Senate Bill Proposes Expansion of Post-Grant Review of Business Methods

Last week, Senator Charles Schumer introduced a bill intended to expand the scope of covered business methods eligible for post-grant review under Section 18 of the America Invents Act. Titled the “Patent Quality Improvement Act of 2013” (S. 866), Senator Schumer’s bill would modify the transitional program for covered business methods by:

• Including patents covering data processing or other operations used in any “enterprise, product or service”—not just “financial” products or services—within the definition of “covered business method patents” and
• Eliminating the eight-year limit on post-grant review of business-method patents.

These changes would allow parties to challenge a wider range of software-implemented business-method patents under the CBM provisions of Section 18. CBMs provide patent challengers advantages over inter partes review and post-grant review proceedings. First, CBM proceedings result in a more limited estoppel effect than IPRs and PGRs. Second, challenging a patent via a CBM proceeding instead of an IPR allows the petitioner to raise grounds for invalidity other than printed prior art. For example, invalidity arguments based on the claiming of unpatentable subject matter (under 35 U.S.C. 101) and lack of enablement (under 35 U.S.C. 112) are both available in CBMs, but not IPRs.

In a May 2, 2013, press release announcing the bill, Senator Schumer indicated that the bill would “crackdown on ‘patent trolls’” by providing “small technology start-ups with the opportunity to efficiently address [infringement suits] outside of the legal system.” Senator Schumer’s proposed legislation, however, is not limited to patent holders that do not manufacture products.  Nor are its beneficiaries restricted to small technology start-ups. Instead, all software-implemented business method patents would be subject to CBM review, regardless of the entity that owns them or the entity that is challenging them.

In this respect, Senator Schumer’s bill differs from the SHIELD Act, a house bill targeting patent-assertion entities introduced this February (“Saving High-Tech Innovators from Egregious Legal Disputes Act of 2013,” H.R. 845). The SHIELD Act expressly limits its cost-shifting provisions to entities that do not produce or sell products covered by the patent at issue. But Senator Schumer’s proposed legislation would apply to all software-implemented business methods.

Senator Schumer’s bill has been referred to the Senate Judiciary Committee. To date, no senator has co-sponsored the bill.

*Jonathan R.K. Stroud is a Law Clerk at Finnegan.