Ten years later, court does mulligan and rejects “business process” patents

October 30, 2008 | Eric Eldon

Thousands of patents that cover business models and software are likely headed into history’s dustbin, per a ruling today by the Court of Appeals for the Federal Circuit. Specifically, the court rejected an appeal by the founders of a company called WeatherWise — they had been trying to patent a method of managing risk associated with sudden changes in energy costs, based on existing methods used by utility companies.

When one entity holds a process patent, such as Priceline’s “Name Your Price” feature, it can force all other companies that want to use the same idea to pay up.

The ruling clarified what types of patents the court found eligible: “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” Ten years ago, the same court had ruled that a “useful, concrete, and tangible result” also signified that a concept could be patented. This opened the floodgates. As researchers later showed, the result was a 3000 percent increase in the number of business method patents between 1995 and 2001.

Today, the court specified that its decision could change in the future as new technologies warranted. This case could also still go to the Supreme Court, although the common sentiment among patent experts appears to be that the decision will stand.

[Mulligan image via Allposters]

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About the Author, Eric Eldon

Eric currently covers digital media technology and business, especially what's happening on social networks and their platforms. He writes and edits stories about lots of other stuff, too. He started at VentureBeat in the spring of 2007, half a year or so after Matt Marshall left his reporting job at the San Jose Mercury News to found the site. Eric previously cofounded a now-failed startup called Writewith, that was building editorial software for newspapers and other groups of writers.

  • Bob,

    You are correct that the court does not reconsider State Street but I think you can get where all of this may be going:

    MAYER, Circuit Judge, dissenting:

    The en banc order in this case asked: “Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case and, if so, whether those cases should be overruled in any respect?” I would answer that question with an emphatic “yes.” The patent system is intended to protect and promote advances in science and technology, not ideas about how to structure commercial transactions. Claim 1 of the application of Bernard L. Bilski and Rand A. Warsaw (“Bilski”) is not eligible for patent protection because it is directed to a method of conducting business. Affording patent protection to business methods lacks constitutional and statutory support, serves to hinder rather than promote innovation and usurps that which rightfully belongs in the public domain. State Street and AT&T should be overruled.

    Oh, and by the way Bob, your an ass.
    ("It is just this sort of drivel that makes me laugh whenever I read a non-lawyer opine on legal decisions.")

    Michael
  • Michael

    As a technology entrepreneur looking for clarity, for me Mayer's quote adds confusion. 'The patent system is intended to protect and promote advances in science and technology, not ideas about how to structure commercial transactions.'
    The fundamental problem has been that on one hand the patent system does not protect abstract ideas (algorithms) but it wants to protect some processes, where often the meat is in the process logic (the algorithm). To separate a patentable process from an unpatentable abstract idea, the courts have sought to identify some anchor of tangibility. The ruling has reinforced this tangibility notion with (1) a particular machine, (2) a particular article. That is a step towards clarity.
    Is Mayer distinguishing commercial from scientific/technical applications? Are not scientific/technical applications a superset, encompassing commercial applications?

    Riaz
  • Do you think this could effect Amazon's "one click" patent? I would argue that "one click" is a process and not a technology and I can remember myself and my e commerce industry peers being in disbelief when it was granted.
  • Crap! Huge!
    This opens the landscape and REALLY devalues startups that try and sell their "unfair advantage" as patent related.

    Ought to be a Fun year!!!

    Michael Kassing
    MarkTend.com
  • Bob
    Will you mainstream journalists please talk to a patent professionals before you publish this rubbish. The decision did not, and I repeat did not, invalidate business method patents. It did not overturn State Street which very specifically said that business methods are not excluded from patent protection. It is just this sort of drivel that makes me laugh whenever I read a non-lawyer opine on legal decisions. Get out of the way, let us figure out what this really means and stop riling the masses.
  • Woah, Bob. Read the article again. I had qualified myself on the points you mentioned.
  • Bob, that was tough love right there. Your wish was my command:

    http://venturebeat.com/2008/10/31/patent-lawyer...
  • I think the points are qualified enough to show that this decision isn't doing anything to even reduce the growing backlog of patent applications. I know that this argument skews the direction of the article but I would really like to hear more than laughing from a real lawyer. What have you "figured out" so far about this process Bob? I am out of the way and interested to learn more about the real process versus what I have been reading.