The Turning Point
A major change in the patent environment has occurred in the past 4
years. One court case, State Street Bank & Trust Co. v. Signature
Financial Group, Inc., effectively created a category of patents that
many had previously believed to be unpatentable. This category is
generically referred to as "business method" patents (BMP's).
The State Street Bank decision held that inventions relating to
methods of doing business should not be rejected by the United States
Patent Office, nor struck down by the courts, as non-statutorily
defined subject matter. The decision had an immediate impact on the
United States Patent Office, and patent practice in general. The
number of patent applications filed within this field has grown from
approximately 1,300 applications in 1998 to an anticipated 10,000
applications in 2001. That is an impressive 670% growth in four years.
An invention must be useful, novel, non-obvious, and fall within a
statutorily defined category of subject matter to be patentable.
United States Code Title 35 defines statutory subject matter as
encompassing "any new and useful process, machine, manufacture, or
composition of matter, or any new and useful improvement thereof."
Prior to the State Street Bank decision most practitioners believed
that methods of doing business did not fall within a statutorily
defined category of subject matter.
While it is now accepted that business methods fall within a
statutorily defined category of subject matter they are closely
scrutinized for usefulness, novelty, and non-obviousness. The
usefulness requirement is generally easily met by business method
inventions. Most inventions do not become applications unless they
have some degree of usefulness. To meet the novelty requirement an
invention must be new as compared to the prior art. While more
challenging than the usefulness requirement, most business method
applications satisfy the novelty requirement. It is the
non-obviousness requirement that is a stumbling block for many BMP
applications. Here, the invention must be non-obvious in light of the
prior art. This means that the differences between the invention and
the prior art would not have been obvious to a person having ordinary
skill in the art.
Today, business method patents claim inventions that are methods of
doing business, typically implemented using computers. The explosive
growth of the Internet and electronic transactions has redefined
methods of doing business in many ways. Two of the most widely know
- Amazon.com's "one-click" patent on a method using the single click
of a mouse to enter all the information required to complete an online
- Priceline.com's "reverse auction" patent covering a method of
purchasing airline tickets over the Internet.
Patent Office Obstacles
Whenever there is rapid growth in a relatively new technology area
there will be obstacles to overcome in the Patent Office. The greatest
problem encountered by the Patent Office in reviewing BMP applications
may have been the examiners' limited knowledge of business methods.
Unlike most new technology areas that are offshoots of mature
technology areas, patent examiners have had relatively little business
method prior art to draw upon. Prior to the State Street Bank decision
there were only a handful of issued patents on business methods and
companies that had innovative methods of doing business kept them
closely guarded. Therefore, patent examiners have struggled with
obtaining prior art reference material, as their traditional printed
resources were simply not suited for BMP's.
The Patent Office has taken several steps to overcome these obstacles.
Since the beginning of 2000, the Patent Office has doubled the number
of examiners in the workgroup reviewing BMP applications.
Additionally, the Office has made it a priority to hire examiners with
both technical and business expertise for this workgroup. The Office
has also held several business method partnership meetings with
representatives from the business and legal community, trade
associations, and the Office to identify obstacles and procedures to
overcome them. Further, the Office has instituted a mandatory second
examination by a different examiner for all allowed BMP applications.
A Sword And A Shield
BMP's have allowed many traditionally "non-technology" companies, such
as those in insurance and financial services, to seek patent
protection on their proprietary business practices. As with any
patent, there can be many varied motivations for obtaining patent
Of course, patent protection increases the value of a company and may
attract investors, but a patent's ability to block competition is
often even more valuable. BMP's often can serve as a barrier to entry
preventing poorly financed small start-up companies from entering a
Additionally, a patent portfolio can serve as a shield protecting a
company from infringement claims by a third party. A company with an
extensive patent portfolio can be a very intimidating opponent in a
patent infringement suit, especially when it threatens counterclaim
infringement suits. Patent portfolios can offer great leverage in
Mining BMP's In Your Company
The key to maximizing the number of potential BMP's in an organization
is to ensure that everyone involved in creating and implementing
business systems is aware of BMP's and their potential value to the
company. For most companies this simply means educating the key group
of project managers that oversee the teams developing new systems
within the organization.
Additionally, agreements with outside consultants of all kinds now
warrant extra attention. Prior to the State Street Bank decision,
intellectual property development and ownership clauses in management
consulting contracts were an afterthought, when present at all. Now,
the companies that hire management consulting firms should closely
scrutinize such clauses. It is only fair that a patent resulting from
the work of a hired consultant be assigned to the company paying the
Business method patents have opened the doors of the incredibly
valuable field of intellectual property protection to many
"non-technology" companies. Current trends in the courts and the
Patent Office indicate that business method patents are here to stay
and will likely continue to grow in number at an amazing rate.