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Business methods put to the technological test

Photonics Spectra
Aug 2009
Amanda D. Francoeur,

Business methods are a company’s particular processes for conducting business. These practices include handling business transactions, managing an organization, piloting an Internet commerce deal, investing in products and processing financial data.

Since 1998, when the Federal Circuit Court of Appeals allowed the patenting of a business method involving tracking mutual fund investments, numerous others have been patented by the US Patent and Trademark Office on the premise that they impart a useful and evident result.

In October, however, the US Court of Appeals for the Federal Circuit in Washington proposed that, for business methods to gain patent protection, the processes must be “tied to a particular machine or apparatus” or must convert an article into a separate state or entity.

By law, intellectual property represents a novel approach, incorporates a plausible application and signifies nonobviousness.

Regarding the thousands of business method patents that have been issued, many believe that they are mainly abstract ideas and do not promote innovation as physical inventions do. On the other hand, proponents of business method patents believe that, in an information-based economy, the patents heighten innovation.

Accenture, a global consulting and outsourcing company, says it supports patenting business methods because the techniques use science and engineering principles to help people collaborate more effectively. Conversely, IBM, which has numerous business methods in its patent portfolio, now maintains it is opposed to this type of patenting because it is not essential for encouraging innovation.

To solve the outstanding debate, the Supreme Court has agreed to reconsider the Bilski case – involving a patent first applied for in 1997 and rejected during the appeals process ever since – and to decide more exactly what constitutes patentable subject matter.

Case in point

Bernard Bilski and Rand Warsaw applied for a patent on their “capped bill systems, methods and products,” a process for hedging risks in commodities trading. The system proposed offering an individual a fixed payment rate for a product, with the payment over time not exceeding a predetermined capped rate. However, an appeals court examiner rejected claims 1 through 11 of 35 U.S.C. §101, asserting 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.”

Bilski and Warsaw argue that the Supreme Court should reconsider protecting their rights and those of others whose business methods may be denied a patent in the future. They believe technological strategies that could benefit the economy depend on the court’s decision.

The federal government disapproves of the Supreme Court’s willingness to hear the case. The administration believes that, because the business method was ineligible for a patent and is not relevant to software or other complex business processes, it is not significant.

Nevertheless, the Supreme Court will hear the Bilski case next term, in October. Many business method patent holders and others are wondering whether the Court of Appeals’ October ruling will be upheld or whether the requirements for obtaining a business method patent will again depend less strictly on technological and tangible criteria.

Bilski casePatent NewspatentingSlices from the BreadboardSupreme Court

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