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Elton Cane

Elton Cane - writer & tech geek

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Business practices no longer patentable in the US

31 October 2008  |  4376 views  |  4

This ruling is going to have a huge impact on the financial and software industries if it's not overturned on appeal (which I hope it isn't). Interesting to see that State Street Bank started the questionable process of patenting business practices. Personally I think it's a good thing to put these to the (common sense) test before the patent is granted.

Otherwise you end up with the blatantly ridiculous - like Bank of America trying to patent offshoring as a business concept.

Comments: (5)

A Finextra member | 31 October, 2008, 11:28

I don't agree with the suggestion that business practices should be tested based on common sense before being admitted as patentable. Most good ideas are based on common sense.

Business processes which are not transformable into software or claimed as software, I agree should not be patentable. In fact the ruling affirms this by stating the following : "We also note that the process claim at issue in this appeal is not, in any event, a software claim. Thus, the facts here would be largely unhelpful in illuminating the distinction between those software claims that are patent-eligible and those that are not not."

Then it goes on to say : "At present, however, and certainly for the present case, we see no need for such a departure and reaffirm that the machine-or- transformation test, properly applied, is the governing test for determining patent eligibility of a process under § 101."

To say that software will no longer be patentable will greatly stifle innovation. It is difficult enough to invest one's time to design, create and develop an innovative system. Because most of the time, even if this innovative creation is ideal, big businesses do tend to stifle innovation and competition by forcing the market to use their less adequate creations/systems.

So, just imagine if transformable business processes (i.e. systems/sofware) become unpatentable !

But thank you for pointing our this ruling. I read it and so far it does not worry me.

Elton Cane - writer & tech geek - Brisbane | 31 October, 2008, 23:26

Hi Marite - In referring to common sense, I didn't mean whether the idea itself was based on common sense or not. As you say, most of the best ideas are. I was actually suggesting that the patent office should use their common sense in judging the substance of patent applications - is there anything concretely new in the idea, and are there obvious and widely known instances of prior art.

A Finextra member | 01 November, 2008, 08:17

Hi Elton, actually it was the PTO that repeatedly rejected Bilski's patent application.

Bilski's patent claims are directed to a method of hedging the costs of a commodity (for example, electric and gas supply to a home). His method requires the steps of initiating transactions between consumers and a commodity provider (for example a gas and electric suppliers), identifying market participants for this commodity and initiating transactions between the commodity provider and the market participants.

PTO emphasized that Bilski's claims did not require a machine and did not transform anything, (including data). Bilksi stated that his process does not use a machine, but does require physical steps.

Therefore, in this case, the Appeals court applied the machine or transformable test and upheld the PTO's decision in rejecting Bilski's patent application.

Headlines of "Software Inventions, unpatentable" is terribly misleading. I suspect that many lawyers are sensationalizing this in order to prop up their services as well.

Clearly, the test applied in this case is simple: does the method require a machine and does it transform anything (any data)? The inventor himself responded 'no'.

Software requires machine and software does transform data. Now, I think that the 'common sense' that should be applied is this : "Will this business method work without software and machine?" If the answer is yes (which implies a purely manual process), then I agree that it should not be considered patentable.

For analysts or journalists to say that microsoft has lost a lot of its value because of this ruling is plain ridiculous. 

But the PTO, I believe, applied common sense in repeatedly rejecting Bilski's patent application.

Richard Self - University of Derby - Derby | 05 November, 2008, 21:33

There is a wider issue here which is the question of why the US ever allowed software and business processes to be patented, when any written material, including software, has always been covered by copyright law (at least in the UK and Europe) and copyright law provides much longer protection of the "work".

Being based on the "sweat of the brow" test, copyright actually encourages innovation by allowing people to find and implement better ways to do the task by re-engineering, re-writing and re-implementing the software, whereas the patent approach actually stifles innovation once a patent of a "concept" has been granted.

A Finextra member | 06 November, 2008, 12:03


Richard Self said : "whereas the patent approach actually stifles innovation once a patent of a "concept" has been granted."

Not all 'concepts' are patentable. The Bilski's case shows this.

Richard also said : "There is a wider issue here which is the question of why the US ever allowed software and business processes to be patented, when any written material, including software, has always been covered by copyright law (at least in the UK and Europe) and copyright law provides much longer protection of the "work"."

Functional elements of software are not protected by copyright, but expression of those ideas – the code – is protectable. Therefore, it would be easy for anyone to provide a different expression of these functional elements to bypass a copyright issue. 


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