Financial Firm to Patent Idea
PATENTS
Moneymaking Math Formulas -- August 3, 1998
By TERESA RIORDAN
Imagine that Albert Einstein were alive today and
that he were just now formulating his theory of
relativity. Could
he get a patent on Emc2?
Some patent experts contend that Einstein might be able
to, thanks to a recent ruling by the federal U.S.
Circuit Court of Appeals in Washington.
The case in question -- State Street Bank and Trust Co.
vs. Signature Financial Group -- had nothing to do with
physics. Rather, at issue was a patent for a
data-processing system for a so-called hub-and-spoke
mutual fund partnership in which mutual funds pool
their assets in an investment portfolio.
The appeals court's ruling has been long awaited by
financial services companies, which have resisted the
idea that innovative approaches in their industry
should be patented. Visa and Mastercard filed an amicus
brief in the case saying they were doing just fine
without patents, thank you.
But to no avail. The appeals court ruled on July 23 in
favor of Signature Financial, upholding its patent.
In its ruling, the court said, "We hold the
transformation of data, representing discrete dollar
amounts, by a machine through a series of mathematical
calculations into a final share price, constitutes a
practical application of a mathematical algorithm,
formula, or calculation, because it produces 'a useful,
concrete, and tangible result."'
Translation: If your mathematical formula has a
practical end, you can probably patent it.
"I believe this is going to cause a surge in patents
relating to financial instruments," said Peter Roberts,
chief executive of College Savings Bank of Princeton,
N.J., who in 1988 received a pioneering patent for a
computerized prepaid tuition program.
Some patent experts suggested that such an
interpretation might have allowed Michael Milken, for
example, to have patented the idea of junk bonds in the
1980s.
But the ruling may have even wider implications.
E. Robert Yoches, a partner with the law firm of
Finnegan, Henderson, Farabow, Garrett & Dunner in
Washington, said he thought the appeals court had made
the right decision in the case. But he said the court
had gone further than expected in its ruling.
"This is very broad, very sweeping," Yoches said. "You
can probably get a patent on anything as long as it's
not purely mathematical -- as long as it produces a
concrete, tangible result."
The ruling seems to bolster software patenting
guidelines issued three years ago by the Patent and
Trademark Office, which expanded the definition of what
kinds of software are patentable.
The last time the Supreme Court ruled in this area was
in 1981, in the case of Diamond vs. Diehr. Then the
court held that three categories of matter are
unpatentable: laws of nature, natural phenomena and
abstract ideas.
Since then, the appeals court, which is the highest
patent court in the land short of the Supreme Court,
has deviated from this interpretation in a series of
rulings.
"The direction the federal circuit has been moving is
to say you can patent anything as long as it's
economically valuable," said Richard Stern, who teaches
computer patent law at George Washington University.
Stanley Amberg, a patent attorney in New York, said the
appeals court had gone too far with the State Street
ruling. "The federal circuit has crossed over a
critical line, and now holds eligible for patent
protection any computer-implemented math equation in
which the input are numbers and the output are
numbers," he said.
"Thus, if Einstein were alive and now uncovered the
Emc2 law of nature, he could effectively monopolize its
use in the design of atomic reactors, bombs, et
cetera," Amberg said. "Because, for all practical
purposes, a computer must be used to perform the
calculation of the amount of energy released."
Copyright 1998 The New York Times Company |
