Business method patents

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BUSINESS METHOD PATENTS

Shelley E.



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INTRODUCTION

• ‘Business method patents are part of a larger family of patents known as utility patents, which protect inventions, chemical formulas, processes, and other discoveries.

• A business method is classified as a process, because it is not a physical object like a mechanical invention or chemical composition.

• Business method patents are a class of patents which disclose and claim new methods of doing business.

• This includes new types of e-commerce, insurance, banking, tax compliance etc.



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BUSINESS METHOD PATENT

• In the recent past, an increasing number of patents have been issued to software and Internet companies that have devised novel ways of doing business.

• For example, new online ordering processes or a unique Internet advertising scheme.

• These patents, which usually combine software with business methodology, are commonly referred to as business method patents or Internet patents.

• These patents are important because any company that develops or acquires such a patent can stop others from using the patented business method and, of course, the owner of the patent can exploit it by licensing the method.



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• For example, Amazon.com devised a method for expediting online orders, known as the "1-Click" system.

• The method allows a repeat customer to bypass address and credit card data entry forms, because Amazon can access that information directly from the customer's account.

• Amazon was granted a patent on this business method in September 1999 (U.S. Pat No. 5,960,411).



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Legal Requirements for Getting a Business Method Patent

• In order to qualify for patent protection, a business method or software must meet four requirements: – The method or software must fall within the

classes of patentable subject matter. Anything that is created by humans falls within these classes;• laws of nature, natural phenomena, and

abstract ideas do not. – The method or software must be useful. This

requirement is fairly easy to satisfy because any functional purpose will suffice.• A business need only demonstrate that its

method or software provides some concrete tangible result.

• For example, the Amazon 1-Click patent provides a tangible result -- an expedited purchase.



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Cntd…

• The method or software must be novel. This requirement means the method must have an aspect that is different in some way from all previous knowledge and inventions.

• The method or software must be nonobvious, meaning that someone who has ordinary skill in the specific technology could not easily think of it.



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JURISDICTION

Whether a business method is regarded as patentable subject matter depends on the legal jurisdiction.



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USA

• Business methods were historically unpatentable until the late 1990’s , claiming that a process could not be patented if it was simply an abstract idea.

• Then that position changed rather dramatically, most famously with the 1998 US Court of Appeals for the Federal Circuit decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc. 149 F.3d 1368 (Fed. Cir. 1998) cert denied 119 S. Ct. 851 (1999).

• The federal court ruled that patent laws were intended to protect any method, whether or not it required the aid of a computer, so long as it produced a "useful, concrete and tangible result."



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Cntd…

• In the six months following the ruling, patent filings for software/Internet business methods increased by 40% .

• The USPTO created a new classification for applications: "Data processing: financial, business practice, management or cost/price determination."

• This happened, notably, through judicial interpretation and not by legislative intervention.

• Whereas this gave way, soon, to a torrent of business method patent filings before the USPTO, the backlash it created was felt far more strongly in other countries.



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INDIA

• India like European Union does not allow patents for inventions related to mathematical or business method or computer programme “per se” or algorithms.

• The 1970 Act, as amended up to 1999, had not provided one way or the other - which means that business method patents were, at least in theory, available to be granted.

• But the amendment of 2002 changed all that and how. Act 38 of 2002, viz. The Patents (Amendment) Act, 2002, with effect from May 20, 2003 specifically declared– ‘a mathematical or business method or a computer

programme per se or algorithms, as not being an ‘invention’ within the meaning of the patent statute.



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Cntd…

The relevant provision under the Indian Patents Act reads as under:

INVENTIONS NOT PATENTABLE • 3. What are not inventions.- the following are not

inventions within the meaning of this act,-- • (k) a mathematical or business method or

computer programme per se or algorithms; • The Section makes it amply clear that algorithms

are not patentable in India. Though as per the Indian Patent Act, mathematical method, business method or computer programme per se are not allowed.



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Cntd…

Section 2 (j), • even as amended by the same amending Act of 2002,

defines an invention as meaning a new product or process involving an inventive step and capable of industrial application.

• Section 2 (ja) also inserted by that very amendment, defines an inventive step as meaning a feature of an invention that involves technical advance as compared to the existing knowledge or having economic significance or both and that makes the invention not obvious to a person skilled in the art.

• A large number of business method patents are, in the meanwhile, being filed in India.

• Most are by way of national phase of PCT applications.



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Case Laws

• Recently in the case of Yahoo v controller of Patents, Yahoo sought to patent an invention titled “A method of operating a computer network search apparatus”.

• This was a case relating to business methods.

• The court invalidated Yahoo’s claim and held that the claimed ‘invention’ “is nothing but doing the advertisement business electronically.

• Even the technical advance that is claimed over the existing art is only an improvement in the method of doing business and S.3(k) is clear that business method cannot be patented, the fact that there is an advance has not improved the case”.



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Cntd..

• Many business methods are still being granted protection in India.

• A Patent, which assesses creditworthiness, was granted to Punjab National Bank (Patent No. 240258) for a method to compute the credit risk rating of a client by analyzing the business operations of the said individual.

• The analysis includes scrutinizing the past transactions of the client in order to predict the individual’s future prospects in the industry in which he operates.



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Cntd…

• Another interesting example of a business method patent that was granted was Afton Chemical Corporation’s patent (Patent No.240258).

• The patent was granted for “a method of enhancing fuel value of used or waste lubricating oil”.

• The patent protected not only the method of enhancing fuel value but also protected a business method for distributing and using waste oils.

• Though the patent over the method of increasing fuel value may still be legitimate, protection for the method of sale of this fuel is questionable.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



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Cntd…

• As Per Section 3(k), business methods are not patentable per se However they are patentable if a new method solves a "technical" problem and an apparatus/system is involved.

• All these patents are pure business method patents since they seek to achieve business efficiency and profitability.

• Though many of them are executed by computer programs, these programs arguably have no technical application and produce no tangible or concrete result.

• Even if it is assumed that these programs do have some ‘technical effect’, the ‘inventions’ are prima facie business methods and regardless of the result of the software they should not be granted protection.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



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CONCLUSION

• Granting monopoly power to businesses runs counter to existing laws in India like the Competition Act, 2002.

• Though this Act makes an exception to ‘reasonable’ monopolies created due to ownership of intellectual property right, a patent to a business method in itself contradicts the very principles that the Competition Act is based on and hence may not be considered ‘reasonable’.

• Moreover, capturing markets and business opportunities with broadly worded patent claims, can result in eradication of small entrepreneurs and start-ups.

• This will naturally affect economic growth of the nation.

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