Key Takeaways

  • A “business method patent” protects a novel method of doing business, especially if it yields a concrete, practical result.
  • Not all business ideas can be patented—only those that are new, useful, and non-obvious, and not merely abstract ideas or algorithms.
  • Courts have made it harder to patent abstract or software-related business methods without technical implementation.
  • Prior art searches and detailed technical descriptions (including software flowcharts and system overviews) are crucial for approval.
  • Alternatives to business method patents include trade secrets, trademarks, and copyright for broader protection.

A business method is a method of operating an aspect of an economic enterprise. A business method patent is a type of patent that claims or shows a new way of doing business. New types of e-commerce are one such example. Business method patents are a relatively new concept and have been around since 1998. Prior to this time, it was argued that business methods could not be patented, and up until 2005, the United States Patent Office required that business method inventions must apply, involve, use or advance the “technological arts” in order for a patent to be approved.

The current USPTO guidelines require that a process must produce a “concrete, useful and tangible result” in order to be patentable. Thus a business method can now be patented regardless of whether or not it must be done on a computer. Business method patents are important assets for independent investors and major corporations. To qualify for a patent, the business method or software must:

  • Be patentable (laws of nature, natural phenomena and ideas are excluded)
  • Be useful
  • Be new i.e., different in some way from all prior knowledge and inventions, and not used publicly or described in a published document before filing the application (unless the inventor created the publication and it was made up to a year prior to filing)
  • Not be obvious i.e., would be new to someone with ordinary skill in business.

To Obtain a Business Method Patent

To patent a business method, it has to have a real-world application. This means that the method can't just be an idea or concept, but a method for doing business that offers a "useful, concrete and tangible result." Ideas aren't patentable, but methods that develop an idea into a workable application are. The description must clearly identify the invention as completely as possible when filing the first patent application – as it must be articulated with enough detail to satisfy the statutory requirements of 35 US.C. 112.

The current case law in the US requires that the business method must be “significantly more” than implementing a well-known business process or abstract idea on a computer/via the internet. Technical details are necessary. Business methods not associated with the underlying technology, hardware, or equipment are not eligible for patents. For business method inventions linked to some kind of computer implementation you should:

  1. Describe the method in a way that shows the real-world value of it. Include a general description of what it accomplishes and how, maybe using a flow chart. Try to identify the method from all possible perspectives (e.g. user vs. central computer)
  2. Identify what the central computer does when it performs the required processes. Include as much technical information as you can.
  3. Give an overview of the system used to implement the method – describe the central control and its relationship to other components/elements which combine to create the system for the business method.
  4. Provide a description of the specialized software necessary to carry out the invention (flowcharts are highly recommended, although not required, along with other figures that can be easily understood by non-technical personnel as well).
  5. Disclose software code where you can to help convey the core functionality.

Businesses seeking patents must research prior art before filing to make sure the method is in fact novel. They are also required to provide “reasons for allowance” in every case and for each independent claim.

Getting Started

You must apply for a business method patent with the United States Patent and Trademark Office. The application is lengthy, and you must meet all of the requirements in order to get approved. If your method is not fully developed, if it doesn't offer anything new, or it is difficult to understand, you will not be approved for a business method patent.

Many business method patents are for software applications. When you are trying to get a software patent, a clear, precise description of what your software does is essential. It has become quite difficult to get a business method patent as regulations continue to change. In other words, your method must actually accomplish something of value. Once granted a business method patent, however, you can license your method and make money from it or use the patent to block competition.

What Kinds of Business Ideas Can Be Patented?

Not every business idea qualifies for a patent. To patent a business idea, it must be more than just an abstract concept or general business strategy. The idea must involve a specific process or method that results in a concrete, tangible outcome, such as an improved way to process transactions or deliver services. The U.S. Patent and Trademark Office (USPTO) requires that the method be:

  • Tied to a particular machine or involve a transformation of matter, or
  • Contain an “inventive concept” that adds something significantly more than a routine or conventional step.

Examples of potentially patentable business methods include innovative e-commerce platforms, online auction systems, or data processing algorithms embedded in a technical infrastructure.

However, courts often reject patents that are merely abstract ideas, such as organizing human activity or using general-purpose computers to carry out common tasks.

The Cost of a Business Method Patent

Business method patents are complex, and you can expect to pay $3,000 to $15,000 unless you do most of the work on your own. If you are successful in getting your patent, you will have to pay fees at the 3.5, 7.5 and 11.5 year marks from the date your patent was accepted.

Many people seek legal help if their business method patent is complicated, although some go through the patent process on their own. The process from the initial application to approval can take several years.  The period between filing for a patent and getting it issued is the “pendency period” – the patent owner can’t stop competitive use of his process during this time – he can only do once the patent is issued. The patent is then valid for twenty years.

Additional fees may also show up at a later date if someone challenges the patent – those costs can be quite high.

Current Fee Schedule for Patents in the United States

The fee structure is broken down into three categories, depending on the size of your business and the method being patented. There are fees throughout the process, from basic filing fees to fees to examine and search your methods, to fees to finalize your patent. In addition, if you receive a patent, you will pay maintenance fees. If you want to file an appeal because of a denial, there are fees for that, too.

Benefits of a Business Method Patent:

  • Legal protection for company investments into developing new and original business models
  • Prevents competitors from copying ideas without permission or without paying for the idea
  • Allows patent holders to sue for infringement and to obtain court-ordered injunctions where applicable. Ignorance of a patent is not a defence if you are sued for infringing.

Limitations and Challenges of Business Method Patents

While business method patents offer protection, they also come with significant legal and practical challenges. Courts have increased scrutiny over these patents since the 2014 Supreme Court decision in Alice Corp. v. CLS Bank International, which ruled that abstract ideas implemented on a computer are not patentable unless they include an inventive technical solution.

As a result:

  • Many business method applications are rejected due to lack of technical specificity.
  • Claims must clearly demonstrate how the method improves computer functionality or solves a technical problem.
  • Drafting successful claims requires precise language and often the inclusion of software-based flowcharts and hardware configurations.

Additionally, enforcing a business method patent can be difficult, especially if competitors slightly alter their methods to avoid infringement.

The America Invents Act (AIA) – enacted September 16, 2011

  • Put a post-grant review procedure in place which allows challenges to a patent on invalidity for 9 months after issue.
  • Transitional 8 year period where anyone can have PTO review the validity of the patent based on prior art.
  • USPTO won’t grant patents for strategies reducing, avoiding, or deferring tax liability.

Alternatives to Patenting a Business Idea

If your business method doesn’t meet patentability standards, you may still protect it using other forms of intellectual property:

  • Trade Secrets: If your method can be kept confidential, trade secret protection can last indefinitely—so long as the secrecy is maintained.
  • Trademarks: Branding elements, such as names or logos, can be trademarked to protect your market identity.
  • Copyrights: While you can’t copyright an idea, you can protect written descriptions, flowcharts, or software code associated with your business method.

These alternatives can offer cost-effective and sometimes more flexible protections compared to patents.

Frequently Asked Questions

1. Can I patent a business idea without a prototype? No, you must show how the idea works in practice. A detailed explanation or technical implementation is required, not just a concept.

2. Is software required for a business method patent? Not always, but including software details often strengthens your application by showing a technical implementation.

3. What is the difference between a business method and a business idea? A business idea is abstract. A business method is a process that applies the idea in a tangible, specific way.

4. How long does a business method patent last? A utility patent, which includes business methods, lasts 20 years from the filing date.

5. What happens if someone copies my business method but changes a few details? If their method is substantially the same and your patent is valid, you may have grounds for infringement—but enforcement depends on how well your claims are drafted.

Talk to a Lawyer

If you need help with your business method patent, you can post your question or concern on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.