Business Method Patents Marc GratacosMelinda Macauley Holly LiuPete Perlegos Strategic Computing and Communications Technology Fall 2002

2 Business Method Patents Issue at Hand “Business method patents should be encouraged as a matter of government policy as a source of new innovation”

3 Business Method Patents Background –Patents created to “promote the progress of science and the useful arts.” –Generally persist for 20 yrs from date of application created. –Limited term monopoly granted to the inventor.

4 What changed? Traditionally, there had been a reluctance to grant patent protection to business methods. What changed? –Courts began upholding technological business processes patents. –The Supreme Court began validating patents directed toward mathematical algorithms based on their method of use. –In State Street & Trust Co. v. Signature Financial Group-- an algorithm that produces a useful result is not excluded from patent protection. –No reason that business methods should be excluded from patents. More Information

5 What changed? More Information

6 Business Method Patents Qualifications –As with any invention, business methods must meet three criteria for patentability: Useful New Non-obvious

7 Business Method Patents Four Issues at Hand –Are business methods suitable for patent? –Can business methods easily be validated? –How do they function in practice? –Are business method patents good for society?

8 Business Method Patents Four Issues at Hand –Are business methods suitable for patent? –Can business methods easily be validated? –How do they function in practice? –Are business method patents good for society?

9 Business Method Patents Are business methods suitable for patent? –Pro A patent must produce a useful, concrete and tangible result. If a business method is merely conceptual and abstract, it would be rejected. Business processes are more akin to scientific discoveries than different.

10 Business Method Patents Are business methods suitable for patent? –Con Business processes are often conceptual and abstract. Business processes are qualitatively different than scientific inventions. A business process patent can apply to multiple markets and industries, creating overbroad protection that forecloses efficient innovation. More Information

11 Business Method Patents Four Issues at Hand –Are business methods suitable for patent? –Can business methods easily be validated? –How do they function in practice? –Are business method patents good for society?

12 Business Method Patents Can business methods easily be validated? –Pro Current business method patent issues are new and will disappear over time. The USPTO has an action plan to improve examination quality. Patent laws are sufficient to address current business method patent issues. More Information

13 Business Method Patents Can business methods easily be validated? –Con Proving the validity of a patent can be difficult and costly. Patent Office lacks the expertise and resources. USPTO limited by the lack of documentation of previous business method innovations. Substantial risk of issuing overly broad or otherwise defective patents.

14 Business Method Patents Four Issues at Hand –Are business methods suitable for patent? –Can business methods easily be validated? –How do they function in practice? –Are business method patents good for society?

15 Business Method Patents How do they function in practice? –Pro Each patent is currently being evaluated on its own merits: –Amazon.com Inc. v. BarnesandNoble.com –Netzero Inc. v. Juno Online SVCS Inc. –Priceline Inc. v. Expedia Inc. Amazon.com Inc. v. BarnesandNoble.com Netzero Inc. v. Juno Online SVCS Inc. Priceline Inc. v. Expedia Inc.

16 Business Method Patents How do they function in practice? –Con Patenting business methods may be difficult to prove, particularly if the business method is “new” –Amazon.com Revisited Litigation as a means to protect patents is unpredictable

17 Business Method Patents Four Issues at Hand –Are business methods suitable for patent? –Can business methods easily be validated? –How do they function in practice? –Are business method patents good for society?

18 Business Method Patents Are business method patents good for society? –Pro Patents have proven beneficial to innovation Allow room for competition from smaller companies Increase diversity among business methods Intuitive appeal of protecting inventors & preventing “freeloaders” Careful, educated examination should prevent the issuance of overly broad patents Well-established licensing structures are available for non- competing uses & standardization Standardization can be accomplished via licensing Hijacking in favor of existing technology products is unlikely in the business process arena

19 Business Method Patents Are business method patents good for society? –Con Monopoly reward not as needed for innovation in business arena 20-yr term is too long given the current market & technology Limit the spread of most efficient processes Can damage competitors because they will need to spend money and time to design around or litigate Overly broad or invalid patents are likely even with process improvements May hinder standardization within an emerging industry Might affect unrelated businesses, if patent is too broad Market leader can hijack new technology in favor of more profitable existing technology Monopoly pricing per component will create inefficiency for both producers and consumers

20 Business Method Patents Thank you for your time, you can access the full paper at the link below: Business Method Patent Analysis Paper