How is it Possible to Patent a Business Model?

Business Model

The well-known lawsuit over Amazon’s patent on its one-click shopping feature and another one of Priceline’s patent over its reverse auctions have prompted the notion of patenting the business methods into the public eye. Though, it is not a recent phenomenon; many businesses have been doing the same. Some companies have patented the way they offer airline tickets to their customers and how they handle the money market account. But in the current era, which is led by technological inventions and information economy, and where business models have been relying on the digital code, the need to use the patent as a weapon has escalated. But before that, it is crucial to file provisional patent for any particular business processes that you may deem unique. 

This has given impetus to controversies as well. To dig deep on that, let’s look into Andrea Ovans’ (from HBR) interview with Todd Dickinson (director of U.S. patent and trademark office) on business patents’ realities and myths.

What composes the patentable business model?

We differentiate the business model, that is a common strategy or vision, and a business method, that is a modus operandi of the business (a particular way of doing business). Legally, there is a 4-part test for a business method’s patentability, as the case is the same for any other inventions. The modus operandi of the business has to be useful and also it has to be new. It should not be incremental that it will be evident to a skilled practitioner. While applying, the revelation of the innovation should be complete so that fellow practitioners can comprehend it.

Why are we currently witnessing the hurtle to patent business methods?

There are a couple of reasons for that. The first one is the court’s opinion on State street bank VS Signature financial that was delivered about two years ago, that specifically ruled that software that maintains the business methods is allowed to be patented as long as it produces some useful, concrete, and tangible fruition. This has led them to believe that they can patent software-based business methods. Simultaneously, there has been a spike in the software patents of all the types; the accessibility of the internet basically drives that. To put it simply, Todd said they have issued 161000 patents last year from which almost 600 were of software-related business methods. And he expects to issue another 1000 this year as well.

Is it possible that patenting business methods would diminish the rate of innovation?

This is not the first time that such type of arguments has been brought to the fore. Some of them were brought into the chemical industry when companies applied for patents on several copolymers and monomers. And they were put forward in relation to patenting any type of software at all. But in all such cases, innovations and inventions of the general industry eventually intensified.

If you innovated something, patent ASAP as it stays valid for 20 years from the date of application submission. But then owners of the patent should publicly disclose their inventions, which gives other people some idea to build on it. This would give entrepreneurs and small companies some elbow room with large, multinational, and powerful business concerns instead of another way around.

What about the grievances related to companies obtaining patents for business methods that are inherently not new?

The patent office would not grant a patent to the old business methods. Our job is to identify the piece of evidence against the existing methods, what the patent office calls prior art to assure that will not occur. We possess a plethora of software prior art in a diverse discipline, consisting of business and persistently trying to expand the collection. We arranged a hearing to ensure that we were obtaining access to prior art outside of patent procedure, specifically concerning the software.

In the past, people said that prior art was not available when a flurry of software was launched. We do not possess an inclusive and comprehensive database, such as a one-stop-shop of prior art for software that composes business methods, as we often do in other domains. For instance, in chemistry, Chem abstracts are there, and in the medical field, Medline is there. If someone out there develops that, then that would be great work. But it is crucial to keep in mind that applicants are legally obliged to reveal all the relevant prior art themselves. If they neglect it, then there is a risk of invalidation of their patent from the authority.