Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 17

Should the Law Continue to Allow Business Process Patents?
At one time, it was difficult for developers and manufacturers of software to obtain patent protection because many software products simply automate procedures that can be performed manually. In other words, it was thought that computer programs did not meet the "novel" and "not obvious" requirements for patents. This changed in 1981 when the United States Supreme Court held that a patent could be obtained for a process that incorporates a computer program.Then, in a landmark 1998 case, State Street Bank Trust Co. v. Signature Financial Group, Inc., a federal appellate court ruled that business processes are patentable.
Skyrocketing Demand
After the State Street case, numerous firms applied for and received patents on business processes or methods. Walker Digital obtained a business process patent for its "Dutch auction" system, which allows Priceline.com users to name their own price for airline tickets and hotels. Amazon.com patented its "one-click" online payment system. The U.S. Patent and Trademark Office (USPTO) has issued thousands of business process patents, and many more applications are clogging its system. These applications frequently involve ideas about a business process, blurring the distinction between ideas (which are not patentable) and processes (which are). In addition, because business process patents often involve fields that provide services, such as accounting and finance, determining when a process originated or who first developed it can be difficult. Consequently, business process patents are more likely to lead to litigation than patents on tangible inventions, such as machines.
The In re Bilski Decision Significantly
Limits Business Process Patents
In 2008, the same court that decided the State Street case made it more difficult to obtain patents for business processes when it reversed its earlier decision and invalidated "pure" business process patents. In the In re Bilski case, two men had applied for a patent for a process that uses transactions to hedge the risk in commodity trading. The USPTO denied their application because it was not limited to a particular machine and did not describe any method for working out which transactions to perform. The men appealed.
After soliciting input from numerous interest groups, the appellate court established a new test for business process patents. A business process patent is valid only if the process (1) is carried out by a particular machine or apparatus or (2) transforms a particular article into a different state or object. Because the men's process did not meet the machine-or-transformation test, the court affirmed the USPTO's decision.
One of the dissenting judges in the Bilski case, Judge Haldane Robert Mayer, would have done away with business process patents altogether. He lamented that "the patent system is intended to protect and promote advances in science and technology, not ideas about how to structure commercial transactions." In Mayer's view, these patents "do not promote 'useful arts' because they are not directed to any technological or scientific innovation." Although they may use technology, such as computers, the creative part of business methods is in the thought process rather than the technology.
FOR CRITICAL ANALYSIS
Some patent experts think that the Bilski decision, and sentiments such as those expressed by Judge Mayer, may signal an end to all business process patents in the near future. Should business process patents be severely limited or eliminated? Why or why not?