Recent developments in U.S. patent law have dramatically widened the scope of patentability of business methods. In 1998, in State Street Bank & Trust Co. v. Signature Financial Group n1, the Federal Circuit dispelled a long standing misconception that business methods are mere abstract ideas that are unpatentable. The Federal Circuit in State Street Bank and a subsequent case in AT&T Corp. v. Excel Communications, Inc. n2 declared that business methods are proper patentable subject matter n3 so long as the method produced a useful result n4. Not surprisingly, these two cases have opened a floodgate for companies to seek patent protection for new business methods. According to the U.S. Patent and Trademark Office ("PTO"), the number of applications filed in class 705, which is the principal class for classifying business method applications, has exploded from 927 in 1997 to over 8700 in 2001 although the number has come down to about 5000 in year 2002.

The term "business method" is broadly defined as a method or certain aspect of operating a business. Although the definition may be fairly straight forward, it may be difficult to recognize a potentially patentable business method. This is because business method patents typically come from departments that are not traditionally thought of as generating patentable ideas such as a marketing, finance or sales department. Another reason may be a popular belief that only business methods that are implemented in software can be patented. While many do, there are "pure" business method patents that do not require software implementation. For these reasons, potentially patentable business methods are often overlooked even though they can be very valuable.

To assist the reader in recognizing a potentially patentable business method and the value of patenting such a method, this article discusses five business method patents that have issued from the PTO in diverse fields. For each patent, patentable features as well as a representative "claim", which defines the scope of the invention, are discussed.

Representative patents claiming a business method

Online Dating Service, Patent No. 5,884,272 assigned to Walker Asset Management

This patent relates to facilitating anonymous communication among multiple parties such as in an online dating service. In the past, an automatic search and matchmaking process has been used to search for and identify members who have qualifications that match certain search criteria. The problem with the traditional method is that it does not provide anonymous communications between members and does not provide control over the release of information from one member to another. To solve these problems, the invention provides a communication system with a central database of member information and member rules, where each member controls the release of his or her own information to other members based on the member rules.

The relevant portion of representative claim 1, which defines the scope of the invention, requires the following steps: (1) for each member, storing personal member information and release rules which specify the criteria for releasing the personal information (such as a rule that specifies release of the name, photograph and contact information of the member if a requesting member is a male over 35 years old and is interested in traveling); (2) processing search criteria from a requesting member; (3) communicating to the requesting member that at least one target member satisfies the search criteria; (4) receiving a request for information of the target member from the requesting member; (5) releasing the requested information if the release rule set up by the target member has been satisfied.

This patent illustrates a typical e-commerce business method. As shown by the broad language used in claim 1 above, the invention covers not only an online dating service, but potentially any anonymous communication service that provides a controlled release of information such as an online job searching service that initially conceals employers’ identity. Accordingly, this patent, if held valid, could potentially exclude anyone from offering an anonymous communication service that relies on rules that specify the criteria for releasing member information.

Offering Secured Credit Card, Patent No. 6,158,657 issued to Capital One Financial Corporation

As the name implies, a secured credit card requires a security deposit because it is offered to customers with poor credit history. In the past, they have been marketed with a fixed line meaning that the card has a fixed credit limit and a fixed deposit amount. According to the patent, however, this type of marketing produced a low level of response because the fixed credit limit is generally low even though many potential customers could qualify for a higher credit limit elsewhere.

In an effort to increase the customer response rate, the invention provides a secured credit card offer that specifies the maximum credit limit that a customer may receive rather than the traditional low fixed credit limit. With this approach, cardholders are provided with credit limits that are more commensurate with their credit history, which will ultimately increase the response rate of potential customers.

The relevant portion of representative claim 17 requires the following steps: (1) sending a secured credit card offer to potential customers where the offer specifies a fixed security deposit and a maximum credit limit possible; (2) receiving a customer response to the offer; and (3) establishing a customer account for the customer responding to the offer.

This patent illustrates a typical business method of marketing a product or service. It is also important to note that the above claim requires no computer or software to infringe. Thus, this patent, if held valid, could potentially exclude anyone from sending out a secured credit card offer with a stated maximum credit limit and fixed security deposit regardless of whether the offer is processed manually or automatically by using a computer.

Airline Seat Upgrade System, Patent No. 6,112,185 assigned to Walker Digital

This patent relates to an automatic service upgrade offer acceptance system. For example, such a system can be used to manage offers from airline customers to purchase an upgrade to first class at prices that are set by the customers.

According to the patent, there is currently no effective way for an airline to handle such an upgrade offer because it wants to keep the gate area for boarding flights as trouble-free and effortless as possible. The airline is also concerned with exposing the underlying level of pricing flexibility to its competitors, which could dramatically impact the airline's overall revenue. It is claimed that by using the patented offer acceptance system, customer upgrade offers can be conveniently processed to incrementally add revenue to the airline without causing delays at the gate and without exposing the airline’s pricing flexibility.

The relevant portion of representative claim 1 requires the following steps: (1) receiving an upgrade offer at a price set by a customer who already has a reservation for a service to be upgraded; (2) evaluating the offer based on a predefined offer acceptance criteria such as a minimum acceptable price (evaluating step is illustrated in the figure above); and (3) indicating that the offer is acceptable if it satisfies the predefined offer acceptance criteria.

This patent illustrates another business method of marketing a service. It is also important to note that because very broad language is used in claim 1, the scope of the invention is not limited to the airline industry. Indeed, the specification states that it can be applied to other services such as car washing and dry cleaning. Accordingly, this patent, if held valid, could potentially exclude anyone from providing an upgrade management service that manages upgrade offers at prices that are set by the customers which are compared against a predefined offer acceptance criteria.

Internet Based Grocery Shopping, Patent No. 6,246,998 assigned to Fujitsu

This patent relates to home shopping through the Internet. According to the patent, conventional Internet based home shopping systems can be problematic because they allow a customer to shop for an unlimited amount of products even though the customer’s storage space at home is limited. The problem is compounded because various products have different storage requirements, i.e., they must be frozen, refrigerated or stored at room temperature. That means that the customer must prejudge whether the products being ordered can fit into the customer’s available storage space in a freezer, refrigerator, and pantry closet without being able to inspect the items being ordered. To solve these problems, the invention provides a products database that contains the weight and size as well as the storage requirement for each product and allows a customer to visually inspect the order online to ensure that sufficient space exists to store the items ordered.

The relevant portion of representative claim 1 requires the following elements: (1) a server computer capable of communicating with a customer computer through the Internet; (2) a product database containing price, weight, size and storage requirement for each item of the products; and (3) means for displaying the total weights and size of the order on the customer’s computer display to allow the consumer to visually inspect the order.

Although the claim is written in terms of computer components, those are all well-known in the industry. Rather, the apparent novelty is in its visual interface that displays the size and weight characteristics of the order to allow the customer to visually inspect the order. Thus, this patent is an example of a business method that attempts to protect its novel way of displaying a graphical representation of the order. If held valid, the patent could potentially exclude anyone from offering an Internet based shopping service that displays a graphical representation of the weight and size of the order.

Cash Management Account, Patent No. 4,346,442 assigned to Merrill Lynch

This patent relates to a brokerage and cash management system. In the past, various accounts such as a brokerage account, money market account, and checking and credit card account were set up separately and operated independently of each other. According to the invention, these accounts are all combined into a single composite account for each customer to provide many synergistic benefits. One benefit is that any cash generated from the brokerage account such as dividend payment is automatically transferred to an interest bearing money market fund. Another benefit is that the cash balance in the brokerage account, cash shares in the money market fund and available margin loan value backed by the securities held in the brokerage account are used to provide the maximum credit available to the customer.

The relevant portion of representative claim 1 requires the following functions: (1) a charge card and checks administered by a first institution such as Bank One; (2) a margin brokerage account and participation in at least one short term investment administered by a second institution such as Merrill Lynch; (3) means for verifying charge card and check transactions; (4) means for generating an updated credit limit based on brokerage account activities and charge card and checking activities; and (5) means for transferring proceeds in the brokerage account into a money market fund.

Behind all the complex language above, claim 1 is simply directed to a financial product that incorporates a charge card with checking, brokerage and money market components into a single composite account called a CMA account which is being marketed by Merrill Lynch. Thus, this expired patent is an example of a business method patent that protects a novel financial product concept.

Conclusion

Some potentially patentable business method ideas can be overlooked because they may come from areas that are not traditionally thought of as generating patentable ideas. Still, other patentable ideas may be erroneously overlooked because they are not implemented in software even though pure business method patents involving no software can be patented. On the other hand, the reward of recognizing and patenting a novel business method can be great as broad protection can potentially be obtained.

Recently, however, Congress and the PTO have begun to restrict the scope of business method patents that are being issued partly in response to public protest over very broad patents that allegedly covered obvious variations of well-known technology. Even so, a business method patent is still a valuable tool to exclude the competition from offering a similar product or service. Accordingly, any company doing business in the U.S. should actively look for novel business methods that can be potentially patented.

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