Absolute Technology Law Group
Home | Our Team | Government Contracting |Contact Us |White Papers |Events & Seminars | gTLD Update | Careers
Inventors Forum

Business Method Patents

By Jill Gilbert Welytok

Business method patents are close cousins to software patents. Both can trace their modern origins to a case that received less media outcry than the Amazon.com case, but was far more legally significant.

The Birth of the Business Method Patent

In State Street Bank v. Signature Financial Group, the Court of Appeals for the Federal Circuit upheld a disputed patent involving a software system for tracking performance of pooled mutual fund investments for partnerships. 1 Citing Diamond v. Diehr, the court viewed the software as practical application of an algorithm, rather than the algorithm itself. The court included in its opinion language that seemed to be an open invitation to businesses who used similar software-implemented business methods.

Since the State Street Case, the PTO has issued hundreds of business method patents and has thousands more pending.

Should Janitorial Training Processes be Patentable?

Critics of the business patent boom have argued that the PTO is going too far, issuing patents for trivial claims. For example, in 1999, the PTO issued AT&T Corp. a patent for a process of inserting data into a billing field. 2

Another case in point is U.S. Patent 5,851,117, which covers a method for training janitors. The method uses visual displays and systematic steps for cleaning in a safe, thorough and efficient manner.

New PTO Standards of Review

In response to public criticism and embarrassing press, the PTO announced in March of 2000 that it would beef up its scrutiny of business patents. 3 The agency plans to implement new guidelines and meet on a regular basis with representatives from the software industry. Under the new guidelines, when you submit a business method patent, you'll be required to include a more detailed prior art search detailing existing practices for businesses in your field.

The PTO also plans to implement a tougher two-tier system of review. After one examiner has conducted a detailed foreign and domestic prior art search, a second level review will carefully scrutinize the scope of your business method patent claims. This means you can probably expect the process take longer, and generate more challenges to the validity of your patent.

The Legislative Outlook for Business Method Patents

The flurry of business method patents has not escaped the notice of Congress. The American Inventor's Protection Act of 1999 added a new section to the U.S Patent Act specifically aimed at stemming the tide. 4

The Act provides a new "First Inventor Defense." This defense allows you to avoid liability by proving your prior use of the disputed business process. To prevail on the defense, you must demonstrate you used the claimed method more than one year prior to the date the patent application was filed.

There's also pending legislation to make it tougher to get a business method patent. The proposed Business Method Improvement Act of 2000 would prohibit software developers from claiming protection for business methods that were previously implemented manually. 5 Under this standard, inserting data into a billing field might not qualify for a patent because preparing a bill is something that businesses have traditionally done manually.

Should You File for a Business Method Patent?

Many companies view a business method patent as a good defensive, competitive measure. It makes it harder for a new competitor to enter your market using your methods. Much start up businesses, short on venture capital, may be deterred by the risk of infringement litigation.

The economics of patenting trivial processes are questionable. Even if you pass the PTO's new heightened scrutiny, your patent may be subject to subsequent costly challenges to its validity.

On the other hand, if your business does employ significant innovative methods and processes, ownership of a business method patent can boost its balance sheet. The patent itself can be a valuable asset. The patent can be an important protection for the investment your company has made in research and development.

1. 149 F. 3d 1368, 47 U.S.PQ. 2d (BNA) 1596 (Fed. Cir. 1998), cert. denied, 119 S. Ct. 851 (1999)

2. AT&T Corp. vs. Excel Communications, Inc., 50 U.S.P.Q. 2d 1447, 1443-54 (Fed. Cir. 1999).

3. U.S.P.T.O Business Methods Patent Initiative Action Plan, March 29, 2000. (You can access this document at the U.S.P.T.O. Website at www.uspto.gov.)

4. 35 U.S.C. Sec. 273.

5. H.R. 5364.


3316 W. Wisconsin Avenue | Milwaukee, Wisconsin 53208 | Phone: 414-223-1670 | Fax: 414-223-1671 | jw@abtechlaw.com