lawyers in India

Business Method Patents

Written by: Nick Chain - Director of Business Development
Patent Law in India
Legal Service
  • An invention which is a solution to a technical problem is protected by way of Patent. This protection is available for specified period (usually 20 years) during which the patentee holds certain exclusive rights with regard to exploitation of his invention. In return, the patent holder is obliged to publicly disclose his invention which adds into the technical knowledge bank of the world. The aim of granting patent protection is to encourage economic & scientific development by rewarding the inventor for his intellectual creations.

    Business Method Patents are a special category of patents which are granted for an innovative way of doing business. The methods or process which can be patented under this category includes teaching methods, sales skills, financial services, investment services and marketing & advertising methods etc. Even skills for playing a game may be protected by way of Business Method Patents. Most of these patents are implemented by way of computers. Before 1998 patent protection was not available to business methods; however the decision of Court of Appeals for Federal Circuit (U.S.) in State Street Bank Case completely changed the situation.

    Between 1998 to present, the business method patent applications have increased significantly. From their beginning, business method patents are always in controversy to their subject matter. The issue is not confined to United States only but to major economies of the world. The Two major views came out of this controversy, one is against issuing patent protection to the subject matter (European Commission's position) and second is advocating for business method patents (i.e. United States' Position).

    The major arguments of the above two opposing views with regard to Business Method Patents are as follows:

    A. The European Commission's Position on the Impact of Business Method Patents:

    The business method patents should not be allowed because:
    1. Science is something different than business. Patent system and its principles are better for science and not for business.

    2. Issuance of business method patents hampers free development of the Internet & e-commerce. Innovation comes from competition in an open and fair market and not from the monopolistic market.

    3. Issuance of business method patents keeps the small and medium sized firms / individuals out of the game because big players will take out most of the patents and play the game as per their terms.

    4. Issuance of business method patents does not stimulate innovation but rather it rewards existing monopoly right holders who do not distribute wealth and opportunities but rather it strengthens the present structure of power.

    5. Every method of doing business over Internet (i.e. e-commerce) involves technology which can be patented individually. Neither every method/way can be patented nor it is possible to license each of the associated patents. It will have exorbitant costs and will be very risky and uncertain to launch such a product based on the business method patent in the market.

    6. Subject matter for most of the business method patents is obvious and issuance of business method patents on such broad subject matter will harm other businesses. Grant of 1-click patent to Amazon, severely harming the other online trading businesses.

    7. The global patent industry acts as an unregulated monopoly and it is unbalancing the system of property rights that underpin the software industry.

    B. The United States' Position on the European allegations that Business Method Patents causes Uncertainties:

    The business method should be evaluated like the other patents because:
    1. The only constitutionally permissible purpose of the patent system is to promote Science and useful arts and the same should be applied with respect to business method patents. E-commerce is no different than science.

    2. Patent system provides incentive to the creator for his research & development and promotes further innovation.

    3. Earlier economy was based on the means of production but today's economy is based heavily on information and knowledge and business method patents are a natural protection for useful applications of information and knowledge. It would be ironic if the patent system, which has been essential in creating the current economy, now has no place in the Information and knowledge age.

    4. Patent system will promote disclosure of inventions. Once the business methods are employed on the Internet in e-commerce, they can be easily copied and this will help to promote innovation.

    5. A business method patent may be the sole asset of an Internet startup company, other than the accumulated knowledge of the personnel. It also helps up to value the startup company and gives a competitive advantage. Investors are more likely to invest in a startup company if the company is easier to value and is able to offer security for an investment in the company.

    6. (much criticized business method patent – reverse auction system) offers an example of a business method patent providing an incentive to innovate; it lured hundred of millions of investment dollars to finance its attempt to practice its business method patents. Without the patent protection, the investors are not going to invest with

    7. Adoption of copyright principles to evaluate patentability of business method adds unnecessary complications without providing a benefit.

    8. The mere listing of patents and litigation is not a sufficient evaluation of whether business method patent provide a net benefit to the society.
    The issue is still open-ended and needs some better approach to harmonize of dissimilar interests.

    However, if we go minutely, we will find that patent protection for business method patents is available in virtually every major market of the world provided that the business method must utilize some tangible technology such as hardware embedded software. The solutions provided by such business method patents are making a contribution in the development. Considering the importance of Business Method Patents in the era knowledge economy where e-commerce is expanding at an enormous speed, the world leaders should arrive at a consensus and such a consensus will be beneficial for all the nations and further economic & scientific development.

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