] 102 (1999).

(122.) 35 U.S.C. [section] 103 (1999).

(123.) 35 U.S.C. [section] 112 (1999).

(124.) U.S. Patent No. 6,080,436 (issued June 27, 2000).

(125.) U.S. Patent No. 6,004,596 (issued Dec. 21, 1999).

Eugene R. Quinn, Jr. *

* The author is an Assistant Professor of Law at Barry University School of Law in Orlando, Florida, where he teaches intellectual property, Internet and business law courses. He is presently on a leave of absence from Barry University School of Law and is a Visiting Professor at the University of Toledo College of Law. Professor Quinn also teaches at the Summer Institute in Intellectual Property at Whittier Law School, and is an Adjunct Professor at the University of Toledo College of Law, where he teaches patent claim drafting. He is a member of the patent bar and admitted to practice in New Hampshire. Professor Quinn holds an LL.M. in Intellectual Property from Franklin Pierce Law Center; a J.D. from Franklin Pierce Law Center; and a B.S.E.E. from Rutgers University. His Internet home page can be found at
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Title Annotation:Patent and Trademark Office
Author:Quinn, Eugene R., Jr.
Publication:Rutgers Computer & Technology Law Journal
Geographic Code:1USA
Date:Mar 22, 2002
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