Anthony J. Pennings, PhD

WRITINGS ON DIGITAL STRATEGIES, ICT ECONOMICS, AND GLOBAL COMMUNICATIONS

Controversies in Intellectual Property – The Business Method Patent

Posted on | November 11, 2013 | No Comments

Disclaimer: The following is a brief overview related to business method patents and should not be considered legal advice.

One of the most controversial forms of intellectual property in the digital age is the business method patent (BMP). These deal with particular systems or ways of conducting business and have gained a fair amount of notoriety lately with software-related processes becoming integral in a wide range of commercial activities. From banking to manufacturing and retailing, business methods are increasingly providing a competitive advantage to companies and understandably they seek to limit others from using the same methods.

Patents in general are exclusive rights given by the federal government to limit others from using, making or selling the same innovations or designs for the term of the patent. Successful applications showing a utility of some sort are granted 20 years while a novel design is granted 14 years. Patents must meet the criteria that the innovation be useful, novel and not obvious. In the US, patents are granted by the United States Patent and Trademark Office (USPTO), often called the “PTO“. Currently it takes about 3 years to get a patent.

The US government has been awarding patents since George Washington signed off on the first one in 1790. One of the most notable information business patents was given to Herman Hollerith for The Art of Compiling Statistics in 1889. He was in the process of conducting the first automated census calculations with punched card tabulating machines he invented. When the company he created merged with several others and eventually became IBM, his patent provided the intellectual property foundation for its early success with tabulating machines.

In general, business methods patents were not seriously considered by the PTO until the 1980s when businesses started to develop their own in-house computer systems for automating a wide variety of payment, transaction and trading capabilities. A 1998 decision by the Court of Appeals for the Federal Circuit “upheld a patent on a software program that was used to make mutual fund asset allocation calculations”.[1] Since that ruling, business method applications to the PTO and their approvals have increased dramatically.

The PTO has debated whether BMP needs to be a “technological art” or whether a claimed innovation is a manufacture, process or composition of machine or matter. What seems to be important is that it produces a tangible result. Other basic patent criteria apply as well. For example, Amazon’s One-Click application has been challenged because it has been argued that it is obvious that anyone in the business eventually develop it. The patent has been continuously denied in Europe although upheld in the US. Apple for instance did license the one-click technology from Amazon for its iTunes store.

Netflix on the other hand has been quite successful in patenting their business model which covers their method of renting DVDs to customers in conjunction with the interface on their website that lists the viewer’s preferences, verifies return based on their subscription status, and delivers the next item on their queue to the subscriber.

For more information visit the Patents Business Methods site at the USPTO.

Notes

[1] Business Method Patents Online by William Fisher and Geri Zollinger. Accessed at http://cyber.law.harvard.edu/ilaw/BMP/ on November 11, 2013.

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Anthony J. Pennings, PhD recently joined the Digital Media Management program at St. Edwards University in Austin TX, after ten years on the faculty of New York University.

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    Professor and Associate Chair at State University of New York (SUNY) Korea. Recently taught at Hannam University in Daejeon, South Korea. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, media economics, and strategic communications.

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