Business method patent

Business method patent

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Business method patents are a class of patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....

s which disclose and claim
Claim (patent)
Patent claims are the part of a patent or patent application that defines the scope of protection granted by the patent. The claims define, in technical terms, the extent of the protection conferred by a patent, or the protection sought in a patent application...

 new methods of doing business. This includes new types of e-commerce
Electronic commerce
Electronic commerce, commonly known as e-commerce, eCommerce or e-comm, refers to the buying and selling of products or services over electronic systems such as the Internet and other computer networks. However, the term may refer to more than just buying and selling products online...

, insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...

, banking, tax compliance
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

 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 corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...



In general, invention
An invention is a novel composition, device, or process. An invention may be derived from a pre-existing model or idea, or it could be independently conceived, in which case it may be a radical breakthrough. In addition, there is cultural invention, which is an innovative set of useful social...

s are eligible for patent protection if they pass the tests of patentability
Within the context of a national or multilateral body of law, an invention is patentable if it meets the relevant legal conditions to be granted a patent...

: patentable subject matter
Patentable subject matter
Patentable, statutory or patent-eligible subject matter is subject matter which is susceptible of patent protection. The laws or patent practices of many countries suggest that certain subject matter is or is not something for which a patent should be granted.Together with novelty, inventive step...

, novelty
Novelty (patent)
Novelty is a patentability requirement. An invention is not patentable if the claimed subject matter was disclosed before the date of filing, or before the date of priority if a priority is claimed, of the patent application....

, inventive step or non-obviousness
Inventive step and non-obviousness
The inventive step and non-obviousness reflect a same general patentability requirement present in most patent laws, according to which an invention should be sufficiently inventive — i.e., non-obvious — in order to be patented....

, and industrial applicability
Industrial applicability
In patent law, industrial applicability or industrial application is a patentability requirement according to which a patent can only be granted for an invention which is susceptible of industrial application, i.e. for an invention which can be made or used in some kind of industry. In this...

 (or utility
Utility (patent)
In United States patent law, utility is a patentability requirement. As provided by , an invention is "useful" if it provides some identifiable benefit and is capable of use...


A business method may be defined as "a method of operating any aspect of an economic enterprise".


On January 7, 1791, France passed a patent law that stated that "Any new discovery or invention, in all types of industry, is owned by its author...". Inventors paid a fee depending upon the desired term of the patent (5, 10, 15 years), filed a description of the invention and were granted a patent. There was no preexamination. Validity was determined in courts. 14 out of 48 of the initial patents were for financial inventions. In June of 1792, for example, a patent was issued to inventor F. P. Dousset for a type of tontine
A tontine is an investment scheme for raising capital, devised in the 17th century and relatively widespread in the 18th and 19th. It combines features of a group annuity and a lottery. Each subscriber pays an agreed sum into the fund, and thereafter receives an annuity. As members die, their...

 in combination with a lottery
A lottery is a form of gambling which involves the drawing of lots for a prize.Lottery is outlawed by some governments, while others endorse it to the extent of organizing a national or state lottery. It is common to find some degree of regulation of lottery by governments...

. These patents raised concerns and were banned and declared invalid in an amendment to the law passed in 1792.


In Britain, a patent was issued in 1778 to John Knox for a “[p]lan for assurances on lives of persons from 10 to 80 years of age.” At this time in British law, patents could only be issued for manufactured objects, not manufacturing processes.

United States

Patents have been granted in the United States on methods for doing business since the US patent system was established in 1790. The first financial patent was granted on March 19, 1799, to Jacob Perkins of Massachusetts for an invention for "Detecting Counterfeit Notes." All details of Mr. Perkins invention, which presumably was a device or process in the printing art, were lost in the great Patent Office fire of 1836. Its existence is only known from other sources.

The first financial patent for which any detailed written description survives was to a printing method entitled "A Mode of Preventing Counterfeiting" granted to John Kneass on April 28, 1815. The first fifty years of the U.S. Patent Office saw the granting of forty-one financial patents in the arts of bank notes (2 patents), bills of credit (1), bills of exchange (1), check blanks (4); detecting and preventing counterfeiting (10), coin counting (1), interest calculation tables (5), and lotteries (17).

On the other hand, cases such as Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2d Cir. 1908), which held that a bookkeeping system to prevent embezzlement by waiters was unpatentable, were often read to imply a "business method exception", in which business methods are unpatentable. Another such case was Joseph E. Seagram & Sons v. Marzell, 180 F.2d 26 (D.C. Cir. 1950), in which the court held that a patent on “blind testing” whiskey blends for consumer preferences would be “a serious restraint upon the advance of science and industry” and therefore should be refused.

For many years, the USPTO took the position that "methods of doing business" were not patentable. With the emergence in the 1980 and 1990s of patent applications on internet or computer enabled methods of doing commerce, however, USPTO found that it was no longer practical to determine if a particular computer implemented invention was a technological invention or a business invention. Consequently they took the position that examiners would not have to determine if a claimed invention was a method of doing business or not. They would determine patentability based on the same statutory requirements as any other invention.

The subsequent allowance of patents on computer implemented methods for doing business was challenged in the 1998 State Street Bank v. Signature Financial Group, (47 USPQ
United States Patents Quarterly
The United States Patents Quarterly is a United States legal reporter published by the Bureau of National Affairs in Washington, D.C. The USPQ covers intellectual property cases including patents, copyrights, trademarks, and trade secrets, from 1913 to the present.The USPQ reports case law from...

 2d 1596 (CAFC
United States Court of Appeals for the Federal Circuit
-Vacancies and pending nominations:-List of former judges:-Chief judges:Notwithstanding the foregoing, when the court was initially created, Congress had to resolve which chief judge of the predecessor courts would become the first chief judge...

 1998)). The court affirmed the position of the USPTO and rejected the theory that a "method of doing business" was excluded subject matter. The court further confirmed this principle with AT&T Corp. v. Excel Communications, Inc.
AT&T Corp. v. Excel Communications, Inc.
AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 was a case in which the United States Court of Appeals for the Federal Circuit reversed the decision of the United States District Court for the District of Delaware, which had grant­ed sum­ma­ry judg­ment to Excel Com­mu­ni­ca­tions, Inc....

, (50 USPQ 2d 1447 (Fed. Cir. 1999)).

The USPTO continued to require, however, that business method inventions must apply, involve, use or advance the "technological arts" in order to be patentable. This was based on an unpublished decision of the U.S. Board of Patent Appeals and Interferences
Board of Patent Appeals and Interferences
The Board of Patent Appeals and Interferences is an administrative law body of the United States Patent and Trademark Office , which decides issues of patentability. The Chief Administrative Patent Judge is James Donald Smith.-Structure:...

, Ex Parte Bowman
Ex Parte Bowman
Ex Parte Bowman 61 USPQ 2d 1669 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...

, 61 USPQ2d 1665, 1671 (Bd Pat. App. & Inter. 2001). This requirement could be met by merely requiring that the invention be carried out on a computer
A computer is a programmable machine designed to sequentially and automatically carry out a sequence of arithmetic or logical operations. The particular sequence of operations can be changed readily, allowing the computer to solve more than one kind of problem...


In October 2005 the USPTO's own administrative judges overturned this position in a majority decision of the board in Ex Parte Lundgren
Ex Parte Lundgren
Ex parte Lundgren is a decision by the United States Patent and Trademark Office board of appeals, i.e. the Board of Patent Appeals and Interferences , that asserts that process inventions do not have to be in the technological arts in order to be patentable in the United States. They do, however,...

, Appeal No. 2003-2088 (BPAI 2005). The board ruled that the "technological arts" requirement could not be sustained, as no such requirement existed in law.

In light of Ex Parte Lundgren, the USPTO has issued interim guidelines for patent examiners to determine if a given claimed invention meets the statutory requirements of being a process, manufacture, composition of matter or machine (35 USC 101). These guidelines assert that a process, including a process for doing business, must produce a concrete, useful and tangible result in order to be patentable. It does not matter if the process is within the traditional technological arts or not. A price for a financial product, for example, is considered to be a concrete useful and tangible result (see State Street Bank v. Signature Financial Group).

The USPTO has reasserted its position that literary works, compositions of music, compilations of data, legal documents (such as insurance policies
Insurance contract
In insurance, the insurance policy is a contract between the insurer and the insured, known as the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for payment, known as the premium, the insurer pays for damages to the insured which are caused by...

), and forms of energy (such as data packets transmitted over the Internet), are not considered "manufactures" and hence, by themselves, are not patentable. Nonetheless, the USPTO has requested comments from the public on this position.

In 2006, Justice Kennedy
Anthony Kennedy
Anthony McLeod Kennedy is an Associate Justice of the United States Supreme Court, having been appointed by President Ronald Reagan in 1988. Since the retirement of Sandra Day O'Connor, Kennedy has often been the swing vote on many of the Court's politically charged 5–4 decisions...

 of the US Supreme Court  cast aspersions on business method patents when he commented that some of them were of "potential vagueness and suspect validity". This was expressed in a concurring opinion
Concurring opinion
In law, a concurring opinion is a written opinion by one or more judges of a court which agrees with the decision made by the majority of the court, but states different reasons as the basis for his or her decision...

 to the case of eBay Inc. v. MercExchange, L.L.C.
EBay Inc. v. MercExchange, L.L.C.
eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 is a case in which the Supreme Court of the United States unanimously determined that an injunction should not automatically issue based on a finding of patent infringement, but also that an injunction should not be denied simply on the basis that...

There has been considerable speculation as to how this opinion might affect future business method patent litigation, particularly where a patent owner seeks an injunction to stop an infringer. In 2006, three Justices (Breyer, J., joined by Stevens and Souter, JJ.) dissented from the dismissal of certiorari as improvidently granted in Laboratory Corp. of Am. Holdings v. Metabolite Labs., Inc., arguing that State Street enunciated an erroneous legal test under which processes that the Supreme Court had held patent-ineligible would be held patent-eligible.

On October 30, 2008, the Federal Circuit handed down its long-awaited en banc decision in In re Bilski
In re Bilski
In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385 , was an en banc decision of the United States Court of Appeals for the Federal Circuit on the patenting of method claims, particularly business methods. The Federal Circuit court affirmed the rejection of the patent claims involving a method of...

. The decision appears to hold patent-ineligible many business-method patents granted in the last decade. Bilski announces a two-branch test of patent-eligibility for processes. First, processes that transform an article from one state or thing to another are patent-eligible regardless of whether their use requires a machine. What is an article, however, is debatable. The transformations involved in smelting ores or vulcanizing rubber are clearly patent-eligible. Thus, substances such as ores and rubber, are articles. Processes involving transformation of signals representative of physical parameters may also be patent-eligible. Processes involving transformation of financial data, such as that claimed in machine format in State Street, are probably patent-ineligible. Second, processes that do not make patent-eligible transformations are patent-eligible only if they are claimed as carried out with a “particular machine.” What is a particular machine is unclear. It appears that a programmed general-purpose digital computer is not a particular machine, for this purpose. It is unclear whether a particular machine must be novel and unobvious, and specially adapted for carrying out the new process. The Supreme Court’s decision in Parker v. Flook
Parker v. Flook
Parker v. Flook, was a 1978 United States Supreme Court decision that ruled that an invention that departs from the prior art only in its use of a mathematical algorithm is patent-eligible only if the implementation is novel and unobvious. The algorithm itself must be considered as if it were part...

seems to call for that, but the Bilski court did not choose to opine on this point.

A cutting-edge issue in regard to business-method patents is whether they are patent-ineligible because they are not "technological," regardless of whether they meet the other criteria of patent-eligibility and patentability. The majority opinion in In re Bilski
In re Bilski
In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385 , was an en banc decision of the United States Court of Appeals for the Federal Circuit on the patenting of method claims, particularly business methods. The Federal Circuit court affirmed the rejection of the patent claims involving a method of...

refused to hold business methods categorically ineligible on any ground. Judge Mayer's dissent, however, seconded by Judges Dyk's and Linn's concurring opinion, insisted that the US patent system is limited to technology and therefore it excludes trade and business expedients. Judge Mayer equated the US Constitution's limitation of patent grants to the "useful arts" to a limitation to technology, relying on case law
Case law
In law, case law is the set of reported judicial decisions of selected appellate courts and other courts of first instance which make new interpretations of the law and, therefore, can be cited as precedents in a process known as stare decisis...

 stating that technology is the modern equivalent of useful arts. The Supreme Court of the United States
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...

 granted certiorari
Certiorari is a type of writ seeking judicial review, recognized in U.S., Roman, English, Philippine, and other law. Certiorari is the present passive infinitive of the Latin certiorare...

 in the matter of In re Bilski and the case was argued on November 9, 2009.

Bilski v. Kappos, 561 U.S. ___ (2010), 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.

In November 2007, the United States Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...

 proposed rules that would require tax filers who paid a license fee for a tax patent
Tax patent
A tax patent is a patent that discloses and claims a system or method for reducing or deferring taxes. Tax patents have been granted predominantly in the United States but can be granted in other countries as well. They are considered to be a form of business method patent. They are also called...

 to declare that to the IRS.


Whether a business method is regarded as patentable subject matter depends on the legal jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...

. The World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

’s Agreement on Trade-Related Aspects of Intellectual Property Rights
Agreement on Trade-Related Aspects of Intellectual Property Rights
The Agreement on Trade Related Aspects of Intellectual Property Rights is an international agreement administered by the World Trade Organization that sets down minimum standards for many forms of intellectual property regulation as applied to nationals of other WTO Members...

 (TRIPS) does not specifically address business method patents.


There is no general prohibition on the patentability of business methods in Australia. Their patentability is determined by applying the tests used to determine the patentability of any type of invention.

In a recent decision, Grant v Commissioner of Patents [2006] FCAFC 120, [47], the Full Court of the Federal Court of Australia held that a business method will only be patentable if it has a physical aspect, being a concrete, tangible, physical, or observable effect or phenomenon. Accordingly, 'pure' business methods, being those that do not have a physical aspect, are not patentable in Australia.

However, it has been suggested that Grant v Commissioner of Patents was wrongly decided because the court failed to properly apply the existing law as set out in the decision of the High Court of Australia in National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252 and that the court should not have imposed a physical aspect requirement.


Pure business methods cannot be patented in Canada because of its pre-constitutional (in 1982) subordination to British Common Law. Article 1(2)(c) of the Patent Law of 1977 “It is hereby declared that the following (among other things) are not inventions for the purposes of this Act, that is to say, anything which consists of …. a scheme, rule or method for performing a mental act, playing a game or doing business, or a program for a computer.” For example, the Canadian counterpart application of the U.S. patent at issue in the State Street case has been abandoned.

However, a business method patent may be patented in Canada if the patent is claimed in a manner which provides that an apparatus is involved. See Mark B Eisen, Arts and Crafts: The Patentability of Business Methods in Canada (2001), 17 C.I.P.R. 279. See also, Inc. v The Attorney General of Canada, 2010 FC 1011, October 14, 2010


According to Brazilian Patent Law 9279, "commercial, accounting, financial, educational, advertising, raffling, and inspection schemes, plans, principles or methods" are not considered to be inventions or Utility Models.

European Patent Convention

Under the European Patent Convention
European Patent Convention
The Convention on the Grant of European Patents of 5 October 1973, commonly known as the European Patent Convention , is a multilateral treaty instituting the European Patent Organisation and providing an autonomous legal system according to which European patents are granted...

, "Schemes, rules and methods for (...) doing business" are not regarded as being inventions and are not patentable
Within the context of a national or multilateral body of law, an invention is patentable if it meets the relevant legal conditions to be granted a patent...

, "to the extent that a European patent application or European patent relates to such subject-matter or activities as such".

But if a new method solves a technical, rather than a purely administrative, problem then it may indeed be patentable. (For example, an improved design of letter-franking
Franking are any and all devices or markings such as postage stamps , printed or stamped impressions, codings, labels, manuscript writings , and/or any other authorized form of markings affixed or applied to mails to qualify them to be postally serviced.-Franking types and...



Per Section 3(k), business methods are not patentable per se. However they are patentable if a new method solves a "technical" problem and an apparatus/system is involved.


In Japan, business methods are well recognized and accepted as patentable subject matter. The legal standard used to assess whether a business method is patentable requires that inventions be "a highly advanced creation of technical ideas by which a law of nature is utilized."

Patents are not issued solely for business methods. The business method must contain a technical aspect that is both tangible and real.

However this requirement may be satisfied simply by specifying that the method is implemented using a computer.

United States

There is no exclusion for methods of doing business under US 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
In re Bilski
In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385 , was an en banc decision of the United States Court of Appeals for the Federal Circuit on the patenting of method claims, particularly business methods. The Federal Circuit court affirmed the rejection of the patent claims involving a method of...

) 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
Bilski v. Kappos
Bilski v. Kappos, 130 S. Ct. 3218, 561 US __, 177 L. Ed. 2d 792 , 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...

 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 connector
Electrical connector
An electrical connector is an electro-mechanical device for joining electrical circuits as an interface using a mechanical assembly. The connection may be temporary, as for portable equipment, require a tool for assembly and removal, or serve as a permanent electrical joint between two wires or...

s will only get 2 rejections for every allowance.


Methods of doing business that involve the use of a computer are classified in Class 705 ("data processing: financial, business practice, management or cost/price determination"). Class 705 includes sub-categories for industries such as health care, insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...

, electronic shopping, inventory management, accounting, and finance.

Delays in examination

The USPTO is experiencing significant delays in examining business method patents. Projected delays of up to 14 years have been reported. The delays are due to a combination of the step change in business method filings as of the State Street Bank decision and the difficulty in hiring qualified examiners with financial services backgrounds (e.g. insurance and banking). It has also been reported, however, that inventors can get their patent applications examined in as little as six months, if they submit a Petition to make special
Petition to make special
In United States patent law, a petition to make special is a formal request submitted to the United States Patent and Trademark Office asking that a patent application be examined ahead of the other pending applications in the same technological art.- Background and rationale :Normally patent...

. A petition to make special is a procedure for getting particular patents examined early.

Peer to Patent

In July 2008, the USPTO announced that business method patent applications would be opened up to public commentary as part of the Peer to patent
Peer to patent
The Peer To Patent project is an initiative that seeks to assist patent offices in improving patent quality by gathering public input in a structured, productive manner...

 pilot program. Only applicants that volunteer and sign a waiver will have their applications be part of the program. They must apply no later than one month after their applications are published. Those that do volunteer will have their applications examined right away. It is hoped that knowledgeable members of the public will review the applications and provide prior art and commentary to assist patent examiners in examining them. A Peer-to-Patent project is also running in Australia (see Peer-to-Patent Australia
Peer-to-Patent Australia
Peer-to-Patent Australia is an initiative designed to improve the patent examination process and the quality of issued patents by connecting the review of pending patents to an open network of experts online....



In the 8th edition of the International Patent Classification
International Patent Classification
The International Patent Classification is a hierarchical patent classification system created under the Strasbourg Agreement and updated on a regular basis by a Committee of Experts, consisting of representatives of the Contracting States of that Agreement with observers from other...

 (IPC), which entered into force on January 1, 2006, a special subclass has been created for business methods: "G06Q". In the previous editions, business methods were classified in "G06F17/60". This is purely a classification matter and will not change the patent laws however.

See also

  • Patentability
    Within the context of a national or multilateral body of law, an invention is patentable if it meets the relevant legal conditions to be granted a patent...

  • Software patent debate
    Software patent debate
    The software patent debate is the argument dealing with the extent to which it should be possible to patent software and computer-implemented inventions as a matter of public policy. Policy debate on software patents has been active for years. The opponents to software patents have gained more...

:Category:Computer-related patent law
  • State Street Bank v. Signature Financial Group
  • Decision T 931/95 (Pension Benefit Systems Partnership) of August 9, 2000 of the Boards of Appeal of the European Patent Office
    Appeal procedure before the European Patent Office
    Decisions of the first instances of the European Patent Office can be appealed, i.e. challenged, before the Boards of Appeal of the EPO, in a judicial procedure , as opposed to an administrative procedure. These boards act as the final instances in the granting and opposition procedures before the...

  • EBay v. MercExchange
  • Insurance patent
    Insurance patent
    Under some patent laws, patents may be obtained for insurance-related inventions. Historically, patents could only cover the technological aspects of a new insurance invention. This is still the case in most countries. In the United States, however, recent court decisions have encouraged more...

  • Public participation in patent examination
    Public participation in patent examination
    The involvement of the public in patent examination has been proposed and is currently used in some forms to help identifying relevant prior art and, more generally, to help assessing whether patent applications and inventions meet the requirements of patent law, such as novelty, inventive step or...

External links