Supreme Court Patent Ruling Won’t Affect Us, DataTreasury Says

A U.S. Supreme Court ruling that appears to rein in the ability of certain technology patent holders to press their claims against alleged infringers is likely to have little or no impact on what has been a highly effective enforcement campaign by a company that holds patents bearing on check imaging, a spokesman for the company, DataTreasury Inc. says. Indeed, the unanimous ruling issued on Monday may turn out to have only a muted effect on all pending cases, a noted patent expert argues. In a decision issued on an appeal in a patent-infringement case, the court said the U.S. Court of Appeals for the Federal Circuit, which hears all patent appeals, has given patent holders too much latitude in making claims that innovations were not obvious advances on already-known technology. Some observers interpreted the ruling to mean that certain inventors, particularly those whose work involves software and a highly controversial class of claims known as business methods, would now have a much tougher time winning infringement cases. Claims resting on a unique combination of pre-existing technologies would now be especially vulnerable, some observers said. This is because the court seemed to weaken a key argument these inventors depend on: that their innovations are not “obvious” in the sense that anyone reasonably skilled in the underlying technologies could have come up with them. The test applied by the Federal Circuit to determine whether a claim is obvious is to check whether the invention was the result of some prior “teaching, suggestion, or motivation.” If so, the claim is obvious and not patentable. But the court's ruling is actually less sweeping than it may have at first appeared, says Peter Zura, a patent attorney at Bell, Boyd & Lloyd, Chicago. “It's more of a tweak than a fundamental shift,” he says. “It will give ammunition to people seeking to invalidate patents, but it's not open season on combination patents.” Zura argues the court didn't invalidate the “teaching, suggestion, motivation” test. It only said the test should be more broadly interpreted to include common-sense judgments and other sources of information outside of the immediately available documents supporting a patent claim. In the short run, indeed, the ruling may sow confusion as courts scramble to meet what Zura says is a vague new standard. “It's going to create a mess in the short term,” Zura says. “The court said we don't like the way [the Federal Circuit] is applying this [test], that common sense should apply, but how do you define common sense? There's some potential for abuse here, and there's going to be some bad rulings.” At least one electronic-transactions vendor that has been remarkably successful pressing its patent claims says the ruling will have little if any effect on its pending cases. “We're confident as to the non-obviousness of DataTreasury's patents,” says the spokesman for the Plano, Texas-based company, which holds patents bearing on the imaging, centralized processing, and electronic storage of documents, including checks. Enforcing its patents in court, DataTreasury over the past several years has wrung settlements from JPMorgan Chase & Co. and a slew of other major defendants involved in check image exchange, and currently has cases pending against other major banks, processors, and terminal vendors. For one thing, says the spokesman, The JPMorgan case, which was settled in July 2005, has already tested DataTreasury's claims, challenging them with what the bank said was prior art, or previous applications of similar technology. “JPMorgan Chase put the patents through a prior-art wringer, and they got nowhere,” says the spokesman. The system patented by DataTreasury figures as a key element in the image-exchange networks created by banks and processors since the Check Clearing Act for the 21st Century (Check 21) became law in 2004. Also, the particular case the Supreme Court ruled on, which involved an accelerator pedal for trucks, involved an invention with less original underlying technology, the spokesman argues. “We feel the Supreme Court decision in [this] case was an appropriate one, but it has little bearing on DataTreasury cases,” he says. Separately, the spokesman says DataTreasury is waiting for a response from the U.S. Patent and Trademark Office regarding its answer to a preliminary office action the USPTO issued late last year (Digital Transactions News, Dec. 3, 2006). In the office action, the patent office rejected all claims contained in two key patents awarded to DataTreasury in 1999 and 2000. DataTreasury had 60 days to file a response to the action, which was prompted by a reexamination request from First Data Corp., a defendant in one of DataTreasury's lawsuits. “We are as confident as ever the patents will be upheld,” says the DataTreasury spokesman. A separate portfolio of four electronic-payment patents acquired by DataTreasury was not affected by the USPTO action.