Friday, May 27, 2016

Why It May Still Be Worthwhile to Try to Patent Your Business Method Invention

Since the 1980s, the U.S. Patent Office has been the leading pioneer in the world in enabling the patenting of business method inventions.  For over four decades, we have seen the many surprising twists and turns of U.S.-style business method patenting, from Merrill Lynch’s enforcement of its Cash Management Account patent against Paine-Webber in the early 1980s, to the wild-and-woolly patenting of ecommerce usages when the Internet went public in the 1990s, to the billion-dollar infringement lawsuits brought by investor-backed patent trolls in the 2000s, and to the public, political and judicial backlash against patenting of tax avoidance schemes, method for making enclosed peanut-butter-and-jelly sandwiches, and other fringe “inventions” in recent years.

All the while the U.S. Patent Office and the courts have struggled to keep up with the infinite creativity of patent applicants seeking to patent their new business ideas.  They have sought to define a bright line separating unpatentable “abstract ideas” from patentable uses of such ideas for “manipulation of a tangible machine or process” to enable “significant post-solution activity”.  Meanwhile both startups and giant technology companies alike have been whipsawed by the ever-more spurious semantic attempts of the Patent Office and the courts to define what are unpatentable "abstract ideas", resulting in ever-increasing challenges to patents that were otherwise obtainable under previous court interpretations.

Meanwhile, the patent offices and high courts in other countries have long clamped down on the patenting of business methods.  The European Patent Office and the Japanese Patent Office examiners stringently require that grantable patent claims define specific new “technical effects” for computer implementation of business methods.  The high courts in Canada and recently in Australia have invalidated business method patents which were interpreted as covering primarily abstract ideas.

However, it may still be worthwhile for an aspiring startup company to file a U.S. patent application on its business method invention.  First of all, an applicant is entitled under U.S. Patent Laws to give public notice that it has a “U.S. patent pending” upon filing a patent application, even a provisional application.  This can provide significant marketing advantage, as well as serve as a warning to competitors that copying your product or system may risk legal consequences if a patent is eventually granted.

Secondly, if a business method patent application is drafted with attention to the Patent Office and court pronouncements on how a patent application must disclose a specific, new technical implementation of a business method function, there is still a good chance of a patent being granted by the Patent Office and later being found valid by the courts.  Anecdotal surveys indicate that up to about 20% of business method patent applications are being granted, and statistics on patent litigation in the courts indicate a similar percentage being upheld as valid.  The percentages would be expected to be higher for patent applications that have been drafted to meet technical disclosure requirements more stringently.

Thirdly, a U.S. patent application (non-provisional) is required to be published by the U.S. Patent Office 18 months from its filing date, unless non-publication is specifically requested at the time of filing and all parallel foreign patent filing rights are waived.  Publication of your patent application at 18 months from filing, even if not later granted as a patent, serves as an official record of your invention claim, and becomes a prior art reference that can be cited to prevent any later-filed patent applications by others on the same or similar business method invention from being patented (anywhere in the world).

Lastly, as long as your patent application remains pending under examination at the U.S. Patent Office, it is a business asset that may be valued by a potential acquiring company or exclusive licensee.  While you may not have the budget to pursue patenting after initial rejections in examination, the acquiring company or licensee may have the budget to do so.  The filing date of your patent application is officially recognized by the U.S. Patent Office as your recorded date of invention, and as long as your patent application remains pending, any divisional, continuation, and/or improvement (continuation-in-part) patent applications related to your original invention that are filed by the patent owner are entitled to claim the invention priority date of your original filing date.  Under the U.S. patent system, the right to file divisional, continuation, or improvement applications is unlimited, and can be done up to a hypothetical patent term of 20 years from the original filing date.

In summary, there are significant business and tactical advantages that may make it worthwhile for a startup company to file for a U.S. patent application on its business method invention, despite the current chaos in the U.S. Patent Office and the courts on defining the legal parameters for patenting business method inventions.

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