February 2007

Patentability of Business Methods

A method of doing business was not traditionally patentable. However, in the latter part of the 20th century, there was a slow realization that the basis for rejecting business-method patent applications was not because the invention to be patented was a business method but because the subject matter of the application did not meet the fundamental requirements for patents such as novelty and non-obviousness. With the widespread use of computers and the development of business methods involving computers, courts were forced to reexamine the question of whether a business method could be patented or, as they had been treated by the U.S. Patent Trademark Office, were inherently unpatentable. In 1998, the U.S. Court of Appeals for the Federal Circuit, ruled that business methods could be patented if they produce a “useful, tangible, and concrete result.” The court concluded that a system that used a computer to calculate a mutual fund share price from a complex set of parameters was not an abstract idea but rather a machine–embodied by the computer–that produced a useful result–the share price.

Because it had long been believed that business methods were not patentable, most companies had not bothered to invest the necessary time and money to apply for business-method patents. The 1998 court decision opened a floodgate of patent applications for business methods, many of which involved computer technologies and methodologies, in many cases for conducting business on the Internet. There quickly developed a widespread concern on the part of companies that they might infringe a business-method patent simply by continuing to conduct their business using well-established methods for which someone all of a sudden held patents. In response, Congress passed the First Inventor Defense Act, which adds to the federal patent statute a defense to patent infringement based on the prior commercial use of a business method.

Under the prior-use defense, a person or company that is sued for the infringement of a business method may escape liability for infringement by showing that it had used the patented method commercially for at least one year before the patent holder had applied for the business-method patent. Commercial use does not necessarily mean public use; use in an internal manufacturing or distribution procedure that contributes to the effectiveness of a business operation qualifies as commercial use for the purposes of the prior-use defense, as would a method that produced a product for final sale to another party. A party asserting the prior-use defense has a burden of proving the circumstances that constitute a successful defense by clear and convincing evidence. If a party asserts a prior-use defense without a reasonable basis to do so, the party will be required to pay the patent holder’s attorney’s fees.

Protecting your Patent under the Doctrine of Equivalents

When a patent is applied for, the inventor must include a specification, which is a written description of the invention, the manner and process by which the invention is made, and the manner and process by which the invention is used. A specification concludes with a claim or claims that particularly point out and distinctly claim the subject matter that the applicant asserts to be the invention to be patented. One of the purposes of claims is to put the public on notice as to what inventions have been patented and may not be patented again. Therefore, the language of claims is exceedingly important in a patent application because, in the event of a patent dispute, the language of the claims will define the scope of the patent protection. Ordinarily, even if patentable, any part of the invention that is not included in the claims will not receive patent protection. Each claim must conform to the description of the invention set out in the specification.

The doctrine of equivalents represents a certain flexibility in the rule that the language of a patent claim defines the scope of patent protection. Under the doctrine of equivalents, if an invention that is claimed to infringe a patent does not come within the language of a patent claim and thus seemingly does not infringe the patent, a patentee might still prevail against an alleged infringer if the changes in the allegedly infringing invention are so slight that the allegedly infringing invention can be considered to be the equivalent of the patented invention. This provides patent protection against devices that make insubstantial changes that the inventor may not have foreseen and thus did not include within his or her claim.

There are certain limits to the application of the doctrine of equivalents. During the patent process, part of a claim may be found to have already been patented and thus does not qualify for a patent. A patent applicant will accordingly amend the subject matter of the claim so that there is no overlap with existing patents. In such a case, a patentee may not later seek protection of the subject matter that was removed from his or her claims by invoking the doctrine of equivalents. This limitation on the doctrine of equivalents is known as “prosecution history estoppel.” The doctrine of equivalents may apply, depending upon the particular circumstances, to amendments made to a claim that expanded the subject matter of the original claim rather than relinquished subject matter. The doctrine of equivalents may not be invoked in order to claim protection of an invention that is in the public domain.

Protecting Ordinary Words as Trademarks

To be treated as a trademark a mark must have a certain quantity of distinctiveness. A mark that is not inherently distinctive is entitled to legal protection only if the mark acquires a secondary meaning that distinguishes the goods/services it represents from the goods/services of another. A descriptive mark that is initially unregistrable may achieve trademark status and be subject to registration after sufficient use has been made to prove secondary meaning.

Secondary meaning arises when consumers have come to identify a trademark with its source over time. Acquired distinctiveness and secondary meaning are different terms for the same thing. That distinctiveness can be inherent (inherent distinctiveness) in the mark or it can be developed in the minds of the consumers (acquired distinctiveness). Acquired distinctiveness may be thought of as consumer recognition of the trademark as an identifier of source, sponsorship, affiliation, or other business relationship.

Establishing Secondary Meaning

Evidence may need to be gathered in order to meet the threshold required to establish secondary meaning. The evidence may consist of advertising and sales volume or consumer surveys. Secondary meaning attaches to a trademark when a majority of the public considers a term or logo to be an indicator of source and quality of a product, rather than merely descriptive of that product. Secondary meaning develops after long, continuous and exclusive use. It takes significant amounts of advertising and promotion to develop and maintain public awareness of brand or trademark identity in a descriptive mark.

The Lanham Act

The Lanham Act substituted the word ”distinctive” for the common law phrase ”secondary meaning” as being more readily understandable, but the term of art ”secondary meaning” retains its legal vitality. A mark which would not have been registrable under the 1905 Trademark Act because it was essentially descriptive, laudatory, geographically descriptive, or primarily merely a surname became registrable under the Lanham Act upon a showing that it had acquired distinctiveness through use as a trademark.

The following are the three basic types of evidence that may be used to establish acquired distinctiveness under the Lanham Act:

  • A claim of ownership of one or more prior registrations on the Principal Register of a mark which is the same as the mark in the pending application for goods or services which are the same or related to those named in the pending application.
  • A statement verified by the applicant that the mark has become distinctive of the applicant’s goods or services by reason of substantially exclusive and continuous use in commerce thereof by the applicant for the five years before the date on which the claim of distinctiveness is made.
  • Actual evidence of acquired distinctiveness.

Protection Against Other Users of Confusingly Similar Marks

Proof that a descriptive mark has acquired secondary meaning will not automatically confer protection against other users of confusingly similar marks. Instead, the plaintiff must also demonstrate that its mark acquired secondary meaning prior to the other’s first use. The rationale for this is that a descriptive mark without secondary meaning does not designate source. If the senior user cannot demonstrate that its mark had acquired secondary meaning prior to the junior user’s first use, then the senior user cannot prove any infringement because there was no likelihood of confusion when the junior user began using a similar mark. However, a plaintiff may not have to prove that its mark acquired secondary meaning prior to an infringer’s first use in each and every geographical pocket if the plaintiff can demonstrate that its mark acquired secondary meaning nationally among a substantial portion of consumers and that the junior user was aware of the senior user’s mark.


If matter is inherently distinctive as a trademark, it is registrable on the Principal Register without evidence that it is recognized as a mark. If not inherently distinctive, a mark may be registered on the Principal Register only upon proof of acquired distinctiveness or secondary meaning. If the applicant establishes, to the satisfaction of the examining attorney, that the matter in question has acquired distinctiveness as a mark in relation to the named goods or services in commerce, then the matter in question is registrable on the Principal Register pursuant to the Lanham Act.

Protecting your Trademark Internationally

With the advent of a global economy, foreign trademark protection is important. The need to obtain, maintain, and enforce trademark rights on a multilateral basis is becoming imperative because many United States companies look to markets beyond the country’s borders. Unfortunately, obtaining and maintaining trademark rights abroad is often a time-consuming, costly, and complicated process. Further, the enforcement of such rights in some countries is virtually nonexistent.

Differences in Trademark Laws

Trademark protection outside the United States is based upon the laws of the various foreign countries, which vary considerably. Unlike the situation in the United States, in most countries trademark rights are solely dependent on registration and use is not a requirement for registration. Accordingly, an American corporation need not wait until products bearing its trademark are actually being marketed before pursuing a program of foreign trademark registration.

Although in many countries actual use is generally not a condition precedent to registration, the failure to use the mark within a specified period after registration, unless legally excused, may make the registration unenforceable or vulnerable to a cancellation proceeding brought by a third party. In a few jurisdictions, failure to use the mark within a specified period actually nullifies the registration, but in most jurisdictions the registration remains alive until challenged.


The standards for registrability vary considerably around the world. Some countries only examine for so-called absolute grounds of non-registrability, such as descriptiveness and deceptiveness. Other countries only examine for relative grounds of non-registrability. Still other countries examine for both absolute and relative grounds of non-registrability. Moreover, some countries do not follow the United States’ practice of allowing applications to be filed seeking protection for a mark in more than one international class.

The time it takes to obtain a registration varies from months to years. In some countries it typically takes up to three or four years to obtain a registration, while in others registrations may be granted within several months after filing.

Many countries do not provide for an opposition procedure. In those countries that do, opposition proceedings are handled by foreign agents or attorneys and are the subject of various local requirements as to type of proof and appellate review.

The length of the term of protection also varies, as do renewal and assignment procedures. With respect to assignments, most countries do not require the transfer of the corresponding goodwill. Therefore, protection for trademarks abroad requires a detailed understanding of the law of each jurisdiction.

Foreign Trademark Selection

The selection of a trademark for foreign use and registration is generally governed by the same principles that apply in the United States. A truly distinctive trademark should be selected in order to avoid rejection by various foreign trademark offices. It may also be advisable to obtain trademark searches in the various foreign countries in advance of filing an application to register.

Foreign Application Practice

American corporations file trademark applications in foreign countries through foreign law firms, agents, or governmental agencies which act before local trademark offices as their foreign associates. Usually, American corporations utilize American in-house lawyers or outside law firms as intermediaries. A foreign associate acts under a power of attorney running from the American applicant. Local requirements differ as to the type of power required, which is either general, authorizing the foreign associate to act continuously in local trademark matters for the applicant, or special, authorizing the associate to act only with respect to a single trademark application. Frequently, such powers must be legalized by a consular official of the foreign country based in the United States.

Foreign Trademark Licensing

An American business may license a foreign company to use its trademarks in marketing a product. Such license agreements are considered valid under the laws of all major commercial countries, provided the local requirements are met. Many countries require trademark license agreements to be recorded in the local trademark office or with some other governmental agency, or both. A number of countries require a trademark licensee to be entered as a ”registered user” of the trademark registration.

Copyright Infringement Online

The Online Copyright Infringement Liability Limitation Act (OCILLA) provides a safe harbor to online service providers (OSPs) that promptly take down content if a party alleges it infringes its copyrights. It is a powerful device for the protection of copyright on the Internet for providers that are located in the United States, though many foreign providers may also respond to such requests for fear of litigation in the United States should they have any significant business interests in the United States.

Service Provider Defined.

The OCILLA provides a definition of “service provider” for purposes of the limitation as follows:

  • an entity offering the transmission, routing, or providing of connections for digital online communications between or among points specified by a user, or material of the user’s choosing, without modification as to the content of the material as sent or received; and
  • a provider of online services or network access, or the operator of facilities therefor.

All entities whose services fit these descriptions may qualify with regard to those activities. However, to the extent the functions of the OSP involve creation and posting of content, choosing recipients of messages or controlling users, the limitation does not apply and regular copyright rules respecting proper clearance, as well as fair use and other defenses, are applicable.

Benefits to Online Service Providers and Customers

OCILLA provides the following benefits to OSPs:

  • new protection from liability to its own customers as a result of a decision to remove material;
  • clear procedures for removing and restoring material; and
  • a safe harbor against infringement claims, duplicating the protection against copyright infringement liability provided by the Communications Decency Act.

Customers gain through a reduced chance that works will be removed unnecessarily by an OSP which hasn’t received an infringement complaint.

Requirements to Obtain the Safe Harbor

To obtain the safe harbor the OSP must:

  • not have actual knowledge that the material or an activity using the material on the system or network is infringing;
  • not be aware of facts or circumstances from which infringing activity is apparent;
  • upon obtaining such knowledge or awareness, act expeditiously to remove, or disable access to, the material;
  • not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and
  • have a designated agent registered with the U.S. Copyright Office to receive notifications of claimed infringement, which are also called takedown notices. If the designated agent receives a notification which substantially complies with the notification requirements, the OSP now has actual knowledge and must expeditiously disable access to the work.

The OSP must make available to the public through its service, including on its Web site substantially this information:

  • the name, address, phone number and electronic mail address of the agent
  • other contact information which the Register of Copyrights may deem appropriate

The OSP must also:

  • adopt, reasonably implement, and inform subscribers and account holders of a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers and
  • accommodate and not interfere with standard technical measures used to identify and protect copyrighted works.

Notification of claimed infringement

If an infringement has occurred a copyright holder may send a written notification of claimed infringement to the designated agent. If a notice which substantially complies with the requirements of OCILLA is received, the OSP must expeditiously remove or disable access to the allegedly infringing material. After the notice has been complied with, the OSP must take reasonable steps to promptly notify the alleged infringer of the action. If there is a counter notification from the alleged infringer, the OSP must respond appropriately to it. If the OSP complies with this and the counter notification procedures, it is safe from legal liability to its own customer as a result of taking down the material.

Counter notification

An alleged infringer may file a counter notification to the OSP. Once a valid counter notification has been received the OSP must:

  • promptly provide the person who filed the original notification with a copy of the counter notification and inform them that the material will be replaced or access to it restored in 10 business days and
  • replace the material and cease disabling access to it not less than 10 and not more than 14 business days following receipt of the counter notification. This does not apply, and the material should not be replaced, if the designated agent receives notification that legal action to seek a court order to restrain the subscriber from engaging in infringing activity to the material has been commenced.

Actual knowledge of infringement

Additional Provisions of OCILLA

  • The section about transitory network communications says that service providers aren’t liable just because traffic passes through their networks, so long as it is not stored on their systems and is handled automatically by their systems and they don’t control or modify it. Essentially, this says that Internet Service Providers (ISPs) aren’t responsible for what flows through their networks, even if it is infringing and they know it. There are no takedown provisions
  • The section about system caching says that system caching conducted in standard ways and not interfering with copy protection systems is fine. If the cached material is made available to end users the system provider must follow the takedown and put back provisions.
  • The section about information residing on systems or networks at direction of users applies to personal home pages, Web sites, Internet providers, message boards and a very wide range of other services. It is the cause of the vast majority of activities relating to this law.
  • The section about limitation on liability of nonprofit educational institutions protects nonprofit educational institutions from liability for the actions of faculty and graduate student employees relating to course materials placed online for use within courses provided in the preceding three years, provided the institution doesn’t receive more than two infringement notifications about the same individual in a three-year period. The institution must provide informational materials which accurately describe and promote compliance with U.S. copyright laws.
  • The section about misrepresentations says that anyone who makes a false claim of infringement or false counter-notification is liable for the damages suffered by the other parties, including legal fees.

Limitations on Relief

A service provider that fails to satisfy one of the limitations of liability set forth in OCILLA may find itself charged with copyright infringement, and thus subject to many remedies. However, a service provider who succeeds in invoking one of OCILLA’s safe harbors is exempt from monetary damages and equitable relief apart from injunctions.


Notwithstanding its limitations on liability, OCILLA still allows injunctions to issue against those service providers who find shelter within its safe harbors, subject to limitation as to their scope. OCILLA creates two types of injunctive relief, depending on which limitation of liability is implicated.