Standards Shift in Proof of Patent Infringement

By Bills, Steve | American Banker, September 28, 2007 | Go to article overview

Standards Shift in Proof of Patent Infringement


Bills, Steve, American Banker


A ruling last week in a dispute involving the merchant processor Paymentech LP is another sign that the courts have narrowed their views on what types of business process advances can be patented and what constitutes infringement, legal experts said.

In decisions dating back almost a decade, the courts have held that companies can patent specific methods for handling their various business practices, even if some components of these methods have been used before. But in a series of recent decisions, courts at various levels, including the Supreme Court, have chipped away at this policy and raised the bar considerably for companies hoping to advance claims of patent infringement.

In the Paymentech case, BMC Resources Inc. accused the merchant processor of using BMC's patented technology for handling debit payments made by phone. In the Sept. 20 ruling against BMC, however, the Appeals Court for the Federal Circuit said Paymentech "performed some but not all of the steps" of BMC's patented process, and noted that "direct infringement requires a party to perform or use each and every step."

(Paymentech, a joint venture of First Data Corp. and Bank One Corp., merged in 2005 with the Chase Merchant Services joint venture of First Data and JPMorgan Chase & Co. to become Chase Paymentech Solutions LLC.)

Gerald L. Fellows, a partner in the Phoenix law firm Greenberg Traurig, said the ruling could prompt other companies to adopt a similar strategy in patent cases.

"This is another line of defense that has been established by the federal circuit," said Mr. Fellows, who was not involved in the case. "It's very good for defendants who are accused of infringing."

Mr. Fellows said he was preparing a notice to his clients and colleagues advising them of the potential new defense tactic. "This is going to be a big case," he said.

Christopher R. Benson of the Dallas law firm Fulbright & Jaworski, who represented BMC, said Thursday that he planned to ask the court to review the decision. "It's not final yet," he said.

James W. Dabney, a litigation partner in the New York office of Fried, Frank, Harris, Shriver, & Jacobson, said the courts have been progressively clamping down on patent claims for business processes for several years.

"The Supreme Court has been mooting out issue after issue," said Mr. Dabney, who successfully argued before the U.S. Supreme Court last November that federal courts had adopted an overly broad approach for patenting business processes.

A decision in August also narrowed the scope of business process patents. In that case a federal trial court in Texas voided a patent held by AdvanceMe Inc., a Kennesaw, Ga., receivables processor, saying its process for automated debt repayment, was based on ideas that had already been in use in the market.

U.S. District Judge Leonard Davis wrote that AdvanceMe "implemented an aggressive marketing and business development program that brought this financing method to widespread use," but "did not invent a new business method.

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