Senate Proposes Expansion of USPTO’s Business Method Patent Challenge Proceeding

As I pointed out last week, Congress is considering fixes to the U.S patent system are designed to combat the patent troll problem. Yesterday, S.866 or the “Patent Quality Improvement Act” was introduced by Senator Charles Schumer (D-NY) to amend Sec. 18 of the recently passed America Invents Act (AIA). The Bill proposes to remove the 8-year sunset provision of the Transitional Program for Covered Business Method (CBM) Patents so that it becomes permanent. Additionally, the Bill proposes to remove the language “a financial product or” from the standing definition. In its place, the bill proposes “an enterprise, product, or.” The change would effectively make clear that any e-commerce patent, even if not related to finances per se, is subject to a CBM challenge. (Note that the USPTO has been sued very recently on the importance of this “financial” component of the statute.)

The Bill essentially seeks to codify Senator Schumer’s commentary provided to the USPTO last year on the appropriate scope of a CBM. In his earlier comments to the USPTO, the Senator urged the USPTO to take an expansive read of a covered business method patent such that e-commerce and software patents would be covered.

As I have pointed out in the past, CBM challenges are especially lethal to patent trolls. While the above fix will not apply to trolls excepted under the “technological invention” component of the CBM definition, it would almost certainly devastate the business model for most e-commerce and software patent trolls. Without the leverage of the high cost of litigation to force settlements, and with the far less expensive and challenger friendly proceedings of the USPTO, contingency based legal representation becomes a very dicey proposition.

I expect that this legislation will garner wide support and become law in the near term.