Business Methods by the Numbers: A Look Inside PTO Class 705

By Gene Quinn
January 22, 2012

The United States Patent Classification System is a system for organizing all U.S. patents into a smaller sub-collection of patents based on common subject matter. Each subject matter division includes a major component, which is called a class, and a minor component, which is called a subclass.  Few classes draw as much attention as class 705.  Class 705 is the generic class for innovations relating to the performing of data processing operations where 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.  Class 705 was created in 1997 from the business and cost/price sections of computer classes 395 and 364.

The 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 within class 705.  There must be significant claim recitation of the data processing system or of a calculating computer while at the same time having only nominal recitation of any external art environment within the claims.  If the claim mentions a particular tangible apparatus in combination with performing data processing or calculation operations then the invention is categorized in the classification that most closely matches the tangible apparatus.  In other words, class 705 relates to business method patents and the processing of financial data.

For fun I recently logged into PatentCore, which provides statistical information about each Art Unit and all of the patent examiners, in order to find out what I could learn about class 705. There are 10 Art Units assigned to examine patent applications assigned to class 705. See Classes Arranged Numerically with Art Unit. What I found out about certain Art Units was astonishing.

Currently, the data in this system is a collection of approximately 1.2 million patent files, and is on track to have 1.5 million by the end of January 2012.  For those Art Units assigned to class 705 there are 14,307 patent files loaded into the PatentCore system, which is certainly not all of the patent files from class 705, but by any fair measure this is a very meaningful subset.  After all, without a tool like this those who sought to do any kind of statistical analysis were left to randomly select several dozen, or maybe several hundred, files in order to attempt to identify patterns.


Upon reviewing the data from PatentCore I was struck by the difference in allowance rate between the 10 Art Units assigned to class 705.  The table below shows great variation.  The percent allowed is reached by taking the number of cases allowed and dividing by number of cases allowed plus the number of cases abandoned.  Pending cases were not considered.

Art Unit Allowed Abandoned % Allowed
 3621  449  625  41.8%
 3622  55  750  6.8%
 3623  250  713  25.9%
 3625  467  713  39.6%
 3626  143  697  17.0%
 3627  406  922  30.6%
 3628  239  533  31.0%
 3629  226  789  22.2%
 3689  18  415  4.3%
 3693  330  767  43.0%

Generally speaking, there are a lot of factors that go into allowance rate.  With class 705, however, there are far more than meet the eye.  Back in about 2005 the United States Patent and Trademark Office started clamping down on these types of patents, subjecting them to a so-called “two-pair of eyes” review before allowing a patent.  That meant that any allowance had to be confirmed by a second examiner.  As you can probably imagine the allowance rate dropped significantly.

Furthermore, in 2008 the United States Court of Appeals for the Federal Circuit decided Bilski and announced the machine-or-transformation test, which essentially rendered many patent applications unpatentable due to the drafting techniques used years earlier when the application was originally filed.  The Supreme Court largely adopted the Federal Circuit test and today the machine-or-transformation test is best viewed as a safe harbor; satisfy it and you have a patentable invention.  Nevertheless, from at least 2002 through today there has been an evolving understanding of what is required to obtain a patent in class 705, so lower than expected allowance rates shouldn’t necessarily be a cause for alarm.

But how do you explain what the data shows for Art Unit 3622 and Art Unit 3689?  Even discounting for evolving standards and allowing some leeway for data sample size, a 6.8% and 4.3% allowance rate seems quite low.  Intrigued, I drilled deeper.

With respect to Art Unit 3622, here is just some of the information I discovered from PatentCore:

  • Average time between filing date and patent issuance ~ 5 years, 9 months, 9 days
  • Application with shortest pendency before patent issuance ~ 1 year, 3 months, 27 days
  • Application with longest pendency before patent issuance ~ 10 years, 0 months, 29 days
  • 16.4% of cases allowed required the filing of a notice of appeal
  • 66.7% of appealed cases lead to patent issuance after BPAI decision

With respect to Art Unit 3689, here is just some of the information I discovered from PatentCore:

  • Average time between filing date and patent issuance ~ 7 years, 4 months, 9 days
  • Application with shortest pendency before patent issuance ~ 4 years, 9 months, 14 days
  • Application with longest pendency before patent issuance ~ 9 years, 3 months, 9 days
  • 77.8% of cases allowed required the filing of a notice of appeal
  • 71.4% of appealed cases lead to patent issuance after BPAI decision

What these numbers tell you is if your application is in Art Unit 3622 or 3689 you are in for a long wait to obtain a patent.  The numbers also show that if you carry the case all the way through appeal there is quite a high success rate for applicants; 66.7% when in Art Unit 3622 and 71.4% when in Art Unit 3689.

It is hard to know for sure what is going on in Art Units 3622 and 3689, but one number jumps out at me as particularly alarming.  In Art Unit 3689 nearly 4 out of 5 of the applications they allow require the applicant to hop on the appeal track.

Let’s assume for a moment that we lived in a world where clients simply gave up and didn’t pursue appeals to the Board.  That isn’t so far fetched really, is it?  How many clients do you have that simply abandon applications when they can’t get anywhere with the patent examiner?  Sure there is recourse — the appeals track — but that is a long, arduous and expensive path.  In class 705 how many technologies will remain commercially viable and exploitable after an 8 or 9 year wait that is typically required for applications that require an appeal?

We all know clients will decide to abandon patentable inventions because of the time and cost involved with appealing an examiner decision.  So it is certainly worthwhile to look at the subset of patent applications that were granted or abandoned without following the appeal track.  If you were to focus on those cases that were not appealed this is what the allowance rate would look like:

Art Unit Allowed Abandoned % Allowed
3622 47 754 5.9%
3689 8 383 2.0%

The percentage of allowed cases does not appreciably drop when you remove appealed cases from the Art Unit 3622 statistics, but the percentage of allowed cases is more than cut in half for Art Unit 3689.  Something just doesn’t seem right about an Art Unit where you have a 2% chance of getting a patent without an appeal and a 77.8% chance of getting a patent if you pursue an appeal.

There does not seem to be a bias against or in favor of large or small companies in Art Units 3622 and 3689.  Rather it seems everyone has difficulty getting patents. Of course, the appeals are going to be mostly (if not exclusively) from the well funded, which is unfortunate but just the way the legal system is set up both inside and outside the Patent Office. Nevertheless, it might be useful to take a look at the top 10 owners/assignees within the Art Units according to the information contained in PatentCore.

Art Unit 3622 Top 10

  1. MICROSOFT CORPORATION
  2. INTERNATIONAL BUSINESS MACHINES CORPORATION
  3. YAHOO! INC.
  4. AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.
  5. GOOGLE INC.
  6. FUJITSU LIMITED
  7. NEC CORPORATION
  8. FIRST DATA CORPORATION
  9. IGC SYSTEMS, INC.
  10. RETAILDNA, LLC

Art Unit 3689 Top 10

  1. INTERNATIONAL BUSINESS MACHINES CORPORATION
  2. FUJITSU LIMITED
  3. MICROSOFT CORPORATION
  4. GENERAL MOTORS CORPORATION
  5. CATERPILLAR INC.
  6. FORD MOTOR COMPANY
  7. SAP AG
  8. GENERAL ELECTRIC COMPANY
  9. HON HAI PRECISION INDUSTRY CO., LTD.
  10. AMERICAN EXPRESS TRAVEL RELATED SERVICES COMPANY, INC.

Conclusion

What does this all mean?  It appears as if there are several Art Units tasked with examining in class 705 that make it very difficult to obtain a patent without at least filing a notice of appeal.  That information is critical for attorneys and agents to have.  Frequently clients blame the attorney or agent because they believe that the Patent Office couldn’t make it so difficult to obtain a patent.  Unfortunately, there are what seem to be pockets of resistance within the Patent Office.  You absolutely need to set client expectations.

PatentCore data, which can be drilled down to each examiner within the Art Unit, makes it possible to set client expectations, but also to engage in strategy.  If you get stuck with an examiner that doesn’t seem to issue many patents or in an Art Unit like 3689 where there is a 2% chance you will get a patent without an appeal, you might find it worthwhile to immediately file a new patent application that articulates the invention in a slightly different way in order to attempt to get assigned to a different Art Unit.

For example, take a look at U.S. Patent No.7,228,226 for a method of analyzing commuting routes.  Doesn’t this look like a business method patent?  Yet it was assigned to Art Unit 3661, which according to PatentCore has an allowance rate of 84.4% (2,838 allowances and 526 abandoned applications) and only an average wait to a patent of 3 years and 6 days.  The ‘226 patent was issued in just a few months without acceleration!

Armed with statistical information patent attorneys and patent agents can now better prepare clients for the realities of patent prosecution, but we can also now engage in strategic lawyering in order to better represent our clients.

 

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 18 Comments comments.

  1. Anon January 22, 2012 9:59 am

    Gene,

    Thanks. Long has there been suspicion and “street level” wisdom that said that something was up. Data like this makes it hard for anyone that is not hard core anti-patent to ignore the disparate treatment (objective data is like that – the famous allowance cliff chart, for example, has long been corroborated with the “reject-reject-reject” era).

    Two thoughts:

    1) Does this rise to the level of an actionable offense? A systematic denial of due process?

    2) What would the data say (if the Office followed its own overarching mandate to have ALL offcial actions captured in writing) if the data were present? By this comment I mean to indict the “quality program” (the Gestapo style one) that only looks at allowances for “quality errors,” but by its own “rules” erases its tracks, and does not even permit the file to indicate that the application was subjected to this “extra” look.

    When a government is allowed to operate in the shadows, accountability is lost. When a bias can be objectively established (as in here with a particular art unit or as in with the allowance cliff with a larger systematic bias), the shadow realm is especially pernicious. When even a searching eye is precluded from gaining an objective measure, how is the validity of any shadow program to be measured?

  2. Gene Quinn January 22, 2012 2:11 pm

    Anon-

    I think PatentCore is going to revolutionize the practice of patent law before the United States Patent and Trademark Office. The data that can be obtained is extraordinarily useful and really paints a picture of what is going on inside the Patent Office. I can certainly see litigators and appellate attorneys using this information to make a case of unequal treatment. As I think you know I have long been a proponent of making an equal protection argument, practically begging attorneys to make such an argument in briefs before the BPAI and then before the district court and ultimately the Federal Circuit. The numbers are so overwhelming.

    Having said this, I don’t want to jump to any rash conclusions. PatentCore has almost 1.2 million cases and is adding files as Google crawls and collects more data. Right now it can be used by attorneys to set client expectations and allow those with foresight to attempt to engineer applications so they can get assigned to more favorable Art Units. Ultimately, as the PatentCore database moves toward 1.5 million cases and beyond we will get an ever more clear picture that may well provide nearly conclusive evidence of a systematic denial of due process, as you suggest.

    -Gene

  3. Anon v2.0 January 23, 2012 3:28 am

    Please don’t get carried away.

    In your analysis, you claim to have discovered unequal treatment of applications classified in 705.

    Unfortunately, you have missed a key piece of information.

    Your argument assumes that applications classified in 705 are randomly assigned to the art units you listed. However, that is not the case. Please see either your own link above or http://www.uspto.gov/patents/resources/classification/art/2914_3715.jsp. These links show that the individual art units examine different parts (subclasses) of 705. For Example, AU 3622 examines subclasses 14.1-14.73 (Discounts and Incentives) whereas AU 3621 examines subclasses 12 and 50-79 (Voting or Election Arrangement and Business Processing Using Cryptography).

    In essence, the individual art units are applying unequal treatment because the applications they are examining are unequal and involve very different subject matter.

    This isn’t just comparing apples to oranges. This is comparing reduced priced apples to segnaro.

    If I were forced to draw a conclusion from the data you provided, then I would say you have a much higher chance of getting a business method patent involving cryptography than one involving discounting.

  4. Gene Quinn January 23, 2012 10:58 am

    Anon v2.0-

    Your point might seem like a good one, but is misguided. If you actually look at the patents examined by Art Unit 3689, for example, you will see that they examine patents that are not categorized in the subclasses to which the USPTO website says they are assigned.

    Regardless, a 2% chance of obtaining a patent without appeal and a 78% chance of obtaining a patent with an appeal is ridiculous. That means that on appeal the BPAI says the examiners are wrong with alarming frequency. The fact that you would defend this clearly disparate and unequal treatment is curious.

    -Gene

  5. Mark Nowotarski January 23, 2012 11:24 am

    Gene,

    Can you sort these out by issue date? The reason I ask is that at least based on my experience and other practitioners I’ve talked to, the situation in class 705 has dramatically improved over the past two years. Sure, a lot of cases issuing now have been pending for a while, but a lot of recently filed cases are getting allowed as well.

    I’m not sure why, but it seems that on average, applicants and examiners are more on the same page as to what is or isn’t obvious in the business method area.

  6. Anon January 23, 2012 12:16 pm

    The reason I ask is that at least based on my experience and other practitioners I’ve talked to, the situation in class 705 has dramatically improved over the past two years.

    Another sign, but one related to the over-all allowance cliff chart.

  7. Mark Nowotarski January 23, 2012 12:41 pm

    Another sign, but one related to the over-all allowance cliff chart.

    True, but my point is that the cliff may not be there any more. It doesn’t really matter what the allowance rate was, just what it is.

  8. Stan E. Delo January 23, 2012 3:30 pm

    Anon writes in small part:
    “1) Does this rise to the level of an actionable offense? A systematic denial of due process?”

    It seems to me to have been a form of the government engaging in an unfair denial of arguably valid property rights that were being applied for *in the past*, given Gene’s conjecture based upon the data that he found using the PatentCore database. As Mark N. very aptly mentions, hopefully the practice of just saying no whenever any question arises is gone forever, apparently at the behest of and the urging of past management at the USPTO. If a licensed practitioner made so many egregious mistakes they would almost certainly be called onto the carpet by the OED and possibly sanctioned or maybe even have their license to practice suspended or maybe worse.

    In the case of examiners though, they were probably just doing what they were told to do by management, so they would seem to be blameless in this (hopefully) past case to me. Unfortunately hundreds of patent rights were lost forever due to extreme expense and delay (abandoned), but that would seem to be water down the drain at this point. Since the option of being able to appeal the decisions is present, it would seem to absolve the examiners of an OED-like roasting, but then again, the damage has probably already been done.

    BTW- I told a few of my practitioner friends about the PatentCore gambit, and they Both Immediately thanked me profusely for letting them know of it, which seems to indicate to me that it would become a valuable asset for them both. One of the very few times I was able to help them out in return for all the favors they have done for me in the past.

    Cheers,
    Stan~

  9. Blind Dogma January 23, 2012 5:01 pm

    In the case of examiners though, they were probably just doing what they were told to do by management, so they would seem to be blameless in this

    Good little soldiers, hmm? I seem to remember that even good soldiers have toobey the laws and “just following orders” doesn’t go too far.

  10. Chris Holt January 23, 2012 5:43 pm

    Mark –

    With the current tool set available to users of the PatentCore system, breaking out this particular data by issue or abandonment date would require a lot of clicking around. Clicking around just now, I did see issue/abandonment dates at least in the 2010 range. I would expect some 2011 dates to show up as well. The publication factor comes into play in terms of the recency of available data. It would likely be easiest for us (the PatentCore team) to run the appropriate queries on our end and provide the data broken down by the date of issuance/abandonment. Perhaps we could provide that data to someone that would like to write a follow-up article?

    Also, If there is strong interest from the PatentCore community of users, we could modify the front end tool set to include an ability to see this type of data broken down by issuance/abandonment data as you suggest.

    For those of you who have not tried out the PatentCore system, click navigate the following link for a free two-day trial (no credit card required!):

    http://www.patentcore.com/subscribe-to-our-mailing-list/

    For those of you who have, please do consider signing up for a paid subscription. Signing up will enable us to to add more features sooner…and run more custom queries to support additional interesting articles like this one!

    Thank you for your support!

    – Chris Holt

  11. Chris Holt January 24, 2012 3:02 pm

    Mark –

    Since yesterday, we have added additional features within the PatentCore system that will make it much easier to consider whether the trends discussed in this article have changed over time. In particular, we have added a table of applications to the bottom of each Art Unit page of statistics. This table will show you detailed information about each application factored into the statistics shown on the page. The table divides the applications based on whether the relevant status is pending, issued or abandoned.

    We are committed to being responsive to suggestions from the PatentCore community of users!

    – Chris

  12. Mark Nowotarski January 25, 2012 9:45 am

    Chris,

    Super! I’ll take a look.

    Mark

  13. mo January 26, 2012 6:02 am

    Is this an advertisement or an article? Perhaps both.

    Anon V2.0 hits the nail on the head. He is entirely correct in his conclusion. The diversity of applications in 705 covers a very wide spectrum. You’ll find similar results for the same data in the European G06Q class.

  14. Gene Quinn January 26, 2012 1:09 pm

    mo-

    You really seriously ask whether this is an advertisement or an article? Please try and keep it real, will you?

    Anyone who thinks that diversity of applications in 705 is to blame needs to have their head examined. There is ABSOLUTELY no justification for one Art Unit having a near 85% allowance rate and another Art Unit having only a 2% allowance rate for applications that are not appealed.

    I find it impossible to believe that there is anyone who would seek to make excuses. 705 is dominated by the largest companies in the world, who hire some of the best lawyers in the world, and who are well capable of writing applications to identify allowable material.

    How many of you who are defending 3689 have read the BPAI decisions reversing examiners from 3689? I suspect few, if any of you have. On the other hand, I have read them. Very interesting reading. The tale is one of unsupported conclusions being passed off as valid final rejections, the Board noticing that the examiner has only naked conclusions and no supporting rationale, and a reversal.

    -Gene

  15. tifoso January 26, 2012 4:53 pm

    Comparing allowances to abandonments may not be the best measure. A better measure would be allowances vs. rejections. There can be many reasons for an abandonment that have nothing to do with the examiners. Software (and these are essentially software) usually has a short commercial life. In most shops, it is under constant development. So the code that produced Level 1.5 could be completely or almost completely rewritten for Level 3.4. If the company is pushing 3.4, why spend any assets on 1.5? Best to simply abandon the application.

    There is another issue with the numbers. When there is a small number of allowances, the average times can easily be skewed by outliers. With only 8 allowances, this is highly likely.

    Interesting data, however, and a link to a valuable source of information. Thanks.

    Tifoso