April 2006

Patenting Business-Methods

It was the growing use of computers in business that forced the courts to decide once and for all in 1998 whether business methods could be patented, and indeed, many patented business methods involve the use of computers to do business on the Internet, sometimes referred to as “e-commerce.” The aftermath of the 1998 court decision was a flood of business-method and e-commerce patent applications, which quickly created problems for the United States Patent and Trademark Office (USPTO).

Under the Patent laws, if an invention has been used in commerce or described in literature for more than a year before a patent application for that invention is filed, it cannot be patented because the invention is no longer new. With regard to a business method, a vast amount of information must be examined to determine if the business-method is patentable. Because of the vast amount of literature that might reveal that an invention is not new (called the “prior art”), it was very difficult for patent examiners, particularly those not well versed in computer technologies, to review all of the prior art to determine whether an invention was in fact new. This is especially true in a field that is experiencing rapid growth, change and progress. Accordingly, the USPTO has been widely criticized for issuing business-method and e-commerce patents for methods that have already been in extensive use or that are obvious extensions of existing business methods. This has forced the USPTO to adjust its process with respect to business-methods to accommodate a rapidly evolving patent landscape.

In 2000, the USPTO responded to the concerns of the business community by announcing an action plan for business-method and e-commerce patents. In the plan, the USPTO sought to establish formal customer partnerships with the software, Internet, and e-commerce industries; provide a forum to discuss concerns and issues presented by e-commerce patents and their possible solutions; and solicit industry input in identifying sources of prior art. The USPTO also sought to enhance the quality of its review of prior art by providing additional technical training for patent examiners, revise the examination guidelines for computer-related inventions, and expand the scope of prior art search into additional databases. In addition, the USPTO has instituted a second level of review for business-method and e-commerce patent applications.

Presently, the USPTO maintains a separate Web site for business methods that reflects its efforts to improve its approach to the review of business-method and e-commerce patent applications. The Web site contains links for industry partnership meeting newsletters, questions and answers from a business partnership meeting, guidance for preparing a business-method patent application, examples of business-method patent rejections, training materials for computer-implemented inventions, business-method white papers, and other resources that specifically address business-method patents.

If you believe you may have a new business method or if believe a current business method patent should be challenged, please contact one of our patent attorneys to review your legal options.

Patenting Multiple Inventions in a Single Patent Application

Under US laws, a patent application may only be directed to a single invention. If a patent application contains claims to more than one independent and distinct invention, the United States Patent and Trademark Office (USPTO) may impose a restriction requirement on the applicant to separate out the inventions. The applicant must then elect one invention for prosecution in the original application and may file new, divisional applications claiming the other, “non-elected,” inventions. Restrictions are imposed to maintain the patent classification system, the examination process and to prevent an applicant from filing an application covering several inventions while only paying for one.

Two or More Independent and Distinct Inventions Claimed in One Application

The Commissioner of Patents and Trademarks requires restriction if two or more independent and distinct inventions are claimed in one application. This is the independent and distinct standard. USPTO policy prevents restriction unless the two groups of claims are patentable over each other, which means that neither is obvious in the light of the other.

The USPTO defines ”independent” as meaning ”not dependent,” which in turn means ”there is no disclosed relationship between the two or more subjects disclosed.” The USPTO defines ”distinct” as related or dependent but ”capable of separate manufacture, use or sale as claimed” and ”patentable (novel and unobvious) over each other.” The USPTO contends that restriction is appropriate where two joined inventions are either independent or distinct. The Commissioner of Patents and Trademarks must require restriction if two or more independent and distinct inventions are claimed in one application.

The USPTO may require restriction where two or more inventions are related or dependent but nevertheless ”distinct.” Inventions are distinct if they are both (1) capable of separate manufacture, use, or sale as claimed and (2) patentable over each other. Assuming two joined inventions are distinct in this sense, then restriction will in fact be required if but only if one or more of the following reasons are present: (1) separate classification, (2) separate status in the art, and (3) different field of search.

Examiner Enters Restriction Requirement

An examiner enters a restriction requirement when he or she determines that the application includes claims to independent and distinct inventions. The applicant must then indicate a provisional election and may oppose the requirement by requesting reconsideration. In the next action, the examiner may make the requirement final and will take action on the elected claims.

One restriction requirement does not preclude a second one at a later stage of the prosecution. Additionally, a restriction requirement may be made, withdrawn, and then required again if the circumstances warrant. In requiring restriction, the examiner must indicate clearly how the application is to be restricted as well as the reasons for restriction.

Applicant Must Elect an Invention

A restriction requirement calls on the applicant to elect an invention to which the claims will be restricted. Election is thus the designation of the particular one of two or more disclosed inventions that will be prosecuted in the application. In responding to such a requirement, the applicant must state a provisional election even though he or she contests the propriety of the restriction requirement. This enables the examiner to examine claims to the elected invention immediately as well as to reconsider the requirement.

Provisional Election Binding on Applicant

The provisional election binds the applicant throughout subsequent prosecution. The general policy of the USPTO is not to permit the applicant to shift to claiming another invention after an election is once made and action given on the elected subject matter. Shifting would allow the applicant to obtain two examinations for the price of one. However, the USPTO may waive election and permit the applicant to shift.

Traverse and Reconsideration

If the applicant wishes to contest the restriction requirement, he or she must traverse the requirement and request reconsideration as well as state a provisional election. The applicant must give reasons why the requirement is in error. After traverse, the examiner reconsiders the requirement and may repeat and make it final. In making the requirement final, the examiner also acts on the merits of the elected invention.

Petition and Review

If the examiner makes a traversed requirement final, the applicant may petition the Commissioner to review the requirement. The applicant may file the petition after the restriction requirement is made final and must file it not later than an appeal on the merits of final rejection. After a restriction requirement becomes final, the examiner will withdraw from further consideration all claims for non-elected inventions or species. If claims to elected inventions are allowed, the claims to non-elected inventions must be cancelled. The applicant may traverse the examiner’s holding that a given claim is not for elected subject matter. Such a holding is an appealable rejection.

Protecting Distinctive Scents

While some clients may joke that an attorney is motivated simply by the smell of money, smells are no joking matter for some innovative businesses, they mean money. As decided by the Trademark Trial and Appeal Board, in a landmark decision, Distinctive fragrances are eligible for federal trademark registration. The
Trademark Trial and Appeal Board, has ruled that there was no reason why a fragrance was not capable of identifying and distinguishing certain types of products. In fact some products are readily identifiable by their scents. Thus, the Board allowed registration of an arbitrary, nonfunctional scent for sewing thread and embroidery yarn and for a nonfunctional scent in certain types of oil.

The Lanham Act

The Lanham Act definition of ”trademark” encompasses fragrances by not excluding them. The term ”includes any word, name, symbol or device, or any combination thereof” which identifies and distinguishes the goods or services of one person from those of another and indicates their source. A fragrance could be considered a ”symbol” or ”device” under the Lanham Act. The statutory language has been bent in the past to accommodate new subject matter, such as sound marks and color marks. The Trademark Review Commission recommended that ”symbol” and ”device” should not be eliminated or narrowed in any revision of the Lanham Act as that could preclude registration of colors, shapes, smells, sounds, or configurations. Thus, there is no statutory reason and no apparent public policy that would prohibit registering and protecting fragrance trademarks.

Problems with Scent Marks

Marks consisting of scents are some of the most problematic. In addition to the practical difficulties of describing such marks sufficiently to determine where conflicts may exist, there is little legislation or jurisprudence on the subject. A scent mark was first recognized in 1990 in the United States, when a scent, described as a high impact, fresh, floral fragrance reminiscent of plumeria blossoms, applied to sewing thread, was deemed a registrable trademark.


Fragrance Protection in the International Marketplace

The international marketplace has not been as welcoming. Neither the General Agreement on Tariffs and Trade (GATT), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), the EU Directive nor the Community Trademark Regulation address protection for scent marks. The new United Kingdom Trade Marks Act neither provides for nor prohibits protection for scent marks. Similarly, registration of fragrance marks in France and Germany is not expressly excluded, although such marks require graphical representation. There also appear to be no judicial decisions concerning the protection of such marks under other theories such as unfair competition. The new Australian Trade Marks Act expressly provides that a scent may constitute a “sign.” In Mexico, scent marks are unregisterable but it may be possible to protect distinctive scent marks under a theory of unfair competition. Although the South Korean Trademark Act does not provide for the registration of scent marks, the Unfair Competition Prevention Act may protect scent marks, as with color and sound marks. The door is firmly closed in most other countries, such as Brazil, Japan, China, and Taiwan, where scent marks are not registrable and the courts do not appear to have considered the protection of unregistered scent marks under other legal theories.

Protecting your Trademarks on the Internet

A Trademark may be used within a domain name such as www.Pepsi.com or www.Kraft.com. If the use of the domain name incorporates a trademark of another, or if the web site content associated with the domain name unlawfully and illegally utilizes the trademark or service mark of another, the domain maybe transferred or cancelled under the rules of the Internet.
On October 24, 1999, the Internet Corporation for Assigned Names and Numbers (ICANN) adopted the Uniform Domain Name Dispute Resolution Policy (UDRP). ICANN is a nonprofit organization that has assumed the responsibility for IP address space allocation, protocol parameter assignment, domain name system management and root server system management functions previously performed under U.S. Government contract. The UDRP is part of the Registration Agreement that Internet users sign to register domain names in the global top-level domains. Trademark owners may elect to file a complaint under ICANN’s UDRP. The UDRP is a fast-track procedure under which a victorious trademark owner receives an order from an arbitration panel that the domain name be cancelled or transferred to the trademark owner.

Administrative Procedure for Disputes


The UDRP established an administrative procedure for speedy, low-cost resolution of a specific category of disputes: those arising from abusive, bad faith registrations of domain names. In such cases, which are commonly called “cybersquatting” cases, a holder of trademark rights initiates the administrative procedure by filing a complaint with an approved dispute-resolution service provider. The arbitration is performed by one of several international arbitration organizations, which the complainant may select. The arbitrators are not bound to follow any rules of evidence but must promise to treat the parties equally. The arbitration is designed to take less than two months. Parties remain free to litigate their dispute, and a remedy under the UDRP will not be implemented if a lawsuit is begun within 10 business days of an arbitrative determination.

Elements of a Complaint

In order to have the domain name transferred or cancelled, the trademark holder must establish the following:

  1. that he or she has a legally recognized trademark in a name that is identical or confusingly similar to the domain name;
  2. that the current registrant of the domain name has no legitimate rights in the name; and
  3. that there has been some evidence of bad faith or abuse.


Evidence of Registration and Use in Bad Faith

The UDRP sets forth a nonexclusive list of “circumstances” that are evidence of registration and use in bad faith. The circumstances are as follows:

  1. the domain name was acquired primarily for the purpose of selling, renting, or otherwise transferring the domain name registration to the owner of the trademark or service mark or to a competitor of that complainant, for valuable consideration in excess of the registrant’s documented out-of-pocket costs directly related to the domain name;
  2. the domain name has been registered in order to prevent the owner of the trademark or service mark from reflecting the mark in a corresponding domain name, provided the registrant has engaged in a pattern of such conduct;
  3. the domain name has been registered primarily for the purpose of disrupting the business of a competitor of the registrant; or
  4. by using the domain name, the registrant has intentionally attempted to attract, for commercial gain, Internet users to the registrant’s Web site or other online location by creating a likelihood of confusion with the complainant’s mark as to the source, sponsorship, affiliation or endorsement of the registrant’s web site or location or of a product or service on the registrant’s Web site or location.

Defenses to a Complaint Under the UDRP

The UDRP also sets forth a nonexclusive list of circumstances that, if any is proved, demonstrate a registrant’s rights or legitimate interests in a domain name that is the subject of a complaint under the UDRP. The circumstances are the following:

  1. that before any notice to the registrant of the dispute, the registrant used, or can demonstrate preparations to use, the domain name or a name corresponding to the domain name in connection with a bona fide offering of goods or services; or
  2. that the registrant has been commonly known by the domain name, even if the registrant has acquired no trademark or service mark rights; or
  3. that the registrant is making a legitimate noncommercial or fair use of the domain name, without intent for commercial gain to misleadingly divert consumers or to tarnish the trademark or service mark at issue.


Remedies under the UDRP are limited to cancellation or transfer of the domain name. Most complainants seek transfer as a remedy.

Other Disputes

In disputes other than those arising from abusive, bad faith registration, the UDRP provides that they must be resolved by traditional means such as voluntary negotiation and lawsuits. Without a court order or consent of the registrant, a registrar will not cancel, suspend or transfer a domain name.

Computer Programs – Copyright or Patent?

A popular question regarding Computer Programs is how should they be protected, with a Patent or a Copyright? Generally, it depends on what aspects need protection. If the graphical or textual elements, including the source code need protection, copyright. However, if the functional aspects of the program need protection, then patent protection should not be overlooked. The differences between the two types of protection are great as is the cost difference, but both should be considered by developers of new computer programs. If copyright protection is being considered, it should be done so before or shortly after the initial publication. If patent protection is being considered, it should be considered within the first twelve (12) months of sell or public display of the program. Failure to timely protect your computer program may have a devastating impact.

Copyright Protection of Computer Programs

The Copyright Office began registering copyrights on computer software in 1964, but registration only raised a presumption in favor of copyright validity. Any doubts as to whether software could be the subject of copyright were dispelled by the passage of the Computer Copyright Act of 1980.


Copyright protection has been held to subsist in both source code and object code. Furthermore, copyright has been held to extend to application programs, operating systems programs and microcode. Copyright protection is also available for video games and other programs with complicated and creative audiovisual displays.

Copyright Protection of Screen Displays

Protection of the programs contained in the silicon chips is not in itself sufficient for video game authors because video game audiovisual displays can often be replicated by means of computer programs which are markedly dissimilar and, therefore, noninfringing. Thus, the courts have permitted authors of video games to independently register the sights and sounds of their games as audiovisual works. Where stylistic creativity constitutes a minor aspect of an audiovisual display, the Copyright Office considers the creative aspects of the screen display to be covered by the underlying computer program and will not require separate registration.

Utility Patent Protection of Computer Programs

The United States Supreme Court has held that otherwise patentable processes implemented via computer software constitute patentable subject matter. Thus, computer algorithms, when associated with a computer to accomplish specific purposes, have been held to be protectable by utility patents as long as they do not recite or preempt mathematical equations. Also, media such as ROMs, tapes or diskettes embodying computer programs may be patentable as falling within the statutory subject matter of patentable articles of manufacture.

Design Patent Protection of Software Screen Displays

While utility patents protect the functional aspects of technology, design patents protect their ornamental aspects. Thus, companies have sought and obtained design patents on ornamental designs used in their graphical screen displays.

Patents Provide a Stronger Form of Protection then Copyrights

Neither the U.S. Constitution nor federal statutory law provides that patent and copyright protection should be an either/or proposition. Patents and copyrights are very different forms of protection with patent protection clearly the stronger form of protection. Unlike copyrights, patents protect against infringement even if the infringing program was not copied from the patented program but was independently created. In addition, while neither patents nor copyrights protect ideas, patents protect embodiments of ideas. Thus, patent protection extends not only to the coding of computer programs which qualify for protection but to equivalents of such coding, the underlying computer algorithms, equivalents of those algorithms, and particular applications of those algorithms. The scope of copyright protection will probably not be extended beyond a computer program’s underlying algorithm.

The Idea/Expression Merger Limits Copyright Scope

The scope of copyright protection is limited by a doctrine known as the idea/expression merger. This doctrine provides that where an idea can be expressed in only a narrow variety of ways, copyright protection should protect only against identical copying. The doctrine of idea/expression merger may have an impact over the scope of copyright protection for certain operating systems programs. A similar issue is the appropriate scope of copyrights on microcode. It has been held that the idea/expression merger requires a very narrow scope of copyright protection for short microcode sequences because the coding of the sequences may be dictated by rigid constraints. On the other hand, the idea/expression merger is not available as a defense to a patent infringement action.


The Copyright Office Regulations

The Copyright Office has created a direct obstacle to obtaining copyright protection for design patented computer software. Copyright regulations provide that while the eligibility of a work for design patent protection and the application of a work for design patent protection will not affect the availability of copyright registration, copyright registration for a work will be denied after a design patent has been issued. This regulation has a direct effect upon the protectability of computer screen displays. The application of this regulation may block any screen display icons previously protected by design patent from eligibility for copyright registration.

The Patent Office Regulation

A regulation enacted by the United States Patent and Trademark Office allows previously copyrighted screen display icons to be included with a copyright notice on design patent applications and on granted design patents. Thus, while the Copyright Office regulations probably prohibit previously design patented icons from being registered for copyright, one can obtain joint copyright and design patent protection by obtaining the copyright registration first.

Joint Copyright and Patent Protection

While the Copyright Office regulations may create an obstacle to obtaining copyright protection for previously design-patented icons in computer screen displays, the Patent and Trademark Office regulations expressly permit items which are previously copyrighted to later be the subject of design patents. While the case law and federal regulations do not directly address the availability of joint copyright and utility patent protection for computer software, the same considerations apply as in the design patent context. Joint copyright and patent protection for software, regardless of whether the patent is a design or utility patent, does not constitute an illegal extension of the patent grant.