Worldwide use of the Internet has dramatically increased over the past few years, and doing business via the Internet became very attractive and popular within only a few years. The keyword is "e-commerce", and the number of start-ups in this field is exploding. With its shift from primarily scientific to more and more commercial use, the legal implications of the Internet have also grown. As regards intellectual property, one particular area of interest is the appropriate protection for especially computer-based (ie software implemented) methods of doing business but also business methods in general. Meanwhile the discussion focuses solely on the question of whether such methods are statutory subject-matter within the realm of patent protection provided by the European Patent Convention (EPC). The progress in the United States where a large number of patents have been issued so far for business methods, in particular in the field of e-commerce in the Internet, is the reason why this topic is at present excessively discussed in Europe with all its pros and cons.
The situation in the United States
"Anything under the sun that is made by man" is patentable - this statement of the US Supreme Court made in 1980 appears to be the initial starting point of a nowadays quite generous practice in granting patents on business methods in the US. (A famous example is the "one-click" patent 5,960,411 to Amazon.com, Inc). The US Supreme Court made this statement when interpreting 35 USC § 101 providing that whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor. Non-patentable subject-matter was restricted solely to laws of nature, natural phenomena, and abstract ideas. Later, in order have a proper tool at hand for judging the patentability of software-related inventions and particularly mathematical algorithms, a test known as the "Freeman-Walter-Abele" test (FWA test) was developed by case law. This test has intensively been used, however, without leading to predictable results. As regards business methods, the USPTO applied a "business methods" exception.
A fairly recent decision of the Court of Appeals for the Federal Circuit that is now on everyone's lips was rendered in the case State Street Bank & Trust Co v Signature Financial Group Inc, the State Street case. In this case, the Court suddenly departed from the established tests. The patent at issue in the State Street case described a data processing system for implementing an investment structure known as a "Hub and Spoke" system. In fact, it is not the actual claims granted that makes the State Street case important (notably, the claims were not directed to methods at all), but the reasoning given by the Court. The State Street case tells us that the key inquiry concerning statutory subject-matter involves the essential characteristics of the subject-matter, in particular its utility. Hence, the relevant test for statutory subject-matter under the US Patent Act is whether the invention produces a "useful, concrete, and tangible result". As to the former restrictions upon patents for methods of doing business, the Court voiced that these were "ill-conceived" from the start, and the previous FWA test for patentability of software inventions was set aside as being "unhelpful". The Court apparently finally returned to the provisions of the US patent law itself, and skipped the "business methods" exception. These findings were confirmed in the case AT&T v Excel Communications, Inc.
Consequently, the State Street decision expands patent protection in the US to a new category of inventions: inventions which do not have a technical character but are exclusively situated in the business field.
The European approach
Other than in the US, methods of doing business are like computer programs, and are as such excluded from patentability under the European Patent Convention (EPC). Business methods do not form statutory subject-matter under the EPC.
Material aspects and selected cases
Under Article 52(1) of the EPC, patent protection can be obtained for any inventions which are susceptible of industrial application, which are new and which involve an inventive step. Restrictions to this general clause are laid down in Article 52(2) EPC which defines a catalogue of subject-matters which are not regarded as inventions. In particular, methods for doing business and programs for computers shall not be regarded as inventions. However, Article 52(3) EPC stipulates that this exclusion applies only to such subject-matter "as such", that is business methods as such and programs for computers as such. This limitation is in fact an important one and demonstrates that the legislators did not want to totally exclude all business methods and computer programs (software) in general from patentability.
There have been some cases of patent applications and patents where the restrictions of Article 53(2) and (3) EPC required interpretation by the Technical Boards of Appeal (The Boards of Appeal are the second instance in the European Patent Office). In various decisions, the Technical Boards of Appeal made an attempt to determine the exact meaning of the term "as such", particularly in the context of programs for computers, and it is generally accepted that the "technical character" of an invention is an essential requirement for its patentability. In short, the exclusion "as such" is equated with lacking in technical character. It is remarkable that this requirement is neither explicitly stated in the EPC nor is there any definition in the EPC (nor in the Guidelines for Examination) of what "technical" exactly means.
The Technical Boards of Appeal have interpreted the "as such" exclusion from patentability somewhat more narrowly in recent decisions thus carefully trying to establish a more and more liberal approach in order to take into account the technological and economic developments.
In one case, known as the General-purpose management system/SOHEI case, the mere fact that technical considerations were required in order to arrive at the invention claimed was considered to lend sufficient technical character to the invention for it to avoid exclusion from patentability under the "as such" requirement. Such technical considerations lend a technical nature to the invention in that they imply a technical problem to be solved by (implicit) technical features. Moreover, in this case it was clarified that non-exclusion from patentability cannot be destroyed by an additional feature which as such would itself be excluded, as in that case features referring to management systems and methods, ie business methods.
Landmark decisions on this topic are the fairly new decisions rendered in the cases Computer program product/IBM allowing for the first time at the EPO so-called Beauregard claims, ie, claims directed to a computer program product. In these cases, the Board decided that the requirement of "technical character" in computer programs is complied with if a specific or further technical effect is present in addition to the common technical character inherent in the performance of all computer programs causing, for example, electrical currents in these hardware. And what is even more remarkable, according to the decisions the mere potential to produce a further technical effect is sufficient. This further technical effect may in principle be already known in the art.
The case law so far can be summarized in that the invention as a whole must have technical character, ie the claim must specify some technical elements, or provide a technical effect or solution to a technical problem. If one of these aspects applies, the claimed subject-matter should be considered a patentable invention.
In the above State Street case, the invention makes use of a standard personal computer which is used in a standard manner, ie a program is just run on it. Therefore, applying the findings of the Boards of Appeal, the invention finally patented in the US is apparently lacking a further technical effect or a solution to a technical problem, and would not be allowable under the EPC. (As an aside, the corresponding European application is meanwhile deemed to be withdrawn).
Practice of the Examining and Opposition Divisions
Based on the present case law and particularly those decisions introduced above, the Examining Divisions in the European Patent Office have meanwhile refined their usual practice in examining patent applications and now also try to establish a more liberal approach. Basically, the examination of subject-matter at issue here is done at two stages.
At a first stage, the examiners in the EPO check whether the claimed invention is statutory subject-matter which means that they now look for a further technical effect the invention brings about. If such a further technical effect or even the potential to produce such an effect is present, the second stage is entered, which is examination of novelty and inventive step. From some granted patents it appears that the EPO has set the hurdle to enter the second stage quite low. That the Examining Divisions are more generous in acknowledging that software-based business methods are statutory subject-matter is evidenced in the grant of a patent for a system for computer-assisted trading in warrants. In this example, as in the State Street case, the invention relates to the economic field (that is the provision of instantaneous executable warrant rates so that orders can be immediately fulfilled for customers) wherein an apparently economic/fiscal problem is solved by implementing the trading of warrants in software form. The only "technical feature" involved in this method and recited in the claims is that data, eg warrant rates, are held for a pre-determined time period. No less than 12 parties independently filed oppositions against the grant of that patent, and the Opposition Division dealing with that case made an interesting statement in its preliminary opinion: "... time is measured automatically by the computer system, ie a physical entity is measured automatically. Hence, the claimed subject-matter comprises clearly technical matter." Consequently, in cases where the invention actually resides in the economic field, it seems advisable to just recite in the claims some kind of (minor) "technical aspect" in order to arrive at the second stage, that is the examination of the merits of the invention.
According to the present practice in the EPO, the focus of the examination is more or less shifted from technical character to inventive step. When examining the merits of the invention at the second stage, the EPO now tests whether the invention solves an objective technical problem. If the outcome of this test is positive, the next question is obviousness/inventive step of the claimed subject-matter. However, if the first question is denied, ie the invention does not solve an objective technical problem, then it is assumed that there is no technical contribution to the prior art that may justify an inventive step. In fact, this approach is critical as it allows the EPO to escape through the backdoor with the argument that the claimed invention - although statutory subject-matter due to some kind of technical character - does not provide a technical solution to a technical problem.
It remains to be seen how generous and liberal this approach is actually handled in the future.
A more restrictive approach
From the above discussion it is clear that at present the European approach is still more restrictive than the US practice in granting patents on business methods. As (non-technical) business methods, ie mere business methods are as such still excluded from patentability under the EPC, patents such as, eg, US patent 5,851,117 claiming a method of a trainer teaching a cleaner ("6 Steps to Perfect Dusting") are at present inconceivable in Europe. However, the European counterpart of the afore-mentioned US "one-click" patent to Amazon has already reached "stage two" of examination and one will see whether it is considered novel and inventive.
Although it is planned to delete the computer program exception from the EPC with the next revision in order to adapt the regulations of the EPC to that of TRIPs, it is unlikely that the other exceptions including the exception for methods of doing business are also removed. However, it does not appear that the rather traditional requirement of "technical character" for patentable inventions will be suddenly thrown overboard. Consequently, patent protection for a business method invention can still be obtained only if it is implemented as software with some technical feature or aspect specified in the claims.
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