Business Method Patents


Since 1998 business methods have been patentable in the United States. This is thanks to the decision of the United States Court of Appeals in State Street Bank & Trust Co. v. Signature Financial Group, Inc., which categorically and unceremoniously did away with what had previously been come to be known as the business method exception to patentability. Essentially, the business method exception said that no method of doing business deserved patent protection. The Federal Circuit pointed out that the business method exception had never been invoked by either the Federal Circuit or its predecessor court the CCPA. Furthermore, the case frequently cited for establishing the business method exception did not ultimately rely on that exception to deny patentability, meaning it was nothing more than dicta. The Court explained that “[s]ince the 1952 Patent Act, business methods have been, and should have been, subject to the same legal requirements for patentability as applied to any other process or method.”

The importance of State Street Bank is that business methods were considered patentable subject matter, and that led to an ever increasing number of business method applications being filed at the United States Patent Office. The volume of business method patents is staggering, and in part a function of the fact that business methods are only patentable in the United States. The volume is also partly a function of the fact that business methods seem easy to explain, at least conceptually, so many individuals see this as a way to easily invent, particularly given the importance of the Internet to commerce today.

In order to have a patentable business method it is necessary for the invention to accomplish some practical application. In other words, in order for a business method to be patentable it must produce a “useful, concrete and tangible result.” The purpose of this requirement is to limit patent protection to inventions that possess a certain level of “real world” value, as opposed to subject matter that represents nothing more than an idea or concept (which is not patentable), or is simply a staring point for future investigation or research. It is, therefore, critically important that the description of the business method be as complete as possible, which means that the description must clearly identify the invention.

While there is not yet a requirement that a business method be associated with a computer implementation, most business method inventions today are inextricably linked to some form of computer implementation, and I opined that the United States Court of Appeals for the Federal Circuit would at some point during 2008 make such a requirement. See An End to Business Method Patents? The Federal Circuit did make such a determination in In re Bilski, and that decision has brought into question the future of not only business method patents, but also the future of software patents.  For more see A Blow to Software Patents and Why Not Allow Software Patents?

While the Federal Circuit seems to want to do away with both business method patents and, at least to some extent software patents, there is still room for innovations to achieve at least some protection, albeit rather indirect protection, provided that there is some kind of tangible and real connection with a computer, a computer system or an overall tangible architecture created to enable the method.

In typical business method patent applications today a computer implementation is frequently carried out over the Internet or some other communications network. In order to adequately identify the business method invention that is linked to a computer implementation the following requirements apply:

  1. The business method must be described in a way that clearly identifies the real world value of the business method. In order to fulfill this requirement it will be necessary to provide a generalized description of the overall business method in a way that explains what the business method accomplishes and how it accomplishes the task. In order to do this most patent attorneys suggest the use of one or more flow charts the depict the steps associated with the overall business method. In most, if not all, business method inventions it will be possible to describe the process from multiple viewpoints. For example, how the overall system operates viewed from the user perspective is different from the perspective of the central computer, which performs the various computations, comparisons and routes information. It is, therefore, critical to clearly identify the business method from all possible viewpoints.
  2. In addition to providing a generalized overview of the business method, it is also necessary to clearly identify what the central computer does when it performs the processes required by the business method. This will normally require a detailed description of the functionality of the central computer. This description should be as complete with as much technical information as possible, including discussion of how the central computer is to be configured to provide the required functionality.
  3. It is also necessary to provide an overview of the system used to implement the business method. This will require description of the relationship of the central computer to other subject matter outside the computer, which together represent the system for carrying out the business method. In other words, it is necessary to explain how the central computer is to be integrated with other elements that are a part of the invention, and to further explain how these other elements work to facilitate the business method. These other elements can include, but are not limited to telecommunications equipment, the Internet, remote computers or terminals and peripheral devices connected to the central computer.
  4. In many cases specialized software will also constitute a part of the best way to carry out the invention. In this situation it is necessary to provide a description of the best way to carry out the invention using software by disclosure of the functions of the software. While the Patent Office position is that flow charts are not a requirement for adequately disclosing the functions of the software, most patent attorneys would strongly recommend or even require their clients to include flow charts. This is because those skilled in the art will be computer programmers, who are taught from the earliest levels of their technical education to conceptualize software first in a flow chart. Therefore, the provision of a flow chart is fundamental to conveying the function of software.
  5. Disclosure of the software code is not necessary where the functions of the software program are readily apparent from the specification and one skilled in the art could generate the necessary software code to implement the disclosed functions. Nevertheless, the disclosure of at least some code is becoming more popular, and can be an effective way to convey certain aspects relating to core functionality. This is true because patent applications need to speak to those skilled in the art, who in this case would be computer programmers. When a computer programmer reads code it will convey with pinpoint accuracy both the requirements and any number of alternatives that could be employed to achieve the same functionality.