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Patent - Business Method Patents - Part I
from: Michael RussellIn this first of a series of articles we're going to discuss a
specific type of patent called a business method patent.
If a company develops a new method for conducting an e-commerce
business they may be able to prevent other companies from using
this method for almost twenty years.
The truth is, since 1998 an increasing number of software and
Internet companies have been issued patents for designing new
ways of doing business. Examples would be new online ordering
processes or a unique Internet advertising method. These kind of
patents which are usually the combination of software and
business methods are called business method patents or Internet
patents.
The reason these patents are important is because a company that
develops such a patent can keep other companies from using these
business methods for 17 years. And if the owner wants, he can
make additional money from the patent by licensing out to other
companies. If there is a large enough market, the company may
make more money from the licenses than from the patent itself.
A very good example of a business method patent is Amazon.com's
1-click payment method. This system allows a customer to bypass
the traditional address and credit card forms as long as the
customer has an account with Amazon. After clicking on the
payment button the order automatically goes through. This patent
was granted to Amazon.com in September 1999. The patent number
is U.S. Pat No. 5,960,411.
Business method patents are actually a part of a larger family
of patents called utility patents. These protect inventions,
chemical formulas, processes and other discoveries. A business
method is technically classified as a process. The reason is
because it is not a physical object like a machine or some form
of chemical compound.
During most of the last century the patent office issued very
few business method patents. The reason for this is that they
claimed that a process could not be patented if it was an
abstract idea. The same thing was also said about software
because software was said to be unpredictable algorithms.
That all changed in 1998. In July of that year a federal court
upheld a patent for a method of calculating the net asset value
of mutual funds. The court ruled that patent laws were intended
to protect any method regardless of what it was, even an idea.
As long as it produced a useful, concrete and tangible result.
With this ruling the court made idea and software patents a
reality again. After this ruling, business method patents
increased by 40%. Also, that year, the U.S. Patent and Trademark
Office created a new classification for business method patents.
The classification is stated as "Data processing: financial,
business practice, management or cost/price determination."
Many patents since this time have been issued for online
shopping programs, Amazon's 1-click being the best example.
However, because of the gray area of these patents, not having a
physical product, an additional layer of review was added to the
patent determination process. Technology specialists have been
hired specifically to review these type of patent applications.
In the next article in this series we're going to discuss how to
go about applying for a business method patent.
About the author:
Michael Russell
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