AMEX Gift Cards Not Infringing

Privacash, Inc. v. Am. Express Co., No. 2011-1027 (Aug. 11, 2011) [PDF].

Privacash sued AMEX alleging that AMEX gift cards infringed U.S. Patent 7,328,181. The ‘181 provides a system with the objective of providing an anonymous and untraceable means for transacting purchases over the internet.

AMEX cards are activated when purchased and a usable until the value of the card is exhausted. AMEX will deactivate a card if it is reported lost or stolen. If reported stolen, a replacement gift card will be issued with the value remaining on the deactivated card.

Claim 1 of the ‘181 patent provides :

1. A method of transacting a purchase, comprising:

distributing a plurality of unfunded purchase cards from a purchase card provider to a plurality of purchase card outlets, wherein each of the purchase cards is a bearer instrument having an associated account number issued by a major branded credit card organization, an expiration date and a non-personalized cardholder name selected by the purchase card provider printed thereon, wherein the purchase card does not include information identifying the specific perspective cardholder, wherein information associated with each of the purchase card accounts is maintained in a software implemented application operated by the purchase card provider;

issuing a purchase card to a cardholder at the a purchase card outlet;

contacting the purchase card provider to fund and activate the purchase card account of specific purchase card issued with a software implemented application or via the telephone; and

transacting a cardholder purchase at any one of a number of retailers not associated with the purchase card outlet which accepts credit cards of the major branded credit card organization, wherein the cardholder presents the purchase card and the retailer contacts the purchase card provider over a network connection to interface with the software implemented application transmitting the purchase amount and the purchase card account number without requiring the retailer to collect and transmit personalized card holder identifying information, to verify using the software implemented retail application that the  purchase card is unexpired and that the purchase amount does not exceed the cardholder’s funding limit, whereupon the purchase card account information will be debited by the amount of the purchase and the account of the retailer will be electronically credited completing the purchase transaction.

A cancelable card is not a bearer instrument. The Federal Circuit  agreed with the district court that the AMEX card was not a bearer instrument or bearer card because it was capable of being cancelled or deactivated. Therefore the AMEX card was not  “as good as cash” and may not be  “used up to the limit available on the card by anyone in possession of the card” as provided in the ‘181 patent description.

The court noted that the purpose of the card in the ‘181 patent was to ensure anonymity of a purchase. However because the AMEX card allowed the true owner of the AMEX card to deactivate the card and get a replacement for the value remaining, the AMEX card did not provide anonymity, which was the purpose of the system of the ‘181 patent.

U.S. District Court Invalidates Computer Aided Method of Managing a Credit Application under Bilski

Dealertrack, Inc. v. Huber, et al., Doc. No. 06-2335 (C.D. Cal. 2009) [PDF]

Summary. The court granted summary judgment finding the asserted claims directed to a computer aided method of managing a credit application were invalid as failing the machine-or-transformation test from Bilski. The court found the process claims were not tied to a particular machine.

Facts. The plaintiff DealerTrack, Inc. (DealerTrack) asserted that defendant’s Finance Express and RouteOne infringed three of DealerTracks patents, including U.S. Patent 7,181,427 [Link] (the 427 Patent). The ‘427 patent provides a computer based credit application processing system [that] provides a graphical user interface, automatic software update downloading, lender to lender routing of credit applications, and integration with in-house finance and insurance systems and third party data entry facilities, among other features.

Claim 1 of the ‘427 patent provides:

A computer aided method of managing a credit application, the method comprising the steps of:

receiving credit application data from a remote application entry and display device;
selectively forwarding the credit application data to remote funding source terminal devices;
forwarding funding decision data from at least one of theremote funding source terminal devices to the remote application entry and display device;
wherein the selectively forwarding the credit application data step further comprises:
sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;
sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding [sic] source returns a positive funding decision;
sending . . . a credit application . . . after a predetermined time . . . ; or;
sending the credit application from a first remote funding source to a second remote finding [sic] source . . . .

DealerTrack arged that the claims of the 427 Patent were tied to a (1) central processor consisting of a specially programmed computer hardware and database, a (2) remote application entry and display device, and a remote funding source terminal device.

Central Processor Not Specially Programmed. The court stated, “The 427 Patent does not specify precisely how the computer hardware and database are ‘specially programmed,’ and the claimed central processor is nothing more than a general purpose computer that has been programmed in some unspecified manner.” See Ex Parte Nawathe, No. 2007-3360, 2009 WL 327520, (BPAI Feb. 9, 2009) (rejecting under Section 101 a claim reciting a computerized method of inputting and representing XML documents as insufficiently tied to a particular computer specifically programmed for executing the steps of the claimed method).

Not Tied to a Particular Machine. In an earlier claim construction order the court found:

  • “remote application entry and display device included any device, e.g.,personal computer or dumb terminal, remote from the central processor, for application entry and display.”
  • terminal device as any device, e.g., personal computer or dumb terminal, located at a logical or physical terminus of the system.”

The court has little trouble finding these devices were not particular machines withing the meaning of Bilski after finding that these various “devices” include “any device.”

Drafting Tips for Overcoming Obviousness Rejections and Officially Noticed Facts

In a patent application, it is important to describe the benefits and advantages that the invention provides over the prior art. This gives the invention context and provides reasons for the Examiner to find the unique features of the invention novel and non-obvious.

Defensive Uses. You may also use the benefits and advantages provided in the application defensively during prosecution. This may occur in two instances (1) when the examiner makes an obviousness rejection and provides reasons why one skilled in the art would combine the references and (2) when the examiner takes official notice of one or more facts.

Reasons To Combine References. Section 2145(X) of the MPEP provides that an obviousness rejection may not be based on improperhindsight reasoning gleaned from the applicants disclosure. Section 2142 provides To reach a proper determination under 35 U.S.C. 103, the examiner must step backward in time and into the shoes worn by the hypothetical person of ordinary skill in the art when the invention was unknown and just before it was made. It continues, The tendency to resort to hindsight based upon applicant’s disclosure is often difficult to avoid due to the very nature of the examination process. It further provides that knowledge of the applicants disclosure must be put aside in reaching an obviousness determination.

Therefore, if the Examiner provides a reason to combine two references, and that reason is listed in the application, the applicant can assert that the Examiner is using improper hindsight reasoning based on the applicant’s disclosure.

For example, say the Examiner asserted that one skilled in the art would combine two references to gain operational efficiency. Further, the applicant provided in the disclosure that the invention provided the benefit of increased operational efficiency over the prior art. Then the applicant could assert that the examiner is using improper hindsight reasoning and therefore, the operational efficiency rationale is not a proper basis to combine references. The Examiner may not be able to sustain the obviousness rejection without the given rationale.

Official Notice. Section 2144.03 of the MPEP allows an Examiner to take official notice of facts not in the record or to rely on common knowledge in making a rejection. However, section 2144.03(A) provides that Official notice unsupported by documentary evidence should only be taken by the Examiner where the facts asserted to be well-known, or to be common knowledge in the art are capable of instant and unquestionable demonstration as being well-known. The Examiner must be capable of such instant and unquestionable demonstration as to defy dispute.

Section 2144.03(B) provides that when the Examiner claims certain facts are common knowledge, the Examiner must “provide specific factual findings predicated on sound technical and scientific reasoning to support his or her conclusion of common knowledge.”

If the examiner uses a reason listed in the applicants disclosure to support his or her conclusion of common knowledge–like above–the applicant may assert that the Examiner is using improper hindsight reasoning based on the applicant’s disclosure.

Failure to List Advantages. If the applicant drafts a “slim” application that does not list the advantages and benefits provided over the prior art, the applicant will have a more difficult time attacking an Examiner’s reasoning as a basis of officially noticed facts and as used in an obviousness rejection.

Federal Circuit on Tour

The U.S. Court of Appeals for the Federal Circuit will hold oral argument in Silicon Valley in November:

The Court of Appeals for the Federal Circuit will hold hearings in several locations in Silicon Valley, California during the week of November 3, 2008. Santa Clara University School of Law, Stanford University School of Law and the United States District Courts in San Francisco and San Jose will each host a panel of judges for oral argument during that week.


AIPLA Suggests Improvements at the USPTO

I previously reported on the patent prosecution costs disclosed by Alan Kasper’s testimony [PDF] to Congress as the First Vice-President of the American Intellectual Property Law Association (AIPLA). In that testimony, Alan suggested the following improvements at the USPTO:

  • Develop a culture within the USPTO to encourage Examiners to propose claim amendments that would, at least in the examiners view, distinguish the claimed invention over the prior art. This would eliminate applicant guessing as to what a Examiner considers allowable and permit the applicant to forgo the cost of filing further amendments, RCEs, continuations, or appeals, by accepting the Examiner’s proposal.
  • Encourage the Examiners to resolve the applicant’s technical formality errors (e.g. an incorrectly designated a claim in an Amendment as, for example, currently amended) by informal communication and Examiners amendment rather than, for example, issuing a Notice of Non-Compliant Amendment.
  • Modify “Pre-Appeal Submission” process to avoid having both the Examiner and the Examiner’s Supervisor—both of whom are presumably against finding any error in the Examiner’s action—on the three member panel that evaluates the reasonableness of the Examiners position. At least two senior examiners not involved in prosecution of the application should be on the panel. Having both the Examiner and the Examiner’s Supervisor sets up a 2 to 1 panel position against the applicant at the start.
  • Improve Examiner retention through improvements in the diversity and quality of opportunities for professional development.
  • Increase monitoring of Examiner’s work to ensure quality, by for example, triggering an investigation when an application has more than three Office Actions on the merits.

“End Software Patents” Group Lanches and Sparks Debate

  • The group “End Software Patents” was born recently and asserted that (1) software patent lawsuits result in $11.26 billion in costs; (2) non-software companies are increasingly targeted for software patent infringement suits; and (3) the USPTO and the US Supreme Court [link] do not support software patentability. [Report]
  • Joff Wild of IAM questions the 11.26 billion dollar figure and asserts the underlying data on “total cost” includes both legal costs as well as costs to the business from lost market share, management distraction, etc–not simply litigation costs.
  • Ben Klemens, Executive Director of End Software Patents defends his numbers and responds to Joff here. Joff responds to Ben’s defense here.

Patent Prosection Costs

Peter Zura’s 271 Patent Blog reports on the Congressional testimony [PDF] of the First Vice-President of the American Intellectual Property Law Association (AIPLA) concerning the average cost to prosecute and obtain a patent.

The Average Cost of Preparing a Patent Application:

  • To prepare and file an original application of minimal complexity (10 page specification, 10 claims) by a firm the size of Sughrue Mion, PLLC (an IP boutique with over 100 IP professionals) $8,548.00
  • Mechanical cases (relatively complex) $11,482.00
  • Electrical/computer cases (relatively complex) $13,684
  • Biotechnology/chemical cases (relatively complex) $15,398.00

The Average Cost of Filing an Amendment:

  • Minimal complexity $2,244.00
  • Mechanical case (relatively complex) $3,506.00
  • Electrical/computer case (relatively complex) $3,910.00
  • Biotechnology/chemical case (relatively complex) $4,448.00

The government fees for those filings are $1,030.00 (unless the Applicant is a small entity).

GAO: USPTO Hiring Won’t Reduce Backlog

Wednesday the Government Accountability Office released a report [Summary] [Full Report] that found “it is unlikely that the [Patent Office] will be able to reduce the growing backlog simply through its hiring efforts.” The report provided, “The agency has also estimated that if it were able to hire 2,000 patent examiners per year in fiscal year 2007 and each of the next 5 years, the backlog would continue to increase by about 260,000 applications, to 953,643 at the end of fiscal year 2011.” Therefore the report stated, “Despite its recent increases in hiring, the agency has acknowledged that it cannot hire its way out of the backlog and is now focused on slowing the growth of the backlog instead of reducing it.”


Software and Information Industry Association Questions State Immunity

siia.jpgThe Software and Information Industry Association (SIIA) filed an amici curiae brief asking U.S. Supreme Court to hear a case where State sovereign immunity for patent infringement is at issue. The issue is whether a State waives its Eleventh Amendment immunity in patent infringement actions by regularly and voluntarily nvoking federal jurisdiction to enforce its own patent rights. The SIIA asserts that it is equitable for States to have immunity from damages for patent infringement while they are free to sue private sector organizations for violations of State held intellectual property rights. The SIIA joined the U.S. Camber of Commerce in filing the brief.

BMPG v. Calf Dept of Health Services, No. 07-956 [Docket Link] [SIIA Brief] [SIIA Press Release].