USA / PATENTS / BUSINESS METHOD PATENTS

Santa Barbara Computer and Higher Technology Law Journal, Vol 16 No 2, 2000

Are Business Method Patents bad for business?

Rochelle Cooper Dreyfus

This article is critical of the State Street judgment. "Think how the airline industry might now be structured if the first company to offer frequent flyer miles had enjoyed the sole right to award them or how differently mergers and acquisitions would be financed … if the use of junk bonds had been protected by patent." The author is one of the growing number who believe that "the trend towards expanding [intellectual property] protection deserves attention" and takes the view that the advent of business method patenting deserves the most attention of all. There is a useful reminder that the patent in the State Street case involved a "data processing system for hub and spoke financial services configurations". Since the invention in the case produced basically numbers rather than goods or material processes, it could be argued that it was more akin to an algorithm than to a patentable invention. But the Court thought otherwise. As a result, two factors had been put in question: the first concerned the quality of the business patterns themselves; the second concerned the wisdom of recognising exclusivity in competitive processes. As to quality, the author considers known or "mundane" business inventions; the loyalty or "stickiness" factor; the subjective quality of court decisions. As to wisdom, the author doubts whether the free rider argument or the disclosure rationale holds good for business method patents: the costs of business methods patents are high, the benefits low. The author concludes that the main reason for the increase in business method applications was that the court's ruling in Freeman-Walter-Abele made patent eligibility for software turn on placing the program into the context of a process. Now that the subject matter argument can be met by generating numbers which produce useful, concrete and tangible results, there is no longer a need for this economically unwise legal fiction. [20038]