Controlling Business Method Patents: How the Japanese Standard for Patenting Software Could Bring Reasonable Limitations to Business Method Patents in the United States
James S. Sfekas · Pacific Rim law & policy journal · 2007
I. INTRODUCTIONBusiness methods have historically been excluded from patenting in all countries. However, recently that situation has changed in the United States. After the Court of Appeals for the Federal Circuit ruled in State Street Bank & Trust Co. v. Signature Financial Group, Inc.1 that business methods were not excluded from patenting, the number of applications for business method patents received by the U.S. Patent and Trademark Office (USPTO) increased from very few in 1997 to almost 8,000 in 2000.2 Many commentators in the mass media argue that this has led to broken patent system that grants patents for trivial inventions.3A proposed definition of business methods defines one as a method of... administering, managing, or otherwise operating an enterprise ... including technique used in ... conducting business; or processing financial data.4 The definition also includes techniques used in athletics, instruction or personal skill.5 There is some overlap between business method patents and software patents, because business method inventions are frequently implemented in software. However, software patents cover wide range of inventions that are not considered business methods. Because of the close connection between the two areas, any discussion of business method patents must consider the general category of software patents as well.Critics of business method patents argue that they are unnecessary and that allowing them has led to an increased number of bad patents-patents that should never have been granted by the patent office.6 Many also argue that business method patents should not be allowed because they are abstract ideas rather than concrete inventions.7 These same arguments have played out in Europe and Japan as well.8 Over the past two decades, national patent offices in those countries have changed and broadened the standards for what software and business methods may be patented.9 Since the government grants patent monopoly in order to encourage innovation in technology,10 it is important to ensure that this monopoly is serving its purpose with business method patents.This comment argues that the United States should adopt the Japanese standard for determining whether software or business method invention is patentable subject matter. The Japanese standard limits business method patents while still allowing patents on software. In addition, changing the U.S. standard would be step toward eliminating one of the biggest obstacles to patent law harmonization. Part II provides general background on common features of patent systems worldwide and describes essential concepts for understanding the contrasting standards. Part III explains the U.S. standard for patenting software and business methods and how it developed. Part IV explains the Japanese standard for patenting software and business methods. Part V describes the advantages of software patents and objections to business method patents. Part VI proposes that the United States should incorporate the elements of the Japanese standard for determining whether software invention is patentable subject matter, because the proposed standard would limit business method patents while retaining most of the advantages of software patents. Part VII discusses how this change would also support efforts to harmonize world patent laws.II. THE PATENT SYSTEM REPRESENTS A GOVERNMENT-SANCTIONED MONOPOLY TO ENCOURAGE INNOVATIONThe patent system is unusual in that it is government-sanctioned monopoly. Patents were originally royal grants of monopoly in particular area12 but were outlawed by the Statute of Monopolies, except in the case of patent monopolies given to the first and true inventor of new manufacture.13 The patent monopoly was acceptable because the cost of granting the right was balanced by the inventive contribution.14 The monopoly was intended to ensure that inventors would be able to enjoy the economic benefits of their efforts15 and to provide an incentive for inventors to share their inventions with the public. …