Patents and The Internet: Business Method Patents

Business Method Patents

This post is part of a series of posts entitled A Legal Guide to the Internet. For a comprehensive list of articles contained in this series, click here.

Business method patents are utility patents that claim processes related to the operation of a business, and that relate to the accuracy, yield, profitability, or performance of the business. Although the patent claims often recite software and/or a computer system, neither is required to be patentable. Courts have found that there is no statutory or policy basis for excluding a business method from statutory patentable subject matter if the claimed method is within the class of patentable subject matter (i.e., not an abstract idea) and is useful, novel, and non-obvious. These patents are important because any company that develops or acquires such a patent can stop others from using the patented business method, or charge a fee for others to use it.

Many Different Aspects of Software May Be Patentable

Many different aspects of software may be patentable. The concept driven by the software may be entitled to patent protection. For example, in State Street, the Federal Circuit held that a data processing system that implemented an investment structure for use as an administrator and accounting agent for mutual funds constituted patentable subject matter. The Court noted that a process facilitated by a computing arrangement is a “machine,” or in some cases a “process,” either of which are statutorily available for patent protection. This case confirmed that business method patents were indeed patentable subject matter.

The State Street case has opened the door to a large number of business method patents. recently obtained a U.S. patent for a “one-click” on-line sales method. The “one-click” sales method involves purchasing items over the Internet with a single click of a mouse. The prior art methods utilize a two-step process in which the item to be purchased is placed in a “shopping cart” and is then “checked out.” Just over two months after issuance of its patent, successfully obtained a preliminary injunction against’s “Express Lane,” which used a sales method for purchasing items with a single mouse click,, Inc. v., Inc., 53 U.S.P.Q.2d 1115 (W.D. Wash. 1999). The Federal Circuit vacated the preliminary injunction, though it agreed with the lower court that the patent had been infringed, stating that had mounted a substantial challenge to the validity of the patent based on prior art,, Inc. v., Inc., 57 U.S.P.Q.2d 1747 (Fed. Cir. 2001). Although the case was vacated and remanded, the Court did not question the validity of the subject matter of the patent, indicating that the “one-click” business method is patentable subject matter.

Critics of PTO

Critics contended that that the PTO is ill-equipped to investigate if an Internet business method is novel or nonobvious. In response, the PTO added a “layer of review” to business method patent applications and hired technology specialists, particularly in the area of financial systems, to aid examiners. How this policy will affect the popular opinion of the patentability of business methods remains to be seen.

This and the following posts have been copied or adopted from A Legal Guide To The INTERNET – Sixth Edition, published through a collaborative effort by the Minnesota Department of Employment & Economic Development and Merchant & Gould.

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