Business Method Patents

(Wednesday, November 9, 2011 – Marin County, CA)


Business method patents are a class of patents which disclose and claim new methods of doing business. This includes new types of e-commerce, insurance, banking, tax compliance etc. Business method patents are a relatively new species of patent and there have been several reviews investigating the appropriateness of patenting business methods. Nonetheless, they have become important assets for both independent inventors and major corporations.


Major court cases:

State Street Bank and Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), also referred to as State Street or State Street Bank, was a decision of the United States Court of Appeals for the Federal Circuit concerning the patentability of business methods. State Street for a time established the principle that a claimed invention was eligible for protection by a patent in the United States if it involved some practical application and, in the words of the State Street opinion, “it produces a useful, concrete and tangible result.” With the 2008 decision In re Bilski, however, the useful-concrete-tangible test was jettisoned. According to the Bilski opinion, the “‘useful, concrete and tangible result inquiry’ is inadequate,” and the portions of the State Street decision relying on this inquiry are no longer of any effect under US patent law. The Supreme Court granted certiorari in In re Bilski and oral argument was held on November 9, 2009.

Ex Parte Bowman 61 USPQ 2d 1669 (Bd. Pat. App. & Int. 2001) was a decision by the U.S. Board of Patent Appeals and Interferences which asserted that in order to be patent-eligible, a process had to involve or promote the technological arts. This decision was overruled by the Board’s subsequent Ex Parte Lundgren decision, but the Board’s and then the Federal Circuit’s In re Bilski opinion then superseded Lundgren. In re Bilski, however, rejects use of “not in the technological arts” as a basis for a rejection, although it seems to accept the concept when differently named. Bilski is now pending on writ of certiorari.

In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385 (Fed. Cir. 2008), was an en banc decision of the United States Court of Appeals for the Federal Circuit (CAFC) on the patenting of method claims, particularly business methods. The Federal Circuit court affirmed the rejection of the patent claims involving a method of hedging risks in commodities trading. The court also reiterated the machine-or-transformation test as the applicable test for patent-eligible subject matter, and stated that the test in State Street Bank v. Signature Financial Group should no longer be relied upon.

Bilski v. Kappos, 561 U.S. ___ (2010), (another document here) (another article here) was a case decided by the Supreme Court of the United States holding that the machine-or-transformation test is not the sole test for determining the patent eligibility of a process, but rather “a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101.”[1] In so doing, the Supreme Court affirmed the rejection of an application for a patent on a method of hedging losses in one segment of the energy industry by making investments in other segments of that industry, on the basis that the abstract investment strategy set forth in the application was simply not patentable subject matter.


Recent court cases:


Other information:

There is no exclusion for methods of doing business under U.S. patent law. Patent applications for methods of doing business are examined using the same standards as any other invention.

Current case law (In re Bilski) requires that a method for doing business must be tied to a particular machine (e.g. computer) or transform matter. This case law, however, is under review by the US Supreme Court. In oral arguments presented in November 2009, the justices of the Supreme Court seemed sceptical of the plaintiff’s arguments that a business method did not have to be tied to a machine. The Supreme Court decision in Bilski v. Kappos on June 28, 2010 ruled that Bilski’s patent was not valid. However, the decision was widely criticized for resolving the immediate problem with Bilski’s business method patent while offering little guidance on the actual issue of business method patentability. Ultimately, the court rejected the more ‘bright-line’ test proposed by the federal circuit as too rigid and resolved the question by restating the statutes broad goals. Therefore, business methods continue to be patentable subject matter; however, the question remains as to how exactly to decide that patentability.

On average, the USPTO will issue 20 rejections for every allowance. Patent applications in more conventional technologies, such as electrical connectors will only get 2 rejections for every allowance.

White Paper from US Gov on Business Method Patents can be found here