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|So-called business method patents
have been the subject of mounting interest and controversy among
internet and e-commerce businesses. Many internet startups, e-commerce
inventors, and venture capital groups have implemented formal patent
programs. Even small internet companies and individual internet
entrepreneurs are seeking patent protection for what they believe to be
key aspects of their products, services, and web sites. Conversely some
internet companies have shunned patent protection. For them, the
aversion to seeking patent protection for business method and internet
inventions is philosophical or economic.
Deciding whether to pursue patent protection for business method inventions is a management decision that must take into consideration the individual goals, financial position, technology, relevant market, and a host of other factors unique to each company. An informed decision requires that management and counsel be educated about the current and evolving state of the law concerning business method patents, and about their effect on the e-commerce industry.
Historical BackgroundPrior to the Federal Circuit's ruling in State Street v. Signature Financial business methods were considered by many to be unpatentable. In Hotel Security Checking Co. v. Lorraine Co. the court held that a method for cash registering and account-checking designed to prevent fraud by waiters was unpatentable because "a system of transacting business disconnected from the means for carrying out the system is not" worthy of protection. In In re Johnston, the Federal Circuit's predecessor, the Court of Customs and Patent Appeals, decided that an automatic record keeping system which allowed banks to provide bookkeeping services was patentable because the claims were directed to a machine, rather than a system or process.
As a result of those cases, business methods themselves were largely considered unpatentable. In contrast, the machines or system that implement a novel method was patentable. In In re Schrader, Judge Newman's dissent sharply criticized the business method exception and stated that it is an "unwarranted encumbrance to the definition of statutory subject matter." He thought the business method exception ought to "be discarded as error prone, redundant, and obsolete." According to Judge Newman "the decisions that have spoken to methods of doing business, have or could have, resolved the issue in each case simply by relying on the statutory requirements of patentability such as novelty and non-obviousness." However, until 1998, the question of whether a patent directed to a pure method of doing business remained unanswered. In 1998, the case State Street v. Signature Financial cleared the way for business method patents.
The Patent At Issue In State StreetThe United States Patent Office issued Signature Financial Group a Patent entitled "Data Processing System for Hub and Spoke Financial Services Configuration." More specifically, the patent covers a computer programmed to implement an investment structure that was developed by the patent owner to manage mutual funds. The program, identified by the proprietary name "Hub and Spoke," facilitates a structure whereby mutual funds (the "spokes") pool their assets in an investment portfolio (the "hub") that is organized as a partnership.
This investment configuration provides the administrator of a mutual fund with the advantageous combination of economies of scale in administering investments, coupled with the tax advantages of a partnership. It accomplishes this by calculating daily changes in the allocation of assets among the spokes invested in the hub, based on the daily changes in the hub's investment securities and the percentage share of each spoke in the hub -- including each spoke's share of the hub's daily expenses, income, and net realized and unrealized gain or loss, using the concept of book capital account. The program also tracks the data relevant to determining aggregate year-end income, expenses and capital gain or loss for accounting and tax purposes. Accurate calculations of these figures are required within an hour and a half of the close of the market because the spokes sell shares to the public, and the price of those shares is dependent on the spokes' percentage interest in the hub portfolio.
Result Of The State Street DecisionMethod and process claims directed specifically to methods of doing business cannot be rejected by the Patent Office solely on the basis of the business method exception. Evidence of this ruling is reflected in the latest revision of the Manual of Patent Examining Procedure (MPEP), which eliminates the prior language that read, "though seemingly within the category of process or method, a method of doing business can be rejected as not being within the statutory classes."
The Bottom LineBusiness methods can be patented. In fact, business methods are currently being filed with the United States Patent Office at a record pace.
Disclaimer: This discussion is general in nature and is not intended to and does not create a lawyer/client relationship. This discussion should in no way be relied upon or construed as legal advice, particularly since most legal outcomes are highly dependent on the facts of a particular case or situation. This discussion is provided on the condition that it cannot be referred to or quoted in any legal proceeding; if this condition is unacceptable to you, immediately delete this email and do not keep a copy of it in any form. The reader or recipient is strongly urged to consult with a lawyer for legal advice on these matters. Any reliance on the discussion information by someone who has not entered into a written retainer agreement with the lawyer providing the discussion information is at the reader's or recipient's own risk.
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Download Patent Forms | Patent laws in India | Can Business methods and e-commerce technology be patented
Patent Regime And Right To Health: The product patent prohibits others from making, using, offering for sale, selling or importing the patented product. As a result, the product patent gives a monopoly to the patent owner for the production of patented article during the term of the patent (20 years).
What is patent?: Patent, is a legal document granted by the government giving an inventor the exclusive right to make, use, and sell an invention for a specified number of years. Patents are also available for significant improvements on previously invented items.
The Patents (Second) Amendment Bill - An Epilogue: The Patent (Second Amendment) Bill 2000 has been proposed by the Government to bridge the conflict between the TRIPS and the Patent Act, 1970. Thus, it will be wise to deal with the important amendments proposed by Bill of 2000. Further the need for any further amendment will also be discussed herein.
Patents and Geographical Indication: A patent is a monopoly right granted to person who has invented a new and useful article or an improvement of an existing article or an improvement of an existing article or a new process of making an article
India In Pharmaceutical Patents Regime: RIPs, the intellectual property component of the Uruguay round of the GATT Treaty, has given rise to an acrimonious debate between the developed countries and less developed countries (LDCs)
Child Custody law in India: Section 26 of Hindu Marriage Act, 1955 deals with Custody of Children
In any proceeding under this Act, the court may, from time-to-time, pass such interim orders and make such provisions in the decree as it may deem just and proper with respect to the custody, maintenance and education of minor children, consistently with their wishes, wherever possible and may, after the decree,
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