RIP, Lame Business Process Patents
Savor it: A U.S. Federal Appeals Court just invalidated all business process patents, and it looks like the decision is going to stick. It’s not clear yet how far-reaching this decision will be, or it whether it will have retroactive impact on existing business process patents, but it’s reason to celebrate regardless.
I remember drafting a business process patent, back during the first dot-com boom. It was a for an adaptive system that would reliably strip people’s purchase information from receipts that got over email. It was profitable, maybe, and definitely a little evil. But also seemed quite obvious. I actually asked my boss, “Are we seriously going to get this patent approved?”
“Probably,” he said, “but the point is to create a barrier to entry with the chilling effect, and to create speculative value in case of an acquisition.” I’m paraphrasing, but the point is that this was a patent that rewarded the investment of lawyers, not inventors. It didn’t represent true value, except as a defensive weapon against competitors.
This kind of business practice that later brought me to do an internship at the EFF and get obsessed with intellectual property law reform. The fact is, though, this was the norm at the time. There were a number of court rulings in the 80’s and 90’s that opened the door to a lot of business process patents (e.g. Amazon’s notorious “one-click shopping.”) That legal environment fueled the speculative bubble in the tech industry that blew up on us in 2002. There’s a lot of good history on this subject in [this article by Roger Parloff].(http://legalpad.blogs.fortune.cnn.com/2008/02/28/ending-software-patents-has-the-time-come/)
In any case, this expansion of the scope of patents all occurred in lower courts; the Supreme Court never ruled directly on these issues. In the last couple years, however, SCOTUS has made a number of rulings signaling its displeasure with how badly the patent regime had screwed up the business environment in Silicon Valley, clogging the courts with unnecessary patent cases.
So it may not be a surprise to some, but I’m shocked that we’re actually seeing the tide turning back against business process patents, re-establishing a more balanced regime.
Interestingly, Lessig hasn’t blogged about this yet, but I imagine he’s doing a little jig somewhere, too.
Here are some more details on the ruling, from the first article I linked to:
The Federal Circuit said software and business methods are still patentable but rejected standards set in a 1998 decision that allowed patents on “methods” of doing business so long as the methods involved use of a computer and produced a “useful, concrete and tangible result.” That decision opened the door for patents that had no connection to technological innovation.
“[W]hile looking for ‘a useful, concrete and tangible result’ may in many instances provide useful indications of whether a claim is drawn to a fundamental principle or a practical application of such a principle, that inquiry is insufficient to determine whether a claim is patent-eligible,” the court ruled in the Bilski case.
The decision added, “And it was certainly never intended to supplant the Supreme Court’s test. Therefore, we also conclude that the useful, concrete and tangible result inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply.”


