Payment Patent Infringement
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Transcript of Payment Patent Infringement
Payment Patent Infringement
J. Thomas Vitt
Overview
• The Patent System
• The Emergis Case
• Practical Lessons
The Patent System
What Can You Patent?
The Patent System
What Can You Patent?
• Supreme Court: “anything under the sun made by man”
• “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 . . .”
• But you cannot patent: (1) abstract ideas (2) laws of nature (3) physical phenomena
The Patent System
What Can You Patent?
• To obtain a patent, the claimed invention has to be:• Novel (meaning the invention has at least one difference from
what’s in the art)• Not Obvious (meaning more than ordinary skill is required)• Useful (an easy standard)
• The Practical Reality: The pendulum swings back and forth, but more things are patentable than you might think
The Patent System
Two Areas of Special Interest for Payment Systems
– Business Method Patents
– Software Patents
The Patent System
Business Method Patents
• “A new and useful process” is patentable
• A method of doing business can meet this definition
• Limited by the “abstract idea” limitation (and other requirements for patentability)
The Patent System: The Controversy Over Business Method Patents
• State Street (1998) Broad permission for business methods as long as the method produced a “useful, concrete, tangible result”
– Led to significant increase in “business method” patent filings
– Business method patents are harshly criticized
The Patent System: The Controversy Over Business Method Patents
• Bilski (2010)
– Federal Circuit reversed State Street and created a narrow, bright line test for business methods: “tied to a machine” or “transformation of matter”
– But the Supreme Court rejected that bright line “machine or transformation” test
• Business methods survive (barely) and can still be patented
• But, Supreme Court invalidated the patent in the Bilski case as “abstract idea”
The Patent System: The Controversy Over Business Method Patents
• Continuing battle on what business methods are patentable
• Congress to the rescue?– No, but
– Pending Patent Reform: Singles out business method patents that claim “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service” for a special post-grant review procedure
– Can use to stop litigation and force Patent Office review
– May apply to business methods in utility payment systems
The Patent System:Software Patents
• Less controversial than business method patents, but still controversial– Mark Cuban: Outlaw all software patents!
– Software patentable as an article of “manufacture”, also as a “process”
• Retail Decisions (August 16, 2011)– Rejected computerized credit card fraud detection
system as “abstract idea”
The Emergis Case
• The Emergis Patent Claims an Electronic Invoicing and Payment System
The Emergis Case
• 99 Claims! But, essentially the patent claims using a computer to pay bills online
• Emergis was a “non-practicing entity” (called a “patent troll” by defendants)
The Emergis Case
• Emergis Patent Claims: Many words obscuring simplicity– (1) invoice presentation electronics adapted to present
customer billing data . . . and to request payment instructions
• Translation: A computer sends you the bill
– (2) remote electronic customer authorization interface . . . to (a) receive customer billing data and request for payment (b) provide customer billing data and request for payment instructions to customer (c) transmit customer payment instructions directly to invoicer
• Translation: You use a computer to pay the bill
The Emergis Case
• Direct Transmission is the key
The Emergis Case
The Emergis Campaign
• Sent (at least) dozens of threat letters to utilities in 2004-2006 time period
• Filed 16 lawsuits in 2005-2006
The Emergis Case
The Response to the Emergis Campaign• Pay, or Fight?
The Emergis Case
Several Companies Chose to Settle
• Different Payment Systems– Non-infringement defense is much cheaper than invalidity
• Home-grown systems/third-party providers
• Emergis Settlement Strategy, and the Costs of Litigation
The Emergis Case
• Fear of Cost of Patent Litigation Is A Powerful Tool for Plaintiffs
• Median Costs To Defend Mid-Sized Patent Case is $1.5 Million (through end of discovery) and $2.5 Million (through trial)
Source: AIPLA Report of the Economic Survey (2011)
The Emergis Case: Emergis v. Otter Tail
Otter Tail’s vendor, Princeton eCom, chose to fight
• Defense Strategy
– Focus just on direct transmission noninfringement defense• Princeton eCom system was the same as Figure 1
– Ignore, as much as possible, all other issues
– Ask Court to dismiss the case as soon as possible
The Emergis Case
• The Strategy Worked• Chronology is Revealing
– April 18, 2005 Otter Tail Letter: “the system used follows the prior art illustrated by Figure 1 of the ‘362 Patent”
– January 26, 2006 Emergis Files Suit
– July 10, 2006 Otter Tail Files Motion for Summary Judgment, re Direct Transmission
– March 9, 2007 Otter Tail Wins in District Court
– January 31, 2008 Federal Circuit Affirms Otter Tail’s Win
The Emergis Case
• Defense Argument: – Direct Transmission means what it says.
– Payment instructions go only to third-party vendor, are not transmitted “directly to the invoicer”, and indeed are never transmitted to the invoicer
• Emergis Argument– “directly to the invoicer” means directly to the invoicer
or to an agent or third party that the invoicer hires or controls
The Emergis Case
• District Court and Federal Circuit Rejected Emergis Argument
• Summary Judgment of No Infringement– Early Motion Saved Money
• Emergis Campaign Ended
Practical Lessons From The Emergis Case
• Pay Attention To Vendor Contracts
• Consider Joint Defense
• Analyze Early, and Don’t Feel Compelled to Cave
Questions?
J. Thomas VittPartner Dorsey & Whitney LLP50 South Sixth StreetSuite 1500Minneapolis, MN 55402-1498(612) [email protected]
Devan V. Padmanabhan Partner Dorsey & Whitney LLP50 South Sixth StreetSuite 1500Minneapolis, MN 55402-1498(612) [email protected]