Still Aiming at the Wrong Target: A Case for Business Method and Software Patents from a Business Perspective

In Part I, I briefly discuss the rise and recent fall of business method patents. Part II covers the scholarly literature discussing business method and software patents. In Part III, I explain the proxy argument that I have made elsewhere and show how it plays in the recent decisions surrounding the patent eligibility of business method and software inventions. I then explain why the analysis of business method and software patents in the literature uses the same proxy-type arguments to avoid more difficult questions of patentability and policy. Finally, I conclude by explaining how business method and software patents, if administered properly, are actually good for business

Business method patents and U.S. financial services

A decade after the State Street decision, more than 1,000 business method patents are granted each year. Yet only one in ten are obtained by a financial institution. Most business method patents are also software patents. ; Have these patents increased innovation in financial services? To address this question the author constructs new indicators of R&D intensity based on the occupational composition of financial industries. The financial sector appears more research intensive than official statistics would suggest but less than the private economy taken as a whole. There is considerable variation across industries but little apparent trend. There does not appear to be an obvious effect from business method patents on the sector’s research intensity. ; This working paper supersedes Working Paper No. 07-21 and Payment Cards Center Discussion Paper No. 07-10 ; Also issued as Payment Cards Center Discussion Paper No. 08-05Patents ; Financial services industry

Business and financial method patents, innovation, and policy

Two court decisions in the 1990s are widely viewed as having opened the door to a flood of business method and financial patents at the US Patent and Trademark Office, and to have also impacted other patent offices around the world. A number of scholars, both legal and economic, have critiqued both the quality of these patents and the decisions themselves. This paper reviews the history of business method and financial patents briefly and then explores what economists know about the relationship between the patent system and innovation, in order to draw some tentative conclusions about their likely impact. It concludes by finding some consensus in the literature about the problems associated with this particular expansion of patentable subject matter, highlighting the remaining areas of disagreement, and reviewing the various policy recommendations.intellectual property, State Street, software, internet, business methods, patents, innovation

Controlling Business Method Patents: How the Japanese Standard for Patenting Software Could Bring Reasonable Limitations to Business Method Patents in the United States

In recent years, the United States has expanded the scope of subject matter that can be patented. The Court of Appeals for the Federal Circuit has evolved a standard that allows inventors to patent software as long as it produces a useful and tangible result. Japan has also expanded the scope of patentable subject matter, but in a more limited fashion. Under the Japanese standard, the Japan Patent Office will only grant a patent to software inventions that apply a law of nature. The U.S. standard is too generous in allowing patents on software and business methods. Business method patents, in particular, are problematic because they are not consistent with the goals of patents and because they stray from the focus on granting patents to technology. Software patents, however, should not be overly limited because software is an area of technology and because software patents provide value to innovative parts of the economy. The United States should change its standard for determining whether an invention claims patentable subject matter by incorporating the Japanese standard. Under this standard, software inventions that control an apparatus or that work based on physical properties are considered patentable subject matter. Software inventions that do not meet this requirement will only be considered patentable subject matter if they show information processing performed by software as it is implemented in hardware. This standard would put limits on business method patents, including requiring that they be technological, while not overly limiting useful software patents. In addition, incorporating the Japanese standard would help the cause of patent law harmonization. Patentability of software has been a stumbling block for negotiations to harmonize patent law world-wide, but unilateral action in this area would improve the chances of countries agreeing to substantive patent law harmonization

Patents and the Survival of Internet-related IPOs

We examine the effect of patenting on the survival prospects of 356 internet-related firms that IPO'd at the height of the stock market bubble of the late 1990s. By March 2005, nearly 2/3 of these firms had delisted from the NASDAQ exchange. Although changes in the legal environment in the US in the 1990s made it much easier to obtain patents on software and, ultimately, on business methods, less than half of the firms in this sample obtained, or attempted to obtain, patents. For those that did, we hypothesize that patents conferred competitive advantages that translate into higher probability of survival, though they may also simply be a signal of firm quality. Controlling for age, venture-capital backing, financial characteristics, and stock market conditions, patenting is positively associated with survival. Quite different processes appear to govern exit via acquisition compared to exit via delisting from the exchange due to business failure. Firms that applied for more patents were less likely to be acquired, though obtaining unusually highly cited patents may make them more attractive acquisition target. These findings do not hold for business method patents, which do not appear to confer a survival advantage.

Alice-Backed Securitization: Start-Ups’ New Alternative to Venture Capital, 16 J. Marshall Rev. Intell. Prop. L. 246 (2017)

As of 2016, the United States software industry added $1.07 trillion in total value to the U.S. economy alone. Today, it’s no mystery that high-tech solutions are embedded in the fabric of our world. Venture Capital has been the dominant source of funding for startup and midsize high-tech firms for the last two decades. However, Venture Capital funding comes at a hefty cost. Young developing high-tech firms are often forced to bargain large shares of their ownership and managerial control to receive the funding they need to realize their potential. But, what if high-tech firms didn’t have to make such a sacrifice? What if these firms could keep their ownership and receive the financing they need? A potential solution lies in their most valuable assets—business method patents. Business method patentability, as it pertains to software and high-tech patents, has been restrained by a high degree of uncertainty surrounding claim validity. In 2014, the United States Supreme Court finally set forth the legal framework to determine whether a software patent is valid under the U.S. patent laws in the case of Alice Corp. Pty. Ltd. v. CLS Bank Int’l. This case was the final piece needed to develop reliance on the validity of business method patents. This comment argues that the uncertainty surrounding business method patents’ legality has settled and in turn unique opportunities are available to business method patent holders who seek alternative financing solutions

A Resource Based View of Business Method Patents

In recent years, patents have become widely popular for protecting software-based business methods. However, the IS literature has yet to consider the potential influence of patents in the IS-firm performance relationship. At the same time, the resource-based view (RBV) of the firm has proven to be a useful lens through which to examine the IS-firm performance relationship. In organizational strategy literature, various measures of patents are frequently utilized as proxies for components of the RBV or as the dependent variable in RBV studies. Following in this vein, the purpose of the current study is to examine whether software-based business method patents fit the definitions prescribed in the RBV and if such patents can be empirically connected to a firm’s performance

The international law of business method patents

Before the landmark State Street case in 1998, the courts and the U.S. Patent and Trademark Office (USPTO) had often denied patents to inventions that were no more than methods of doing business. But State Street swept away three decades of complex, inconsistent case law, firmly establishing the patentability of business methods and computer software. ; This article reviews the current state of U.S. and international patent law with respect to business methods. After outlining the basic U.S. and international requirements for patentability, the author describes the evolution and current state of both American law and international law, particularly in the European Union, various European countries, and Japan. ; After reviewing a number of case histories, the author argues that the differences between U.S. and international law that appear so striking in theory are probably less profound in practice. While the American patent system has seemingly become more lenient in granting business method patents, the USPTO has taken steps to scrutinize such patents more rigorously on certain grounds. In contrast, Europe and Japan, which have apparently more rigorous business method patent standards than the United States does, may in practice be somewhat more liberal than their policies would indicate. ; Eventually, the author predicts, U.S. and international business method patent standards will converge, with the United States being more permissive in theory but more demanding in practice and Europe and Japan displaying the opposite tendency.Patents ; Financial services industry