Your Business Method Patent Has Just Been Invalidated

If you are one of the recipients of the 1,330 business method patents issued in the U.S. last year, or the thousands more that have been issued rampantly and indiscriminately over the past decade, you are probably out of luck. The U.S. Court of Appeals in Washington, D.C. ruled today that business methods are not patentable unless they meet fairly narrow rules. What this means for Internet companies and patent trolls alike is that many of their existing patents may be invalid—at least until the case is heard by the Supreme Court, assuming it is appealed.

Mike Masnick at TechDirt has a good overview of the issues in the case and the stricter rules to be applied to these sorts of patents. He writes:

The summary is that the court has said that there’s a two-pronged test to determine whether a software of business method process patent is valid: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In other words, pure software or business method patents that are neither tied to a specific machine nor change something into a different state are not patentable.

The most famous business method patent is Amazon’s One-Click patent, but that is not what the case was about. (It deals with a proposed patent for a method to manage the risks associated with energy cost fluctuations that was rejected). But even the validity of Amazon’s One-Click patent could be questioned if it does not meet the new test. And that would depend on what you consider to be the definition of a “machine.” Is the Amazon store the machine in question (in which case that particular patent doesn’t have any particular value beyond Amazon’s own operations), or is it any online store (in which case, it might be too far reaching)?

This ruling raises a ton of questions like that across literally thousands of patents. And it is a good thing too because business-method patents tend to be overly broad and abused.