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BUSINESS FUNCTIONS, ELECTRONIC COMMERCE AND FINANCIAL INSTITUTION DATA PROCESSING Patentable Business Methods. Business methods have been explicitly patentable in the United States since the 1998 Court of Appeals decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc. 47 USPQ2d 1596, 1604 (Fed. Cir. 1998).  The U.S. Supreme Court in Bilski v. Kappos (Supreme Court, 28-JUN-2010, 08-964) recognized that some business methods are patentable despite distancing itself from any of the State Street legal principles set down to more particularly define what is patentable.  The Supreme Court stated: "This Court has more than once cautioned that courts should not read into the patent laws limitations and conditions which the legislature has not expressed.” (Bilski, slip opinion, p.1, internal quotations deleted). The Supreme Court’s precedents provide three specific exceptions to §101’s broad patent-eligibility principles: “laws of nature, physical phenomena, and abstract ideas.” Diamond v. Chakrabarty, 447 U. S. 303, 309 (1980). As with other inventions, a business method invention to be patentable must be new, useful, non-obvious, and not indefinite. But, even meeting those conditions, the practical result of the Bilski decision is likely that patentability rejections for business method patents will rest on whether or not what is claimed is an attempt to patent an abstract idea. Patentability of Business Methods.    Section 101, title 35 of the United States Code is the section of the law that defines patentable subject matter. The Bilski decision states that the earlier "machine-or-transformation" test for patent-eligible subject matter offers "a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101."  However, it is "not the sole test for deciding whether an invention is a patent-eligible process." Nevertheless, on 28-JUN-2010, immediately after the Bilski decision was issued by the Supreme Court, the U.S. Patent and Trademark Office (USPTO) issued examiner guidance stating: "Examiners should continue to examine patent applications for compliance with section 101 using the existing guidance concerning the machine-or-transformation test as a tool for determining whether the claimed invention is a process under section 101." Failing this test will likely cause a finding that it is an abstract idea and is not patentable.  So, while the "machine-or-transformation test is not the "exclusive test," it is likely to be the test applied to determine patentability, subject to rebuttal by the applicant.  The machine-or-transformation test was set out by the Federal Circuit in In re Bilski , (Fed. Cir. 30-OCT-2008): "A claimed process is surely patent-eligible subject matter under § 101 if: "(1) it is tied to a particular machine or apparatus, or "(2) it transforms a particular article into a different state or thing." As before, simply adding a computer to a method claim may not meet the test because Federal Circuit said that "the use of a specific machine or transformation of an article must impose meaningful limits on the claim's scope to impart patent-eligibility." Particularly vulnerable inventions involve adding a computer for what might otherwise be performed in the mind of an individual. For example, "a claimed process wherein all of the process steps may be performed entirely in the human mind is obviously not tied to any machine and does not transform any article into a different state or thing. As a result, it would not be patent-eligible under § 101."  Business method patent applications are filed as utility patent applications. Business method inventions are not categorized in "business method" claims, but rather they are treated like any other invention claiming a process in a series of steps. However, most fall within patent classification 705 and in that classification, about 5,000 U.S. patents issued in the 5 year period spanning 2001 to 2005. According to the United States Patent and Trademark Office, automated financial/management business data processing method patents did not suddenly spring into being in 1998.  Rather, the first cited are 1889 patents (395,781; 395,782; and 395,783) involving automated the tabulating and compiling of statistical information for businesses and enterprises. DEFINITION OF BUSINESS METHOD Defining Business Methods.  Business methods are loosely defined.  Generally they may be categorized as methods for performing data processing or calculation operations in the--   practice, administration or management of an enterprise; processing of financial data; or determination of the charge for goods or services. CONDITIONS FOR PATENTABILITY & EXPECTATIONS Rigorous Reviews.  Partly because of the criticism of allowing too many questionable business method patents and partly because of the tendency of applicants to seek broad claims in their applications, the United States Patent and Trademark Office subjects business method patent applications to two reviews before allowing an application:  the first by the examiner who scrutinizes the prior art (secret U.S. patents, patent applications (domestic and foreign), and non-patent literature); and the second by a select group of reviewers (composed of management, quality review examiners, special program examiners, and others). Rejection Rate and How Long It Takes.  As a result of rigorous reviews, about 84% of electronic commerce business method applications and about 43% of the business method patent applications overall, are rejected by the Patent Office.  This compares to a rejection rate of about 35% of other patent applications.  Additionally, the processing time for a business method application is about three-and-a-half years compared with about two years for others. Rest of the World.  Business method patents in most of the rest of the world face even more significant hurdles than in the United States.  Generally, these relate to an invention having a "technical" component. The European Patent Office, acting for 32 member states, rejects patent applications which do not have a "technical character."  An invention must relate to a "technical" problem and have "technical" features.  While "technical" is not defined in the law, it has been interpreted to require a physical feature that is useful to solve an industrial problem.  Article 52 of the European Patent Convention contains an explicit bar to patenting "methods of doing business." Perhaps a bit more liberal is Australia, where a process claim on a business method must have "A physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation," according to Federal Court of Australia - Full Court in Grant v Commissioner of Patents (FCAFC 120, July 18, 2006). In Japan, patentable subject matter involves "a technical idea utilizing a law of nature."  Business methods are generally regarded as software related inventions and are considered to have a technical nature. TYPICAL BUSINESS METHOD CATEGORIES Patentable Business Methods.  The four largest groupings of business method inventions are directed to the general business operations--      1.  Determining Who Your Customers Are, and The Products/Services They Need/Want Operations Research - Market Analysis      2.  Informing Customers You Exist, Showing Them Your Products & Services, and Getting Them to Purchase Advertising Management; Catalog Systems; Incentive Programs; and, Redemption of Coupon      3.  Exchanging Money and Credit Before, During, and After the Business Transaction Credit and Loan Processing; Point of Sale Systems; Billing; Funds Transfer; Banking; Clearinghouses; Tax Processing; and, Investment Planning      4.  Tracking Resources, Money, And Products Human Resource Management; Scheduling; Accounting; and, Inventory Monitoring SOFTWARE RELATED PATENT Software.  Most business method patents today involve a software implementation.  See the Software Patent page for more information on computer program patentability.  Visit the page on utility patent applications to understand the costs and next steps.       Home | How to Communicate | Email to: lventre@lventre.com | Useful Links Client Inventions | Bio | FAQs | Disclaimers Search Click Here to Fill-In a Web Form Email © 2006 Louis Ventre, Jr. This file last modified 07/09/10. 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