Does H.R. 1249 Include Language To Help Banks Faced With Business Method Patent Infringement?

As momentum builds toward the passage of legislation that will bring the most comprehensive revisions to United States patent law in more than 50 years, more and more attention is being given to what impact that may have on the U.S. patent system.  The Senate has already passed its version of the America Invents Act of 2011 (S. 23) and now the House of Representatives is poised to pass H.R. 1249, for which President Obama has already indicated his support. Although certainly not a new concept, patent reform stands its best chance of becoming law in quite some time.

One portion of H.R. 1249 that is drawing significant interest is Section 18 of H.R. 1249, which many commentators have dubbed a “bank bailout.” While most of H.R. 1249 deals with substantive changes to patent law such as the movement to a first-to-file system to harmonize U.S. law with most of the rest of world, other language has many worried about the true impact the legislation may have.

For several years now, patent holding companies and other non-practicing entities have been very active in asserting patents against a wide array of targets in courts around the country. Banks and other financial services institutions have frequently been among these targets, forced to deal with expensive and uncertain patent infringement lawsuits. In many cases, rather than risk potentially huge judgments, many of these banks and financial institutions have paid millions in patent licensing fees. Others have taken their cases to trial, and many others are currently being litigated, with no end in sight. With this in mind, it is understandable for the industry to seek innovative ways to deal with issues raised by these types of plaintiffs and the patents they own, and H.R. 1249 may include just such a way to combat this threat.

Section 18 is titled “Transitional Program For Covered Business Method Patents” and at first glance appears to be another attempt to deal with the patentability of business method patents. But a closer look reveals that this language is specifically for banks and financial institutions facing patent infringement litigation. Section 18 establishes a transitional post-grant review proceeding for review of the validity of “covered business method patents.” These are specifically defined as patents claiming “a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service.”

Section 18 further provides that the post-grant review process can only be invoked by someone who has been sued for or charged with infringement of such a patent. There is also a venue clause which specifies that the presence of an automated teller machine shall not be deemed to be a physical facility for determining whether a case can be brought in a particular judicial district.

Section 18 appears designed to provide a specific post-grant review process for patents that can be asserted against banks and financial institutions. Current U.S. patent law provides no post-grant review mechanism at all – the addition of this alone is an enormous change to the patent system. True patent reform has always proven very difficult to enact, but the presence of language like that of Section 18 is sure to draw, and indeed has already drawn, attention to exactly what changes to U.S. law are contemplated, and why.  Despite the limited scope of Section 18, the apparent special-interest benefit may ultimately provide enough ammunition for opponents of the legislation to once again derail passage of the entire legislation.