Business methods and processes
Patenting ways of doing business online.
Learning Objectives
- Define a business method patent.
- Explain the State Street Bank decision and its significance.
- Identify examples of business method patents.
- Recognise the controversy around business method patents.
Explanation
A business method patent protects a specific way of doing business online — like Amazon's one-click checkout. Since 1998, such methods have been patentable in the US, though critics argue they grant monopolies on basic commercial ideas.
Business method patents protect specific ways of doing business online. They extend patent protection — traditionally limited to machines, products, compositions, and processes — to methods of conducting commercial transactions, particularly on the Internet. Amazon's one-click purchasing and Priceline's Name Your Own Price are classic examples of business method patents.
The pivotal case was the 1998 State Street Bank decision, in which the U.S. Court of Appeals for the Federal Circuit held that business methods are patentable, overturning the longstanding 'business method exception' that had excluded them. After State Street, the USPTO began granting thousands of business method patents, particularly for e-commerce and financial services processes.
Amazon's patent on one-click purchasing is the iconic example: it caused Barnes & Noble to invent a simplified two-click method of purchasing to avoid infringement. This illustrates both how business method patents work and how they can encourage alternative implementations — but also how they can be used to stifle competitors.
Business method patents remain controversial. Critics argue they grant broad monopolies on basic commercial ideas that should be available to all, that they are often granted for 'obvious' methods that should not meet the nonobvious requirement, and that they can stifle innovation in e-commerce. The 2014 Supreme Court decision in Alice Corp. v. CLS Bank tightened the standard, making it harder to patent abstract business methods implemented on a computer.
Key Points & Important Terms
Key Points
- •Business method patents protect ways of doing business online.
- •1998 State Street Bank decision made business methods patentable.
- •Amazon one-click and Priceline Name Your Own Price are examples.
- •Patents can encourage alternative implementations (Amazon → Barnes & Noble two-click).
- •Controversial: critics say they grant monopolies on basic commercial ideas.
- •2014 Alice Corp. decision tightened the standard for abstract methods.
Important Terms
- Business method patent
- A patent protecting a specific way of doing business online.
- State Street Bank decision (1998)
- The Federal Circuit ruling that business methods are patentable, removing the business method exception.
- Business method exception
- The pre-1998 doctrine excluding business methods from patentability.
- Alice Corp. v. CLS Bank (2014)
- Supreme Court decision tightening the standard for patenting abstract business methods on a computer.
- One-click patent
- Amazon's business method patent on single-click purchasing.