BUILDING FENCES IN CYBERSPACE:BUSINESS METHOD PATENTS AND THE INTERNET

Analysis of Recent Internet/E-Commerce Business Method Patents

by Jerry A. RiedingerPerkins Coie LLP1201 Third Ave.

48th FloorSeattle, WA 98052

206-583-8664

Prepared for thePracticing Law Institute Program on

“Patenting the New Business Model,Building Fences in Cyberspace”

at theHyatt Regency Hotel

San Francisco, CAJune 26, 2000

CONTENTS

I. The State of the Internet IP World:Patenting Business Models in Cyberspace. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. The “Business Method” Battle Lines. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

B. Biting the Hand that Feeds Them. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

C. The Road to State Street. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

D. High Tech vs. Low Tech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II. WHAT IS A BUSINESS METHOD PATENT? . . . . . . . . . . . . . . . . . . . . . . . . 12

III. ISSUES REGARDING INTERNET BUSINESS METHOD PATENTS. . . . . . 17

A. Litigating Internet Business Method Patents. . . . . . . . . . . . . . . . . . . . . . 17

B. Drafting Internet Business Method Patents. . . . . . . . . . . . . . . . . . . . . . . 19

IV. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

APPENDIX A Patent Claims From Selected Internet“Business Method” Patents. . . . . . . . . . . . . . . . . . . . . . . A

APPENDIX B Selected Non-Internet Patent Claims Argued toInclude “Business Methods”. . . . . . . . . . . . . . . . . . . . . . B

APPENDIX C USPTO Business Method Patent Initiative. . . . . . . . . . . . . .. . . C

APPENDIX D Selected Excerpts from the PTO Manual for

Patent Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . D

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Patenting The New Business Model:Building Fences In Cyberspace*

Litigation over Internet business method patents has begun, and its presence isspreading throughout the web. Although the growth in Internet and e-commerce patentlitigation has not matched the explosive expansion of e-commerce and the web itself,Internet patent litigation is now an established part of the e-commerce environment.1

Yahoo! has been sued over its system for retail purchases.2 Priceline.com sued Microsoftover its reverse auction patent.3 Wang sued AOL, among others, for infringement ofWang’s “Videotext Frame Processing” patent.4 Microsoft was again sued over an“electronic directory” patented by Civix-DDI, LLC.5 eBay has been sued by NetworkEngineering Software, Inc. over an “online information service” patent.6 CompuServewas sued over a 1985, pre-web patent relating to sending music over a network.7 Ofcourse, Amazon.com’s successful pursuit of a preliminary injunction has repeatedlycaptured headlines.8

Indicative of the omnipresent nature of e-commerce patent suits is their spreadbeyond the major e-commerce players. As in other technologies, patent suits nowpepper the activities of smaller e-commerce players.9 Yet this flowering of litigationmasks a host of uncertainties that stalk e-commerce patents, raising issues that will onlybe eroded by time and a raft of judicial pontification. In the interim, the Internet and theweb will continue to evolve, while locked in a perpetual embrace with the patent Medusa. * Earlier versions of this paper accompanied the author’s remarks at the Washington State Bar Association5th Annual Intellectual Property Institute, March 24, 2000 in Seattle, WA and at the San FranciscoIntellectual Property Law Association Annual Seminar, May 25, 2000 in Victoria, B.C.1 Only a few months ago, in December of 1999, the advent of internet patent lawsuits evoked startled, andeven bitter, reaction. See, e.g., R. Korman, Behold the Technology Patents! Behold the String ofLawsuits!, The New York Times (Dec. 27, 1998), available at www.nytimes.com.2 Harrington v. Yahoo! Inc., No. 4:99 CV-1751 (E.D. Mo.), now transferred to the Northern District ofCalifornia.3 U.S. Patent No. 5,794,207 directed to a “Method and Apparatus for a Crytographically AssistedCommercial Network System Designed to Facilitate Buyer-Driven Conditional Purchase Offers.” SeeAppendix A-2.4 U.S. Patent No. 4,751,669. See B. Wright, “Internet and E-Commerce Patents,” available atwww.bannerwitcoff.com/articles.htm.5 See CIVIX-DDI, LLC v. Microsoft Corp. et al., 2000 U.S. Dist. LEXIS 717 (Jan. 24, 2000).6 U.S. Patent No. 5,778,367, titled “Automated On-Line Information Service and Directory, Particularlyfor The World Wide Web.” Representative ’367 patent claims are at Appendix A-13. See also, B. Wright,“Internet and E-Commerce Patents,” available at www.bannerwitcoff.com/articles.htm.7 See Interactive Gift Express, Inc. v. CompuServe, Inc., 47 U.S.P.Q.2d 1797 (S.D.N.Y. 1998).8 See Amazon.com, Inc. v. Barnesandnoble.com, Inc., 51 U.S.P.Q.2d 1115 (W.D. Wa. 1999). Adiscussion of the headlines and controversy resulting from the Amazon.com suit is contained in section IA,infra, regarding “The ‘Business Method’ Battle Lines.”9 See, e.g., Trilogy Software, Inc. v. CarsDirect.com, Inc., No. A 99CA-69 (W.D. Tex.); ParsecSight/Sound, Inc. v. N2K, Inc., No. 98-CV-118 (W.D. Pa.); Coolsavings.com, Inc. v. I. Commerce Corp.,51 U.S.P.Q.2d 1136 (N.D. Ill. 1999). Doubleclick has also sued L90 in the Eastern District of Virginiaon its advertising tracking software, U.S. Patent 5,948,061 titled “Method of Deliver, Targeting, andMeasuring Advertising Over Networks. The ’061 patent claims are at Appendix A-10.

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I. THE STATE OF THE INTERNET IP WORLD:PATENTING BUSINESS MODELS IN CYBERSPACE

The rise of e-commerce patent litigation has produced a maelstrom of protest andcommentary, causing even the titans of e-commerce to take note. On March 9, 2000, JeffBezos, Time Magazine’s 1999 “Person of the Year”10 and the founder of Amazon.com,proposed significant changes to the patent system, including a 3 to 5 year term for“business method and software patents.” 11 Occurring three months after the start of aboycott of Amazon.com by strident “open source” advocates on the Web,12 Bezos’action injected further electricity into the already charged subject of software patents,especially patents on business methods and e-commerce. The action guaranteescontinued debate on a subject the patent community had believed resolved: the legitimacyof e-commerce and business method patents in a world operating at “internet speed.”

The opportunities for unfettered business method patents ballooned with thedecision by Court of Appeals for the Federal Circuit in State Street Bank,13 in which theFederal Circuit adopted the view that “business methods” were not statutorily excludedfrom patentable subject matter.14 While the patent community responded with mildsurprise at State Street (the decision, after all, reflected the common view among patent 10 “Jeff Bezos: Person of the Year,” Time Magazine, Dec. 27, 1999, vol. 154, no. 26.11 See An Open Letter From Jeff Bezos on the Subject of Patents, posted March 9, 2000 on theAmazon.com web site (at www.amazon.com/exec/obidos/subst/misc/patents.html/103-4069011-1038207).The “open letter” was widely reported. See, e.g., Amazon.com Chief Executive Urges Shorter Duration forInternet Patents, The Wall Street Journal, March 10, 2000 p. B3; Bezos Urges Changes in Patent Law,reported March 10, 2000 by the Associated Press and published in the Washington Post online edition, atwww.washingtonpost.com/wp-srv-aponline/20000309/aponline17354_000.htm; V. Slind-Flor, Bezos’Patent Ideas are Roiling the IP Waters, Cal Law, www.callaw.com/opinions/stories/edit0321c.html.12 At the center of the open source movement is the “Free Software Foundation,” founded by softwareactivist Richard Stallman. The philosophy of Mr. Stallman and the Free Software Foundation may befound in the “GNU Manifesto” at www.gnu.ai.mit.edu/gnu/manifesto.html. The “Open Source” positionon software patents is described in Mutual Defense Against Software Patents, Jan. 28, 1994, available atlpf.ai.mit.edu/Patents.mutual-def.html and Against Software Patents, Feb. 28, 1991, available atlpf.ai.mit.edu/Patents/against-software-patents.html. An example of Stallman’s activity is his call for aboycott against Amazon.com for its recent suit against Barnesandnoble.com on the “1-Click” patent,Amazon.com, Inc. v. Barnesandnoble.com, Inc., 73 F. Supp. 2d 1228 (W.D. Wa. 1999). The boycott isdescribed in, for example, Stallman, Updated: Richard Stallman – Boycott Amazon! Linux Today,www.linuxtoday.com.story/13652.html and in L. Grossman, Boycott Amazon?, Time Digital, Dec. 22,1999, www.time.com/time/digital/daily/0,2822,36373,00.html. Although prominent in the softwarecommunity, Stallman’s approach has had, at best, only moderate success. See, e.g., S. Garfinkel, IsStallman Stalled? Wired Mar./Arp. 1993 (available atwww.wired.com/wired/archive//1.10/stallman_pr.html).13 State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 47 U.S.P.Q. 2d1596 (Fed. Cir. 1998), cert. denied 119 S.Ct. 851 (1999).14 State Street, 149 F.3d at 1377. See also 35 U.S.C. §101. Section 101 defines patentable subject matteras “any new and useful process, machine, manufacture, or composition of matter, or any new and usefulimprovement thereof.”

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attorneys that business method patents are a natural extension of traditional patentlaw),15 the software, e-commerce and “open source” communities reacted with dismay atwhat they perceived as an unjustifiable restriction on internet freedom.16 The financialcommunity, especially banks and large financial service institutions, reacted with lessfervor, but nevertheless mobilized to minimize what it saw as an expanding threat to theindustry. The general public, with no immediately obvious stake in the outcome, barelynoticed what may seem a mere tempest in a teapot.17 Each of these reactions has 15 A post State Street discussion in the Federal Circuit Bar Journal referred to State Street as “theculmination of decades of evolution of the statutory patentability of mathematical algorithms...an almostpredictable result.” S. Swanson, The Patentability of Business Methods, Mathematical Algorithms andComputer-Related Inventions After the Decision by the Court of Appeals for the Federal Circuit in StateStreet, 8 Fed. Cir. B. J. 153, 154 (1999). According to Swanson, State Street suggests “the court systemmight catch up to industry.” Id. at 152. Both the Federal Circuit and earlier commentators emphasizedthat the “business method” exception had never been adopted by the federal courts, including the FederalCircuit and its predecessor, the Court of Customs and Patent Appeals. State Street, 149 F.3d at 1375; Inre Schrader, 22 F.3d 290, 298 (Fed Cir. 1994) (Newman, J., dissenting); R. Del Gallo, Are ‘Methods ofDoing Business’ Finally Out of Business as a Statutory Rejection? 38 IDEA 403 (1998); M. Fuelling,Manufacturing, Selling, and Accounting: Patenting Business Methods, 76 J. Pat. & Trademark Ofc. Soc’y471 (1994); A. Hansmann, Method of Doing Business, 50 J. Pat. Ofc. Soc’y 503 (1968); G. Tew, Methodof Doing Business, 16 J. Pat. Ofc. Soc’y 607 (1934). In the words of Jay Walker, founder of WalkerDigital (creator of Priceline.com), “Our patents are no different than the patents granted after the inventionof electricity caused a revolution in how industrial processes worked.” S. Hansell, Surging Number ofPatents Engulfs Internet Commerce, The New York Times (Dec. 11, 1999), available on the archives ofwww.nytimes.com.16 See the discussion accompanying notes 19-23 infra. A similar, though more muted reaction has beenexpressed in Canada. See, e.g., M. Geist, A patently obvious threat to e-commerce, globetechnology.com(Jan. 27, 2000) available at www.globetechnology.com/archive/gam/E-Business/20000127/TWGEIS.html.17 The recent article in the New York Times Magazine is the first feature-length discussion of the topic inthe general press. Among other things, the article sharply criticized the patent office:

“In ways that could not have been predicted even a few years ago, the patent system is incrisis. A series of unplanned mutations have transformed patents into a positive threat tothe digital economy. The patent office has grown entangled in philosophical confusionof its own making; it has become a ferocious generator of litigation; and manytechnologists believe that it has begun to choke the very innovation it was meant tonourish.”

J. Gleick, Patently Absurd, New York Times Magazine (March 12, 2000) (the article may be found on theweb at www.nytimes.com/library/magazine/20000312mag-patents.html). An earlier publication with anidentical title was published in Wired, a magazine with a narrower clientele. See S. Garfinkel, PatentlyAbsurd, Wired (July 1994) (the Wired Patently Absurd article is available on the web atwww.wired.com/wired/archive/2.07/patents_pr.html). A third article with the identical title was publishedshortly before the NY Times Magazine article in the alternative newspaper “Seattle Weekly.” See A. Gunn,Patently Absurd, Seattle Weekly (March 9, 2000). Yet a fourth article with the identical title appeared inForbes Magazine on May 29, 2000. See P. Ross, Patently Absurd, Forbes Magazine, (May 29, 2000),available at www.forbes.com/forbes/00/0529/6513180a.htm. Still another article with a similar titleappeared in early 1999 in the New York Times. See D. Caruso, Patent Absurdity, The New York Times(Feb. 1, 1999), available from the New York Times archives at www.nytimes.com. A short comment alsoappeared in 1999 in Fortune magazine, J. Gurley, The Trouble With Internet Patents, Fortune Jul. 19,1999 available at www.fortune.com/fortune/technology/gurley/1999/07/19/index.html. Software patentcritic Greg Aharonian published a similar 1999 criticism in IEEE Software: G. Aharonian, Does ThePatent Office Respect The Software Community? IEEE Software, Jul./Aug. 1999 available atwww.bustpatents.com/ieeeart.htm. The harsh criticism of software and e-commerce patents in the articlescould lead to greater general public opposition to business method patents.

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importance, to varying degrees, to the outcome of the debate on e-commerce and businessmethod patents.

A. The “Business Method” Battle Lines

The loudest voices in the cacophony are those raised by the software community.Since the decision in State Street, “open source” software advocates have cried loud andlong about the perceived ills of software patents, with particular emphasis on e-commercepatents.18 Similar attitudes are expressed by members of the software community whoare not formally associated with the “open source” movement, but who neverthelessconsider software and business method patents anathema.19 Despite the stridency oftheir expression, the anti-patent attitudes of the software community would have meritedlittle consideration were it not for the stature of some adherents. On the software side,the opponents of business method patents include Richard Stallman, Linux advocate andsometime “open source” guru,20 as well as Tim Berners-Lee, considered one of thecreators of the world-wide-web.21 On the legal side, the anti-patent advocates includeHarvard professor and sometime internet-law guru Lawrence Lessig,22 who, betweenservice in U.S. v. Microsoft23 and his professorial duties, has eloquently criticized patentswhen applied to the internet.24 Similarly, Professor Merges of the University ofCalifornia at Berkeley, author or Intellectual Property in the New Technology Age,25 hassharply criticized e-commerce patents.26 Bezos’ action has now added the influence of 18 An example is the several thousand negative comments regarding Amazon.com’s 1-Click™ enforcementthat accompany the “Open Letter” from open-source advocate Tim “O’Reilly to Amazon.com chairman JeffBezos. See www.oreilly.com/ask_tim/amazon_patent.comments.html.19 A detailed listing of the opposition to such patents is available at www.bustpatents.com, operated byInternet Patent News Service founder Greg Aharonian.20 See the discussion of Richard Stallman in n.3, supra.21 See M. Duvall, No Patent Excuses, Inter@ctive Week (May 27, 1999) published atwww.zdnet.com/intweek/stories/column/0,4163,2266093,00.html.22 See the discussion of Professor Lessig’s views accompanying notes 31-38 and 41-44 infra.23 Professor Lessig was selected by the presiding judge in the Microsoft anti-trust litigation, Judge ThomasPenfield Jackson, appointed him a special master to address issues relating to a 1995 consent decree, a rolethat was subsequently rejected by the Court of Appeals for the D.C, Circuit. Professor Lessig wasnevertheless invited by Judge Jackson to submit an amicus brief on liability issues. Professor Lessig’srole in the Microsoft antitrust litigation is outlined in D. Bank, Legal Scholar Could Influence MicrosoftTrial, The Wall Street Journal, Feb. 23, 2000, p. B1 and A. Zitner, Harvard Professor Warns Privacy,Free Speech on Net Sacrificed for Profit, Knight-Ridder/Tribune March 22, 2000, available atipnetwork.com/newsstorypage.asp?id_number=1752&sec=news.24 See L. Lessig, The Problem with Patents, The Standard, Apr. 23, 1999 atwww.thestandard.com/article/display/0,1151,4295,00.html. See also L. Lessig, Patent Problems, TheStandard,” Jan. 21, 2000 available at www.thestandard.com/article/display/0,1151,8999,00.html.25 New York, Aspen Law and Business (1977).26 R. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Conceptsand Patent System Reform, 14 Berkeley Technology Law Journal (1999). Merges also contends that in“cumulative” technologies such as the software industry, broad blocking patents have retarded innovation

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the largest e-commerce player on the side of the opponents of patenting businessmethods, resulting in an alignment of intellectual prowess and internet prestige favoringrestrictions on State Street.27

The vociferous opposition to business method patents in the software andinternet world demonstrates an emotional commitment to unrestricted copying of theideas of others.28 According to software patent opponents, internet patents are“absurdly broad,” and part of a patent policy that “obviously undermines competition,discourages innovation, and distorts market dynamics in an important, emergingindustry.”29 The same commentator contends that a “profound error” underlies the“dysfunctional tradition of jurisprudence” involving internet patents,30 and that“[i]nternet patent holders are violating the constitutionally guaranteed freedom ofsoftware developers to engage in thought processes characteristic of their profession.”31

Others suggest that internet patent suits are “obviously spurious” and “odious,” suchthat the patent laws will be “a tool for the slow to retard the fast and the big to stymiethe small” on the web.32 Internet patents look, it is said, as if they were invented by“any schmoe,” “by taking some everyday occurrence and adding to it the phrase ‘with a and industry growth. See Merges & Nelson, On the Complex Economics of Patent Scope, 90 Col. L. Rev.839, 890-94 (1990).27 Additional intellectual support for the anti-patent position was expressed in the early 1990’s by the staffof the Bureaus of Competition and Economics of the Federal Trade Commission, Comment of the Staff ofthe Federal Trade Commission, Docket No. 9505 31 44-5144-01, available atwww.ftc.gov.be/v950013.htm.28 One commentator stated: “I predict that tough cybersquatters law (up to five years in jail and a $100,000fine) will be expanded to include claiming patents for obvious or prior art. Such trumped-up patent claimsare the worst form of cybersquatting, and are simply unenforceable internationally, as the offshore casinobusiness indicates.” A. Lightman, The Myths that Support Massive Internet Market Caps,IntellectualCapital.com (Jan. 13, 2000), available atwww.intellectualcapital.com/issues/issues337/item7886.asp.29 B. Pfaffenberger, Internet Patents: Giving away the Store, Linux Journal, Dec. 23, 1999 (published onthe web at www2.linuxjournal.com/articles/currents/014.html). The theme that internet and softwarepatents are discouraging innovation is common. See, e.g., R. Wilson, The Patent System Has Just GoneMAD, Electronic Engineering Times, Jan. 1, 1999 available at www.bustpatents.com/eetimes.htm; M.Miller, Software Patents Must Go, PC Magazine, Mar. 15, 1999 available atwww.bustpatents.com/mustgo.htm; J. Gurley, The Trouble With Internet Patents, Fortune, Jul. 19, 1999available at www.fortune.com/fortune/technology/gurley/1999/07/19/index.html; M. Richtel, Are PatentsGood or Bad for Business Online?, The New York Times (Aug. 28 1998), available on line atwww.nytimes.com.30 Id.31 Id.32 C. Shirky, No Title, Feed Daily (Dec. 23, 1999) (published on the web atwww.feedmag.com/daily/dy122399.html). Similar, thoughts have been expressed by William Purcell,Chief Executive of Planet U., a recent defendant on an internet patent suit brought by Coolingsavings,when he stated that “when people get a patent, they often get patent testosterone and think their patentcovers a lot of area it doesn’t.” R. Korman, Behold the Technology Patents! Behold the String ofLawsuits!, The New York Times (Dec. 27, 1998), available at www.nytimes.com.

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computer network.’”33 Even normally staid editorialists at the Wall Street Journal havepiled on, referring to patent office employees as “turnips,” who are “creating dozens ofdubious new monopolies by granting exclusive rights to every random notion.”34

In attacking internet patents, the critics echo the pre-State Street attack on patentsgenerally in the software arena. A common view was (and is) that “[p]atents can’tprotect or invigorate the computer software industry; they can only cripple it.”35 This isso, at least in part, because software developers often believe that “most of the [software]patents have about as much cleverness and originality as a recipe for boiled rice.”36 In1991, the “League for Programming Freedom” issued it’s manifesto “Against SoftwarePatents,”37 that attacked “Absurd Patents” and took the view that software patents“threaten to devastate America’s computer industry.”38 Other critics frequently contendthat the Patent Office does not have access to the most important prior art, which, theyargue, is contained in non-patent references.39 Wired magazine fueled the opposition firstin 1994 with an “expose” of what it termed “the software patent crisis”40 and next in1996 when it criticized E-data’s enforcement of its patent on electronic distribution.41

The opposition continues today.42

Even Professor Lessig has pulled no punches in attacking business methodpatents. Calling such patents “the space debris of cyberspace,”43 Lessig suggests grant of 33 P. Wayner, How Can They Patent That? The Torrent of Patents for E-Commerce Schemes Raises NewQuestions About an Old-Fashioned System, Salon Magazine (March 9, 1999) (published on the web atwww.salon.com/21st/feature/1999/03/09feature.html).34 See H. Jenkins Jr., Gasoline Joins the Information Age, The Wall Street Journal, p. A27 (June 21,2000).35 S. Garfinkle, R. Stallman & M. Kapor, Why Patents Are Bad For Software, Issues in Science andTechnology (Fall 1991) (on the web at lpf.ai.mit.edu/Links/prep.ai.mit.edu/issues.article).36 Id.37 The Feb. 28, 1991 publication can be found at http://lpf.ai.mit.edu/Patents/against-software-patents.html.38 Id.39 See, e.g., J. Markoff, Internet Gadfly Wants U.S. To Put More Data Online, The New York Times(May 4, 1998), available on the web at www.nytimes.com. The most vocal advocate of this position isGreg Aharonian, who’s position is detailed at www.bustpatents.com.40 S. Garfinkel, Patently Absurd, Wired (July 1994)(www.wired.com/wired/archive/2.07/patents_pr.html).A later Wired article describing “how easy it is for a corporation with a lame-duck product to make a minton someone else’s intellectual property.”41 See S. Berger, Patently Offensive, Wired (Sep. 1996)(www.wired.com/wired/archive/4.09/scans.html?pg=7).42 See, e.g., B. Pfaffenberger, The Coming Software Patent Crisis: Can Linux Survive? Linux Journal,August 10, 1999 (www2.linuxjournal.com/articles/currents/003.html);D. Johnson, Fight for SoftwareFreedom Far From Over – Interview With Richard Stallman, Linux Today, Aug. 19, 1999(linuxtoday.com/stories/8940.html): J. Berst, How Patent Attorneys Are Stealing Our Future, ZDNet,January 18, 2000 (www.zdnet.com/anchordesk/story/story_4364.html). Some voices are more restrained.See T. Riordan, PATENTS; Historians Take a Longer View Of Net Battles, The New York Times (Apr.10, 2000), available at www.nytimes.com.43Lessig, The Problem with Patents at note 11, supra.

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such patents “siphons off resources from technologists to lawyers.44 According toLessig, “[w]hen the world was given TCP/IP and the collection of protocols it induced, abillion ideas became obvious to anyone who took the time to think.”45 Nevertheless, saysLessig, a “feeding frenzy” is underway.46 Referring to business method patents as a“monster,”47 and a “weed” that “will choke innovation,”48 Lessig contends such patentswill change cyberspace because “[l]awyers will be regulating the coders; innovation willproceed only as quickly as the licenses can be sold.”49 In a final swipe at patent lawyers,Lessig calls for immediate action by Congress, because “[t]his central issue about thefuture of innovation should not be left to the innovation of lawyers, the mandarins of ourculture, pushing courts to see how ‘this’ is just like ‘that.’”50

Although the reaction to State Street in the intellectual property community hasbeen more subdued, the decision has nevertheless produced a host of comments andarticles51 reflecting the strong interest in the subject among patent and other intellectualproperty attorneys. The PTO reaction has been the most vigorous. On March 29, 2000,the Patent Office unveiled its “Business Methods Patent Initiative,”52 which announced,among other things, a “new second-level review” of allowed business methodapplications.53 Unfortunately, neither the PTO’s action nor the articles assist in 44 Id.45 Id. That comment reveals the depths of Professor Lessig’s ignorance of the difficulties surroundinginnovation.46 Id.47 Lessig, Patent Problems, supra.48 Id.49 Id.50 Id. Quoted in the New York Times Magazine, Lessig expressed even greater hostility to softwarepatents. Calling them a “disaster,” Lessig contended “they create these little mafia monopoly holders whocan go around demanding, with a federal court behind them, that you pay up or we’ll shut you down.” J.Gleick, Patently Absurd, New York Times Magazine (March 13, 2000).51 E.g., C. Cantzler, State Street: Leading the Way to Consistency for Patentability of ComputerSoftware, 71 U. Col. L. Rev. 423 (2000); C. Feldman, Business Method Patents in the Age of ElectronicCommerce: The State Street Decision and its Aftermath, II John Marshall Law School Center forIntellectual Property Law News Source 16 (Winter 2000); G. Rinkerman & K. Sheehan, Patent Protectionfor Investment and Financial Service Configurations, 116 Banking L.J. 166 (1999); S. Swanson, ThePatentability of Business Methods, Mathematical Algorithms and Computer-Related Inventions After theDecision by the Court of Appeals for the Federal Circuit in State Street, 8 Federal Circuit Bar Journal 153(1999): R. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for BusinessConcepts and Patent System Reform, 14 Berkeley Technology Law Journal (Spring 1999); S. Alter,Federal Circuit Broadens Scope for Software Patents, 15 The Computer Lawyer 24 (Oct. 1998).52 See www.uspto.gov/web/offices/sol/actionplan.html. A copy of the initiative is contained in AppendixC. The National Academies of Science Board on Science, Technology, and Economic Policy soughtproposals on March 23, 2000 for “Research on Intellectual Property in the Knowledge-Based Economy,”that will include, in “Topic 2,” an analysis of “Software-enabled business method patents andbiotechnology patents.” See Federal Register, March 23, 2000.53 Id. Rumors among patent attorneys suggest that the “second-level review” will actually produce amoratorium on business method patents.

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interpreting the term “business method” or suggest ways for the patent system to copewith the burgeoning controversy.

B. Biting the Hand that Feeds Them

Much of the software communities’ criticism of patents stems from a desire to beable to write code without worrying about infringing on the rights of others.54 Despitethat simple source, the intellectual underpinning of the opposition is a broadly-basedassault on the benefits intellectual property confers on the growth and vitality of thesoftware industry. As expressed by Professor Lessig, the opposition to business methodpatents arises from a belief that intellectual property is “non-rivalous,” that is, intellectualproperty supposedly differs from conventional property because one person’s use of aconcept protected by intellectual property does not stop another from also using thatproperty.55 An apple, according to professor Lessig, can be eaten by only one person,but the same intellectual property can be used repeatedly by any number of peoplewithout interfering with a use by others.56 That view leads to Lessig’s conclusion,expressed for both patents and copyrights, that increased intellectual property protectionoften reduces innovation.57 In simplest form, this argument contends that the e-commerce and software industries would continue to do well, even absent patentprotection.58

The opposition in the software and internet world to patent protection representsa fundamental failure to understand the importance of intellectual property, especiallypatents, in creating and maintaining capital funding for software and e-commerce ventures.Ease of imitation of a product produces a powerful disincentive to funding that product’sdevelopment. Strong intellectual property protection, including broadly enforced patent 54 Salon Magazine states that “[o]ne reason the Web has grown so fast is that good ideas get copied soquickly.” S. Rosenberg, Amazon to world: We control how many times you must click! Salon Magazine(Dec. 21, 1999), www.salon.com/tech/log/1999/12/21/bezos/. See the discussion of articles regardingstifling innovation at n. 19, supra.55 See L. Lessig, Code and Other Laws of Cyberspace, New York, Basic Books, ch. 10, 1999. ProfessorLessig cites Thomas Jefferson as the fundamental source of the concept. Id. In modern economics, thesource of the concept is, as Lessig notes, K. Arrow, Economic Welfare and the Allocation of Resources forInvention, in The Rate and Direction of Inventive Activity: Economic and Social Factors, Princeton, N.J.,Princeton University Press, 1962. Professor Lessig’s discussion in Code focuses on copyright protection,but similar concepts underlay his opposition to internet patents. See L. Lessig, The Problem with Patents,The Standard, April 23, 1999, www.thestandard.com/article/display/0,1151,4295,00.html; L. Lessig,Patent Problems, The Standard, Jan. 21, 2000. published atwww.thestandard.com/article/display/0,1151,8999,00.html.56 Id. Professor Lessig speaks in terms of “ideas” being non-rivalous, and thereby introduces confusioninto his argument about copyright protection by failing to distinguish between copyrightable expressionsof ideas and the ideas themselves. A careful reading of Code leads to the conclusion that Professor Lessigconsiders both ideas and expressions of ideas as “non-rivalous.”57 See L. Lessig, The Problem with Patents, The Standard, April 23, 1999,www.thestandard.com/article/display/0,1151,4295,00.html.58 See, e.g., J. Gleick, Patently Absurd, at n. 8 supra.

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protection, discourages imitation. The result is that greater R & D funds are available fortechnologies with strong intellectual property protection, because competitors cannoteasily copy the ideas of the market pioneer and thereby obtain the benefits of thedevelopment without expending the same funds.59 A demonstration of the investmentcommunities’ view of the value of patents occurred when biotech stocks plummeted inMarch, 2000 on the mere suggestion by the President and British Prime Minister thatgenetic technology should be made freely available to scientists everywhere.60 Althoughcritics of e-commerce patents contend such patents allow large companies to drive smallcompetitors out of the market,61 in practice, the effect is the opposite: strong patentprotection allows small organizations to compete with the largest businesses.62 UsingLessig’s terminology, patented inventions are indeed “rivalous,” because an unauthorizedinfringing use can drive the inventor out of the market; often, small entities can competewith the vastly greater marketing and financial muscle of large corporations only byhaving exclusive rights in their developments,63 a fact that is recognized by the investmentcommunity.64 The failure of the software and e-commerce industries to recognize thebenefits of broadly enforced patent rights presents a challenge to the patent communitythat can best be met by better marketing and dissemination of the intellectual propertymessage.

C. The Road to State Street

59 This principle is well known to the investment community, and to many in the internet community.See A. Kessler, “Creative Destruction” Can Be Lucrative, Wall Street Journal (Apr. 18, 2000); T.Riordan, Patents Considered Vital to Thrive on the Internet, The New York Times (Dec. 20, 1999)available at www.nytimes.com; M. Richtel, Are Patents Good or Bad for Business Online, The NewYork Times (Aug. 28, 1998) available at www.nytimes.com. The phenomenon is also detailed further forthe legal community in two National Law Journal articles. See G. Lawrence & C. Lobsenz, Tech Start-Ups Must Assess IP Before Pursuing Cash, The National Law Journal, p. C02 (June 21, 1999), availableat test01.ljextra.com/na.archive.html/99/06/1999_0613_76.html and A. Riddles, L. Bromberg & K. Diaz,Start-Up Companies Should Devise IP Strategies, The National Law Journal, p. C07 (February 8, 1999),available at test01.ljextra.com/na.archive.html/99/01/1999_0131_64.html.60 See L. Lindsey, Washington Leads Bulls to Slaughter, The Wall Street Journal (April 21, 2000). Themarket reaction to the statements of the President and Prime Minister caused the US Patent Office to issuea press release on March 16, 2000 reaffirming that U.S. patent policy regarding patenting human genesequence data had not changed. See Patent and Trademark Office Press Release #00-17, March 16, 2000,available at www.uspto.gov/web/offices/com/speeches/00-17.htm.61 See, e.g., A. Katz, ‘State Street’ May Place Start-Ups in Peril, New York L. J. Feb. 18, 2000 atwww.nylj.com/tech/011999t2.html; B. Pfaffenberger, The Coming Software Patent Crisis: Can LinuxSurvive? Linux Journal, Aug. 10, 1999 at www2.linuxjournal.com/articles/currents/003.html.; B. Perens,Preparing for the intellectual-property offensive, Linux World, Nov. 1998www.linuxworld.com/linuxworld/lw-1998-11/f_lw-ll-thesource.html.62 The best software example is in the case of Stac Electronics v. Microsoft Corp., No. C-93-0413-ER(C.D. Cal.). In Stac, Microsoft was found to infringe and liable for $120 million in damages when itattempted to incorporate Stac’s data compression invention into Microsoft’s MSDOS 6.0 and 6.2 operatingsystems.63 A detailed discussion of this issue, addressed from an anti-patent perspective, is contained in R. Mergesand R. Nelson, On the Complex Economics of Patent Scope, 90 Columbia Law Review 839 (1990).64 . See A. Kessler, “Creative Destruction” Can Be Lucrative, Wall Street Journal (Apr. 18, 2000); L.Lindsey, Washington Leads Bulls to Slaughter, Wall Street Journal (Apr. 21, 2000).

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How did the patent world come to this crossroad? Listening to the anti-patenthysteria, one could easily conclude that greedy lawyers with no interest in innovation(and perhaps a latent desire to destroy the freedom of the internet) hoodwinked thecourts into mounting a radical assault on cyberspace.65 Instead, acceptance of businessmethod patents evolved slowly from a recognition by the courts that such patents werenever really prohibited, and that the 1952 Patent Act cannot reasonably be construed toexclude business methods from patentable subject matter.

The evolution of the decisions leading to State Street has been frequentlydescribed.66 The genesis of the prohibition on business method patents is commonlysaid to have arisen in Hotel Security Checking Co. v. Lorraine Co.,67 a 1908 casecontaining dicta saying “[n]o mere abstraction, no idea, however brilliant, can be thesubject of a patent irrespective of the means designed to give it effect.”68 This was,according to the Hotel Security court, because a “system of transacting businessdisconnected from the means of carrying out the system is not, within the most liberalinterpretation of the term, an art.”69 However, as the Federal Circuit noted in StateStreet, the decision in Hotel Security did not rely on the “business method exception” torender the patent invalid: “[i]n that case, the patent was found invalid for lack of noveltyand ‘invention,’ not because it was improper subject matter for a patent.”70 HotelSecurity nevertheless became the source of judicial statements that business methods werenot patentable subject matter,71 eventually resulting in the PTO’s adoption of a policyagainst granting business method patents.72

The exclusion of business methods from patentable subject matter was only halfof the mid-twentieth century legal obstacles to business method patents. The 65 Displaying a fine disregard for the history of patents relating to business methods, Lessig says businessmethod patents were “discovered” by a federal court in 1998. Id. The research in the area neverthelessdemonstrates that so-called “business method” patents have long been issued and enforced. See M.Feulling, Manufacturing, Selling, and Accounting: Patenting Business Methods, 76. J. Pat. Ofc. Soc’y471 (1994).66 See, e.g., C. Cantzler, State Street, Leading the Way to Consistency for Patentability of ComputerSoftware, 71 U. Col. L. Rev. 423 (2000); S. Swanson, The Patentability of Business Methods,Mathematical Algorithms and Computer-Related Inventions After the Decision by the Court of Appeals forthe Federal Circuit in State Street, 8 Fed. Cir. B. J. 153 (1999); S. Alter, Federal Circuit BroadensScope for Software Patents, 15 The Computer Lawyer 24 (1998).67 160 F.2d 467 (2d Cir.1908).68 160 F.2d at 469.69 Id.70 State Street, 149 F.3d. at 1376.71 See, e.g., Loew’s Drive-In Theatres, Inc. v. Park-In Theatres, Inc., 174 F.2d 547 (1st Cir. 1949).72 Editions of the Manual of Patent Examining Procedures published before 1996 provided: “[t]houghseemingly within the category of process or method, a method of doing business can be rejected as notbeing within the statutory classes. See Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2nd Cir.1908) and In re Wait, 73 F.2d 982, 24 U.S.P.Q. (BNA) 88, 22 C.C.P.A. 822 (1934).” MPEP §706.03(a) (1994).

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“Mathematical Algorithm Exception” served for much of the century to place equallydifficult obstacles to patenting such inventions. Based upon the principle that patentscannot extend to “mere abstract ideas” the mathematical algorithm exception operated topreclude patents involving a sequence of definable steps, such as are typically carried outby software. Since many, if not most, modern developments in business methods involveuse of computers, the mathematical algorithm exception gave courts additionalammunition to reject patents on commercial activity.

The restraints on algorithm patents began to loosen with Diamond v. Diehr,73 inwhich the Supreme Court reiterated the prohibition against patents on mathematicalalgorithms so long as the represent mere abstract ideas, but eviscerated that restriction byagreeing algorithms are patentable when they produce a tangible result.74 The FederalCircuit further loosened the restrictions in two cases describing the Federal Circuit’sunderstanding of the Diehr standard, In re Alappat75, and Arrhythmia ResearchTechnology, Inc. v. Corazonix Corp.76 With the decision in State Street, the FederalCircuit removed all doubt as to the patentability of software systems conducting financialactivity.77 Under State Street, the analysis now focuses on “the essential characteristicsof the subject matter, in particular, its practical utility.”78 Methods and systems havingsuch practical utility are patentable subject mater.79

D. High Tech vs. Low Tech

Any analysis of Internet and e-commerce patents must also included a candidappraisal of their likely enforceability. Despite the success of Amazon.com in enforcingthe “1-Click™” patent,80 real uncertainty exists regarding the overall reception suchpatents will receive in the courts. Many e-commerce patents represent simple,understandable developments that, while patentable, do not describe and claim pioneeringdevelopments. Traditionally, low tech, easily-understood developments, have receivedless favorable treatment in the courts.81 Logically, when faced with Internet patents that 73 450 U.S. 175 (1981).74 Diehr, 450 U.S. at 193.75 33 F.3d1526 (Fed. Cir. 1994) (in banc).76 958 F.2d 1053 (Fed. Cir. 1992).77 State Street reiterated the holding that “it is no ground for holding a claim is directed to nonstatutorysubject matter to say it includes or is directed to an algorithm.” 149 F.3d at 1375 (quoting In re Iwahashi,888 F.2d 1370, 1374 (Fed. Cir. 1989). State Street also ruled that the old Freeman-Walter-Abele test ofthe Court of Customs and Patent Appeals has “little, if any, applicability to determining the presence ofstatutory subject matter.” Id. at 1374.78 149 F.3d at 1375.79 At least one member of the software community vigorously rejects this proposition. See B.Pfaffenberger, Internet Patents: Giving away the Store, Linux Journal, Dec. 23, 1999 (published on theweb at www2.linuxjournal.com/articles/currents/014.html)80 See Amazon.com, Inc. v. Barnesandnoble.com, Inc., 73 F. Supp. 2d 1228 (W.D. Wa. 1999).81 The Supreme Court in particular has used cases on patents describing simple, easy-to-understanddevelopments to present express it’s most problematic decisions. See, e.g., Sakraida v. Ag Pro, Inc., 425

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represent minor adaptations of earlier practices to the web, an unbiased observer wouldexpect a high frequency of invalidity rulings. Indeed, the greatest criticism of e-commercepatents has been directed toward patents that, at least to lay commentators, appear to donothing except take an old practice and claim the use of that practice on the web as aninvention.82 The reality is that many Internet patents involve the cyberspace equivalentof patenting familiar household implements; the patent’s specification is dressed in themost formal facade the drafting attorney can prepare, but upon close inspection thepatent represents a disappointedly trivial development.

A different conclusion, however, is appropriate for patents that describe trulyinnovative uses of the web, and which could not have been developed before the advent ofcommercial use of the Internet. Indeed, a key part of evaluating the potential validity ofInternet and e-commerce patents is the answer to the question: “Does the patent claim amethod that was not possible before the creation of the web?” If the answer is yes, thenthe patent is likely following in the grand tradition of improvement that represents thebulk of patents world wide, and has a higher chance of surviving an attack on its validity.A contrary answer means the patent is potentially subject to a vigorous validitychallenge.

II. WHAT IS A BUSINESS METHOD PATENT?

A discussion of business method patents should begin with a definition of“business methods.” While the phrase “e-commerce” patents seems to allow littleambiguity, no accepted or even proposed definition of “business method” patents exists.Instead, the phrase is used to describe a legion of method and even occasional deviceinventions, spanning the gamut of possible commercial applications. The topic wassignificant before State Street because of the need to avoid drafting claims directed tononstatutory subject matter.83 The issue was reduced to mere academic interest afterState Street; in the view of most patent attorneys, State Street’s primary effect was toeliminate an unnecessary concern when drafting patent claims. A year and a half oftranquility ensued, at least for patent prosecutors.

The 1999 “American Inventors Protection Act”84 returned the subject to thevanguard of patent issues. The act creates a new “First Inventor” defense85 to a claim ofpatent infringement, applicable only to patents directed to “methods of doing U.S. 273, reh’g denied, 426 U.S. 955 (1976); Great Atlantic and Pacific Tea Co. v. SupermarketEquipment Co., 340 U.S. 147 (1950), reh’g denied, 340 U.S. 918 (1951).82 The Priceline.com “reverse auction” patent has been frequently subjected to that criticism.83 See MPEP § 706.03(a) (1994) (now superseded).84 Pub. L. No. 106-113, enacted Nov. 29, 1999.85 American Inventors Protection Act of 1999,.§ 4302.

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business.”86 Neither the act nor the its legislative history provides any hint of a usefuldefinition of the term “business method,”87 leaving it to the courts to determine whichpatents are and are not subject to the defense. The cacophony raised by the “opensource” community, with the potential to energize legislation from Congress, addsurgency to the need to resolve the problems created the definitional absence.

The failure to provide a definition in the Inventor’s Protection Act is peculiar,given the frequent description of the ambiguity surrounding such patents. Indeed, JudgeNewman lamented the “fuzzy” nature of the term “business methods” in her dissent in Inre Schrader,88 a precursor to the Federal Circuit’s ruling in State Street. Judge Newman’sopposition to the business method exception mirrored statements of earliercommentators89 and the general ambiguity contained the cases involving so-called“business method” patents.

The ambiguity continued in the Federal Circuit decision in State Street. Althoughfrequently referred to as the definitive case establishing the legitimacy of business methodpatents, the claims at issue in State Street were not even method claims.90 Directed to a“data processing system for managing a financial services configuration of a portfolio,”91

the primary claim in issue was drafted as a conventional collection of means-plus-functionelements, including “a computer processor means,” a “storage means,” and various meansfor either “initializing the storage medium,” or “processing data.”92 Nothing within theclaim suggests that a method was claimed, leading to the inescapable conclusion that the 86 Id.87 Id. Strangely, the section-by-section analysis of the Act included the statement that a business methodcan be “a preliminary or intermediate manufacturing procedure, which contributes to the effectiveness of thebusiness by producing a useful end result for the internal operation of the business or external sale.” Id.(emphasis added). The reference to “manufacturing” makes this explanation so broad (indeed, it readilyapplies to virtually every manufacturing practice0 that it has virtually no usefulness.88 Judge Newman stated that the business method exception is “an unwarranted encumbrance to thedefinition of statutory subject matter in section 101, that [should] be discarded as error-prone, redundant andobsolete. It merits retirement from the glossary of section 101.” 22 F.3d 290, 298 (Fed. Cir. 1994)(Newman, J., dissenting).89 See, e.g., R. Del Gallo, Are ‘Methods of Doing Business’ Finally Out of Business as a StatutoryRejection? 38 IDEA 403 (1998); M. Fuelling, Manufacturing, Selling, and Accounting: PatentingBusiness Methods, 76 J. Pat. & Trademark Ofc. Soc’y 471 (1994); A. Hansmann, Method of DoingBusiness, 50 J. Pat. Ofc. Soc’y 503 (1968); G. Tew, Method of Doing Business, 16 J. Pat. Ofc. Soc’y 607(1934).90 Indeed, the Federal Circuit specifically concluded in State Street that the claims in issue were notdirected to a process. 149 F.3d at 1371.91 State Street, 149 F.3d at 1371 (emphasis added). Claim 1 of the patent addressed in State Street is setforth in Appendix B-1.92 Id. at 1371-72.

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phrase “business method patents” could come to refer to virtually any kind of patent thatrelates to financial activity.93

The scope of the uncertainty is also illustrated by reference to patents advancedby participants in the debate as directed to “business methods.” Wright94 suggests“business method” patents might include patents directed to: a method of trackingexpenses,95 a method for conducing a survey of music listeners,96 a method for operatinga dating service,97 an interactive game show,98 a method of estimating damage to avehicle,99 a method of forecasting business performance based on weather trends,100 amethod of using estimates for the future earnings potential of college students to fundtheir college tuition 101 and a method of walking under water.102 Three current examplesof patents frequently contended to cover “business methods” are the Priceline.com patentdirected to set-your-own-price auctions,103 the Amazon.com “1-Click™” patent,104 andthe recently issued Amazon.com “associates” patent.105 Although those patents havegarnered the greatest recent hysteria, examples from the past show how broadly thephrase “business methods” can be construed.

A review of such sample “business method” patents provides some insight, butno definitive conclusion. Patents that include financial transactions as part of one or moreclaim elements are likely to be considered “business method” patents. Thus, thePriceline.com name-your-own-price patent includes all of the steps for a makingpurchase, i.e., an “offer,” an “acceptance” and a “payment.”106 The Open Market, Inc.“shopping cart” patent has elements that include a computer programmed to receive a“request for purchasing,” and to “cause a payment message to be sent.”107 U.S. PatentNo. 5,809,484, directed to funding student education by acquiring shares in students’ 93 As early as 1934, a commentator on business methods noted the distinction between patents claimingbusiness methods, and patents directed to inventions useful in the conduct of business. See G. Tew,Method of Doing Business, 16 J. Pat. Ofc. Soc’y 607 (1934).94 B. Wright, Patents That Protect ‘Methods of Doing Business’: Are They Worth The Paper They’rePrinted On? National L. J., Nov. 22, 1999.95 U.S. Patent No. 5,947,526. See, Appendix B-7.96 U.S. Patent No. 5,913,204. See, Appendix B-6.97 U.S. Patent No. 5,920,845. See, Appendix B-9.98 U.S. Patent No. 5,108,115..99 U.S. Patent No. 5,839,112. See, Appendix B-5.100 U.S. Patent No. 5,832,456. See, Appendix B-4.101 U.S. Patent No. 5,809,484. See, Appendix B-3.102 U.S. Patent No. 5,906,200.103 U.S. Patent No. 5,794,207. See, Appendix A-2.104 U.S. Patent No. 5,690,411. See, Appendix A-1.105 U.S. Patent No. 6,029,141.106 See Claim 1 of U.S. Patent No. 5,794,207, set forth at Appendix A-2.107 See Claim 1 of U.S. Patent No. 5,715,314, set forth at Appendix A-3.

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future earnings, includes “processing…collection and receipt from investors of…funds,”and “generating…a document…for purchasing an amount of student earnings.”108 TheAmazon.com 1-Click™ patent includes elements for “sending a request to order,”“generating an order to purchase,” and “fulfilling the generated order.”109 U.S. Patent No.5,191,573, directed to transmission of digital audio signals, includes elements involving“transferring money” and “transmitting the desired digital audio signal” from a memorycontrolled by the party receiving the money.110

Inclusion of financial transactions is not the only way a claim can come to beconsidered to be part of a “business method” patent. Claim 1 Patent No. 5,839,112specifies a method for estimating damage to a vehicle; no transfer of money is mentionedin the claim.111 Similarly, Patent No. 5,913,204 claims a method for surveying thepreferences of listeners to a radio station,112 and No. 5,920,845 describes a method ofrunning a “date matching” event.113 U.S. Patent 5,851,117 describes a method for trainingan individual how to conduct janitorial cleaning activities.114 Each of the activities can beconducted entirely without any payment of money and separate from any commercialbusiness enterprise. Whether such non-financial patents will be considered to claim“business methods” as that term is used in the American Inventors Protection Actremains to be seen.

Even trying to define “business method” patents by reference to payment ortransfer of money is troublesome, since many devices can receive money (i.e., the coin-receptor mechanism in a video game) without being part of a business transaction. As oneearly commentator noted, a distinction should be drawn between patents on methods ofdoing business and methods used in business.115 Logically, the former would be subjectto the prior user defense, while the latter would not. Unfortunately, even such simpleclarity is lacking.

Some limited clarity help – and some additional confusion – is provided byreference to the PTO initiative on business method patents.116 That initiative expressedthe PTO’s decision to provide a second review to business method patent applications.Without explanation, the Patent Office decided to apply the second review to all 108 See Claim 39, set forth at Appendix B-3.109 U.S. Patent No. 5,960,411, set forth in Appendix A-1.110 Claim 1 is set forth at Appendix B-2.111 Claim 1 is set forth at Appendix B-5.112 Claim 1 is set forth at Appendix B-6.113 Claim 1 is set forth at Appendix B-9.114 Claim 1 is set forth at Appendix B-8.115 See G. Tew Method of Doing Business, 16 J. Pat. Ofc. Soc’y 607, 608 (1934).116 That initiative is described in the text accompanying note 52 supra, and is contained in Appendix C.

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applications in Class 705 of the Manual of U.S. Patent Classification.117 Class 705,which existed long before the web attained any commercial use (and well before thedecision in State Street) is titled: “Data Processing: Financial, Business Practice,Management, or Cost/Price Determination,” and includes such varied subjects as“cryptography” in a postage metering system, “point of sale” terminals or electronic cashregisters, and “inventory management.” Although evaluation of many of the subclasses ofClass 705 is less than helpful, some insight can be obtained from review of Class 705/1.That subclass is titled: “Automatic Electrical Financial or Business Practice orManagement Arrangement,”118 and has the following definition:

Subject matter wherein an electrical apparatus and its correspondingmethods perform the data processing operations, in which there is asignificant change in the data or for performing calculation operationswherein the apparatus or method is uniquely designed for or utilized in thepractice, administration, or management of an enterprise, or in theprocessing of financial data.

Thus, in the data processing arts, a patent might be considered to specify a“business practice” if the method involves the “practice, administration, or managementof an enterprise,” or is used in the “processing of financial data.” Helpfully, the classdefinition notes that “[m]ere designation of an arrangement as a ‘business machine’ or adocument as a ‘business form” or ‘business chart’ without any particular businessfunction will not cause classification in this or its indented subclasses.”119 Nevertheless,even the definition provided by the PTO definition of Class 705/1 is too general, since itincludes virtually any machine that is used in the “practice, administration ormanagement” of an enterprise. Further confusion arises from the fact that several of thepatents commonly considered to be directed to business methods have not been classifiedby the Patent Office as part of Class 705.120

117 The manual is available at www.uspto.gov/web/offices/ac/ido/oeip/taf/moc/.118 Portions of the definition of Class 705 are set forth in Appendix D.119 See Appendix C.120 The most striking example is U.S. Patent No. 5,851,117 titled “Building Block Training Systems andTraining Methods,” (and which is directed to a method of training a janitor) which is in Class 434. The’117 patent is frequently used as an example of the supposed absurdity of business method patents. Otherexamples are Patent No. 5,947,526, titled “Personal Financial Tracking System and Method,” Class 283;and Patent No. 5,191,573, titled “Method for Transmitting a Desired Digital Video or Audio Signal,”Class 369. Many patents that expressly deal with Internet e-commerce are not contained in Class 705.The DoubleClick patent (No. 5,948,061) is Class 709. AT&T’s patent for billing over the Internet (No.5,905,736) is Class 370. The patent asserted by Network Engineering Software against Yahoo! (No.5,778,367) is Class 707; similarly, the patent asserted by CIVIX-DDI against AOL and Microsoft (No.5,682,525) is Class 707. Microsoft’s patent directed to intelligent selection of a search engine (No.6,009,459) is Class 709. The patent asserted by Trilogy Development against CarsDirect.com (No.5,825,651) is Class 700. Interestingly, the patent from State Street, No. 5,193,056, was originallyclassified in Class 364, then reclassified in Class 705. The same events occurred with the Open Market,Inc. patents on the shopping cart (no. 5,715,314); it was originally classified as Class 380, but reclassifiedinto Class 705.

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No good solution appears for this problem. As Judge Newman noted, classifyingpatents as “business methods” is “fuzzy,” “poorly defined, redundant, andunnecessary.”121 At best, the courts will settle on a simple bright line test such as“methods including a commercial transaction involving money.” Even then, manylitigation battles can and probably will be fought over whether specific patents fit thedefinition. At worst, the courts will adopt a flexible or obscure definition that leaves thequestion in doubt until finally resolved by the termination of litigation.

III. ISSUES REGARDING INTERNET BUSINESS METHOD PATENTS

Beyond the question of just what is and is not a business method patent, a varietyof material questions remain regarding the best ways to draft and enforce business methodpatents on e-commerce topics. Although some helpful determinations can be made, manyquestions remain for future resolution.

A. Litigating Internet Business Method Patents

The topic of how to litigate “business method” patents presents fewer ambiguitiesthan the problems associated with prosecuting the patents or determining which patentsfit the definition. This is so, because such patents should, as a general rule, be litigated inthe same manner as all other patents.122 The presence of business method or e-commercesubject matter does not change the need for traditional litigation tactics, which areprimarily governed by factors such as the amount of money at stake, the need or lack ofneed for immediate injunctive relief, the financial resources of the parties, the similaritiesor differences between the accused product and the claims, and the differences betweenthe invention and the prior art. Moreover, in “business method” suits, as in most cases,topics such as whether the accused infringer copied the invention and whether the patentowner committed inequitable conduct during the patent’s prosecution will overwhelmmany other considerations.

Some generalities regarding litigation of “business method” and “e-commerce”patents are nevertheless appropriate. If the patent involves e-commerce, speed is likelyto be a critical factor. In an industry changing at “internet speed,” the typical two-to-fouryear pendency before trial can reduce the litigation to mere marginal value, if it does notmake the litigation useless. The “invention” claimed in a patent can become obsolete longbefore the trial is commenced (or perhaps become materially reduced in value). Every e-commerce patent litigation should therefore include evaluation of the potential for apreliminary injunction, so that the suit’s tactics will thereafter flow from each side’s 121 In re Schrader, 22 F.3d 290, 298 (Fed. Cir. 1994) (Newman, J., dissenting).122 See, e.g., J. Riedinger, Making Patent Trials Interesting, Presented Jan. 6, 1998 at the 1998 NationalCLE Conference session on Intellectual Property Law in Vail, CO.

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assessment of an injunction’s potential. The successful assertion of the “1-Click™”patent by Amazon.com is, of course, the most striking example, since an argument can bemade that Amazon.com prevailed regardless of the eventual outcome of the case;Amazon.com obtained an injunction during an important period (Christmas 1999) whene-commerce loyalties were being established. Similarly, the availability of provisionalrights for published applications will bring a new dynamic to litigation strategy, since anopportunity exists now for an owner of an e-commerce patent to obtain royalties foractivities occurring before the patent issues. In the fast-changing internet world, the timebefore issuance might be the only period in which the invention is used significantly.

If the patent is broad and covers important e-commerce activity, litigation of a“business method” patent can involve public relations considerations that are usually notpresent in other patent litigation. The intense opposition to e-commerce patentenforcement might lead to a vociferous outcry, a flood of email protests, or even aboycott.123 In some circumstances, the “open source” community might join with thedefendant to locate invalidating prior art.124 No e-commerce patent litigation should becommenced without being prepared to address these options.

Obtaining jurisdiction over infringers will become an increasingly important issue,especially in view of the likely infringers (or patent holders) outside the United States.Absence a presence in the United States, many infringers will have to be pursued, if at all,by foreign patents, a course made more difficult by the reluctance of other countries toaccept business method patents.125 Questions regarding personal jurisdiction within aparticular district will similarly arise, and will most likely be resolved in the manner ascopyright cases involving the web, i.e., “passive” web sites that are akin to a nationalpublication flowing into a district will not create sufficient minimum contacts to give riseto personal jurisdiction.126

The value of early and extensive prior art searches is often much greater in e-commerce and business method litigation than in other patent cases, because the easilyavailable prior art is often limited. Typical prior art sources such as the Patent Office,technical libraries and online references have yet to develop extensive business methodreferences (although that circumstance is changing rapidly). The bulk of the prior art,which might include the most important art, is therefore likely to be found only byexhaustive investigation in non-traditional sources. Defendants will need to begin their 123 The boycott attempted against Amazon.com for its 1-Click™ enforcement is an example. SeeStallman, Updated: Richard Stallman – Boycott Amazon! Linux Today,www.linuxtoday.com.story/13652.html.124 An example is described in J. Sullivan, Volunteer Army to Fight Patent, Wired News, May 3, 1999available at www.wired.com/news/politics/story/19452.html.125 A good overview of the issues is contained in B. Wright, “Internet and E-Commerce Patents,” availableat www.bannerwitcoff.com/articles.htm.126 See, e.g., Agar Corp. v. Multi-Fluid, Inc., 45 U.S.P.Q. 2d 1444 (S.D. Tex. 1997).

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searches earlier than usual, and conduct the searches with greater intensity. Althoughexpensive, the reward for those efforts is likely to justify the costs.

B. Drafting Internet Business Method Patents

In the broadest sense, e-commerce and business method patents are preparedusing the same principles applicable to other patents. The claims, drawings andspecifications are completed with the dual and somewhat inconsistent objectives ofobtaining the broadest claims the PTO is willing to allow, while simultaneously ensuringthat the patent does not cover the prior art. The patent should be prepared withmaximum variety in claims drafted and alternatives disclosed, and the claim languageinclude a careful balance of expressly understood (and therefore limited) terms anddeliberate ambiguity. The patent should be prepared, of course, in minimum time andwith minimum expenditure of the client’s resources, financial or otherwise. Numerousreferences give fine guidance on effective ways of accomplishing these traditionalobjectives.127

Several aspects of e-commerce patents are, however, unique. The growinghostility to patents within the software community and the presence of prior-user rightssuggest that some effort should be made to prevent a patent from being successfullycharacterized as a “business method” patent, an admonition that is doubly applicable toe-commerce patents. Techniques for doing so are the focus of the remaining discussion inthis section.

First, business method and e-commerce patents should not necessarily beconsidered to be software patents. Although many business method and e-commercepatents involve inventions that are implemented in software, the invention can be andoften is broader than the software used to carry out the invention. As a result, many ofthe techniques used in drafting software patents are either inappropriate or too narrow.Beauregard128 or “computer-readable medium” claims will adequately protect theparticular steps of a business or e-commerce method when embodied on a single memory,but are at best limited and at worst unable to capture the steps of a procedure thatincludes manual activity. Lowry129 claims directed to software data structures will almostnever provide adequate protection. In highly limited circumstances, refined claimingtechniques such as “propagated signal claims” and “compatible system claims” might be 127 See, e.g, R. Faber, Landis on Mechanics of Patent Claim Drafting, Practicing Law Institute, 1996.See also J. Riedinger, Writing Patent Claims for Litigation, Presented Jan. 13, 1999 at the 1999 NationalCLE Conference on Intellectual Property Law, Vail, CO.128 See In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995).129 See In re Lowry, 32 F.3d 1579 (Fed. Cir. 1994).

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worthwhile, but will rarely provide other than the most limited protection.130 Anassumption that business method or e-commerce patent developments are merelytraditional software inventions can therefore lead to underprotection of the invention.

Some traditional “software” claiming techniques are appropriate. Many e-commerce patents lend themselves well to “user interface” claims, directed to the stepsperformed when a computer interacts with the user.131 Such claims allow far easierdetection of infringement than, for example, Beauregard claims where infringement cannotbe identified without access to information describing the internal operation of theinfringing system. Conventional method claims that simply describe the sequence ofsteps performed in the invention, are not only useful in the software field but form thefoundation of most e-commerce and business method patents. Of course, the bestapproach is to prepare a variety of claims using every possible approach, producingbroad, narrow and intermediate claims, as well as claims that vary in the ease with whichinfringement can be detected.

Second, patents might avoid being characterized as claiming a “business method” ifno method is claimed. By so doing, some possibility exists that the claim will not besubject to prior user rights. Although this principal is easy to assert, implementing thatguidance can be a more difficult proposition. Even though the Federal Circuit noted inState Street that the claims in issue were not method claims,132 it still evaluated thebusiness method exception.133 Moreover, if means-plus-function claims are used, afailure to include supporting structure for the recited means can result in the claim beingconstrued as a method claim.134

Third, the claim drafter should be wary of the ability of a potential infringer tomove its activity offshore, a possibility with particular relevance to e-commerce patents.Claims should be avoided, if possible, that specify some of the necessary activityoccurring in a remote host computer. Doing so creates the possibility that the infringerwill move the host to a location outside the United States, and therefore outside the reachof U.S. Patents (while still accessible to customers via the web). Although arguments canbe made that such a strategy would not prevent enforcement of the patent because theeffects of the host computer are experienced within the U.S., the need for that argumentshould be avoided by drafting claims that do not recite a host, unless that host cannot beeasily moved abroad.

130 A discussion of various software claiming techniques is contained in W. Ferron, Business Method andSoftware Patents Legal Update, Feb. 2000.131 The Amazon.com 1-Click™ patent provides a good example of such claims. See Appendix A-1.132 State Street, 149 F.3d at 1371.133 Id. at 1375-77.134 See State Street, 149 F.3d at 1371. See also In re Abele, 684 F.2d 902, 909 (C.C.P.A. 1982); In rePardo, 684 F.2d 912, 916 n.6 (C.C. P.A. 1982); In re Walter, 618 F.2d 758, 768 (C.C.P.A. 1980).

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Fourth, some claims should be drafted to ease the detection of infringement. Forexample, claims that are limited to the details of what occurs when a particular item ofsoftware is processed by a computer’s CPU are often impossible to assert against aninfringer. Absent decompiling all possible software and examining the software’s function(an impossible task), the patent owner might never know of an infringement. For e-commerce patents, a good alternative is to focus the claims on those aspects of theinvention that are visible through use of a web browser, and no more.

Fifth, some business method patents, involve activity that, in hindsight, canappear enormously simple. While the black letter law surrounding claims drawn tosimple inventions emphasizes that they deserve the same respect as complexdevelopments, the law and its application are rarely congruent. Some effort should stillbe made to inject an aura of technical complexity into the patent, particularly when theclaimed invention can be considered to e merely adapting an old business technique to e-commerce. Specifications should not be drafted with deceptive descriptions, but theyshould also not be drafted without regard to the usually plentiful opportunities tomention the technical details that are frequently present but often overlooked by theattorney drafting the application.

Sixth, e-commerce patents should not be drafted in a fashion that precludesinfringement. Surprisingly, some e-commerce patents are written so that neither the e-commerce business nor the consumer using the browser can infringe by themselves; theinfringing activity requires action by both, leading to the unfortunate possibility thatneither direct nor inducement of infringement can be proved.135 Care should be exerted toensure that claims are drafted to focus on the activity of just the e-commerce business orjust the consumer. In a somewhat counter-intuitive result, claims that focus on directinfringement by the consumer are actually better, since the consumer’s activity is easier todetect, and the e-commerce competitor is most likely to be liable for inducement ofinfringement if direct infringement by a consumer can be proven.

In every claim, business method or otherwise, the patent scrivener should bemindful of the admonition in Sage Products, Inc. v. Devon Indus., Inc.,136 where theFederal Circuit noted:

“as between the patentee who had a clear opportunity to negotiate broaderclaims but did not do so, and the public at large, it is the patentee whomust bear the cost of its failure to seek protection for this foreseeablealteration of its claims structure.”137

135 An example is Claim 39 of the Shopping Cart patent, No. 5,715,314. Claim 39 of the x’314 patent isset out in Appendix A-3.136 126 F.3d 1420 (Fed. Cir. 1997).137 Id. at 1425.

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Sage places the burden squarely on the shoulders of patent prosecutors to anticipate“foreseeable” future developments and include them within the literal scope of a patent’sclaims. Given the hostile publicity against e-commerce and business method patents,attorneys writing patents cannot expect courts to adopt expansive interpretations.Rather, courts should be expected to embrace Sage, especially in view of the currentphilosophy of the Federal Circuit that promotes narrow claim interpretations over broadones.138 Redoubled efforts should thus be exerted to thoroughly claim every conceivablevariation when writing patents on e-commerce and business method inventions.

Finally, when e-commerce patents are involved, patent prosecutors shouldseriously consider taking advantage of provisional rights. If the patentee maintains atleast one published (and infringed) claim unchanged during the prosecution, the patenteewill eventually be able to recover a reasonable royalty from those who use the inventionduring the pendency of the patent’s application.139 The pace of change in the internetworld could cause provisional rights to provide the only meaningful recovery.

IV. CONCLUSION

The environment of e-commerce patents is still fluid, if not changing at Internetspeed. As more patents issue, and more patent suits are initiated, fought and resolved,new issues will arise, and the already burgeoning world of Internet patent litigation willbecome both more complex and more controversial. Due to the pace of change in the e-commerce world, successful practitioners are well-advised to maintain a constantawareness of new developments, and adapt as the Internet patent world changes, sincethe only certainty is unceasing fluidity. 138 Allen Archery, Inc. v. Browning Mfg. Co., 898 F.2d 787 (Fed. Cir. 1990). A detailed discussion ofthe Federal Circuit focus on the publics ability to review and understand the patent is contained in M.Banner, “Notice” – The Philosophical Undercurrent of the Recent Federal Circuit Decisions, presented atthe Fifth Annual Intellectual Property Institute of the Washington State Bar Association, March 24, 2000.139 American Inventors Protection Act of 1999 § 4504. Provisional rights are now specified in 35 U.S.C.§ 154.

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APPENDIX APatent Claims From Selected Internet “Business Method” Patents

A-1: U.S. Patent No. 5,960,411 (the Amazon.com “1-Click™ patent”):

1. A method of placing an order for an item comprising:

under control of a client system,

displaying information identifying the item; and

in response to only a single action being performed,

sending a request to order the item along with an identifier of a

purchaser of the item to a server system;

under control of a single-action ordering component of the server system

receiving the request;

retrieving additional information previously stored for the purchaser

identified by the identifier in the received request; and

generating an order to purchase the requested item for the purchaser identified bythe identifier in the received request using the retrieved additional

information; and

fulfilling the generated order to complete purchase of the item

whereby the item is ordered without using a shopping cart ordering model.

6. A client system for ordering an item comprising:

an identifier that identifies a customer;

a display component for displaying information identifying the item;

a single-action ordering component that in response to performance ofonly a single action, sends a request to a server system to order theidentified item, the request including the identifier so that the serversystem can locate additional information needed to complete the order andso that the server system can fulfill the generated order to completepurchase of the item; and

a shopping cart ordering component that in response to performance of anadd-to-shopping-cart action, sends a request to the server system to addthe item to a shopping cart.

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9. A server system for generating an order comprising:

a shopping cart ordering component; and

a single-action ordering component including:

a data storage medium storing information for a plurality of users;

a receiving component for receiving requests to order an item, arequest including an indication of one of the plurality of users, therequest being sent in response to only a single action beingperformed; and

an order placement component that retrieves from the data storagemedium information for the indicated user and that uses theretrieved information to place an order for the indicated user for theitem; and

an order fulfillment component that completes a purchase of theitem in accordance with the order placed by the single-actionordering component.

11. A method for ordering an item using a client system, the method comprising:

displaying information identifying the item and displaying an indication ofa single action that is to be performed to order the identified item; and

in response to only the indicated single action being performed, sending toa server system a request to order the identified item

whereby the item is ordered independently of a shopping cart model and the orderis fulfilled to complete a purchase of the item.

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A-2: U.S. Patent No. 5,794,207 (the Priceline.com patent titled “Method andApparatus for a Crytographically Assisted Commercial Network SystemDesigned to Facilitate Buyer-Driven Conditional Purchase Offers”):

1. A method for using a computer to facilitate a transaction between a buyer andat least one of sellers, comprising:

inputting into the computer a conditional purchase offer which includes an offerprice;

inputting into the computer a payment identifier specifying a credit card account,

the payment identifier being associated with the conditional purchase offer;

outputting the conditional purchase offer to the plurality of sellers after receiving

the payment identifier;

inputting into the computer an acceptance from a seller, the acceptance beingresponsive to the conditional purchase offer; and

providing a payment to the seller by using the payment identifier.

12. An apparatus for facilitating a transaction between a buyer and at least one ofa plurality of sellers, comprising:

a storage device; and

a processor connected to the storage device,

the storage device storing

a program for controlling the processor; and

the processor operative with the program to receive a conditional purchaseoffer which includes an offer price;

receive a payment identifier specifying a credit card account, thepayment identifier being associated with the conditionalpurchase offer;

make the conditional purchase offer available to the plurality ofsellers after receiving the payment identifier;

receive an acceptance from a seller, the acceptance being responsiveto the conditional purchase offer; and

provide payment to the seller by using the payment identifier.

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23. A method for using a computer to facilitate a transaction between a buyer and at leastone of a plurality of sellers, comprising:

inputting into the computer a conditional purchase offer which includes an offerprice;

inputting into the computer a payment identifier specifying a financial account,the payment identifier being associated with the conditional purchaseoffer;

outputting to the buyer a request for authorization to use the payment identifierto provide a payment it an acceptance is received;

inputting into the computer authorization from the buyer in response to therequest;

outputting the conditional purchase offer to the plurality of sellers after receivingthe payment identifier;

inputting into the computer an acceptance from a seller, the acceptance beingresponsive to the conditional purchase offer; and

providing the payment to the seller by using the payment identifier.

A-3: U.S. Patent No. 5,715,314 (the Open Market, Inc. “shopping cart patent”):

1. A network-based sales system, comprising:

at least one buyer computer for operation by a user desiring to buy a product;

at least on merchant computer; and

at least on payment computer;

said buyer computer, said merchant computer, and said payment computer beinginterconnected by a computer network;

said buyer computer being programmed to receive a user request for purchasing aproduct, and to cause a payment message to be sent to said paymentcomputer that comprises a product identifier identifying said product;

said payment computer being programmed to receive s said payment message, tocause an access message to be crated that comprises said product identifierand an access message authenticator based on a cryptographic key, and tocause said access message to be sent to said merchant computer; and

said merchant computer being programmed to receive said access message, to verify said access message authenticator to ensure that said access message authenticator was crated using said cryptographic key, and to cause said product to be sent to said user desiring to buy said product.

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34. A network-based sales system, comprising:

at least on buyer computer for operation by a user desiring to buy product;

at least on shopping cart computer; and

a shopping cart database connected to said shopping cart computer;said buyer computer and said shopping cart computer being

interconnected by a computer network;

said buyer computer being programmed to receive a plurality of requests from auser to add a plurality of respective products to a shopping cart in saidshopping cart database, and, in response to said requests to add saidproducts, to send a plurality of respective shopping cart messages to saidshopping cart computer each of which comprises a product identifieridentifying one of said plurality of products;

said shopping cart computer being programmed to receive said plurality ofshopping cart messages, to modify said shopping cart in said shoppingcart database to reflect said plurality of requests to add said plurality ofproduct to said shopping cart, and to cause a payment message associatedwith said shopping cart to be created; and

said buyer computer being programmed to receive a request from said user topurchase said plurality of products added to said shopping cart and to cause said payment message to be activated to initiate a payment transaction for said plurality of products added to said shopping cart;

said shopping cart being a stored representation of a collection of products, saidshopping cart database being a database of stored representations ofcollections of products, and said shopping cart computer being a computerthat modifies said stored representations of collections of products in saiddatabase.

39. A method of operating a shopping cart computer in a computer networkcomprising at least one buyer computer for operation by a user desiring tobuy products, at least one shopping cart computer, and a shopping cartdatabase connected to said shopping cart computer, said methodcomprising the steps of:

receiving, at said shopping cart computer, a plurality of shopping cart messages

sent to said shopping cart computer by said buyer computer in responseto receipt of a plurality of requests from a user to add a plurality ofrespective products to a shopping cart in said shopping cart database, eachof said shopping cart messages comprising a product identifier identifyingone of said plurality of products;

modifying said shopping cart in said shopping cart database to reflect said

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plurality of requests to add said plurality of products to said shoppingcart; and

causing a payment message associated with said shopping cart to be created;

said buyer computer being programmed to receive a request from said user topurchase said plurality of products added to said shopping cart and to

cause said payment message to be activated to initiate a paymenttransaction for said plurality of products added to said shopping cart;

said shopping cart being a stored representation of a collection of products, saidshopping cart database being a database of stored representations ofcollections of products, and said shopping cart computer being a computerthat modifies said stored representations of collections of products in saiddatabase.

A-4: U.S. Patent No. 5,794,210 (CyberGold’s “Attention Brokerage” patent):

45. In an arrangement comprising plural computers connected to a digitalcomputer network, said network carrying and routing digital information between saidplural computers, said plural computers including at least one personal computerassociated with at least one user, at least one computer associated with at least oneprovider of negatively priced information, and at least one computer associated with atleast one attention broker, said network being decentralized in that any pair of saidpersonal, information provider, and attention broker computers may communicatewithout said communication passing through any of the other said personal, informationprovider, and attention broker computers, said personal computer having a display deviceand at least one user input device, the display device being capable of providing a visualdisplay based at least in part on the digital information delivered to the personal computervia said network, said displayed information including at least one visual link associatedwith one of said information provider and attention broker computers, said user being ableto operate said user input device to select and activate said link in order to effect anetwork connection to said associated computer, a method of creating a market in whichhuman attention is the fundamental commodity of value, the method comprising:

(1) generating a list at said attention broker computer of at least one item ofnegatively priced information from at last one information provider;

(2) establishing compensation range for each item in said list;

(3) determining which items from said list to make available to the personalcomputer;

(4) communicating at least one representation of at least one item determined instep (3) to the personal computer via the computer network;

(5) noting said user’s interaction with said representation, where said interactionincludes selecting and activating a visual link that is contained within said

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representation and that is associated with said negatively priced information provider computer, thereby connecting the personal computer via the network to said negatively priced information provider computerand receiving said negatively priced information from said computer; and

(6) compensating, via said attention broker computer, the user in connection withsaid interaction in accordance with the range determined in step (2).

A-5: U.S. Patent No. 5,825,651 (Trilogy Development Groups patent on a“Method and Apparatus for Maintaining and Configuring Systems”):

1. A method of configuring a system comprising the steps of:

generating a definition for said system, said definition containing one or moreelements and being conveyed graphically using a set of productrelationships, said product relationships identifying classifications for saidone or more elements, said product relationships comprising an includesclassification;

generating a set of part relationships between said one or more element, said set of part relationships being conveyed graphically, and

configuring said system using said definition and said set of product relationshipsand said part relationships.

A-6: U.S. Patent No. 5,774,870 (Netcentives’ patent on “Fully Integrated, OnLine Interactive Frequency and Award Redemption Program”)

1. A system for an incentive award program, including a computer systemaccessible for on-line interactive communication with users, said computer systemcomprising;

a first memory area for storing product catalog, said product catalog includingproduct descriptions and product prices for each product available forpurchase;

a second memory area for storing an awards catalog, said awards catalog including an award description and award points value for each award; and

a frequency database storing account information for each enrolled user of saidincentive award program.

A-7: U.S. Patent No. 6,006,197 (“System and Method for Asssessing Effectiveness

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of Internet Marketing Campaign”):

1. A computer-implemented method for indicating the effectiveness of at least oneadvertisement on at least one site on a wide area computer network, comprising the stepsof:

associating the advertisement with an advertisement identification;

including the advertisement identification in a first network path name;

receiving the first network path name;

in response to the receiving step, returning to a user a second network path nameincluding a visitor identification; and

correlating the advertisement identification with the visitor identification,

wherein the advertisement identification is removed from the first path name andreplaced with the visitor identification to thereby render the second path name.

A-8: U.S. Patent No. 6,009,459 (Microsoft’s patent on “Intelligent AutomaticSearching for Resources in a Distributed Environment”):

1. In a computer system having an output device, an input device and a connectionto enable communication with a plurality of web sites, a method comprising:

(a) providing a user interface element on the output device adapted for auser to specify text that identifies a uniform resource locator (URL) of agiven web site holding media to gain access to the given web site;

(b) in response to text that is specified via the user interface element,determining that the text is not a URL;

(c) in response to determining that the text is not a URL, examining thetext and based on a determined meaning of the content of the textdetermining at least one of a plurality of search engines to search for a website related to the text, passing at least a portion of the text to a determinedsearch engine; and

(d) in response to passing at least a portion of the text to the determinedsearch engine, receiving media back from a web site that the determinedsearch engine located using the text passed to the determined search engine.

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A-9: U.S. Patent No. 5,890,138 (Bid.com’s patent on a “Computer AuctionSystem):

1. A method of auctioning product on-line where computer terminals of potentialpurchasers are used to access a computer site comprising an auction server computer, saidmethod comprising

(a) assigning to each product a designated time for the product to beauctioned,

(b) carrying out an auction at substantially the designated time by

setting a fixed time period for completing the auction,

displaying a current price for the product and decreasing the priceof the product as the time remaining in the auction decreases,

displaying the quantity of product remaining to be auctioned anddecreasing the quantity to immediately reflect instructions frompurchasers of their desire to purchaser the product as theinstructions are received during the auction to provide dynamicfeedback to potential purchasers during the auction,

(c) providing each potential purchaser with a designated actuation controlfor instructing the computer site of the decision to purchase the product atthe current price at the time of receiving the instructions,

(d) removing a potential purchaser from the auction upon said purchaseroperating the actuation control to purchase the product at the displayedcurrent price at the time the instructions are received and decreasing thequantity of product remaining to be auctioned,

(e) continuing to decrease said price in step (c) and to display the price andthe decreased quantity of product remaining to each potential purchasernot removed in step (d);

(f) registering potential purchasers and obtaining and recording financialdata for automated payment of purchased product,

(g) increasing the remaining quantity if a preselected time limit forobtaining said financial data is exceeded, and

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(h) upon receipt of said financial information within the preselected timelimit, initiating a transfer of funds to complete the sale of the product andconfirming the purchase of the product at the current price to the potentialpurchaser by sending a message confirming the purchase to the potentialpurchaser.

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A-10: U.S. Patent No. 5,948,061 (Doubleclick’s patent on “Method of Delivery,Targeting, and Measuring Advertising Over Networks”):

1. A network comprising:

a user node having a browser program coupled to said network, said usernode providing requests for information on said network;

a content provider affiliate node having a respective affiliate web siteresponsive to requests for information from said user node to providemedia content, advertising space for display of advertising content and alink message to said user node;

an advertiser node having an advertiser web site including advertisingcontent, said advertiser node responsive to a request to provide saidadvertising content; and

an advertisement server node responsive to a request from said user nodebased on said link message to select an advertiser node as a selectedadvertiser node, and identify said advertiser node as said selectedadvertiser node to said user node,

whereby said advertising content from said selected advertiser node isdisplayed at said user node.

7. In a network having a user node including a browser program coupled to saidnetwork, said user node providing requests for information on said network, a contentprovider affiliate node having a respective affiliate web site responsive to requests forinformation from said user node to provide media content, advertising space for displayof advertising content and a link message to said user node, a plurality of advertiser nodes,each of said plurality of advertiser nodes having a respective advertiser web site includingrespective advertising content, each of said advertiser nodes responsive to a respectiverequest to provide respective advertising content, a network node comprising:

an advertisement server node responsive to a request from said user nodebased on said link message to select an advertiser node as a selectedadvertiser node, and identify said advertiser node as said selectedadvertiser node to said user node,

whereby said advertising content from said selected advertiser node isdisplayed at said user node.

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42. In a network including a user node having a browser program coupled to saidnetwork, a content provider affiliate node having a respective affiliate web sitecontaining media content, advertising space for display of advertising content andan advertisement server node having an advertising server web site, a method fordelivery of advertising to said user node, said method comprising:

sending a request for information from said user node to said affiliate website requesting information;

sending a reply from said affiliate web site responsive to said request forinformation from said user node, said reply containing media content,advertising space for display of advertising content and a link message tosaid user node;

sending a request from said user node based on said link message to saidadvertising server web site to provide an advertising banner for saidadvertising space;

selecting, at said advertising server web site, an advertising banner;

sending a reply from said advertising server web site identifying saidadvertising banner to said user node; and

displaying said advertising banner in said advertising space at said usernode.

A-11: U.S. Patent No. 5,895,454 (Harrington “Integrated Interface forVendor/Product Oriented Internet Websites”):

1. In a computerized system, a method of effecting commerce in a networkedcomputer environment, the method comprising:

establishing a database of vendor product data and associated databaseinterface on a first computer, where the interface allows remote access byone or more user(s);

a local user interacting with said database by means of the interfacewherein the interaction comprises the user querying the database tospecify a local users product/service specification;

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the database providing the local user with a selection of remote vendornetwork sites, where the selection of remote vendor sites is determined onthat basis of the users querying the database;

the local user interactively connecting with one or more of the remotevendor network sites whereby the local user is connected to the remotevendor network sites;

once connected to a remote vendor network site, the user selectsproducts/services from the information provided on the remote vendornetwork site wherein the selection of a particular product/service triggers atransaction notification which records the users selection and associatedfinancial transaction data which is transmitted to the database andassociated database interface, wherein the local user may connect tosubsequent remote vendor network sites whereby each selection of aproduct/service triggers a transaction notification which is transmitted tothe database;

the database and associated database interface providing informationrelating to the users realtime selection of products/services whereby duringor at the conclusion of a local users shopping session, the user confirmsthe selection whereby the database and associated database interfacetransmits purchase/ordering data to the remote vendor sites correspondingto the users selection.

A-12: U.S. Patent No. 5,682,525 (CIVIX-DDI’s patent on “System and Methods forRemotely Accessing a Selected Group of Items of Interest from aDatabase”):

1. System for remotely determining the position of a selected category of items ofinterest in a selected geographic vicinity from a database, the system comprising

(A) a database for storing information about a plurality of items ofinterest, the information including, for each of the items of interest,positional coordinates, a geographic vicinity, and at least one associatedcategory, the positional coordinates locating the geographic vicinity,

(B) a communications link for communicating between a user of thesystem and the database,

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(C) means for transmitting a portion of the information in the database tothe user via the link upon receipt of a request signal representative of aselected category and geographic vicinity, the transmitted portion of theinformation including identification of a position for each of the items ofinterest within the selected category and geographic vicinity and relative tothe positional coordinates and other items of interest within the vicinity,and

(D) a port for remotely accessing the portion of information via the link,the port generating the request signal in response to inputs by the userwhich are representative of the selected category and geographic vicinity,the port having a user interface for accepting the inputs and for indicatingto the user the position of each of the items of interest in the selectedcategory and geographic vicinity.

A-13: U.S. Patent No. 5,778,367 (Network Engineering Software’s patent on“Automated On-Line Information Service and Directory, Particularly forthe World Wide Web”):

1. A method using a computer network and a database accessible through thecomputer network, comprising the steps of:

receiving requests from individual users of the computer network toelectronically publish information;

accepting information from the individual users;

allowing the individual users to classify the accepted information tofacilitate later searching of the accepted information:

automatically collecting and storing in the database in searchable andretrievable form based on the user classifications entries from theindividual users containing the accepted information;

password protecting the entries;

making the entries freely accessible on the computer network;

searching the database based on the user classifications and retrieving theentries in response to user requests;

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serving entries to users in a hardware-independent page descriptionlanguage without altering the user classifications; and

retrieving and allowing users to update entries by supplying a correctpassword.

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A-14: U.S. Patent No. 5,761,648 (Coolsavings’ patent on “Interactive MarketingNetwork and Process Using Electronic Certificates”):

1. A method for issuing and processing electronic certificates having bothtransaction data and identification data, comprising the steps of:

(a) establishing an electrical communication between a service system and aplurality of issuer systems;

(b) establishing an electrical communication between the service systemand a plurality of remote user stations;

(c) transmitting to the service system from the plurality of issuer systemsinstructions for issuing a predetermined type and number of the electroniccertificates;

(d) the service system receiving remote user profile data, includinginformation sufficient to specifically identify the remote user, from theplurality of remote user stations and developing correlation data whichcategorizes the remote user profile data;

(e) selectively transmitting to the plurality of issuer systems from theservice system the correlation data without also transmitting the specificremote user identification information; and

(f) selectively transmitting to the plurality of remote user stationsspecified electronic certificates based upon the correlation data developedby the service system.

A-15: U.S. Patent No. 5,905,736 (AT&T’s Patent on “Method for the Billing ofTransactions Over the Internet”):

1. A method of billing an account associated with a user's identity for a cost for atransaction conducted on a network between a provider and a user's terminal, the user'sterminal being assigned a temporary address on the network that is used for thetransaction, said billing and said transaction both being conducted on said network, themethod comprising the steps of:

receiving an identifying signal that associated the user's identity and theassigned temporary address;

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storing the association between the user's identity and the assignedtemporary address;

receiving a billing signal to bill for the cost of the transaction, the billingsignal including the cost of the transaction and the assigned temporaryaddress of the terminal;

referencing the cost of the transaction in the billing signal to the accountassociated with

the user's identity from the stored association between the assignedtemporary address and the user's identity; and

billing the account associated with the user's identity for the cost of thetransaction.

A-16: U.S. Patent No. 6,021,398 (“Computer Implemented Methods and Apparatusfor Auctions):

1. A dynamic computer implemented auction system for multiple dissimilarobjects operating in multiple rounds comprising:

a) an auctioneer's system and at least two user systems, the auctioneer'ssystem communicatively coupled to user systems;

b) each user system including:

b1) means for receiving messages from the auctioneer's system andfor displaying those messages;

b2) means for receiving bid related information from a user and fortransmitting bid information to the auctioneer's system, where saidbid information includes a value parameter Pi and an associatedobject subset identification Si, where the object subsetidentification Si identifies a set of objects and where the valueparameter Pi specifies a payment proposed by the bidder in returnfor the objects of subset S1 ;

c) said auctioneer's system including:

c1) means for generating and transmitting messages to usersystems, said messages including a message to initiate an auction, a

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non-final message indicating that the auction will continue at least onemore round, and a final message indicating that the auction has terminated;

c2) means for receiving bid information from user systems inmultiple rounds of bidding;

c3) decision means responsive to the bid information received fromthe user systems for determining if an auction should continue ornot, wherein the decision means includes:

c31 ) means to initiate the generation of a non-final message to atleast one user system in response to a determination to continuethe auction;

c32) means to initiate the generation of a final message to at leastone user system in response to a determination not to continue theauction; and

c33) selecting means to select an n-tuple of bids (Si, Pi), at mostone from each user system, which selection is effective to optimizethe sum of the different value parameters Pi of the selected bidssubject to the constraint that the associated subsets Si of all of theselected bids are compatible.

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Appendix B

Selected Non-Internet Patent Claims Argued to Include “Business Methods”

B-1: U.S. Patent No. 5,193,056 (the “State Street Bank” patent):

1. A data processing system for managing a financial services configuration of aportfolio established as a partnership, each partner being one of a plurality of funds,comprising:

(a) computer processor means for processing data;

(b) storage means for storing data on a storage medium;

(c) first means for initializing the storage medium;

(d) second means for processing data regarding assets in the portfolio and each of the funds from a previous day and data regarding increases or decreases in each of the funds’ assets and for allocating the percentage share that each fund holds in the portfolio;

(e) third means for processing data regarding daily incremental income, expenses, and net realized gain or loss for the portfolio and for allocating such data among each fund;

(f) fourth means for processing data regarding daily net unrealized gain or loss for the portfolio and for allocating such data among each fund; and

(g) fifth means for processing data regarding aggregate year-end income, expenses, and capital gain or loss for the portfolio and each of the funds.

B-2: U.S. Patent No. 5,191,573 (Method for Transmitting a Desired Digital Videoor Audio Signal):

1. A method for transmitting a desired digital audio signal stored on a firstmemory of a first party to a second memory of a second party comprising the steps of:

transferring money electronically via a telecommunication line to the first party at a location remote from the second memory and controlling use of the first

memory, from a second party financially distinct from the first party, saidsecond party in control and in possession of the second memory;

connecting electronically via a telecommunications line the first memory with the

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second memory such that the desire digital audio signal can passtherebetween;

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transmitting the desired digital audio signal from the first memory with a

transmitter in control and possession of the first party to a receiver havingthe second memory at a location determined by the second party, saidreceiver in possession and control of the second party; and

storing the digital signal in the second memory.

B-3: U.S. Patent No.5,809,484 (Method and Apparatus for Funding Education byAcquiring Shares of Students Future Earnings):

39. A data processing method for administering a plan for funding education of aplurality of students, each of said students studying in one or more fields of study at oneor more educational institutions, said method comprising the steps of:

projecting, using an earnings projection unit, earnings of said plan by (1) at leastone of (a) projecting employment and earnings opportunities for studentsin said fields of study, and (b) projecting employment and earningsopportunities for graduates of said educational institutions, and (2) at leastone of (i) limiting projection of earnings to projections for students in oneor more particular fields of study, (ii) limiting projection of earnings toprojections for students in one or more particular educational institutions,and (iii) creating at least one set of application criteria for acceptance ofstudents into said plan, said application criteria being for predictingsuccess of individual students in one or more of said fields of study;

reading and storing application responses from each of said students using anapplication parser;

accepting students into said plan based at least in part on results of said projectingand reading and storing steps;

processing, using a collection unit, collection and receipt from investors ofsufficient funds to fund at least a portion of said education of each of saidaccepted students;

automatically generating and printing a document to be executed by each student for purchasing an amount of student earnings on behalf of said investors, said purchased earnings comprising a predetermined percentage of earnings of each respective accepted student; and

determining, using an accounting unit, an amount of said purchased earnings to bepaid to said investors after subtracting costs from total purchased earningsreceived from accepted students.

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B-4: U.S. Patent No. 5,832,456 (System and Method for Weather Adapted,Business Performance Forecasting)

32. A method of forecasting business performance, comprising the steps of:

(1) storing in a storage device a business history database, a weather historydatabase, and a weather forecast database;

(2) determining by an analyzer the extent to which past business performance of aplurality of business units at a plurality of locations was affected by weather using said business history database and said weather history database;

(3) estimating by a configurator expected future business performance of saidbusiness units at said locations for a plurality of future time periods usingsaid weather forecast database and results produced by said analyzer; and

(4) enabling users to view and manipulate results produced by said analyzer andsaid configurator to thereby forecast future business performance of saidbusiness units at said locations for said time periods, and further comprising the step of locating and displaying any sequence of time periods that match user-specified sequences of weather patterns.

B-5: U.S. Patent No. 5,839,112 (Method and Apparatus for Displaying andSelecting Vehicle Parts)

1. In a computer system, a method for estimating damage to a vehicle comprisingthe steps of:

displaying a plurality of identifiers representing vehicle parts;

selecting an identifier, said identifier representing a layer of said vehicle parts, said layer comprising an entire exterior sheet of said vehicle; and

estimating damage to said vehicle using said layer of vehicle parts.

B-6: U.S. Patent No. 5,913,204 (Method and Apparatus for Surveying MusicListener Opinion About Songs)

1. A method of surveying and reporting listener opinion of a list of songs fromthe music library of a radio station including the steps of:

a) selecting a group of music listeners from which individual listener opinions are to be recorded;

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b) fielding from a survey taker a home music preference test kit including a musicaudio medium containing a number of song hooks to the select listeners ateach listener’s residence;

each listener

listening to a list of music of music song hooks,

entering his preferences as to the song hooks on a test sheetwithout the presence of a survey interviewer;

returning the completed test sheets to the survey taker,

c) collecting and compiling data from each music preference test kit test sheetanswered by each listener;

d) tabulating the test sheet data in a computer to reflect listener opinion for eachsong in the list,reporting the tabulated data to the radio station, and modifying the music

programming of the radio station based on the results of thesurvey.

B-7: U.S. Patent No. 5,947,526 (Personal Financial Tracking System andMethod)

1. A method for tracking monetary expenditures, comprising:

determining a budgeted total monetary amount for a predetermined time interval;

fixing one or more discrete monetary amounts, each of which is a small fraction of the budgeted total monetary amount as a discrete budget unit;

arranging a plurality of representations of the one or more discrete monetaryamounts in a distributed fashion on a medium in a plurality of groups ofrepresentations, each group in turn corresponding to a given time subinterval for the predetermined time interval, such that the aggregate of therepresentations equals the budgeted total monetary amount, wherein thearrangement of the representations provides a visual representation of thebudgeted total monetary amount as a distribution of discrete monetaryamounts;

tracking a plurality of expenditure amounts by canceling, for each expenditureamount, a corresponding amount of the representations to approximate theexpenditure amount, wherein the number of non-canceled representationsprovides a visual indication of the amount of funds remaining forexpenditure, and the number of canceled representation provides a visualindication of the amount of funds expended.

B-8: U.S. Patent No. 5,851,117 (Building Block Training Systems and Training

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Methods)

1. A method of a trainer teaching a cleaner, the method comprising:

(a) providing a training system for use in on the job training of worker whose jobfunctions include the cleaning of a facility, the training system comprisinga plurality of sections, each training system section containing instructionsfor cleaning a typical facility, each training system section limited ininstructions to a specific physical job function to be performed in thefacility, and each training system section containing illustrations of what isto be done and illustrations of what is not to be skipped and what is to beavoided in performing the cleaning job functions;

(b) in the facility, the trainer showing the cleaner a document of a section of thetraining system, the document pictorially indicating what the cleaner is to do in each step of a specific job function;

(c) the trainer telling the cleaner about each step pictorially depicted in the document;

(d) the trainer showing the cleaner how to perform each step pictorially depicted in the document; and

(e) the trainer having the cleaner perform the step in the presence of the trainer while the trainer coaches and the trainer having the cleaner tell the trainer about the step while referring to the document.

B-9: U.S. Patent No. 5,920,845 (Date Matching Methods)

1. A method for use at a date matching event attended by a plurality ofparticipants, the method comprising:

(a) assigning an identification code to each participant, the identification codeplaced in plain sight, being readily observable by a plurality of the otherparticipants;

(b) facilitating interaction of participants;

(c) supplying to each participant a date preference card for indicating, discreetly,at least one date preference, each date preference designating a participantwith whom a date is desired, said car enable each respective participant toindicate a prioritized list of other participants with whom a date is desiredby recording one or more assigned participant identification codes; the datepreference card is computer scannable to support the automated input ofthe listed participant identification codes;

(d) collecting said date preference card for indicating date preferences;

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(e) processing, using a general purpose computing system, each collected datepreference card for indicating date preferences to determine mutualmatches of participants; each mutual match indicating at least twoparticipant who requested each other for a date preference; and

(f) informing the participants of the mutual matches to enable to plan their date.

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Appendix C

BUSINESS METHODS PATENT INITIATIVE: AN ACTION PLAN

INDUSTRY OUTREACH

1. Customer Partnership: Establish formal Customer Partnership with the software, Internet and electronic commerce industry similar to that in place with the biotechnology industry. The Partnership will meet quarterly to discuss mutual concerns, share USPTO plans and operational efforts in this technology area, and discuss solutions to common problems.

2. Roundtable Forum: The USPTO will convene a Roundtable Forum with Stakeholders in Summer 2000 to discuss issues and possible solutions surrounding business method patents.

3. Industry Feedback: A greater effort will be made to obtain industry feedback on prior art resources used by the USPTO, solicit input on other databases and information collections and sources, and expand prior art collections.

QUALITY

1. Enhance Technical Training:

o Enhance technical currency for examiners and continue current training efforts/partnerships with industry associations and various individual corporate sponsors.

o Business practice specialists will be pursued to serve as a resource for examiners on alleged common or well known industry practices, terminology scope and meaning, and industry standards in four basic areas: banking/finance, general e-commerce, insurance, and Internet infrastructure.

o The USPTO will publish the areas of training needs for comment and offers to provide such training.

2. Revise Examination Guidelines: The Examination Guidelines for Computer-Related Inventions and the relevant training examples will be revised in light of the State Street Bank and AT&T v. Excel decisions.

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3. Expand Current Search Activities:

o Mandatory Search: A mandatory search for all applications in Class 705 to include a classified U.S. patent document search, and a text search of U.S. patent documents, foreign patent documents, and non-patent literature (NPL), with NPL searches to include required search areas mapped/correlated to U.S. classification system for Class 705, which will provide a more fully developed prior art record;

o Second Review: A new second-level review of all allowed applications in Class 705 will be required, with an eye toward ensuring compliance with search requirements, reasons for allowance, and a determination whether the scope of the claims should be reconsidered; and

o Expand Sampling Size: The sampling size for quality review by the Office of Patent Quality Review will be substantially expanded, and a new in-process review of Office actions will be introduced with an emphasis on the field of search of the prior art and patentability determinations under 102/103.

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APPENDIX D

U.S. PATENT AND TRADEMARK OFFICEOffice for Patent and Trademark Information

Manual of U.S. Patent ClassificationDecember 31, 1999

Class705

DATA PROCESSING: FINANCIAL, BUSINESS PRACTICE, MANAGEMENT, ORCOST/PRICE DETERMINATION

Subclass Title

50 BUSINESS PROCESSING USING CRYPTOGRAPHY51 . Usage protection of distributed data files52 . . Usage or charge determination53 . . . Including third party for collecting or distributing payment (e.g.,

clearinghouse)54 . . . Adding plural layers of rights or limitations by other than the original

producer55 . . Requiring a supplemental attachment or input (e.g., dongle) to open56 . . . Specific computer ID (e.g., serial number, configuration, etc.)57 . . Copy protection or prevention58 . . . Having origin or program ID59 . . Licensing60 . Postage metering system61 . . Reloading/recharging62 . . Having printing detail (e.g., verification of mark)63 . Utility metering system64 . Secure transaction (e.g., EFT/POS)65 . . Including intelligent token (e.g., electronic purse)66 . . . Intelligent token initializing or reloading67 . . . Including authentication68 . . . Balancing account69 . . . Electronic cash detail (e.g., blinded, divisible, or detecting double spending)70 . . Home banking

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71 . . Including key management72 . . Verifying PIN73 . . Terminal detail (e.g., initializing)74 . . Anonymous user system75 . . Transaction verification76 . . Electronic credential77 . . Including remote charge determination or related payment system78 . . . Including third party79 . . . Including a payment switch or gateway80 . Electronic negotiation

1 AUTOMATED ELECTRICAL FINANCIAL OR BUSINESS PRACTICE OR MANAGEMENT ARRANGEMENT2 . Health care management (e.g., record management, ICDA billing)3 . . Patient record management4 . Insurance (e.g., computer implemented system or method for writing insurance

policy, processing insurance claim, etc.)5 . Reservation, check-in, or booking display for reserved space6 . . Coordination of plural reservations (e.g., plural tri segments; transportation and

accommodation, etc.)7 . Operations research8 . . Allocating resources or scheduling for an administrative function9 . . . Staff scheduling or task assignment10 . . Market analysis, demand forecasting or surveying11 . . Job performance analysis12 . Voting or election arrangement13 . Transportation facility access (e.g., fare, toll, parking)14 . Distribution or redemption of coupon, or incentive or promotion program15 . Restaurant or bar16 . Including point of sale terminal or electronic cash register17 . . Having interface for record bearing medium or carrier for electronic funds

transfer or payment credit18 . . Having security or user identification provision (password entry, etc.)19 . . Tax processing20 . . Price look-up processing (e.g., updating)21 . . Interconnection or interaction of plural electronic cash registers (ECRs) or to

host computer (e.g., network detail, transfer of information from host to ECR orfrom ECR to ECR, etc.)

22 . . Inventory monitoring23 . . Input by product or record sensing (weighing, scanner processing)24 . . Specified transaction journal output feature (e.g., printed receipt, voice output,

etc.)25 . . Specified keyboard feature

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26 . Electronic shopping (e.g., remote ordering)27 . . Presentation of image or description of sales item (e.g., electronic catalog

browsing)28 . Inventory management29 . . Itemization of parts, supplies, or services (e.g., bill of materials)30 . Accounting31 . . Tax preparation or submission32 . . Time accounting (time and attendance, monitoring billable hours)33 . . Checkbook balancing, updating or printing arrangement34 . . Bill preparation35 . Finance (e.g., banking, investment or credit)36 . . Portfolio selection, planning or analysis37 . . Trading, matching, or bidding38 . . Credit (risk) processing or loan processing (e.g., mortgage)39 . . Including funds transfer or credit transaction40 . . . Bill distribution or payment41 . . . Having programming of a portable memory device (e.g., IC card, "electronic

purse")42 . . . Remote banking (e.g., home banking)43 . . . . Including Automatic Teller Machine (i.e., ATM)44 . . . Requiring authorization or authentication45 . . . With paper check handling

400 FOR COST/PRICE401 . Postage meter system402 . . Special service or fee (e.g., discount, surcharge, adjustment, etc.)403 . . Recharging404 . . Record keeping405 . . Data protection406 . . With specific mail handling means407 . . Including mailed item weight408 . . Specific printing409 . . Rate updating410 . . Specialized function performed411 . . . Display controlling412 . Utility usage413 . Fluid414 . Weight415 . . Correcting or compensating416 . . Specific input and output device417 . Distance (e.g., taximeter)418 . Time (e.g., parking meter)

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500 MISCELLANEOUS (E.G., BY GENERIC OR NONELECTRICAL COMPUTING)

********************************* FOREIGN ART COLLECTIONS ********************************* APPLICATIONS (364/400) FOR 124 . Cryptographic electronic funds transfer (e.g., automatic teller) (380/24) FOR 100 . For cost/price (364/464.01) FOR 101 . . Postage meter system (364/464.02) FOR 102 . . . Including mailed item weight (364/464.03) FOR 103 . . Utility usage (364/464.04) FOR 104 . . Fluid (364/465) FOR 105 . . Weight (364/466) FOR 106 . . Distance or time (e.g., taximeters) (364/467)

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Excerpts From the Manual of U.S. Patent ClassificationAs of September 30, 1999

Class 705

DATA PROCESSING: FINANCIAL, BUSINESS PRACTICE, MANAGEMENT, ORCOST/PRICE DETERMINATION

Subclass: 1

AUTOMATED ELECTRICAL FINANCIAL OR BUSINESS PRACTICE ORMANAGEMENT ARRANGEMENT:(under the class definition) Subject matter wherein anelectrical apparatus and its corresponding methods perform the data processingoperations, in which there is a significant change in the data or for performing calculationoperations wherein the apparatus or method is uniquely designed for or utilized in thepractice, administration, or management of an enterprise, or in the processing of financialdata.

(1) Note. The term "arrangement" as used in this and its indented subclasses refers toeither a device or to a method of use of a device for performing the indicated process.Further, a device may be an assemblage of components at a single location or may have itsseveral components at geographically distinct locations, i.e., a network.(2) Note. The term "enterprise" as used in this and its indented subclasses is intended toinclude governmental and nonprofit organizations, as well as conventional businessorganizations.(3) Note. The arrangements in this and its indented subclasses are generally used forproblems relating to administration of an organization, commodities, financialtransactions, or recreation.(4) Note. Mere designation of an arrangement as a "business machine" or a document as a"business form" or "business chart" without any particular business function will notcause classification in this or its indented subclasses.

Subclass: 26

Electronic shopping (e.g., remote ordering):(under subclass 1) Subject matter drawn to a computerized arrangement which enables apurchaser to inspect or select from a plurality of different items, or effect a purchase ofone or more items at a location geographically separated from the system user.

(1) Note. A remote shopping system is included in this subclass.

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(2) Note. Browsing of a selection without a purchase transaction is classified in this or itsindented subclass.

Subclass: 30

Accounting:(under subclass 1) Subject matter drawn to a computerized arrangement for recording,analyzing, verifying, or reporting of funds or other quantitatively innumerable factorsused in a business.

Subclass: 35

Finance (e.g., banking, investment or credit):(under subclass 1) Subject matter drawn to a computerized arrangement for planning thedisposition or use of funds or securities, or extension of credit.

JERRY A. RIEDINGER is a partner at theSeattle office of Perkins Coie, LLP, where heleads the patent litigation group. He focuses hispractice on the conduct of patent infringement,trade secret and related complex intellectualproperty litigation. He has conducted patent andtrade secret infringement suits and trials in 26federal district courts around the countryinvolving such areas as software, medical devices,chemical and pharmaceutical products andelectronics. He earned a B.S. in MechanicalEngineering in 1976 from Rice University and aJ.D. with honor in 1982 from DePaul University,and is a former Lead Articles Editor for theDePaul Law Review. He is admitted to practice inIllinois and Washington, and is a member of thebar of several federal district courts (including theTrial Bar of the Northern District of Illinois), aswell as the Court of Appeals for the FederalCircuit and the U.S. Supreme Court. He isregistered to practice before the U.S. Patent andTrademark office. Jerry is active in severalnational and regional bar associations, includingthe AIPLA, the Washington State Patent LawAssociation, the Intellectual Property Law Asso-ciation of Chicago and the Federal Circuit BarAssociation. He is a member of Council of theIntellectual Property Law Section of the AmericanBar Association, and is a past chair of the ABA IPSection's Division I (Patents) and the Section'sAntitrust Committee, its Trade Secrets Committeeand its Continuing Legal Education Committee.He is currently Secretary of the Washington StateBar Association Intellectual Property Section. Heis a frequent lecturer on topics relating to patent,trade secret and intellectual property litigation.