Business Method Patent: Everything You Need to KnowStartup Law ResourcesIntellectual Property
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.5 min read
Updated November 16, 2020:
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 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:
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)
Identify what the central computer does when it performs the required processes. Include as much technical information as you can.
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.
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).
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.
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.
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.
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.
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.