Are Business Method Patents Any Good?

Are Business Method Patents Any Good?

by Jeffrey R. Kuester

Mr. Kuester ( is a partner with the patent, copyright and trademark law firm of Thomas, Kayden, Horstemeyer & Risley, LLP ( in Atlanta, Georgia. This article was originally published in the August 2000 issue of Patent Strategy & Management.

At the PTO Roundtable on Business Method Patents held in Crystal City on July 27, the question of whether business method patents are any good was not primarily whether they are good for our country, economy or patent system. Accused infringers certainly never think the asserted patents are good for anything but extortion. Nor was there any question that patents are becoming even more important to venture capitalists evaluating new e-commerce business models, as well as to stockholders in established companies with vast untapped intellectual capital. Rather, the main question was whether the PTO is handing out too many invalid business method patents.

This and related questions were discussed by myself and about 20 others, including PTO leader Q. Todd Dickinson, as part of a day-long panel discussion before over 200 attendees. The Roundtable was one of the initiatives announced by the PTO in its Business Method Patent Initiative, which was a response to many who questioned the business method phenomenon.

PTO Measures
The PTO is adopting a number of measures to improve the quality of business method patents:

* The PTO is aggressively recruiting examiners with dual degrees, particularly those with MBAs.
* The second level review process for business method patents is proceeding as expected, with approximately 250 applications having received a second level of review at this point. (Since business method applications may have a more difficult examination, applicants are well advised to draft at least one set of claims that is focused on the technology underlying the business method.)
* The PTO will be considering two new proposals for receiving assistance from the public. One proposal included instituting a bounty system whereby the PTO would pay a bounty, using additional applicant fees, to any party that produced evidence that a patent was invalid. While the bounty could be on the order of $3,000, a bounty on the order of $250 would reduce the number of mere nuisance challenges.
* Another suggestion was that the PTO generate a web page for each published application so that the public can identify prior art during the examination stage. The PTO expects approximately 80 percent of applications to be published when the new publication law takes effect after November 29th. While the PTO cannot adopt an opposition proceeding based upon the published application, the PTO will nevertheless determine whether such a web page program for prior art identification would be possible.

More generally, the PTO is adding databases and resources to help its examiners properly reject unworthy applications. Even further measures could be taken if it were not for Congress's diversion of PTO fees (the only unanimously applauded point of discussion during the Roundtable). For example, in recognition that court decisions rarely involve anything but the closest cases, it was suggested that the PTO consider some sort of post-issuance study to estimate what percentage of non-litigated patents are invalid. In view of its expense, however, such a study seems unlikely. On a larger note, with the red hot economy and the e-commerce explosion pulling at most of the talented potential examiners, the PTO needs all the help it can get to find and retain quality examiners.

Overblown Problem
The true scope of a business method patent is usually exaggerated. For example, I was once asked whether the "one-click" Amazon patent covered clicking once to do anything on a computer. Press accounts of patent invalidity are similarly overblown. In fact, in the business methods class 705, only 57 percent of applications issue as patents, compared to a 67 percent issuance rate for all patents combined. This suggests that business method patents actually have a higher chance of being valid.

Other evidence that the rate of patent invalidity is not rising is that the rate of reexamination is not rising. At least a slight increase in the use of reexamination is expected if there really was a large increase in the number of invalid patents, especially since reexamination is so much cheaper than full scale litigation.

Congress followed the Federal Circuit's direction in State Street by recognizing the validity of business method patents in the American Inventors Protection Act. Nevertheless, the fact that there were strong lobbying forces behind the prior user defense for business methods means that the long-term existence of business method patents is not guaranteed. Those of us who believe valid business method patents have their place in our system, therefore, must remain vigilant.