ABA Section of Business Law

Intellectual Property Section comments on patenting business methods

The ABA Section of Intellectual Property Law passed a resolution in June opposing any amendment or interpretation of Section 101 of Title 35 of the U.S. Code that excludes business methods from the class of statutory subject matter for patents. The Section’s Committee 757, Special Committee on Patents and the Internet, initiated the resolution.

The resolution was proposed in view of predicted congressional activity prompted by outspoken critics of the State Street decision. Those predictions were recently proved to be accurate when the Business Methods Patent Improvements Act (HR 5364) was introduced in Congress in October.

However, since the limitations proposed by that legislation were not aimed directly at amending Section 101, the committee is currently considering additional resolutions aimed at preventing Congress from overreacting to unsubstantiated rhetoric and creating additional uncertainties and needless overreaching complexities in this emerging area.

According to the committee, there is every reason to believe that business methods patents will fulfill the goal of the U.S. patent system to stimulate and support innovation and commerce. The system is designed to permit and encourage patent protection over an extremely broad range of innovations as a way of promoting the development and disclosure of new technology. Any attempt to proscribe protection for business methods inventions would be at odds with the goals of the system, and would ultimately be detrimental to the economy.

It is important to recognize that the Federal Circuit did not conclude in State Street that business methods inventions had suddenly become patentable subject matter. Instead, the court simply confirmed that there has never been any basis in U.S. patent law to suggest that such inventions cannot be patented.

The recent surge in patent application filings in the area of "business" process inventions thus cannot be attributed to a fundamental change in the patent law. Instead, this dramatic increase in filings is principally attributable to the enormous growth of innovative activity in business methods, largely because of the new business paradigms available in the e-commerce world.

The Federal Circuit stated further that since at least as early as the 1952 Patent Act, "business methods have been, and should have been, subject to the same legal requirements for patentability as applied to any other process or method." The Federal Circuit noted that neither it nor its predecessor court, the CCPA, has ever deemed an invention as unpatentable under any business methods exception. Accordingly, in State Street , the Federal Circuit put to rest this "ill-conceived exception" to patentability. Furthermore, the PTO had already abandoned the business methods rejection well before the State Street decision in view of difficulties in properly treating such claims. Indeed, properly defining the term "business method" may be a virtually impossible task.

The patent bar was not very upset by the State Street and Excel decisions since they were largely expected in view of numerous preceding court decisions. Potential congressional overreactions to those decisions, however, as stirred up by the overly critical popular press and academia, have definitely caused concerns. Since business methods are normally represented in technology, as admitted by one academic critic, a reduction in incentive to develop one will likely reduce the incentive to develop the other. Such a threat to the U.S. economy should not be tolerated, regardless of whose turf any proposed legislation affects.

— Jeffrey R. Kuester, Atlanta

Chair, Special Committee on Patents and the Internet

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