BUILDING FENCES IN CYBERSPACE:

BUSINESS METHOD PATENTS AND THE INTERNET

Analysis of Recent Internet/E-Commerce Business Method Patents

by Jerry A. Riedinger
Perkins Coie LLP
1201 Third Ave.
48th Floor
Seattle, WA 98052
206-583-8664

Prepared for the

Practicing Law Institute Program on

“Patenting the New Business Model,

Building Fences in Cyberspace”

at the
Hyatt Regency Hotel
San Francisco, CA
June 26, 2000
 CONTENTS

I. The State of the Internet IP World:

Patenting Business Models in Cyberspace. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

A. The “Business Method” Battle Lines. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

B. Biting the Hand that Feeds Them. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

C. The Road to State Street. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

D. High Tech vs. Low Tech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

II. WHAT IS A BUSINESS METHOD PATENT? . . . . . . . . . . . . . . . . . . . . . . . . 12

III. ISSUES REGARDING INTERNET BUSINESS METHOD PATENTS. . . . . . 17

A. Litigating Internet Business Method Patents. . . . . . . . . . . . . . . . . . . . . . 17

B. Drafting Internet Business Method Patents. . . . . . . . . . . . . . . . . . . . . . . 19

IV. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

APPENDIX A Patent Claims From Selected Internet

“Business Method” Patents. . . . . . . . . . . . . . . . . . . . . . . A

APPENDIX B Selected Non-Internet Patent Claims Argued to

Include “Business Methods”. . . . . . . . . . . . . . . . . . . . . . B

APPENDIX C USPTO Business Method Patent Initiative. . . . . . . . . . . . . .

... C

APPENDIX D Selected Excerpts from the PTO Manual for

Patent Classification . . . . . . . . . . . . . . . . . . . . . . . . . . . . D
 Patenting The New Business Model:
Building Fences In Cyberspace*

Litigation over Internet business method patents has begun, and its presence is
spreading throughout the web. Although the growth in Internet and e-commerce patent
litigation has not matched the explosive expansion of e-commerce and the web itself,
Internet patent litigation is now an established part of the e-commerce environment.1
Yahoo! has been sued over its system for retail purchases.2 Priceline.com sued Microsoft
over its reverse auction patent.3 Wang sued AOL, among others, for infringement of
Wang’s “Videotext Frame Processing” patent.4 Microsoft was again sued over an
“electronic directory” patented by Civix-DDI, LLC.5 eBay has been sued by Network
Engineering Software, Inc. over an “online information service” patent.6 CompuServe
was sued over a 1985, pre-web patent relating to sending music over a network.7 Of
course, Amazon.com’s successful pursuit of a preliminary injunction has repeatedly
captured headlines.8

Indicative of the omnipresent nature of e-commerce patent suits is their spread

beyond the major e-commerce players. As in other technologies, patent suits now
pepper the activities of smaller e-commerce players.9 Yet this flowering of litigation
masks a host of uncertainties that stalk e-commerce patents, raising issues that will only
be eroded by time and a raft of judicial pontification. In the interim, the Internet and the
web will continue to evolve, while locked in a perpetual embrace with the patent Medusa.
*
Earlier versions of this paper accompanied the author’s remarks at the Washington State Bar Association
5th Annual Intellectual Property Institute, March 24, 2000 in Seattle, WA and at the San Francisco
Intellectual Property Law Association Annual Seminar, May 25, 2000 in Victoria, B.C.
1
Only a few months ago, in December of 1999, the advent of internet patent lawsuits evoked startled, and
even bitter, reaction. See, e.g., R. Korman, Behold the Technology Patents! Behold the String of
Lawsuits!, The New York Times (Dec. 27, 1998), available at www.nytimes.com.
2
Harrington v. Yahoo! Inc., No. 4:99 CV-1751 (E.D. Mo.), now transferred to the Northern District of
California.
3
U.S. Patent No. 5,794,207 directed to a “Method and Apparatus for a Crytographically Assisted
Commercial Network System Designed to Facilitate Buyer-Driven Conditional Purchase Offers.” See
Appendix A-2.
4
U.S. Patent No. 4,751,669. See B. Wright, “Internet and E-Commerce Patents,” available at
www.bannerwitcoff.com/articles.htm.
5
See CIVIX-DDI, LLC v. Microsoft Corp. et al., 2000 U.S. Dist. LEXIS 717 (Jan. 24, 2000).
6
U.S. Patent No. 5,778,367, titled “Automated On-Line Information Service and Directory, Particularly
for The World Wide Web.” Representative ’367 patent claims are at Appendix A-13. See also, B. Wright,
“Internet and E-Commerce Patents,” available at www.bannerwitcoff.com/articles.htm.
7
See Interactive Gift Express, Inc. v. CompuServe, Inc., 47 U.S.P.Q.2d 1797 (S.D.N.Y. 1998).
8
See Amazon.com, Inc. v. Barnesandnoble.com, Inc., 51 U.S.P.Q.2d 1115 (W.D. Wa. 1999). A
discussion of the headlines and controversy resulting from the Amazon.com suit is contained in section IA,
infra, regarding “The ‘Business Method’ Battle Lines.”
9
See, e.g., Trilogy Software, Inc. v. CarsDirect.com, Inc., No. A 99CA-69 (W.D. Tex.); Parsec
Sight/Sound, Inc. v. N2K, Inc., No. 98-CV-118 (W.D. Pa.); Coolsavings.com, Inc. v. I. Commerce Corp.,
51 U.S.P.Q.2d 1136 (N.D. Ill. 1999). Doubleclick has also sued L90 in the Eastern District of Virginia
on its advertising tracking software, U.S. Patent 5,948,061 titled “Method of Deliver, Targeting, and
Measuring Advertising Over Networks. The ’061 patent claims are at Appendix A-10.

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I. THE STATE OF THE INTERNET IP WORLD:
PATENTING BUSINESS MODELS IN CYBERSPACE

The rise of e-commerce patent litigation has produced a maelstrom of protest and
commentary, causing even the titans of e-commerce to take note. On March 9, 2000, Jeff
Bezos, Time Magazine’s 1999 “Person of the Year”10 and the founder of Amazon.com,
proposed significant changes to the patent system, including a 3 to 5 year term for
“business method and software patents.” 11 Occurring three months after the start of a
boycott of Amazon.com by strident “open source” advocates on the Web,12 Bezos’
action injected further electricity into the already charged subject of software patents,
especially patents on business methods and e-commerce. The action guarantees
continued debate on a subject the patent community had believed resolved: the legitimacy
of e-commerce and business method patents in a world operating at “internet speed.”

The opportunities for unfettered business method patents ballooned with the
decision by Court of Appeals for the Federal Circuit in State Street Bank,13 in which the
Federal Circuit adopted the view that “business methods” were not statutorily excluded
from patentable subject matter.14 While the patent community responded with mild
surprise at State Street (the decision, after all, reflected the common view among patent

10
“Jeff Bezos: Person of the Year,” Time Magazine, Dec. 27, 1999, vol. 154, no. 26.
11
See An Open Letter From Jeff Bezos on the Subject of Patents, posted March 9, 2000 on the
Amazon.com web site (at www.amazon.com/exec/obidos/subst/misc/patents.html/103-4069011-1038207).
The “open letter” was widely reported. See, e.g., Amazon.com Chief Executive Urges Shorter Duration for
Internet Patents, The Wall Street Journal, March 10, 2000 p. B3; Bezos Urges Changes in Patent Law,
reported March 10, 2000 by the Associated Press and published in the Washington Post online edition, at
www.washingtonpost.com/wp-srv-aponline/20000309/aponline17354_000.htm; V. Slind-Flor, Bezos’
Patent Ideas are Roiling the IP Waters, Cal Law, www.callaw.com/opinions/stories/edit0321c.html.
12
At the center of the open source movement is the “Free Software Foundation,” founded by software
activist Richard Stallman. The philosophy of Mr. Stallman and the Free Software Foundation may be
found in the “GNU Manifesto” at www.gnu.ai.mit.edu/gnu/manifesto.html. The “Open Source” position
on software patents is described in Mutual Defense Against Software Patents, Jan. 28, 1994, available at
lpf.ai.mit.edu/Patents.mutual-def.html and Against Software Patents, Feb. 28, 1991, available at
lpf.ai.mit.edu/Patents/against-software-patents.html. An example of Stallman’s activity is his call for a
boycott against Amazon.com for its recent suit against Barnesandnoble.com on the “1-Click” patent,
Amazon.com, Inc. v. Barnesandnoble.com, Inc., 73 F. Supp. 2d 1228 (W.D. Wa. 1999). The boycott is
described in, for example, Stallman, Updated: Richard Stallman – Boycott Amazon! Linux Today,
www.linuxtoday.com.story/13652.html and in L. Grossman, Boycott Amazon?, Time Digital, Dec. 22,
1999, www.time.com/time/digital/daily/0,2822,36373,00.html. Although prominent in the software
community, Stallman’s approach has had, at best, only moderate success. See, e.g., S. Garfinkel, Is
Stallman Stalled? Wired Mar./Arp. 1993 (available at
www.wired.com/wired/archive//1.10/stallman_pr.html).
13
State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 47 U.S.P.Q. 2d
1596 (Fed. Cir. 1998), cert. denied 119 S.Ct. 851 (1999).
14
State Street, 149 F.3d at 1377. See also 35 U.S.C. §101. Section 101 defines patentable subject matter
as “any new and useful process, machine, manufacture, or composition of matter, or any new and useful
improvement thereof.”

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attorneys that business method patents are a natural extension of traditional patent
law),15 the software, e-commerce and “open source” communities reacted with dismay at
what they perceived as an unjustifiable restriction on internet freedom.16 The financial
community, especially banks and large financial service institutions, reacted with less
fervor, but nevertheless mobilized to minimize what it saw as an expanding threat to the
industry. The general public, with no immediately obvious stake in the outcome, barely
noticed what may seem a mere tempest in a teapot.17 Each of these reactions has

15
A post State Street discussion in the Federal Circuit Bar Journal referred to State Street as “the
culmination of decades of evolution of the statutory patentability of mathematical algorithms...an almost
predictable result.” S. Swanson, The Patentability of Business Methods, Mathematical Algorithms and
Computer-Related Inventions After the Decision by the Court of Appeals for the Federal Circuit in State
Street, 8 Fed. Cir. B. J. 153, 154 (1999). According to Swanson, State Street suggests “the court system
might catch up to industry.” Id. at 152. Both the Federal Circuit and earlier commentators emphasized
that the “business method” exception had never been adopted by the federal courts, including the Federal
Circuit and its predecessor, the Court of Customs and Patent Appeals. State Street, 149 F.3d at 1375; In
re Schrader, 22 F.3d 290, 298 (Fed Cir. 1994) (Newman, J., dissenting); R. Del Gallo, Are ‘Methods of
Doing Business’ Finally Out of Business as a Statutory Rejection? 38 IDEA 403 (1998); M. Fuelling,
Manufacturing, Selling, and Accounting: Patenting Business Methods, 76 J. Pat. & Trademark Ofc. Soc’y
471 (1994); A. Hansmann, Method of Doing Business, 50 J. Pat. Ofc. Soc’y 503 (1968); G. Tew, Method
of Doing Business, 16 J. Pat. Ofc. Soc’y 607 (1934). In the words of Jay Walker, founder of Walker
Digital (creator of Priceline.com), “Our patents are no different than the patents granted after the invention
of electricity caused a revolution in how industrial processes worked.” S. Hansell, Surging Number of
Patents Engulfs Internet Commerce, The New York Times (Dec. 11, 1999), available on the archives of
www.nytimes.com.
16
See the discussion accompanying notes 19-23 infra. A similar, though more muted reaction has been
expressed in Canada. See, e.g., M. Geist, A patently obvious threat to e-commerce, globetechnology.com
(Jan. 27, 2000) available at www.globetechnology.com/archive/gam/E-Business/20000127/TWGEIS.html.
17
The recent article in the New York Times Magazine is the first feature-length discussion of the topic in
the general press. Among other things, the article sharply criticized the patent office:
“In ways that could not have been predicted even a few years ago, the patent system is in
crisis. A series of unplanned mutations have transformed patents into a positive threat to
the digital economy. The patent office has grown entangled in philosophical confusion
of its own making; it has become a ferocious generator of litigation; and many
technologists believe that it has begun to choke the very innovation it was meant to
nourish.”

J. Gleick, Patently Absurd, New York Times Magazine (March 12, 2000) (the article may be found on the
web at www.nytimes.com/library/magazine/20000312mag-patents.html). An earlier publication with an
identical title was published in Wired, a magazine with a narrower clientele. See S. Garfinkel, Patently
Absurd, Wired (July 1994) (the Wired Patently Absurd article is available on the web at
www.wired.com/wired/archive/2.07/patents_pr.html). A third article with the identical title was published
shortly before the NY Times Magazine article in the alternative newspaper “Seattle Weekly.” See A. Gunn,
Patently Absurd, Seattle Weekly (March 9, 2000). Yet a fourth article with the identical title appeared in
Forbes Magazine on May 29, 2000. See P. Ross, Patently Absurd, Forbes Magazine, (May 29, 2000),
available at www.forbes.com/forbes/00/0529/6513180a.htm. Still another article with a similar title
appeared in early 1999 in the New York Times. See D. Caruso, Patent Absurdity, The New York Times
(Feb. 1, 1999), available from the New York Times archives at www.nytimes.com. A short comment also
appeared in 1999 in Fortune magazine, J. Gurley, The Trouble With Internet Patents, Fortune Jul. 19,
1999 available at www.fortune.com/fortune/technology/gurley/1999/07/19/index.html. Software patent
critic Greg Aharonian published a similar 1999 criticism in IEEE Software: G. Aharonian, Does The
Patent Office Respect The Software Community? IEEE Software, Jul./Aug. 1999 available at
www.bustpatents.com/ieeeart.htm. The harsh criticism of software and e-commerce patents in the articles
could lead to greater general public opposition to business method patents.

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importance, to varying degrees, to the outcome of the debate on e-commerce and business
method patents.

A. The “Business Method” Battle Lines

The loudest voices in the cacophony are those raised by the software community.
Since the decision in State Street, “open source” software advocates have cried loud and
long about the perceived ills of software patents, with particular emphasis on e-commerce
patents.18 Similar attitudes are expressed by members of the software community who
are not formally associated with the “open source” movement, but who nevertheless
consider software and business method patents anathema.19 Despite the stridency of
their expression, the anti-patent attitudes of the software community would have merited
little consideration were it not for the stature of some adherents. On the software side,
the opponents of business method patents include Richard Stallman, Linux advocate and
sometime “open source” guru,20 as well as Tim Berners-Lee, considered one of the
creators of the world-wide-web.21 On the legal side, the anti-patent advocates include
Harvard professor and sometime internet-law guru Lawrence Lessig,22 who, between
service in U.S. v. Microsoft23 and his professorial duties, has eloquently criticized patents
when applied to the internet.24 Similarly, Professor Merges of the University of
California at Berkeley, author or Intellectual Property in the New Technology Age,25 has
sharply criticized e-commerce patents.26 Bezos’ action has now added the influence of

18
An example is the several thousand negative comments regarding Amazon.com’s 1-Click™ enforcement
that accompany the “Open Letter” from open-source advocate Tim “O’Reilly to Amazon.com chairman Jeff
Bezos. See www.oreilly.com/ask_tim/amazon_patent.comments.html.
19
A detailed listing of the opposition to such patents is available at www.bustpatents.com, operated by
Internet Patent News Service founder Greg Aharonian.
20
See the discussion of Richard Stallman in n.3, supra.
21
See M. Duvall, No Patent Excuses, Inter@ctive Week (May 27, 1999) published at
www.zdnet.com/intweek/stories/column/0,4163,2266093,00.html.
22
See the discussion of Professor Lessig’s views accompanying notes 31-38 and 41-44 infra.
23
Professor Lessig was selected by the presiding judge in the Microsoft anti-trust litigation, Judge Thomas
Penfield Jackson, appointed him a special master to address issues relating to a 1995 consent decree, a role
that was subsequently rejected by the Court of Appeals for the D.C, Circuit. Professor Lessig was
nevertheless invited by Judge Jackson to submit an amicus brief on liability issues. Professor Lessig’s
role in the Microsoft antitrust litigation is outlined in D. Bank, Legal Scholar Could Influence Microsoft
Trial, The Wall Street Journal, Feb. 23, 2000, p. B1 and A. Zitner, Harvard Professor Warns Privacy,
Free Speech on Net Sacrificed for Profit, Knight-Ridder/Tribune March 22, 2000, available at
ipnetwork.com/newsstorypage.asp?id_number=1752&sec=news.
24
See L. Lessig, The Problem with Patents, The Standard, Apr. 23, 1999 at
www.thestandard.com/article/display/0,1151,4295,00.html. See also L. Lessig, Patent Problems, The
Standard,” Jan. 21, 2000 available at www.thestandard.com/article/display/0,1151,8999,00.html.
25
New York, Aspen Law and Business (1977).
26
R. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts
and Patent System Reform, 14 Berkeley Technology Law Journal (1999). Merges also contends that in
“cumulative” technologies such as the software industry, broad blocking patents have retarded innovation

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the largest e-commerce player on the side of the opponents of patenting business
methods, resulting in an alignment of intellectual prowess and internet prestige favoring
restrictions on State Street.27

The vociferous opposition to business method patents in the software and

internet world demonstrates an emotional commitment to unrestricted copying of the
ideas of others.28 According to software patent opponents, internet patents are
“absurdly broad,” and part of a patent policy that “obviously undermines competition,
discourages innovation, and distorts market dynamics in an important, emerging
industry.”29 The same commentator contends that a “profound error” underlies the
“dysfunctional tradition of jurisprudence” involving internet patents,30 and that
“[i]nternet patent holders are violating the constitutionally guaranteed freedom of
software developers to engage in thought processes characteristic of their profession.”31
Others suggest that internet patent suits are “obviously spurious” and “odious,” such
that the patent laws will be “a tool for the slow to retard the fast and the big to stymie
the small” on the web.32 Internet patents look, it is said, as if they were invented by
“any schmoe,” “by taking some everyday occurrence and adding to it the phrase ‘with a

and industry growth. See Merges & Nelson, On the Complex Economics of Patent Scope, 90 Col. L. Rev.
839, 890-94 (1990).
27
Additional intellectual support for the anti-patent position was expressed in the early 1990’s by the staff
of the Bureaus of Competition and Economics of the Federal Trade Commission, Comment of the Staff of
the Federal Trade Commission, Docket No. 9505 31 44-5144-01, available at
www.ftc.gov.be/v950013.htm.
28
One commentator stated: “I predict that tough cybersquatters law (up to five years in jail and a $100,000
fine) will be expanded to include claiming patents for obvious or prior art. Such trumped-up patent claims
are the worst form of cybersquatting, and are simply unenforceable internationally, as the offshore casino
business indicates.” A. Lightman, The Myths that Support Massive Internet Market Caps,
IntellectualCapital.com (Jan. 13, 2000), available at
www.intellectualcapital.com/issues/issues337/item7886.asp.
29
B. Pfaffenberger, Internet Patents: Giving away the Store, Linux Journal, Dec. 23, 1999 (published on
the web at www2.linuxjournal.com/articles/currents/014.html). The theme that internet and software
patents are discouraging innovation is common. See, e.g., R. Wilson, The Patent System Has Just Gone
MAD, Electronic Engineering Times, Jan. 1, 1999 available at www.bustpatents.com/eetimes.htm; M.
Miller, Software Patents Must Go, PC Magazine, Mar. 15, 1999 available at
www.bustpatents.com/mustgo.htm; J. Gurley, The Trouble With Internet Patents, Fortune, Jul. 19, 1999
available at www.fortune.com/fortune/technology/gurley/1999/07/19/index.html; M. Richtel, Are Patents
Good or Bad for Business Online?, The New York Times (Aug. 28 1998), available on line at
www.nytimes.com.
30
Id.
31
Id.
32
C. Shirky, No Title, Feed Daily (Dec. 23, 1999) (published on the web at
www.feedmag.com/daily/dy122399.html). Similar, thoughts have been expressed by William Purcell,
Chief Executive of Planet U., a recent defendant on an internet patent suit brought by Coolingsavings,
when he stated that “when people get a patent, they often get patent testosterone and think their patent
covers a lot of area it doesn’t.” R. Korman, Behold the Technology Patents! Behold the String of
Lawsuits!, The New York Times (Dec. 27, 1998), available at www.nytimes.com.

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computer network.’”33 Even normally staid editorialists at the Wall Street Journal have
piled on, referring to patent office employees as “turnips,” who are “creating dozens of
dubious new monopolies by granting exclusive rights to every random notion.”34

In attacking internet patents, the critics echo the pre-State Street attack on patents
generally in the software arena. A common view was (and is) that “[p]atents can’t
protect or invigorate the computer software industry; they can only cripple it.”35 This is
so, at least in part, because software developers often believe that “most of the [software]
patents have about as much cleverness and originality as a recipe for boiled rice.”36 In
1991, the “League for Programming Freedom” issued it’s manifesto “Against Software
Patents,”37 that attacked “Absurd Patents” and took the view that software patents
“threaten to devastate America’s computer industry.”38 Other critics frequently contend
that the Patent Office does not have access to the most important prior art, which, they
argue, is contained in non-patent references.39 Wired magazine fueled the opposition first
in 1994 with an “expose” of what it termed “the software patent crisis”40 and next in
1996 when it criticized E-data’s enforcement of its patent on electronic distribution.41
The opposition continues today.42

Even Professor Lessig has pulled no punches in attacking business method

patents. Calling such patents “the space debris of cyberspace,”43 Lessig suggests grant of

33
P. Wayner, How Can They Patent That? The Torrent of Patents for E-Commerce Schemes Raises New
Questions About an Old-Fashioned System, Salon Magazine (March 9, 1999) (published on the web at
www.salon.com/21st/feature/1999/03/09feature.html).
34
See H. Jenkins Jr., Gasoline Joins the Information Age, The Wall Street Journal, p. A27 (June 21,
2000).
35
S. Garfinkle, R. Stallman & M. Kapor, Why Patents Are Bad For Software, Issues in Science and
Technology (Fall 1991) (on the web at lpf.ai.mit.edu/Links/prep.ai.mit.edu/issues.article).
36
Id.
37
The Feb. 28, 1991 publication can be found at http://lpf.ai.mit.edu/Patents/against-software-
patents.html.
38
Id.
39
See, e.g., J. Markoff, Internet Gadfly Wants U.S. To Put More Data Online, The New York Times
(May 4, 1998), available on the web at www.nytimes.com. The most vocal advocate of this position is
Greg Aharonian, who’s position is detailed at www.bustpatents.com.
40
S. Garfinkel, Patently Absurd, Wired (July 1994)(www.wired.com/wired/archive/2.07/patents_pr.html).
A later Wired article describing “how easy it is for a corporation with a lame-duck product to make a mint
on someone else’s intellectual property.”
41
See S. Berger, Patently Offensive, Wired (Sep. 1996)
(www.wired.com/wired/archive/4.09/scans.html?pg=7).
42
See, e.g., B. Pfaffenberger, The Coming Software Patent Crisis: Can Linux Survive? Linux Journal,
August 10, 1999 (www2.linuxjournal.com/articles/currents/003.html);D. Johnson, Fight for Software
Freedom Far From Over – Interview With Richard Stallman, Linux Today, Aug. 19, 1999
(linuxtoday.com/stories/8940.html): J. Berst, How Patent Attorneys Are Stealing Our Future, ZDNet,
January 18, 2000 (www.zdnet.com/anchordesk/story/story_4364.html). Some voices are more restrained.
See T. Riordan, PATENTS; Historians Take a Longer View Of Net Battles, The New York Times (Apr.
10, 2000), available at www.nytimes.com.
43
Lessig, The Problem with Patents at note 11, supra.

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such patents “siphons off resources from technologists to lawyers.44 According to
Lessig, “[w]hen the world was given TCP/IP and the collection of protocols it induced, a
billion ideas became obvious to anyone who took the time to think.”45 Nevertheless, says
Lessig, a “feeding frenzy” is underway.46 Referring to business method patents as a
“monster,”47 and a “weed” that “will choke innovation,”48 Lessig contends such patents
will change cyberspace because “[l]awyers will be regulating the coders; innovation will
proceed only as quickly as the licenses can be sold.”49 In a final swipe at patent lawyers,
Lessig calls for immediate action by Congress, because “[t]his central issue about the
future of innovation should not be left to the innovation of lawyers, the mandarins of our
culture, pushing courts to see how ‘this’ is just like ‘that.’”50

Although the reaction to State Street in the intellectual property community has
been more subdued, the decision has nevertheless produced a host of comments and
articles51 reflecting the strong interest in the subject among patent and other intellectual
property attorneys. The PTO reaction has been the most vigorous. On March 29, 2000,
the Patent Office unveiled its “Business Methods Patent Initiative,”52 which announced,
among other things, a “new second-level review” of allowed business method
applications.53 Unfortunately, neither the PTO’s action nor the articles assist in

44
Id.
45
Id. That comment reveals the depths of Professor Lessig’s ignorance of the difficulties surrounding
innovation.
46
Id.
47
Lessig, Patent Problems, supra.
48
Id.
49
Id.
50
Id. Quoted in the New York Times Magazine, Lessig expressed even greater hostility to software
patents. Calling them a “disaster,” Lessig contended “they create these little mafia monopoly holders who
can go around demanding, with a federal court behind them, that you pay up or we’ll shut you down.” J.
Gleick, Patently Absurd, New York Times Magazine (March 13, 2000).
51
E.g., C. Cantzler, State Street: Leading the Way to Consistency for Patentability of Computer
Software, 71 U. Col. L. Rev. 423 (2000); C. Feldman, Business Method Patents in the Age of Electronic
Commerce: The State Street Decision and its Aftermath, II John Marshall Law School Center for
Intellectual Property Law News Source 16 (Winter 2000); G. Rinkerman & K. Sheehan, Patent Protection
for Investment and Financial Service Configurations, 116 Banking L.J. 166 (1999); S. Swanson, The
Patentability of Business Methods, Mathematical Algorithms and Computer-Related Inventions After the
Decision by the Court of Appeals for the Federal Circuit in State Street, 8 Federal Circuit Bar Journal 153
(1999): R. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business
Concepts and Patent System Reform, 14 Berkeley Technology Law Journal (Spring 1999); S. Alter,
Federal Circuit Broadens Scope for Software Patents, 15 The Computer Lawyer 24 (Oct. 1998).
52
See www.uspto.gov/web/offices/sol/actionplan.html. A copy of the initiative is contained in Appendix
C. The National Academies of Science Board on Science, Technology, and Economic Policy sought
proposals on March 23, 2000 for “Research on Intellectual Property in the Knowledge-Based Economy,”
that will include, in “Topic 2,” an analysis of “Software-enabled business method patents and
biotechnology patents.” See Federal Register, March 23, 2000.
53
Id. Rumors among patent attorneys suggest that the “second-level review” will actually produce a
moratorium on business method patents.

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interpreting the term “business method” or suggest ways for the patent system to cope
with the burgeoning controversy.

B. Biting the Hand that Feeds Them

Much of the software communities’ criticism of patents stems from a desire to be
able to write code without worrying about infringing on the rights of others.54 Despite
that simple source, the intellectual underpinning of the opposition is a broadly-based
assault on the benefits intellectual property confers on the growth and vitality of the
software industry. As expressed by Professor Lessig, the opposition to business method
patents arises from a belief that intellectual property is “non-rivalous,” that is, intellectual
property supposedly differs from conventional property because one person’s use of a
concept protected by intellectual property does not stop another from also using that
property.55 An apple, according to professor Lessig, can be eaten by only one person,
but the same intellectual property can be used repeatedly by any number of people
without interfering with a use by others.56 That view leads to Lessig’s conclusion,
expressed for both patents and copyrights, that increased intellectual property protection
often reduces innovation.57 In simplest form, this argument contends that the e-
commerce and software industries would continue to do well, even absent patent
protection.58

The opposition in the software and internet world to patent protection represents
a fundamental failure to understand the importance of intellectual property, especially
patents, in creating and maintaining capital funding for software and e-commerce ventures.
Ease of imitation of a product produces a powerful disincentive to funding that product’s
development. Strong intellectual property protection, including broadly enforced patent

54
Salon Magazine states that “[o]ne reason the Web has grown so fast is that good ideas get copied so
quickly.” S. Rosenberg, Amazon to world: We control how many times you must click! Salon Magazine
(Dec. 21, 1999), www.salon.com/tech/log/1999/12/21/bezos/. See the discussion of articles regarding
stifling innovation at n. 19, supra.
55
See L. Lessig, Code and Other Laws of Cyberspace, New York, Basic Books, ch. 10, 1999. Professor
Lessig cites Thomas Jefferson as the fundamental source of the concept. Id. In modern economics, the
source of the concept is, as Lessig notes, K. Arrow, Economic Welfare and the Allocation of Resources for
Invention, in The Rate and Direction of Inventive Activity: Economic and Social Factors, Princeton, N.J.,
Princeton University Press, 1962. Professor Lessig’s discussion in Code focuses on copyright protection,
but similar concepts underlay his opposition to internet patents. See L. Lessig, The Problem with Patents,
The Standard, April 23, 1999, www.thestandard.com/article/display/0,1151,4295,00.html; L. Lessig,
Patent Problems, The Standard, Jan. 21, 2000. published at
www.thestandard.com/article/display/0,1151,8999,00.html.
56
Id. Professor Lessig speaks in terms of “ideas” being non-rivalous, and thereby introduces confusion
into his argument about copyright protection by failing to distinguish between copyrightable expressions
of ideas and the ideas themselves. A careful reading of Code leads to the conclusion that Professor Lessig
considers both ideas and expressions of ideas as “non-rivalous.”
57
See L. Lessig, The Problem with Patents, The Standard, April 23, 1999,
www.thestandard.com/article/display/0,1151,4295,00.html.
58
See, e.g., J. Gleick, Patently Absurd, at n. 8 supra.

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protection, discourages imitation. The result is that greater R & D funds are available for
technologies with strong intellectual property protection, because competitors cannot
easily copy the ideas of the market pioneer and thereby obtain the benefits of the
development without expending the same funds.59 A demonstration of the investment
communities’ view of the value of patents occurred when biotech stocks plummeted in
March, 2000 on the mere suggestion by the President and British Prime Minister that
genetic technology should be made freely available to scientists everywhere.60 Although
critics of e-commerce patents contend such patents allow large companies to drive small
competitors out of the market,61 in practice, the effect is the opposite: strong patent
protection allows small organizations to compete with the largest businesses.62 Using
Lessig’s terminology, patented inventions are indeed “rivalous,” because an unauthorized
infringing use can drive the inventor out of the market; often, small entities can compete
with the vastly greater marketing and financial muscle of large corporations only by
having exclusive rights in their developments,63 a fact that is recognized by the investment
community.64 The failure of the software and e-commerce industries to recognize the
benefits of broadly enforced patent rights presents a challenge to the patent community
that can best be met by better marketing and dissemination of the intellectual property
message.

C. The Road to State Street

59
This principle is well known to the investment community, and to many in the internet community.
See A. Kessler, “Creative Destruction” Can Be Lucrative, Wall Street Journal (Apr. 18, 2000); T.
Riordan, Patents Considered Vital to Thrive on the Internet, The New York Times (Dec. 20, 1999)
available at www.nytimes.com; M. Richtel, Are Patents Good or Bad for Business Online, The New
York Times (Aug. 28, 1998) available at www.nytimes.com. The phenomenon is also detailed further for
the legal community in two National Law Journal articles. See G. Lawrence & C. Lobsenz, Tech Start-
Ups Must Assess IP Before Pursuing Cash, The National Law Journal, p. C02 (June 21, 1999), available
at test01.ljextra.com/na.archive.html/99/06/1999_0613_76.html and A. Riddles, L. Bromberg & K. Diaz,
Start-Up Companies Should Devise IP Strategies, The National Law Journal, p. C07 (February 8, 1999),
available at test01.ljextra.com/na.archive.html/99/01/1999_0131_64.html.
60
See L. Lindsey, Washington Leads Bulls to Slaughter, The Wall Street Journal (April 21, 2000). The
market reaction to the statements of the President and Prime Minister caused the US Patent Office to issue
a press release on March 16, 2000 reaffirming that U.S. patent policy regarding patenting human gene
sequence data had not changed. See Patent and Trademark Office Press Release #00-17, March 16, 2000,
available at www.uspto.gov/web/offices/com/speeches/00-17.htm.
61
See, e.g., A. Katz, ‘State Street’ May Place Start-Ups in Peril, New York L. J. Feb. 18, 2000 at
www.nylj.com/tech/011999t2.html; B. Pfaffenberger, The Coming Software Patent Crisis: Can Linux
Survive? Linux Journal, Aug. 10, 1999 at www2.linuxjournal.com/articles/currents/003.html.; B. Perens,
Preparing for the intellectual-property offensive, Linux World, Nov. 1998
www.linuxworld.com/linuxworld/lw-1998-11/f_lw-ll-thesource.html.
62
The best software example is in the case of Stac Electronics v. Microsoft Corp., No. C-93-0413-ER
(C.D. Cal.). In Stac, Microsoft was found to infringe and liable for $120 million in damages when it
attempted to incorporate Stac’s data compression invention into Microsoft’s MSDOS 6.0 and 6.2 operating
systems.
63
A detailed discussion of this issue, addressed from an anti-patent perspective, is contained in R. Merges
and R. Nelson, On the Complex Economics of Patent Scope, 90 Columbia Law Review 839 (1990).
64
. See A. Kessler, “Creative Destruction” Can Be Lucrative, Wall Street Journal (Apr. 18, 2000); L.
Lindsey, Washington Leads Bulls to Slaughter, Wall Street Journal (Apr. 21, 2000).

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 How did the patent world come to this crossroad? Listening to the anti-patent
hysteria, one could easily conclude that greedy lawyers with no interest in innovation
(and perhaps a latent desire to destroy the freedom of the internet) hoodwinked the
courts into mounting a radical assault on cyberspace.65 Instead, acceptance of business
method patents evolved slowly from a recognition by the courts that such patents were
never really prohibited, and that the 1952 Patent Act cannot reasonably be construed to
exclude business methods from patentable subject matter.

The evolution of the decisions leading to State Street has been frequently
described.66 The genesis of the prohibition on business method patents is commonly
said to have arisen in Hotel Security Checking Co. v. Lorraine Co.,67 a 1908 case
containing dicta saying “[n]o mere abstraction, no idea, however brilliant, can be the
subject of a patent irrespective of the means designed to give it effect.”68 This was,
according to the Hotel Security court, because a “system of transacting business
disconnected from the means of carrying out the system is not, within the most liberal
interpretation of the term, an art.”69 However, as the Federal Circuit noted in State
Street, the decision in Hotel Security did not rely on the “business method exception” to
render the patent invalid: “[i]n that case, the patent was found invalid for lack of novelty
and ‘invention,’ not because it was improper subject matter for a patent.”70 Hotel
Security nevertheless became the source of judicial statements that business methods were
not patentable subject matter,71 eventually resulting in the PTO’s adoption of a policy
against granting business method patents.72

The exclusion of business methods from patentable subject matter was only half
of the mid-twentieth century legal obstacles to business method patents. The

65
Displaying a fine disregard for the history of patents relating to business methods, Lessig says business
method patents were “discovered” by a federal court in 1998. Id. The research in the area nevertheless
demonstrates that so-called “business method” patents have long been issued and enforced. See M.
Feulling, Manufacturing, Selling, and Accounting: Patenting Business Methods, 76. J. Pat. Ofc. Soc’y
471 (1994).
66
See, e.g., C. Cantzler, State Street, Leading the Way to Consistency for Patentability of Computer
Software, 71 U. Col. L. Rev. 423 (2000); S. Swanson, The Patentability of Business Methods,
Mathematical Algorithms and Computer-Related Inventions After the Decision by the Court of Appeals for
the Federal Circuit in State Street, 8 Fed. Cir. B. J. 153 (1999); S. Alter, Federal Circuit Broadens
Scope for Software Patents, 15 The Computer Lawyer 24 (1998).
67
160 F.2d 467 (2d Cir.1908).
68
160 F.2d at 469.
69
Id.
70
State Street, 149 F.3d. at 1376.
71
See, e.g., Loew’s Drive-In Theatres, Inc. v. Park-In Theatres, Inc., 174 F.2d 547 (1st Cir. 1949).
72
Editions of the Manual of Patent Examining Procedures published before 1996 provided: “[t]hough
seemingly within the category of process or method, a method of doing business can be rejected as not
being within the statutory classes. See Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2nd Cir.
1908) and In re Wait, 73 F.2d 982, 24 U.S.P.Q. (BNA) 88, 22 C.C.P.A. 822 (1934).” MPEP §
706.03(a) (1994).

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“Mathematical Algorithm Exception” served for much of the century to place equally
difficult obstacles to patenting such inventions. Based upon the principle that patents
cannot extend to “mere abstract ideas” the mathematical algorithm exception operated to
preclude patents involving a sequence of definable steps, such as are typically carried out
by software. Since many, if not most, modern developments in business methods involve
use of computers, the mathematical algorithm exception gave courts additional
ammunition to reject patents on commercial activity.

The restraints on algorithm patents began to loosen with Diamond v. Diehr,73 in

which the Supreme Court reiterated the prohibition against patents on mathematical
algorithms so long as the represent mere abstract ideas, but eviscerated that restriction by
agreeing algorithms are patentable when they produce a tangible result.74 The Federal
Circuit further loosened the restrictions in two cases describing the Federal Circuit’s
understanding of the Diehr standard, In re Alappat75, and Arrhythmia Research
Technology, Inc. v. Corazonix Corp.76 With the decision in State Street, the Federal
Circuit removed all doubt as to the patentability of software systems conducting financial
activity.77 Under State Street, the analysis now focuses on “the essential characteristics
of the subject matter, in particular, its practical utility.”78 Methods and systems having
such practical utility are patentable subject mater.79

D. High Tech vs. Low Tech

Any analysis of Internet and e-commerce patents must also included a candid
appraisal of their likely enforceability. Despite the success of Amazon.com in enforcing
the “1-Click™” patent,80 real uncertainty exists regarding the overall reception such
patents will receive in the courts. Many e-commerce patents represent simple,
understandable developments that, while patentable, do not describe and claim pioneering
developments. Traditionally, low tech, easily-understood developments, have received
less favorable treatment in the courts.81 Logically, when faced with Internet patents that

73
450 U.S. 175 (1981).
74
Diehr, 450 U.S. at 193.
75
33 F.3d1526 (Fed. Cir. 1994) (in banc).
76
958 F.2d 1053 (Fed. Cir. 1992).
77
State Street reiterated the holding that “it is no ground for holding a claim is directed to nonstatutory
subject matter to say it includes or is directed to an algorithm.” 149 F.3d at 1375 (quoting In re Iwahashi,
888 F.2d 1370, 1374 (Fed. Cir. 1989). State Street also ruled that the old Freeman-Walter-Abele test of
the Court of Customs and Patent Appeals has “little, if any, applicability to determining the presence of
statutory subject matter.” Id. at 1374.
78
149 F.3d at 1375.
79
At least one member of the software community vigorously rejects this proposition. See B.
Pfaffenberger, Internet Patents: Giving away the Store, Linux Journal, Dec. 23, 1999 (published on the
web at www2.linuxjournal.com/articles/currents/014.html)
80
See Amazon.com, Inc. v. Barnesandnoble.com, Inc., 73 F. Supp. 2d 1228 (W.D. Wa. 1999).
81
The Supreme Court in particular has used cases on patents describing simple, easy-to-understand
developments to present express it’s most problematic decisions. See, e.g., Sakraida v. Ag Pro, Inc., 425

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represent minor adaptations of earlier practices to the web, an unbiased observer would
expect a high frequency of invalidity rulings. Indeed, the greatest criticism of e-commerce
patents has been directed toward patents that, at least to lay commentators, appear to do
nothing except take an old practice and claim the use of that practice on the web as an
invention.82 The reality is that many Internet patents involve the cyberspace equivalent
of patenting familiar household implements; the patent’s specification is dressed in the
most formal facade the drafting attorney can prepare, but upon close inspection the
patent represents a disappointedly trivial development.

A different conclusion, however, is appropriate for patents that describe truly

innovative uses of the web, and which could not have been developed before the advent of
commercial use of the Internet. Indeed, a key part of evaluating the potential validity of
Internet and e-commerce patents is the answer to the question: “Does the patent claim a
method that was not possible before the creation of the web?” If the answer is yes, then
the patent is likely following in the grand tradition of improvement that represents the
bulk of patents world wide, and has a higher chance of surviving an attack on its validity.
A contrary answer means the patent is potentially subject to a vigorous validity
challenge.

II. WHAT IS A BUSINESS METHOD PATENT?

A discussion of business method patents should begin with a definition of

“business methods.” While the phrase “e-commerce” patents seems to allow little
ambiguity, no accepted or even proposed definition of “business method” patents exists.
Instead, the phrase is used to describe a legion of method and even occasional device
inventions, spanning the gamut of possible commercial applications. The topic was
significant before State Street because of the need to avoid drafting claims directed to
nonstatutory subject matter.83 The issue was reduced to mere academic interest after
State Street; in the view of most patent attorneys, State Street’s primary effect was to
eliminate an unnecessary concern when drafting patent claims. A year and a half of
tranquility ensued, at least for patent prosecutors.

The 1999 “American Inventors Protection Act”84 returned the subject to the
vanguard of patent issues. The act creates a new “First Inventor” defense85 to a claim of
patent infringement, applicable only to patents directed to “methods of doing

U.S. 273, reh’g denied, 426 U.S. 955 (1976); Great Atlantic and Pacific Tea Co. v. Supermarket
Equipment Co., 340 U.S. 147 (1950), reh’g denied, 340 U.S. 918 (1951).
82
The Priceline.com “reverse auction” patent has been frequently subjected to that criticism.
83
See MPEP § 706.03(a) (1994) (now superseded).
84
Pub. L. No. 106-113, enacted Nov. 29, 1999.
85
American Inventors Protection Act of 1999,.§ 4302.

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business.”86 Neither the act nor the its legislative history provides any hint of a useful
definition of the term “business method,”87 leaving it to the courts to determine which
patents are and are not subject to the defense. The cacophony raised by the “open
source” community, with the potential to energize legislation from Congress, adds
urgency to the need to resolve the problems created the definitional absence.

The failure to provide a definition in the Inventor’s Protection Act is peculiar,

given the frequent description of the ambiguity surrounding such patents. Indeed, Judge
Newman lamented the “fuzzy” nature of the term “business methods” in her dissent in In
re Schrader,88 a precursor to the Federal Circuit’s ruling in State Street. Judge Newman’s
opposition to the business method exception mirrored statements of earlier
commentators89 and the general ambiguity contained the cases involving so-called
“business method” patents.

The ambiguity continued in the Federal Circuit decision in State Street. Although
frequently referred to as the definitive case establishing the legitimacy of business method
patents, the claims at issue in State Street were not even method claims.90 Directed to a
“data processing system for managing a financial services configuration of a portfolio,”91
the primary claim in issue was drafted as a conventional collection of means-plus-function
elements, including “a computer processor means,” a “storage means,” and various means
for either “initializing the storage medium,” or “processing data.”92 Nothing within the
claim suggests that a method was claimed, leading to the inescapable conclusion that the

86
Id.
87
Id. Strangely, the section-by-section analysis of the Act included the statement that a business method
can be “a preliminary or intermediate manufacturing procedure, which contributes to the effectiveness of the
business by producing a useful end result for the internal operation of the business or external sale.” Id.
(emphasis added). The reference to “manufacturing” makes this explanation so broad (indeed, it readily
applies to virtually every manufacturing practice0 that it has virtually no usefulness.
88
Judge Newman stated that the business method exception is “an unwarranted encumbrance to the
definition of statutory subject matter in section 101, that [should] be discarded as error-prone, redundant and
obsolete. It merits retirement from the glossary of section 101.” 22 F.3d 290, 298 (Fed. Cir. 1994)
(Newman, J., dissenting).
89
See, e.g., R. Del Gallo, Are ‘Methods of Doing Business’ Finally Out of Business as a Statutory
Rejection? 38 IDEA 403 (1998); M. Fuelling, Manufacturing, Selling, and Accounting: Patenting
Business Methods, 76 J. Pat. & Trademark Ofc. Soc’y 471 (1994); A. Hansmann, Method of Doing
Business, 50 J. Pat. Ofc. Soc’y 503 (1968); G. Tew, Method of Doing Business, 16 J. Pat. Ofc. Soc’y 607
(1934).
90
Indeed, the Federal Circuit specifically concluded in State Street that the claims in issue were not
directed to a process. 149 F.3d at 1371.
91
State Street, 149 F.3d at 1371 (emphasis added). Claim 1 of the patent addressed in State Street is set
forth in Appendix B-1.
92
Id. at 1371-72.

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phrase “business method patents” could come to refer to virtually any kind of patent that
relates to financial activity.93

The scope of the uncertainty is also illustrated by reference to patents advanced

by participants in the debate as directed to “business methods.” Wright94 suggests
“business method” patents might include patents directed to: a method of tracking
expenses,95 a method for conducing a survey of music listeners,96 a method for operating
a dating service,97 an interactive game show,98 a method of estimating damage to a
vehicle,99 a method of forecasting business performance based on weather trends,100 a
method of using estimates for the future earnings potential of college students to fund
their college tuition 101 and a method of walking under water.102 Three current examples
of patents frequently contended to cover “business methods” are the Priceline.com patent
directed to set-your-own-price auctions,103 the Amazon.com “1-Click™” patent,104 and
the recently issued Amazon.com “associates” patent.105 Although those patents have
garnered the greatest recent hysteria, examples from the past show how broadly the
phrase “business methods” can be construed.

A review of such sample “business method” patents provides some insight, but
no definitive conclusion. Patents that include financial transactions as part of one or more
claim elements are likely to be considered “business method” patents. Thus, the
Priceline.com name-your-own-price patent includes all of the steps for a making
purchase, i.e., an “offer,” an “acceptance” and a “payment.”106 The Open Market, Inc.
“shopping cart” patent has elements that include a computer programmed to receive a
“request for purchasing,” and to “cause a payment message to be sent.”107 U.S. Patent
No. 5,809,484, directed to funding student education by acquiring shares in students’

93
As early as 1934, a commentator on business methods noted the distinction between patents claiming
business methods, and patents directed to inventions useful in the conduct of business. See G. Tew,
Method of Doing Business, 16 J. Pat. Ofc. Soc’y 607 (1934).
94
B. Wright, Patents That Protect ‘Methods of Doing Business’: Are They Worth The Paper They’re
Printed On? National L. J., Nov. 22, 1999.
95
U.S. Patent No. 5,947,526. See, Appendix B-7.
96
U.S. Patent No. 5,913,204. See, Appendix B-6.
97
U.S. Patent No. 5,920,845. See, Appendix B-9.
98
U.S. Patent No. 5,108,115..
99
U.S. Patent No. 5,839,112. See, Appendix B-5.
100
U.S. Patent No. 5,832,456. See, Appendix B-4.
101
U.S. Patent No. 5,809,484. See, Appendix B-3.
102
U.S. Patent No. 5,906,200.
103
U.S. Patent No. 5,794,207. See, Appendix A-2.
104
U.S. Patent No. 5,690,411. See, Appendix A-1.
105
U.S. Patent No. 6,029,141.
106
See Claim 1 of U.S. Patent No. 5,794,207, set forth at Appendix A-2.
107
See Claim 1 of U.S. Patent No. 5,715,314, set forth at Appendix A-3.

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future earnings, includes “processing…collection and receipt from investors of…funds,”
and “generating…a document…for purchasing an amount of student earnings.”108 The
Amazon.com 1-Click™ patent includes elements for “sending a request to order,”
“generating an order to purchase,” and “fulfilling the generated order.”109 U.S. Patent No.
5,191,573, directed to transmission of digital audio signals, includes elements involving
“transferring money” and “transmitting the desired digital audio signal” from a memory
controlled by the party receiving the money.110

Inclusion of financial transactions is not the only way a claim can come to be
considered to be part of a “business method” patent. Claim 1 Patent No. 5,839,112
specifies a method for estimating damage to a vehicle; no transfer of money is mentioned
in the claim.111 Similarly, Patent No. 5,913,204 claims a method for surveying the
preferences of listeners to a radio station,112 and No. 5,920,845 describes a method of
running a “date matching” event.113 U.S. Patent 5,851,117 describes a method for training
an individual how to conduct janitorial cleaning activities.114 Each of the activities can be
conducted entirely without any payment of money and separate from any commercial
business enterprise. Whether such non-financial patents will be considered to claim
“business methods” as that term is used in the American Inventors Protection Act
remains to be seen.

Even trying to define “business method” patents by reference to payment or

transfer of money is troublesome, since many devices can receive money (i.e., the coin-
receptor mechanism in a video game) without being part of a business transaction. As one
early commentator noted, a distinction should be drawn between patents on methods of
doing business and methods used in business.115 Logically, the former would be subject
to the prior user defense, while the latter would not. Unfortunately, even such simple
clarity is lacking.

Some limited clarity help – and some additional confusion – is provided by

reference to the PTO initiative on business method patents.116 That initiative expressed
the PTO’s decision to provide a second review to business method patent applications.
Without explanation, the Patent Office decided to apply the second review to all

108
See Claim 39, set forth at Appendix B-3.
109
U.S. Patent No. 5,960,411, set forth in Appendix A-1.
110
Claim 1 is set forth at Appendix B-2.
111
Claim 1 is set forth at Appendix B-5.
112
Claim 1 is set forth at Appendix B-6.
113
Claim 1 is set forth at Appendix B-9.
114
Claim 1 is set forth at Appendix B-8.
115
See G. Tew Method of Doing Business, 16 J. Pat. Ofc. Soc’y 607, 608 (1934).
116
That initiative is described in the text accompanying note 52 supra, and is contained in Appendix C.

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applications in Class 705 of the Manual of U.S. Patent Classification.117 Class 705,
which existed long before the web attained any commercial use (and well before the
decision in State Street) is titled: “Data Processing: Financial, Business Practice,
Management, or Cost/Price Determination,” and includes such varied subjects as
“cryptography” in a postage metering system, “point of sale” terminals or electronic cash
registers, and “inventory management.” Although evaluation of many of the subclasses of
Class 705 is less than helpful, some insight can be obtained from review of Class 705/1.
That subclass is titled: “Automatic Electrical Financial or Business Practice or
Management Arrangement,”118 and has the following definition:

Subject matter wherein an electrical apparatus and its corresponding

methods perform the data processing operations, in which there is a
significant change in the data or for performing calculation operations
wherein the apparatus or method is uniquely designed for or utilized in the
practice, administration, or management of an enterprise, or in the
processing of financial data.

Thus, in the data processing arts, a patent might be considered to specify a

“business practice” if the method involves the “practice, administration, or management
of an enterprise,” or is used in the “processing of financial data.” Helpfully, the class
definition notes that “[m]ere designation of an arrangement as a ‘business machine’ or a
document as a ‘business form” or ‘business chart’ without any particular business
function will not cause classification in this or its indented subclasses.”119 Nevertheless,
even the definition provided by the PTO definition of Class 705/1 is too general, since it
includes virtually any machine that is used in the “practice, administration or
management” of an enterprise. Further confusion arises from the fact that several of the
patents commonly considered to be directed to business methods have not been classified
by the Patent Office as part of Class 705.120

117
The manual is available at www.uspto.gov/web/offices/ac/ido/oeip/taf/moc/.
118
Portions of the definition of Class 705 are set forth in Appendix D.
119
See Appendix C.
120
The most striking example is U.S. Patent No. 5,851,117 titled “Building Block Training Systems and
Training Methods,” (and which is directed to a method of training a janitor) which is in Class 434. The
’117 patent is frequently used as an example of the supposed absurdity of business method patents. Other
examples are Patent No. 5,947,526, titled “Personal Financial Tracking System and Method,” Class 283;
and Patent No. 5,191,573, titled “Method for Transmitting a Desired Digital Video or Audio Signal,”
Class 369. Many patents that expressly deal with Internet e-commerce are not contained in Class 705.
The DoubleClick patent (No. 5,948,061) is Class 709. AT&T’s patent for billing over the Internet (No.
5,905,736) is Class 370. The patent asserted by Network Engineering Software against Yahoo! (No.
5,778,367) is Class 707; similarly, the patent asserted by CIVIX-DDI against AOL and Microsoft (No.
5,682,525) is Class 707. Microsoft’s patent directed to intelligent selection of a search engine (No.
6,009,459) is Class 709. The patent asserted by Trilogy Development against CarsDirect.com (No.
5,825,651) is Class 700. Interestingly, the patent from State Street, No. 5,193,056, was originally
classified in Class 364, then reclassified in Class 705. The same events occurred with the Open Market,
Inc. patents on the shopping cart (no. 5,715,314); it was originally classified as Class 380, but reclassified
into Class 705.

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 No good solution appears for this problem. As Judge Newman noted, classifying
patents as “business methods” is “fuzzy,” “poorly defined, redundant, and
unnecessary.”121 At best, the courts will settle on a simple bright line test such as
“methods including a commercial transaction involving money.” Even then, many
litigation battles can and probably will be fought over whether specific patents fit the
definition. At worst, the courts will adopt a flexible or obscure definition that leaves the
question in doubt until finally resolved by the termination of litigation.

III. ISSUES REGARDING INTERNET BUSINESS METHOD PATENTS

Beyond the question of just what is and is not a business method patent, a variety
of material questions remain regarding the best ways to draft and enforce business method
patents on e-commerce topics. Although some helpful determinations can be made, many
questions remain for future resolution.

A. Litigating Internet Business Method Patents

The topic of how to litigate “business method” patents presents fewer ambiguities
than the problems associated with prosecuting the patents or determining which patents
fit the definition. This is so, because such patents should, as a general rule, be litigated in
the same manner as all other patents.122 The presence of business method or e-commerce
subject matter does not change the need for traditional litigation tactics, which are
primarily governed by factors such as the amount of money at stake, the need or lack of
need for immediate injunctive relief, the financial resources of the parties, the similarities
or differences between the accused product and the claims, and the differences between
the invention and the prior art. Moreover, in “business method” suits, as in most cases,
topics such as whether the accused infringer copied the invention and whether the patent
owner committed inequitable conduct during the patent’s prosecution will overwhelm
many other considerations.

Some generalities regarding litigation of “business method” and “e-commerce”

patents are nevertheless appropriate. If the patent involves e-commerce, speed is likely
to be a critical factor. In an industry changing at “internet speed,” the typical two-to-four
year pendency before trial can reduce the litigation to mere marginal value, if it does not
make the litigation useless. The “invention” claimed in a patent can become obsolete long
before the trial is commenced (or perhaps become materially reduced in value). Every e-
commerce patent litigation should therefore include evaluation of the potential for a
preliminary injunction, so that the suit’s tactics will thereafter flow from each side’s

121
In re Schrader, 22 F.3d 290, 298 (Fed. Cir. 1994) (Newman, J., dissenting).
122
See, e.g., J. Riedinger, Making Patent Trials Interesting, Presented Jan. 6, 1998 at the 1998 National
CLE Conference session on Intellectual Property Law in Vail, CO.

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assessment of an injunction’s potential. The successful assertion of the “1-Click™”
patent by Amazon.com is, of course, the most striking example, since an argument can be
made that Amazon.com prevailed regardless of the eventual outcome of the case;
Amazon.com obtained an injunction during an important period (Christmas 1999) when
e-commerce loyalties were being established. Similarly, the availability of provisional
rights for published applications will bring a new dynamic to litigation strategy, since an
opportunity exists now for an owner of an e-commerce patent to obtain royalties for
activities occurring before the patent issues. In the fast-changing internet world, the time
before issuance might be the only period in which the invention is used significantly.

If the patent is broad and covers important e-commerce activity, litigation of a

“business method” patent can involve public relations considerations that are usually not
present in other patent litigation. The intense opposition to e-commerce patent
enforcement might lead to a vociferous outcry, a flood of email protests, or even a
boycott.123 In some circumstances, the “open source” community might join with the
defendant to locate invalidating prior art.124 No e-commerce patent litigation should be
commenced without being prepared to address these options.

Obtaining jurisdiction over infringers will become an increasingly important issue,

especially in view of the likely infringers (or patent holders) outside the United States.
Absence a presence in the United States, many infringers will have to be pursued, if at all,
by foreign patents, a course made more difficult by the reluctance of other countries to
accept business method patents.125 Questions regarding personal jurisdiction within a
particular district will similarly arise, and will most likely be resolved in the manner as
copyright cases involving the web, i.e., “passive” web sites that are akin to a national
publication flowing into a district will not create sufficient minimum contacts to give rise
to personal jurisdiction.126

The value of early and extensive prior art searches is often much greater in e-
commerce and business method litigation than in other patent cases, because the easily
available prior art is often limited. Typical prior art sources such as the Patent Office,
technical libraries and online references have yet to develop extensive business method
references (although that circumstance is changing rapidly). The bulk of the prior art,
which might include the most important art, is therefore likely to be found only by
exhaustive investigation in non-traditional sources. Defendants will need to begin their

123
The boycott attempted against Amazon.com for its 1-Click™ enforcement is an example. See
Stallman, Updated: Richard Stallman – Boycott Amazon! Linux Today,
www.linuxtoday.com.story/13652.html.
124
An example is described in J. Sullivan, Volunteer Army to Fight Patent, Wired News, May 3, 1999
available at www.wired.com/news/politics/story/19452.html.
125
A good overview of the issues is contained in B. Wright, “Internet and E-Commerce Patents,” available
at www.bannerwitcoff.com/articles.htm.
126
See, e.g., Agar Corp. v. Multi-Fluid, Inc., 45 U.S.P.Q. 2d 1444 (S.D. Tex. 1997).

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searches earlier than usual, and conduct the searches with greater intensity. Although
expensive, the reward for those efforts is likely to justify the costs.

B. Drafting Internet Business Method Patents

In the broadest sense, e-commerce and business method patents are prepared
using the same principles applicable to other patents. The claims, drawings and
specifications are completed with the dual and somewhat inconsistent objectives of
obtaining the broadest claims the PTO is willing to allow, while simultaneously ensuring
that the patent does not cover the prior art. The patent should be prepared with
maximum variety in claims drafted and alternatives disclosed, and the claim language
include a careful balance of expressly understood (and therefore limited) terms and
deliberate ambiguity. The patent should be prepared, of course, in minimum time and
with minimum expenditure of the client’s resources, financial or otherwise. Numerous
references give fine guidance on effective ways of accomplishing these traditional
objectives.127

Several aspects of e-commerce patents are, however, unique. The growing

hostility to patents within the software community and the presence of prior-user rights
suggest that some effort should be made to prevent a patent from being successfully
characterized as a “business method” patent, an admonition that is doubly applicable to
e-commerce patents. Techniques for doing so are the focus of the remaining discussion in
this section.

First, business method and e-commerce patents should not necessarily be

considered to be software patents. Although many business method and e-commerce
patents involve inventions that are implemented in software, the invention can be and
often is broader than the software used to carry out the invention. As a result, many of
the techniques used in drafting software patents are either inappropriate or too narrow.
Beauregard128 or “computer-readable medium” claims will adequately protect the
particular steps of a business or e-commerce method when embodied on a single memory,
but are at best limited and at worst unable to capture the steps of a procedure that
includes manual activity. Lowry129 claims directed to software data structures will almost
never provide adequate protection. In highly limited circumstances, refined claiming
techniques such as “propagated signal claims” and “compatible system claims” might be

127
See, e.g, R. Faber, Landis on Mechanics of Patent Claim Drafting, Practicing Law Institute, 1996.
See also J. Riedinger, Writing Patent Claims for Litigation, Presented Jan. 13, 1999 at the 1999 National
CLE Conference on Intellectual Property Law, Vail, CO.
128
See In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995).
129
See In re Lowry, 32 F.3d 1579 (Fed. Cir. 1994).

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worthwhile, but will rarely provide other than the most limited protection.130 An
assumption that business method or e-commerce patent developments are merely
traditional software inventions can therefore lead to underprotection of the invention.

Some traditional “software” claiming techniques are appropriate. Many e-

commerce patents lend themselves well to “user interface” claims, directed to the steps
performed when a computer interacts with the user.131 Such claims allow far easier
detection of infringement than, for example, Beauregard claims where infringement cannot
be identified without access to information describing the internal operation of the
infringing system. Conventional method claims that simply describe the sequence of
steps performed in the invention, are not only useful in the software field but form the
foundation of most e-commerce and business method patents. Of course, the best
approach is to prepare a variety of claims using every possible approach, producing
broad, narrow and intermediate claims, as well as claims that vary in the ease with which
infringement can be detected.

Second, patents might avoid being characterized as claiming a “business method” if

no method is claimed. By so doing, some possibility exists that the claim will not be
subject to prior user rights. Although this principal is easy to assert, implementing that
guidance can be a more difficult proposition. Even though the Federal Circuit noted in
State Street that the claims in issue were not method claims,132 it still evaluated the
business method exception.133 Moreover, if means-plus-function claims are used, a
failure to include supporting structure for the recited means can result in the claim being
construed as a method claim.134

Third, the claim drafter should be wary of the ability of a potential infringer to
move its activity offshore, a possibility with particular relevance to e-commerce patents.
Claims should be avoided, if possible, that specify some of the necessary activity
occurring in a remote host computer. Doing so creates the possibility that the infringer
will move the host to a location outside the United States, and therefore outside the reach
of U.S. Patents (while still accessible to customers via the web). Although arguments can
be made that such a strategy would not prevent enforcement of the patent because the
effects of the host computer are experienced within the U.S., the need for that argument
should be avoided by drafting claims that do not recite a host, unless that host cannot be
easily moved abroad.

130
A discussion of various software claiming techniques is contained in W. Ferron, Business Method and
Software Patents Legal Update, Feb. 2000.
131
The Amazon.com 1-Click™ patent provides a good example of such claims. See Appendix A-1.
132
State Street, 149 F.3d at 1371.
133
Id. at 1375-77.
134
See State Street, 149 F.3d at 1371. See also In re Abele, 684 F.2d 902, 909 (C.C.P.A. 1982); In re
Pardo, 684 F.2d 912, 916 n.6 (C.C. P.A. 1982); In re Walter, 618 F.2d 758, 768 (C.C.P.A. 1980).

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 Fourth, some claims should be drafted to ease the detection of infringement. For
example, claims that are limited to the details of what occurs when a particular item of
software is processed by a computer’s CPU are often impossible to assert against an
infringer. Absent decompiling all possible software and examining the software’s function
(an impossible task), the patent owner might never know of an infringement. For e-
commerce patents, a good alternative is to focus the claims on those aspects of the
invention that are visible through use of a web browser, and no more.

Fifth, some business method patents, involve activity that, in hindsight, can
appear enormously simple. While the black letter law surrounding claims drawn to
simple inventions emphasizes that they deserve the same respect as complex
developments, the law and its application are rarely congruent. Some effort should still
be made to inject an aura of technical complexity into the patent, particularly when the
claimed invention can be considered to e merely adapting an old business technique to e-
commerce. Specifications should not be drafted with deceptive descriptions, but they
should also not be drafted without regard to the usually plentiful opportunities to
mention the technical details that are frequently present but often overlooked by the
attorney drafting the application.

Sixth, e-commerce patents should not be drafted in a fashion that precludes

infringement. Surprisingly, some e-commerce patents are written so that neither the e-
commerce business nor the consumer using the browser can infringe by themselves; the
infringing activity requires action by both, leading to the unfortunate possibility that
neither direct nor inducement of infringement can be proved.135 Care should be exerted to
ensure that claims are drafted to focus on the activity of just the e-commerce business or
just the consumer. In a somewhat counter-intuitive result, claims that focus on direct
infringement by the consumer are actually better, since the consumer’s activity is easier to
detect, and the e-commerce competitor is most likely to be liable for inducement of
infringement if direct infringement by a consumer can be proven.

In every claim, business method or otherwise, the patent scrivener should be

mindful of the admonition in Sage Products, Inc. v. Devon Indus., Inc.,136 where the
Federal Circuit noted:

“as between the patentee who had a clear opportunity to negotiate broader
claims but did not do so, and the public at large, it is the patentee who
must bear the cost of its failure to seek protection for this foreseeable
alteration of its claims structure.”137
135
An example is Claim 39 of the Shopping Cart patent, No. 5,715,314. Claim 39 of the x’314 patent is
set out in Appendix A-3.
136
126 F.3d 1420 (Fed. Cir. 1997).
137
Id. at 1425.

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Sage places the burden squarely on the shoulders of patent prosecutors to anticipate
“foreseeable” future developments and include them within the literal scope of a patent’s
claims. Given the hostile publicity against e-commerce and business method patents,
attorneys writing patents cannot expect courts to adopt expansive interpretations.
Rather, courts should be expected to embrace Sage, especially in view of the current
philosophy of the Federal Circuit that promotes narrow claim interpretations over broad
ones.138 Redoubled efforts should thus be exerted to thoroughly claim every conceivable
variation when writing patents on e-commerce and business method inventions.

Finally, when e-commerce patents are involved, patent prosecutors should

seriously consider taking advantage of provisional rights. If the patentee maintains at
least one published (and infringed) claim unchanged during the prosecution, the patentee
will eventually be able to recover a reasonable royalty from those who use the invention
during the pendency of the patent’s application.139 The pace of change in the internet
world could cause provisional rights to provide the only meaningful recovery.

IV. CONCLUSION
The environment of e-commerce patents is still fluid, if not changing at Internet
speed. As more patents issue, and more patent suits are initiated, fought and resolved,
new issues will arise, and the already burgeoning world of Internet patent litigation will
become both more complex and more controversial. Due to the pace of change in the e-
commerce world, successful practitioners are well-advised to maintain a constant
awareness of new developments, and adapt as the Internet patent world changes, since
the only certainty is unceasing fluidity.

138
Allen Archery, Inc. v. Browning Mfg. Co., 898 F.2d 787 (Fed. Cir. 1990). A detailed discussion of
the Federal Circuit focus on the publics ability to review and understand the patent is contained in M.
Banner, “Notice” – The Philosophical Undercurrent of the Recent Federal Circuit Decisions, presented at
the Fifth Annual Intellectual Property Institute of the Washington State Bar Association, March 24, 2000.
139
American Inventors Protection Act of 1999 § 4504. Provisional rights are now specified in 35 U.S.C.
§ 154.

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 APPENDIX A
Patent Claims From Selected Internet “Business Method” Patents

A-1: U.S. Patent No. 5,960,411 (the Amazon.com “1-Click™ patent”):

1. A method of placing an order for an item comprising:

under control of a client system,
displaying information identifying the item; and
in response to only a single action being performed,
sending a request to order the item along with an identifier of a
purchaser of the item to a server system;
under control of a single-action ordering component of the server system
receiving the request;
retrieving additional information previously stored for the purchaser
identified by the identifier in the received request; and
generating an order to purchase the requested item for the purchaser identified by
the identifier in the received request using the retrieved additional
information; and
fulfilling the generated order to complete purchase of the item
whereby the item is ordered without using a shopping cart ordering model.

6. A client system for ordering an item comprising:

an identifier that identifies a customer;

a display component for displaying information identifying the item;

a single-action ordering component that in response to performance of

only a single action, sends a request to a server system to order the
identified item, the request including the identifier so that the server
system can locate additional information needed to complete the order and
so that the server system can fulfill the generated order to complete
purchase of the item; and

a shopping cart ordering component that in response to performance of an

add-to-shopping-cart action, sends a request to the server system to add
the item to a shopping cart.

A- 1
9. A server system for generating an order comprising:

a shopping cart ordering component; and

a single-action ordering component including:

a data storage medium storing information for a plurality of users;

a receiving component for receiving requests to order an item, a

request including an indication of one of the plurality of users, the
request being sent in response to only a single action being
performed; and

an order placement component that retrieves from the data storage

medium information for the indicated user and that uses the
retrieved information to place an order for the indicated user for the
item; and

an order fulfillment component that completes a purchase of the

item in accordance with the order placed by the single-action
ordering component.

11. A method for ordering an item using a client system, the method comprising:

displaying information identifying the item and displaying an indication of

a single action that is to be performed to order the identified item; and

in response to only the indicated single action being performed, sending to

a server system a request to order the identified item

whereby the item is ordered independently of a shopping cart model and the order
is fulfilled to complete a purchase of the item.

A- 2
A-2: U.S. Patent No. 5,794,207 (the Priceline.com patent titled “Method and
Apparatus for a Crytographically Assisted Commercial Network System
Designed to Facilitate Buyer-Driven Conditional Purchase Offers”):

1. A method for using a computer to facilitate a transaction between a buyer and

at least one of sellers, comprising:
inputting into the computer a conditional purchase offer which includes an offer
price;
inputting into the computer a payment identifier specifying a credit card account,
the payment identifier being associated with the conditional purchase
offer;
outputting the conditional purchase offer to the plurality of sellers after receiving
the payment identifier;
inputting into the computer an acceptance from a seller, the acceptance being
responsive to the conditional purchase offer; and
providing a payment to the seller by using the payment identifier.

12. An apparatus for facilitating a transaction between a buyer and at least one of
a plurality of sellers, comprising:
a storage device; and
a processor connected to the storage device,
the storage device storing
a program for controlling the processor; and
the processor operative with the program to receive a conditional purchase
offer which includes an offer price;
receive a payment identifier specifying a credit card account, the
payment identifier being associated with the conditional
purchase offer;
make the conditional purchase offer available to the plurality of
sellers after receiving the payment identifier;
receive an acceptance from a seller, the acceptance being responsive
to the conditional purchase offer; and
provide payment to the seller by using the payment identifier.

A- 3
23. A method for using a computer to facilitate a transaction between a buyer and at least
one of a plurality of sellers, comprising:

inputting into the computer a conditional purchase offer which includes an offer
price;
inputting into the computer a payment identifier specifying a financial account,
the payment identifier being associated with the conditional purchase
offer;
outputting to the buyer a request for authorization to use the payment identifier
to provide a payment it an acceptance is received;
inputting into the computer authorization from the buyer in response to the
request;
outputting the conditional purchase offer to the plurality of sellers after receiving
the payment identifier;
inputting into the computer an acceptance from a seller, the acceptance being
responsive to the conditional purchase offer; and
providing the payment to the seller by using the payment identifier.

A-3: U.S. Patent No. 5,715,314 (the Open Market, Inc. “shopping cart patent”):

1. A network-based sales system, comprising:

at least one buyer computer for operation by a user desiring to buy a product;
at least on merchant computer; and
at least on payment computer;
said buyer computer, said merchant computer, and said payment computer being
interconnected by a computer network;
said buyer computer being programmed to receive a user request for purchasing a
product, and to cause a payment message to be sent to said payment
computer that comprises a product identifier identifying said product;
said payment computer being programmed to receive s said payment message, to
cause an access message to be crated that comprises said product identifier
and an access message authenticator based on a cryptographic key, and to
cause said access message to be sent to said merchant computer; and
said merchant computer being programmed to receive said access message, to
verify said access message authenticator to ensure that said access
message authenticator was crated using said cryptographic key, and to
cause said product to be sent to said user desiring to buy said product.

A- 4
34. A network-based sales system, comprising:
at least on buyer computer for operation by a user desiring to buy product;
at least on shopping cart computer; and
a shopping cart database connected to said shopping cart computer;
said buyer computer and said shopping cart computer being
interconnected by a computer network;
said buyer computer being programmed to receive a plurality of requests from a
user to add a plurality of respective products to a shopping cart in said
shopping cart database, and, in response to said requests to add said
products, to send a plurality of respective shopping cart messages to said
shopping cart computer each of which comprises a product identifier
identifying one of said plurality of products;
said shopping cart computer being programmed to receive said plurality of
shopping cart messages, to modify said shopping cart in said shopping
cart database to reflect said plurality of requests to add said plurality of
product to said shopping cart, and to cause a payment message associated
with said shopping cart to be created; and
said buyer computer being programmed to receive a request from said user to
purchase said plurality of products added to said shopping cart and to
cause said payment message to be activated to initiate a payment
transaction for said plurality of products added to said shopping cart;
said shopping cart being a stored representation of a collection of products, said
shopping cart database being a database of stored representations of
collections of products, and said shopping cart computer being a computer
that modifies said stored representations of collections of products in said
database.

39. A method of operating a shopping cart computer in a computer network

comprising at least one buyer computer for operation by a user desiring to
buy products, at least one shopping cart computer, and a shopping cart
database connected to said shopping cart computer, said method
comprising the steps of:
receiving, at said shopping cart computer, a plurality of shopping cart messages
sent to said shopping cart computer by said buyer computer in response
to receipt of a plurality of requests from a user to add a plurality of
respective products to a shopping cart in said shopping cart database, each
of said shopping cart messages comprising a product identifier identifying
one of said plurality of products;
modifying said shopping cart in said shopping cart database to reflect said

A- 5
 plurality of requests to add said plurality of products to said shopping
cart; and
causing a payment message associated with said shopping cart to be created;
said buyer computer being programmed to receive a request from said user to
purchase said plurality of products added to said shopping cart and to
cause said payment message to be activated to initiate a payment
transaction for said plurality of products added to said shopping cart;
said shopping cart being a stored representation of a collection of products, said
shopping cart database being a database of stored representations of
collections of products, and said shopping cart computer being a computer
that modifies said stored representations of collections of products in said
database.

A-4: U.S. Patent No. 5,794,210 (CyberGold’s “Attention Brokerage” patent):

45. In an arrangement comprising plural computers connected to a digital
computer network, said network carrying and routing digital information between said
plural computers, said plural computers including at least one personal computer
associated with at least one user, at least one computer associated with at least one
provider of negatively priced information, and at least one computer associated with at
least one attention broker, said network being decentralized in that any pair of said
personal, information provider, and attention broker computers may communicate
without said communication passing through any of the other said personal, information
provider, and attention broker computers, said personal computer having a display device
and at least one user input device, the display device being capable of providing a visual
display based at least in part on the digital information delivered to the personal computer
via said network, said displayed information including at least one visual link associated
with one of said information provider and attention broker computers, said user being able
to operate said user input device to select and activate said link in order to effect a
network connection to said associated computer, a method of creating a market in which
human attention is the fundamental commodity of value, the method comprising:
(1) generating a list at said attention broker computer of at least one item of
negatively priced information from at last one information provider;
(2) establishing compensation range for each item in said list;
(3) determining which items from said list to make available to the personal
computer;
(4) communicating at least one representation of at least one item determined in
step (3) to the personal computer via the computer network;
(5) noting said user’s interaction with said representation, where said interaction
includes selecting and activating a visual link that is contained within said

A- 6
 representation and that is associated with said negatively priced
information provider computer, thereby connecting the personal computer
via the network to said negatively priced information provider computer
and receiving said negatively priced information from said computer; and
(6) compensating, via said attention broker computer, the user in connection with
said interaction in accordance with the range determined in step (2).

A-5: U.S. Patent No. 5,825,651 (Trilogy Development Groups patent on a

“Method and Apparatus for Maintaining and Configuring Systems”):

1. A method of configuring a system comprising the steps of:

generating a definition for said system, said definition containing one or more
elements and being conveyed graphically using a set of product
relationships, said product relationships identifying classifications for said
one or more elements, said product relationships comprising an includes
classification;
generating a set of part relationships between said one or more element, said set
of part relationships being conveyed graphically, and
configuring said system using said definition and said set of product relationships
and said part relationships.

A-6: U.S. Patent No. 5,774,870 (Netcentives’ patent on “Fully Integrated, On

Line Interactive Frequency and Award Redemption Program”)

1. A system for an incentive award program, including a computer system

accessible for on-line interactive communication with users, said computer system
comprising;
a first memory area for storing product catalog, said product catalog including
product descriptions and product prices for each product available for
purchase;
a second memory area for storing an awards catalog, said awards catalog
including an award description and award points value for each award;
and
a frequency database storing account information for each enrolled user of said
incentive award program.

A-7: U.S. Patent No. 6,006,197 (“System and Method for Asssessing Effectiveness

A- 7
 of Internet Marketing Campaign”):

1. A computer-implemented method for indicating the effectiveness of at least one

advertisement on at least one site on a wide area computer network, comprising the steps
of:

associating the advertisement with an advertisement identification;

including the advertisement identification in a first network path name;

receiving the first network path name;

in response to the receiving step, returning to a user a second network path name
including a visitor identification; and

correlating the advertisement identification with the visitor identification,

wherein the advertisement identification is removed from the first path name and
replaced with the visitor identification to thereby render the second path name.

A-8: U.S. Patent No. 6,009,459 (Microsoft’s patent on “Intelligent Automatic

Searching for Resources in a Distributed Environment”):

1. In a computer system having an output device, an input device and a connection

to enable communication with a plurality of web sites, a method comprising:

(a) providing a user interface element on the output device adapted for a
user to specify text that identifies a uniform resource locator (URL) of a
given web site holding media to gain access to the given web site;

(b) in response to text that is specified via the user interface element,
determining that the text is not a URL;

(c) in response to determining that the text is not a URL, examining the
text and based on a determined meaning of the content of the text
determining at least one of a plurality of search engines to search for a web
site related to the text, passing at least a portion of the text to a determined
search engine; and

(d) in response to passing at least a portion of the text to the determined

search engine, receiving media back from a web site that the determined
search engine located using the text passed to the determined search engine.

A- 8
A-9: U.S. Patent No. 5,890,138 (Bid.com’s patent on a “Computer Auction
System):

1. A method of auctioning product on-line where computer terminals of potential

purchasers are used to access a computer site comprising an auction server computer, said
method comprising

(a) assigning to each product a designated time for the product to be

auctioned,

(b) carrying out an auction at substantially the designated time by

setting a fixed time period for completing the auction,

displaying a current price for the product and decreasing the price
of the product as the time remaining in the auction decreases,

displaying the quantity of product remaining to be auctioned and

decreasing the quantity to immediately reflect instructions from
purchasers of their desire to purchaser the product as the
instructions are received during the auction to provide dynamic
feedback to potential purchasers during the auction,

(c) providing each potential purchaser with a designated actuation control

for instructing the computer site of the decision to purchase the product at
the current price at the time of receiving the instructions,

(d) removing a potential purchaser from the auction upon said purchaser
operating the actuation control to purchase the product at the displayed
current price at the time the instructions are received and decreasing the
quantity of product remaining to be auctioned,

(e) continuing to decrease said price in step (c) and to display the price and
the decreased quantity of product remaining to each potential purchaser
not removed in step (d);

(f) registering potential purchasers and obtaining and recording financial

data for automated payment of purchased product,

(g) increasing the remaining quantity if a preselected time limit for

obtaining said financial data is exceeded, and

A- 9
(h) upon receipt of said financial information within the preselected time
limit, initiating a transfer of funds to complete the sale of the product and
confirming the purchase of the product at the current price to the potential
purchaser by sending a message confirming the purchase to the potential
purchaser.

A- 10
A-10: U.S. Patent No. 5,948,061 (Doubleclick’s patent on “Method of Delivery,
Targeting, and Measuring Advertising Over Networks”):

1. A network comprising:

a user node having a browser program coupled to said network, said user
node providing requests for information on said network;

a content provider affiliate node having a respective affiliate web site

responsive to requests for information from said user node to provide
media content, advertising space for display of advertising content and a
link message to said user node;

an advertiser node having an advertiser web site including advertising

content, said advertiser node responsive to a request to provide said
advertising content; and

an advertisement server node responsive to a request from said user node

based on said link message to select an advertiser node as a selected
advertiser node, and identify said advertiser node as said selected
advertiser node to said user node,

whereby said advertising content from said selected advertiser node is

displayed at said user node.

7. In a network having a user node including a browser program coupled to said

network, said user node providing requests for information on said network, a content
provider affiliate node having a respective affiliate web site responsive to requests for
information from said user node to provide media content, advertising space for display
of advertising content and a link message to said user node, a plurality of advertiser nodes,
each of said plurality of advertiser nodes having a respective advertiser web site including
respective advertising content, each of said advertiser nodes responsive to a respective
request to provide respective advertising content, a network node comprising:

an advertisement server node responsive to a request from said user node

based on said link message to select an advertiser node as a selected
advertiser node, and identify said advertiser node as said selected
advertiser node to said user node,

whereby said advertising content from said selected advertiser node is

displayed at said user node.

A- 11
 42. In a network including a user node having a browser program coupled to said
network, a content provider affiliate node having a respective affiliate web site
containing media content, advertising space for display of advertising content and
an advertisement server node having an advertising server web site, a method for
delivery of advertising to said user node, said method comprising:

sending a request for information from said user node to said affiliate web
site requesting information;

sending a reply from said affiliate web site responsive to said request for
information from said user node, said reply containing media content,
advertising space for display of advertising content and a link message to
said user node;

sending a request from said user node based on said link message to said
advertising server web site to provide an advertising banner for said
advertising space;

selecting, at said advertising server web site, an advertising banner;

sending a reply from said advertising server web site identifying said
advertising banner to said user node; and

displaying said advertising banner in said advertising space at said user

node.

A-11: U.S. Patent No. 5,895,454 (Harrington “Integrated Interface for

Vendor/Product Oriented Internet Websites”):

1. In a computerized system, a method of effecting commerce in a networked

computer environment, the method comprising:

establishing a database of vendor product data and associated database

interface on a first computer, where the interface allows remote access by
one or more user(s);

a local user interacting with said database by means of the interface

wherein the interaction comprises the user querying the database to
specify a local users product/service specification;

A- 12
 the database providing the local user with a selection of remote vendor
network sites, where the selection of remote vendor sites is determined on
that basis of the users querying the database;

the local user interactively connecting with one or more of the remote
vendor network sites whereby the local user is connected to the remote
vendor network sites;

once connected to a remote vendor network site, the user selects

products/services from the information provided on the remote vendor
network site wherein the selection of a particular product/service triggers a
transaction notification which records the users selection and associated
financial transaction data which is transmitted to the database and
associated database interface, wherein the local user may connect to
subsequent remote vendor network sites whereby each selection of a
product/service triggers a transaction notification which is transmitted to
the database;

the database and associated database interface providing information

relating to the users realtime selection of products/services whereby during
or at the conclusion of a local users shopping session, the user confirms
the selection whereby the database and associated database interface
transmits purchase/ordering data to the remote vendor sites corresponding
to the users selection.

A-12: U.S. Patent No. 5,682,525 (CIVIX-DDI’s patent on “System and Methods for
Remotely Accessing a Selected Group of Items of Interest from a
Database”):

1. System for remotely determining the position of a selected category of items of

interest in a selected geographic vicinity from a database, the system comprising

(A) a database for storing information about a plurality of items of

interest, the information including, for each of the items of interest,
positional coordinates, a geographic vicinity, and at least one associated
category, the positional coordinates locating the geographic vicinity,

(B) a communications link for communicating between a user of the

system and the database,

A- 13
 (C) means for transmitting a portion of the information in the database to
the user via the link upon receipt of a request signal representative of a
selected category and geographic vicinity, the transmitted portion of the
information including identification of a position for each of the items of
interest within the selected category and geographic vicinity and relative to
the positional coordinates and other items of interest within the vicinity,
and

(D) a port for remotely accessing the portion of information via the link,
the port generating the request signal in response to inputs by the user
which are representative of the selected category and geographic vicinity,
the port having a user interface for accepting the inputs and for indicating
to the user the position of each of the items of interest in the selected
category and geographic vicinity.

A-13: U.S. Patent No. 5,778,367 (Network Engineering Software’s patent on

“Automated On-Line Information Service and Directory, Particularly for
the World Wide Web”):

1. A method using a computer network and a database accessible through the

computer network, comprising the steps of:

receiving requests from individual users of the computer network to

electronically publish information;

accepting information from the individual users;

allowing the individual users to classify the accepted information to

facilitate later searching of the accepted information:

automatically collecting and storing in the database in searchable and

retrievable form based on the user classifications entries from the
individual users containing the accepted information;

password protecting the entries;

making the entries freely accessible on the computer network;

searching the database based on the user classifications and retrieving the
entries in response to user requests;

A- 14
serving entries to users in a hardware-independent page description
language without altering the user classifications; and

retrieving and allowing users to update entries by supplying a correct

password.

A- 15
A-14: U.S. Patent No. 5,761,648 (Coolsavings’ patent on “Interactive Marketing
Network and Process Using Electronic Certificates”):

1. A method for issuing and processing electronic certificates having both

transaction data and identification data, comprising the steps of:

(a) establishing an electrical communication between a service system and a

plurality of issuer systems;

(b) establishing an electrical communication between the service system

and a plurality of remote user stations;

(c) transmitting to the service system from the plurality of issuer systems
instructions for issuing a predetermined type and number of the electronic
certificates;

(d) the service system receiving remote user profile data, including
information sufficient to specifically identify the remote user, from the
plurality of remote user stations and developing correlation data which
categorizes the remote user profile data;

(e) selectively transmitting to the plurality of issuer systems from the

service system the correlation data without also transmitting the specific
remote user identification information; and

(f) selectively transmitting to the plurality of remote user stations

specified electronic certificates based upon the correlation data developed
by the service system.

A-15: U.S. Patent No. 5,905,736 (AT&T’s Patent on “Method for the Billing of
Transactions Over the Internet”):

1. A method of billing an account associated with a user's identity for a cost for a
transaction conducted on a network between a provider and a user's terminal, the user's
terminal being assigned a temporary address on the network that is used for the
transaction, said billing and said transaction both being conducted on said network, the
method comprising the steps of:

receiving an identifying signal that associated the user's identity and the
assigned temporary address;

A- 16
 storing the association between the user's identity and the assigned
temporary address;

receiving a billing signal to bill for the cost of the transaction, the billing
signal including the cost of the transaction and the assigned temporary
address of the terminal;

referencing the cost of the transaction in the billing signal to the account
associated with

the user's identity from the stored association between the assigned
temporary address and the user's identity; and

billing the account associated with the user's identity for the cost of the
transaction.

A-16: U.S. Patent No. 6,021,398 (“Computer Implemented Methods and Apparatus
for Auctions):

1. A dynamic computer implemented auction system for multiple dissimilar

objects operating in multiple rounds comprising:

a) an auctioneer's system and at least two user systems, the auctioneer's

system communicatively coupled to user systems;

b) each user system including:

b1) means for receiving messages from the auctioneer's system and
for displaying those messages;

b2) means for receiving bid related information from a user and for
transmitting bid information to the auctioneer's system, where said
bid information includes a value parameter Pi and an associated
object subset identification Si, where the object subset
identification Si identifies a set of objects and where the value
parameter Pi specifies a payment proposed by the bidder in return
for the objects of subset S1 ;

c) said auctioneer's system including:

c1) means for generating and transmitting messages to user

systems, said messages including a message to initiate an auction, a

A- 17
non-final message indicating that the auction will continue at least one
more round, and a final message indicating that the auction has terminated;

c2) means for receiving bid information from user systems in

multiple rounds of bidding;

c3) decision means responsive to the bid information received from

the user systems for determining if an auction should continue or
not, wherein the decision means includes:

c31 ) means to initiate the generation of a non-final message to at

least one user system in response to a determination to continue
the auction;

c32) means to initiate the generation of a final message to at least

one user system in response to a determination not to continue the
auction; and

c33) selecting means to select an n-tuple of bids (Si, Pi), at most

one from each user system, which selection is effective to optimize
the sum of the different value parameters Pi of the selected bids
subject to the constraint that the associated subsets Si of all of the
selected bids are compatible.

A- 18
 Appendix B
Selected Non-Internet Patent Claims Argued to Include “Business Methods”

B-1: U.S. Patent No. 5,193,056 (the “State Street Bank” patent):

1. A data processing system for managing a financial services configuration of a

portfolio established as a partnership, each partner being one of a plurality of funds,
comprising:

(a) computer processor means for processing data;

(b) storage means for storing data on a storage medium;

(c) first means for initializing the storage medium;

(d) second means for processing data regarding assets in the portfolio and each of
the funds from a previous day and data regarding increases or decreases in each of
the funds’ assets and for allocating the percentage share that each fund holds in
the portfolio;

(e) third means for processing data regarding daily incremental income,
expenses, and net realized gain or loss for the portfolio and for allocating such
data among each fund;

(f) fourth means for processing data regarding daily net unrealized gain or loss
for the portfolio and for allocating such data among each fund; and

(g) fifth means for processing data regarding aggregate year-end income,
expenses, and capital gain or loss for the portfolio and each of the funds.

B-2: U.S. Patent No. 5,191,573 (Method for Transmitting a Desired Digital Video
or Audio Signal):

1. A method for transmitting a desired digital audio signal stored on a first

memory of a first party to a second memory of a second party comprising the steps of:
transferring money electronically via a telecommunication line to the first party at
a location remote from the second memory and controlling use of the first
memory, from a second party financially distinct from the first party, said
second party in control and in possession of the second memory;
connecting electronically via a telecommunications line the first memory with the

B- 1
second memory such that the desire digital audio signal can pass
therebetween;

B- 2
 transmitting the desired digital audio signal from the first memory with a
transmitter in control and possession of the first party to a receiver having
the second memory at a location determined by the second party, said
receiver in possession and control of the second party; and
storing the digital signal in the second memory.

B-3: U.S. Patent No.5,809,484 (Method and Apparatus for Funding Education by
Acquiring Shares of Students Future Earnings):

39. A data processing method for administering a plan for funding education of a
plurality of students, each of said students studying in one or more fields of study at one
or more educational institutions, said method comprising the steps of:
projecting, using an earnings projection unit, earnings of said plan by (1) at least
one of (a) projecting employment and earnings opportunities for students
in said fields of study, and (b) projecting employment and earnings
opportunities for graduates of said educational institutions, and (2) at least
one of (i) limiting projection of earnings to projections for students in one
or more particular fields of study, (ii) limiting projection of earnings to
projections for students in one or more particular educational institutions,
and (iii) creating at least one set of application criteria for acceptance of
students into said plan, said application criteria being for predicting
success of individual students in one or more of said fields of study;
reading and storing application responses from each of said students using an
application parser;
accepting students into said plan based at least in part on results of said projecting
and reading and storing steps;
processing, using a collection unit, collection and receipt from investors of
sufficient funds to fund at least a portion of said education of each of said
accepted students;
automatically generating and printing a document to be executed by each student
for purchasing an amount of student earnings on behalf of said investors,
said purchased earnings comprising a predetermined percentage of
earnings of each respective accepted student; and
determining, using an accounting unit, an amount of said purchased earnings to be
paid to said investors after subtracting costs from total purchased earnings
received from accepted students.

B- 3
B-4: U.S. Patent No. 5,832,456 (System and Method for Weather Adapted,
Business Performance Forecasting)

32. A method of forecasting business performance, comprising the steps of:

(1) storing in a storage device a business history database, a weather history
database, and a weather forecast database;
(2) determining by an analyzer the extent to which past business performance of a
plurality of business units at a plurality of locations was affected by
weather using said business history database and said weather history
database;
(3) estimating by a configurator expected future business performance of said
business units at said locations for a plurality of future time periods using
said weather forecast database and results produced by said analyzer; and
(4) enabling users to view and manipulate results produced by said analyzer and
said configurator to thereby forecast future business performance of said
business units at said locations for said time periods, and further
comprising the step of locating and displaying any sequence of time
periods that match user-specified sequences of weather patterns.

B-5: U.S. Patent No. 5,839,112 (Method and Apparatus for Displaying and
Selecting Vehicle Parts)

1. In a computer system, a method for estimating damage to a vehicle comprising

the steps of:
displaying a plurality of identifiers representing vehicle parts;
selecting an identifier, said identifier representing a layer of said vehicle parts,
said layer comprising an entire exterior sheet of said vehicle; and
estimating damage to said vehicle using said layer of vehicle parts.

B-6: U.S. Patent No. 5,913,204 (Method and Apparatus for Surveying Music
Listener Opinion About Songs)

1. A method of surveying and reporting listener opinion of a list of songs from

the music library of a radio station including the steps of:
a) selecting a group of music listeners from which individual listener opinions are
to be recorded;

B- 4
 b) fielding from a survey taker a home music preference test kit including a music
audio medium containing a number of song hooks to the select listeners at
each listener’s residence;
each listener
listening to a list of music of music song hooks,
entering his preferences as to the song hooks on a test sheet
without the presence of a survey interviewer;
returning the completed test sheets to the survey taker,
c) collecting and compiling data from each music preference test kit test sheet
answered by each listener;
d) tabulating the test sheet data in a computer to reflect listener opinion for each
song in the list,
reporting the tabulated data to the radio station, and modifying the music
programming of the radio station based on the results of the
survey.

B-7: U.S. Patent No. 5,947,526 (Personal Financial Tracking System and
Method)

1. A method for tracking monetary expenditures, comprising:

determining a budgeted total monetary amount for a predetermined time interval;
fixing one or more discrete monetary amounts, each of which is a small fraction
of the budgeted total monetary amount as a discrete budget unit;
arranging a plurality of representations of the one or more discrete monetary
amounts in a distributed fashion on a medium in a plurality of groups of
representations, each group in turn corresponding to a given time sub
interval for the predetermined time interval, such that the aggregate of the
representations equals the budgeted total monetary amount, wherein the
arrangement of the representations provides a visual representation of the
budgeted total monetary amount as a distribution of discrete monetary
amounts;
tracking a plurality of expenditure amounts by canceling, for each expenditure
amount, a corresponding amount of the representations to approximate the
expenditure amount, wherein the number of non-canceled representations
provides a visual indication of the amount of funds remaining for
expenditure, and the number of canceled representation provides a visual
indication of the amount of funds expended.

B-8: U.S. Patent No. 5,851,117 (Building Block Training Systems and Training

B- 5
 Methods)

1. A method of a trainer teaching a cleaner, the method comprising:

(a) providing a training system for use in on the job training of worker whose job
functions include the cleaning of a facility, the training system comprising
a plurality of sections, each training system section containing instructions
for cleaning a typical facility, each training system section limited in
instructions to a specific physical job function to be performed in the
facility, and each training system section containing illustrations of what is
to be done and illustrations of what is not to be skipped and what is to be
avoided in performing the cleaning job functions;
(b) in the facility, the trainer showing the cleaner a document of a section of the
training system, the document pictorially indicating what the cleaner is to
do in each step of a specific job function;
(c) the trainer telling the cleaner about each step pictorially depicted in the
document;
(d) the trainer showing the cleaner how to perform each step pictorially depicted
in the document; and
(e) the trainer having the cleaner perform the step in the presence of the trainer
while the trainer coaches and the trainer having the cleaner tell the trainer
about the step while referring to the document.

B-9: U.S. Patent No. 5,920,845 (Date Matching Methods)

1. A method for use at a date matching event attended by a plurality of

participants, the method comprising:
(a) assigning an identification code to each participant, the identification code
placed in plain sight, being readily observable by a plurality of the other
participants;
(b) facilitating interaction of participants;
(c) supplying to each participant a date preference card for indicating, discreetly,
at least one date preference, each date preference designating a participant
with whom a date is desired, said car enable each respective participant to
indicate a prioritized list of other participants with whom a date is desired
by recording one or more assigned participant identification codes; the date
preference card is computer scannable to support the automated input of
the listed participant identification codes;
(d) collecting said date preference card for indicating date preferences;

B- 6
(e) processing, using a general purpose computing system, each collected date
preference card for indicating date preferences to determine mutual
matches of participants; each mutual match indicating at least two
participant who requested each other for a date preference; and
(f) informing the participants of the mutual matches to enable to plan their date.

B- 7
 Appendix C

BUSINESS METHODS PATENT INITIATIVE: AN ACTION PLAN

INDUSTRY OUTREACH

1. Customer Partnership: Establish formal Customer Partnership with the

software, Internet and electronic commerce industry similar to that in
place with the biotechnology industry. The Partnership will meet
quarterly to discuss mutual concerns, share USPTO plans and operational
efforts in this technology area, and discuss solutions to common
problems.

2. Roundtable Forum: The USPTO will convene a Roundtable Forum with

Stakeholders in Summer 2000 to discuss issues and possible solutions
surrounding business method patents.

3. Industry Feedback: A greater effort will be made to obtain industry

feedback on prior art resources used by the USPTO, solicit input on
other databases and information collections and sources, and expand
prior art collections.

QUALITY

1. Enhance Technical Training:

o Enhance technical currency for examiners and continue current

training efforts/partnerships with industry associations and
various individual corporate sponsors.

o Business practice specialists will be pursued to serve as a

resource for examiners on alleged common or well known industry
practices, terminology scope and meaning, and industry standards
in four basic areas: banking/finance, general e-commerce,
insurance, and Internet infrastructure.

o The USPTO will publish the areas of training needs for comment and
offers to provide such training.

2. Revise Examination Guidelines: The Examination Guidelines for

Computer-Related Inventions and the relevant training examples will be
revised in light of the State Street Bank and AT&T v. Excel decisions.

C-1
3. Expand Current Search Activities:

o Mandatory Search: A mandatory search for all applications in Class

705 to include a classified U.S. patent document search, and a
text search of U.S. patent documents, foreign patent documents,
and non-patent literature (NPL), with NPL searches to include
required search areas mapped/correlated to U.S. classification
system for Class 705, which will provide a more fully developed
prior art record;

o Second Review: A new second-level review of all allowed

applications in Class 705 will be required, with an eye toward
ensuring compliance with search requirements, reasons for
allowance, and a determination whether the scope of the claims
should be reconsidered; and

o Expand Sampling Size: The sampling size for quality review by the
Office of Patent Quality Review will be substantially expanded,
and a new in-process review of Office actions will be introduced
with an emphasis on the field of search of the prior art and
patentability determinations under 102/103.

C-2
 APPENDIX D

U.S. PATENT AND TRADEMARK OFFICE

Office for Patent and Trademark Information

Manual of U.S. Patent Classification

December 31, 1999

Class
705

DATA PROCESSING: FINANCIAL, BUSINESS PRACTICE, MANAGEMENT, OR

COST/PRICE DETERMINATION

Subclass Title

50 BUSINESS PROCESSING USING CRYPTOGRAPHY

51 . Usage protection of distributed data files
52 . . Usage or charge determination
53 . . . Including third party for collecting or distributing payment (e.g.,
clearinghouse)
54 . . . Adding plural layers of rights or limitations by other than the original
producer
55 . . Requiring a supplemental attachment or input (e.g., dongle) to open
56 . . . Specific computer ID (e.g., serial number, configuration, etc.)
57 . . Copy protection or prevention
58 . . . Having origin or program ID
59 . . Licensing
60 . Postage metering system
61 . . Reloading/recharging
62 . . Having printing detail (e.g., verification of mark)
63 . Utility metering system
64 . Secure transaction (e.g., EFT/POS)
65 . . Including intelligent token (e.g., electronic purse)
66 . . . Intelligent token initializing or reloading
67 . . . Including authentication
68 . . . Balancing account
69 . . . Electronic cash detail (e.g., blinded, divisible, or detecting double spending)
70 . . Home banking

D-1
71 . . Including key management
72 . . Verifying PIN
73 . . Terminal detail (e.g., initializing)
74 . . Anonymous user system
75 . . Transaction verification
76 . . Electronic credential
77 . . Including remote charge determination or related payment system
78 . . . Including third party
79 . . . Including a payment switch or gateway
80 . Electronic negotiation

1 AUTOMATED ELECTRICAL FINANCIAL OR BUSINESS PRACTICE OR

MANAGEMENT ARRANGEMENT
2 . Health care management (e.g., record management, ICDA billing)
3 . . Patient record management
4 . Insurance (e.g., computer implemented system or method for writing insurance
policy, processing insurance claim, etc.)
5 . Reservation, check-in, or booking display for reserved space
6 . . Coordination of plural reservations (e.g., plural tri segments; transportation and
accommodation, etc.)
7 . Operations research
8 . . Allocating resources or scheduling for an administrative function
9 . . . Staff scheduling or task assignment
10 . . Market analysis, demand forecasting or surveying
11 . . Job performance analysis
12 . Voting or election arrangement
13 . Transportation facility access (e.g., fare, toll, parking)
14 . Distribution or redemption of coupon, or incentive or promotion program
15 . Restaurant or bar
16 . Including point of sale terminal or electronic cash register
17 . . Having interface for record bearing medium or carrier for electronic funds
transfer or payment credit
18 . . Having security or user identification provision (password entry, etc.)
19 . . Tax processing
20 . . Price look-up processing (e.g., updating)
21 . . Interconnection or interaction of plural electronic cash registers (ECRs) or to
host computer (e.g., network detail, transfer of information from host to ECR or
from ECR to ECR, etc.)
22 . . Inventory monitoring
23 . . Input by product or record sensing (weighing, scanner processing)
24 . . Specified transaction journal output feature (e.g., printed receipt, voice output,
etc.)
25 . . Specified keyboard feature

D-2
26 . Electronic shopping (e.g., remote ordering)
27 . . Presentation of image or description of sales item (e.g., electronic catalog
browsing)
28 . Inventory management
29 . . Itemization of parts, supplies, or services (e.g., bill of materials)
30 . Accounting
31 . . Tax preparation or submission
32 . . Time accounting (time and attendance, monitoring billable hours)
33 . . Checkbook balancing, updating or printing arrangement
34 . . Bill preparation
35 . Finance (e.g., banking, investment or credit)
36 . . Portfolio selection, planning or analysis
37 . . Trading, matching, or bidding
38 . . Credit (risk) processing or loan processing (e.g., mortgage)
39 . . Including funds transfer or credit transaction
40 . . . Bill distribution or payment
41 . . . Having programming of a portable memory device (e.g., IC card, "electronic
purse")
42 . . . Remote banking (e.g., home banking)
43 . . . . Including Automatic Teller Machine (i.e., ATM)
44 . . . Requiring authorization or authentication
45 . . . With paper check handling

400 FOR COST/PRICE

401 . Postage meter system
402 . . Special service or fee (e.g., discount, surcharge, adjustment, etc.)
403 . . Recharging
404 . . Record keeping
405 . . Data protection
406 . . With specific mail handling means
407 . . Including mailed item weight
408 . . Specific printing
409 . . Rate updating
410 . . Specialized function performed
411 . . . Display controlling
412 . Utility usage
413 . Fluid
414 . Weight
415 . . Correcting or compensating
416 . . Specific input and output device
417 . Distance (e.g., taximeter)
418 . Time (e.g., parking meter)

D-3
500 MISCELLANEOUS (E.G., BY GENERIC OR NONELECTRICAL
COMPUTING)

*********************************
FOREIGN ART COLLECTIONS
*********************************
APPLICATIONS (364/400)
FOR 124 . Cryptographic electronic funds transfer (e.g., automatic
teller) (380/24)
FOR 100 . For cost/price (364/464.01)
FOR 101 . . Postage meter system (364/464.02)
FOR 102 . . . Including mailed item weight (364/464.03)
FOR 103 . . Utility usage (364/464.04)
FOR 104 . . Fluid (364/465)
FOR 105 . . Weight (364/466)
FOR 106 . . Distance or time (e.g., taximeters) (364/467)

D-4
 Excerpts From the Manual of U.S. Patent Classification
As of September 30, 1999

Class 705

DATA PROCESSING: FINANCIAL, BUSINESS PRACTICE, MANAGEMENT, OR

COST/PRICE DETERMINATION

Subclass: 1

AUTOMATED ELECTRICAL FINANCIAL OR BUSINESS PRACTICE OR

MANAGEMENT ARRANGEMENT:
(under the class definition) Subject matter wherein an
electrical apparatus and its corresponding methods perform the data processing
operations, in which there is a significant change in the data or for performing calculation
operations wherein the apparatus or method is uniquely designed for or utilized in the
practice, administration, or management of an enterprise, or in the processing of financial
data.

(1) Note. The term "arrangement" as used in this and its indented subclasses refers to
either a device or to a method of use of a device for performing the indicated process.
Further, a device may be an assemblage of components at a single location or may have its
several components at geographically distinct locations, i.e., a network.
(2) Note. The term "enterprise" as used in this and its indented subclasses is intended to
include governmental and nonprofit organizations, as well as conventional business
organizations.
(3) Note. The arrangements in this and its indented subclasses are generally used for
problems relating to administration of an organization, commodities, financial
transactions, or recreation.
(4) Note. Mere designation of an arrangement as a "business machine" or a document as a
"business form" or "business chart" without any particular business function will not
cause classification in this or its indented subclasses.

Subclass: 26

Electronic shopping (e.g., remote ordering):

(under subclass 1) Subject matter drawn to a computerized arrangement which enables a
purchaser to inspect or select from a plurality of different items, or effect a purchase of
one or more items at a location geographically separated from the system user.

(1) Note. A remote shopping system is included in this subclass.

D-5
(2) Note. Browsing of a selection without a purchase transaction is classified in this or its
indented subclass.

Subclass: 30

Accounting:
(under subclass 1) Subject matter drawn to a computerized arrangement for recording,
analyzing, verifying, or reporting of funds or other quantitatively innumerable factors
used in a business.

Subclass: 35

Finance (e.g., banking, investment or credit):

(under subclass 1) Subject matter drawn to a computerized arrangement for planning the
disposition or use of funds or securities, or extension of credit.

D-6
 JERRY A. RIEDINGER is a partner at the
Seattle office of Perkins Coie, LLP, where he
leads the patent litigation group. He focuses his
practice on the conduct of patent infringement,
trade secret and related complex intellectual
property litigation. He has conducted patent and
trade secret infringement suits and trials in 26
federal district courts around the country
involving such areas as software, medical devices,
chemical and pharmaceutical products and
electronics. He earned a B.S. in Mechanical
Engineering in 1976 from Rice University and a
J.D. with honor in 1982 from DePaul University,
and is a former Lead Articles Editor for the
DePaul Law Review. He is admitted to practice in
Illinois and Washington, and is a member of the
bar of several federal district courts (including the
Trial Bar of the Northern District of Illinois), as
well as the Court of Appeals for the Federal
Circuit and the U.S. Supreme Court. He is
registered to practice before the U.S. Patent and
Trademark office. Jerry is active in several
national and regional bar associations, including
the AIPLA, the Washington State Patent Law
Association, the Intellectual Property Law Asso-
ciation of Chicago and the Federal Circuit Bar
Association. He is a member of Council of the
Intellectual Property Law Section of the American
Bar Association, and is a past chair of the ABA IP
Section's Division I (Patents) and the Section's
Antitrust Committee, its Trade Secrets Committee
and its Continuing Legal Education Committee.
He is currently Secretary of the Washington State
Bar Association Intellectual Property Section. He
is a frequent lecturer on topics relating to patent,
trade secret and intellectual property litigation.