Business Method Patents

The law regarding business method patents has changed substantially over time. At both the U.S. Patent and Trademark Office, and in the courts, attitudes towards business method patents have kept changing and are still in flux.  A case known as “State Street Bank” cracked open the doors for business method patents.  This case was decided by the Federal Circuit, the court of appeals for patent cases and the highest court for patent cases other than the U.S. Supreme Court. In that case, Signature Financial Group, Inc. was granted U.S. Patent 5,193,056 entitled “Data Processing System for Hub and Spoke Financial Services Configuration.

The “spokes” were mutual funds that pool their assets in a central “hub.” The State Street bank court held that an invention was eligible for patent protection if it produced a “useful, concrete, and tangible result.” (Note that this is no longer valid law.) It has been pointed out that the patent claim recited means for performing steps that are the requirements specified in an Internal Revenue Service regulation for avoiding taxes on a partnership. However, when referring to patent eligibility, we are not considering whether the invention is new and non-obvious. That is a separate hurdle to be overcome only if the subject matter is capable of being patented at all. In 1999, a case known as AT&T vs. Excel opened the doors wider to business method patents.

This case involved U.S. Patent No. 5,333,184, which describes a method to take advantage of adding more data into a message record in order to provide appropriate billing for subscribers, based on whether or not the subscriber and call recipient subscribe to the same long-distance carrier. The court held that when a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect (e. g., transforming or reducing an article to a different state or thing), then the claim is patent-eligible.

More recently, the pendulum has swung back a bit against business method patents but they have not been forbidden. In a case known as Bilski vs. Kappos, the U.S. Supreme Court rejected the State Street “useful, concrete, and tangible result” test. Bilski’s patent application describes a method for providing a fixed bill energy contract to consumers. Under fixed bill energy contracts, consumers pay monthly prices for their future energy consumption in advance of winter based on their past energy use. The claims were rejected on the grounds that “the invention is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.” The Supreme Court upheld the rejection but also refused to adopt a test that barred all business method patents. A”machine-or-transformation” test was held to be a useful and important test though it may not be the only test.

Should I Consider a Business Method Patent?

If you have an invention that can be framed as involving a machine-or-transformation, and that is also novel and non-obvious, it should be capable of patent protection.

What is a Patentable Business Method?

A patent may be issued for a business procedure if the method is implemented with a particular machine, that is, one specifically devised and adapted to carry out the process in a way that is not concededly conventional and is not trivial; or else transforms an article from one thing or state to another.

Adequate illustration and explanation needs to be given in the description concerning the specific application of the system or process to assign the method. Most importantly any sort of business technique must also be new and non-obvious to be patentable.

The law is in flux as to whether implementing a method on a general purpose computer is sufficient to meet this machine-or-transformation test.

There has been precedent for the fact that when a computer has been programmed, it is transformed to a specific machine; however, the U.S. Patent and Trademark Office has recently handled a case under a new “covered business method review procedure” of the America Invents Act. This procedure allows asserted business method patents to be challenged if the person requesting the review has been sued for infringement of the patent in question; the patent claims are directed to “financial products or services”; and the patent claims do not recite a “technological invention.”

SAP America, Inc. v. Versata was the very first case brought under the U.S Patent and Trademark Office’s Covered Business Method review procedure. The Patent Trial and Appeal Board held that the patent claims did not recite a technological invention. In that regard, the patent owner had argued that its patent was sufficiently technological because the “patent discloses and claims a software invention.” The PTAB disagreed, and held that the claimed subject matter as a whole neither recited a technological feature nor solved a technical problem using a technical solution, because no specific, unconventional software, computer equipment, tools or processing capabilities are required.” The PTAB noted that, to the contrary, the patent “states that its invention may be implemented in any type of computer system or programming or processing environment.”

Two Examples of Granted Business Method Patents

Business method patents can apply to business models that supply a large amount of revenue to companies, as well as a valuable component towards consumer experience. Two of the most well-known examples of business method patents are:

  1. “Amazon’s 1-Click shopping” Amazon patented a system that allows consumers to purchase items by clicking an order button on a website. The website has a database that stores the user’s information to facilitate the transaction. 1-Click shopping is useful because it simplifies online shopping for consumers.
  2. “Priceline’s Reverse Auction” Priceline patented a system that allows users to place auction bids on items that are not yet available. Once the item becomes available for auction, the system enters the user’s interactive bid. The Reverse Auction has been used to help consumers purchase airline tickets before they are even available.

If your invention aligns with these principles, contact Deepak to develop your patent protection.

Examples of Non-Patentable Business Methods

  1. “Abstract ideas.” A method that can take place in someone’s mind is not patent eligible. For example, a patent that covered obtaining and comparing intangible data (such as IP and email addresses) to detect fraud in credit card transactions over the Internet was held patent-ineligible because it was too abstract. Central to the court’s decision was that the process of comparing relevant data that was claimed could occur with or without a computer, and wholly in someone’s mind.
  2. “Tax strategies.” Any strategy for reducing, avoiding, or deferring tax liability is not capable of being patented according to the America Invents Act. This prohibition does not apply to methods for preparing a tax return or other tax filing, or for methods, apparatus, technology, or computer software used solely for financial management. A business procedure that results in written contracts indicating obligations of expressed parties couldn’t be patentable merely because a physical transformation takes place when the contract is certified using paper and ink.

Thus, case law is unfortunately a bit unsettled in the area of business methods. On the other hand, there is little question that business methods are capable of being patented if complex software programming is involved and the patent claims are drafted in a form that has been determined to be capable of being patented. Malhotra Law Firm PLLC is able to put the claims in the best possible form for favorable treatment.

If you require the best attorney for your business method patent, contact Deepak Malhotra.