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Internet Patents

Prior to 1998, patents were limited to things and methods for making or using things. On July 23, 1998, everything changed. That is the date the United States Court of Appeals for the Federal Circuit, the de facto “Patent Supreme Court,” ruled in their State Street decision that a computer program may be patented. Now computer programs had been patented before, but only to the extent they manipulated something in the physical world: shut off a light, started a washing machine, or started a nuclear war. It was generally thought that methods of doing business were not protectable under existing patent laws. Under this new decision computer programs are patentable, even if all they do is manipulate numbers. This ruling not only applies to thousands of new computer programs, but also to thousands of methods of doing business online as well.

Subsequent to the State Street decision, business entities throughout the world have filed thousands of “business method” applications relating to Internet commerce. These filers hope to obtain exclusive rights to certain types of online transactions. Some of the most notable online business method patents include those issued to for secure credit card processing, for reverse auctions, Lycos for its spider technology, and Cybergold for paying individuals to examine advertisements. As a result of the landmark State Street decision, the United States Patent and Trademark Office identified several problems with its existing patent application review process.

Typically, if an inventor files a patent application on a novel mousetrap, the Examiner accesses the mousetrap patent file and compares the new application against the existing technology. The problem associated with business method applications is that, prior to 1998, no such applications were allowed. When an Examiner received a patent application for such a business method the Examiner attempted to access the associated business method patent file only to find, not surprisingly that the file was empty.

The empty file did not mean that the idea had never been practiced, only that there were no patents covering it or anything like it prior to 1998. Since the Patent Office had not adopted an efficient process to examine existing technology outside of the Patent Office, many such applications were summarily allowed. This included patents covering combinations of elements that had been in the public domain for many years.

In an attempt to address the problem of business method applications issuing on public domain materials, the United States Patent and Trademark Office has now adopted new protocols to more thoroughly examine such applications. These protocols appear to be eliminating the issuance of overly broad Internet related patents. They have not, however, retroactively eliminated any erroneously granted “overbroad” Internet patents. Additionally, these new protocols are slow and costly.

Unfortunately, for many information technology related businesses, these new protocols have proven too expensive and time consuming. Either the business runs out of money before the process is completed, or the patent fails to issue before the technology is outdated. The United States Patent and Trademark Office is working to correct these deficiencies, but it is unlikely the process will be streamlined anytime soon.

If you have a business method you wish to protect, all is not lost. Even if your patent application gets bogged down in the Patent Office for several years or even if the Patent Office eventually denies your patent application, you still have a safe bet of maintaining patent pending status for several years. Depending on how you file your patent application, it is possible to keep the filing date and the contents of the patent application confidential.

Confidential filing makes it difficult for competitors to determine if your pending patent will issue tomorrow, or three years from now. This uncertainty may be just enough to slow down a competitor or deter the competitor from entering the market altogether. Business method patents can be very beneficial; they just require a little extra analysis to determine whether the potentially larger benefits outweigh the extra time and costs involved.

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