Legal protection of software and business methods

(Part two: Business Methods)

Despite the fact that Internet inventions involve intangibles like software, as explained in part one, rather than the kind of goods that are traditionally protected by patent, they are indeed patentable. Many companies, including high-tech and Internet companies, have learned, to a great extent now, that patent law offers them an incredible opportunity to gain legal protection for another intangible asset — methods of doing business.

Business method patents are not unique to the Internet, but they have received significant attention due to clashing jurisprudence. Courts throughout the world have discovered that incorporating the Internet into existing computer business processes could be the basis for a patent, whereas the use of computers and associated software as part of a business is so common that it is difficult to patent such applications. Thus, courts have been upholding patents that have been granted for the application of business process computer software to the Internet.

In 1983, before the Internet entered the vocabulary of most people, one Charles Freeney Jr. filed a patent application in the US titled “System for Reproducing Information in Material Objects at a Point of Sale Location.” Freeney’s system was directed to a methodology for transmitting and copying such things as music, movies, and video games from one location to an object such as paper, recording tape, or video disc to be purchased at another location. While Freeney’s invention was conceived long before the Internet e-commerce revolution, E-data, the successor-owner of the patent, believed that it covered the distribution of software and other content via the World Wide Web.

Beginning in 1995, E-Data began filing various lawsuits against online and media companies, which led, through a couple of years, to a settlement where five defendants settled out of court with E-Data, the details of the settlements having been kept confidential.

The US example led to controversial and conflicting rulings, not only in the US but also throughout the global tele-community. Information obtained by relevant functionaries of the International Telecommunications Union (ITU), which included me as a member then of its Reform Advisory Group (RAG) created by the former head of the ITU, Secretary General Yoshio Utsumi in 1997 — as well as legislation and jurisprudence from Europe, North America and Asia — revealed the necessity for the granting of patents for Business Methods (BM), that satisfy the already mentioned three-pronged test for patentability — it should be new, useful, and non-obvious.

There was, in fact, the problem reported to the RAG of the questionable expertise and the insufficient tools to make the determination of patentability by patent offices throughout the world, so patents with unfortunate histories of undue scope have been issued.

Such overly broad patents are commonly used as examples of bad patents, and have led to the broad-brush condemnation of software and business methods as a whole. This includes the Philippines, where legislation against the patentability of business methods exists.

More recently, with quite a number of courts and patent offices throughout the world allowing patents to issue on business-method inventions, after a long-held precedent forbidding such patents, many doubting Thomases have declared that patent law has entered territory that it neither was intended to, nor should cover.

These critics of BM patents (and software patents) have a point, but perhaps only to a degree. While there is no doubt that patent offices have made and continue to make mistakes, it might be foolish, even unwise, to abolish BM patents in concept merely because the procedure is flawed. If patent offices through the World Wide Web were given the tools and the training to do their jobs properly, then we’d likely see patents issuing on truly innovative concepts that deserve patent protection.

To determine whether the patentability criteria are met, a patent examiner, and ultimately a court, must have a point of reference. After a patent is filed, a patent examiner reviews the application, including the invention defined by the patent claim, which are sentences prepared by the applicant (or his or her attorney), that define the scope of the invention. Based upon the claims, the examiner performs a search for the closest “prior art” that the examiner can find. The examiner then compares the claimed invention to the prior art found in the search and determines whether the defined invention is new and non-obvious.

These can include publicly available documents from anywhere in the world, and previously issued patents from any country, as well as prior users, sales, and even offers for sale that have occurred. Even assuming patent examiners in the world perform competently in applying the rules associated with the new and non-obvious determination, for the examination to be meaningful, the prior art search must be meaningful. The most competent patent examiner will fail if the most relevant prior art is not discovered.

This is a big world we live in, though we’d like to believe it is borderless now. And there are a huge number of sources of publications and other prior art. Patent offices in the global tele-community that we studied at a number of sessions of ITU’s RAG, maintain collections, of course, of all their issued patents. In the US, the patent office collection dates back to 1790, as well as a database of certain technical literature and foreign patents.

Many patent offices usually are unable to subscribe to or maintain access to databases for most types of literature even though they all qualify as prior art. Patent examiners are therefore forced to rely primarily on prior issued patents as prior art. Because patent applications can take two to three years to issue — during which time they are maintained in secrecy and are therefore not yet considered public prior art — by default, patent examiners therefore rely on prior art that is two or three years old when they make the patentability determination.

For some types of inventions, two or three years might not matter much, but for software and Internet-related inventions, as well as business methods that are reduced to computer software, which in turn enable a computer to produce a product, this amount of time is an eternity!

Innovations in e-commerce and automated business methodologies are simply progressing too quickly for the prior art available for the patent examiners to keep pace.

In light of the costs of getting a patent and the potentially higher costs of infringing upon a patent, it is unfortunate that what Internet-related legal guidance does exist is insufficient. Furthermore, still not too many Internet law specialists exist, and only a minuscule number of such specialists are, in fact, actively guiding patent and trademark offices the world over.

The fact that courts and judicial authorities currently have little experience applying patent law to Internet-related matters further exacerbates the problem. After all, Internet law is still evolving.

Since the development of Internet commerce and the laws affecting it are still in flux, parties to licensing agreements must be aware that several parties might have the right (or at least claim to have the right) to perform a particular Internet activity. Consequently, it is advisable to consider patenting Internet business methods, or to at least seek expert counsel to ensure the unimpaired use of these methods.

Remember that one of the greatest artists of all time, and the consummate Renaissance man, Leonardo da Vinci, dabbled in science but was never known to be interested in calculating machines. Yet in 1967, two volumes of his notebooks were discovered in Madrid’s National Library of Spain detailing a digit-counting machine. A model, interpreted from his drawings, is at IBM.

And if we just bear in mind that the human brain is the world’s most miniaturized computer with 10 trillion circuits jammed into an area the size of a cauliflower, then, even in a seemingly unimportant matter as patents in the arena of the World Wide Web, there will be solutions and there will be order.

I cannot end my two-part series without thanking the following: Harrison Theodore David, Ph.D., for sending me via e-mail his brilliant dissertation on the human brain in the 21st century; Prof. Samuel Z. Kozynski, for his enlightening comments on part one of this article; and Counselor Angela A. Caxton from the UK, who authored a book Giga Law, now available in English and US bookstores, for her valuable comments.

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