Biz-method patents OK, says IP lawyer

Business-method patents are not inherently bad for the IT industry, says a top intellectual property attorney, as long as the ideas behind them are truly novel.

Business-method patents are not inherently bad for the IT industry, says a top intellectual property attorney, as long as the ideas behind them are truly novel.

The rising number of patents granted for e-commerce business methods has caused a furore overseas among those who believe the ideas behind them are often trivially novel and that the trend will inhibit innovation.

“They should grant patents for business methods but the ideas and inventions have to be new and not obvious,” says Ken Moon, a partner at AJ Park, who brought about the first pure software patent in this country. “Granting patents for things which are not really patentable is a bad thing in my view. But it’s not confined to software or business methods.”

He says it’s just that these two have grabbed the limelight over, for example, mechanical or chemical patents over the past couple of years and he doesn’t believe legitimately novel patents will stifle the industry any more than other types of patents have stifled those industries.

Both New Zealand and the US theoretically accept business-method applications, though Moon grumbles that AJ Park has been “finding objections” being raised to some. Europe does not accept them, and in fact recently pulled back from a move to approve pure software patents. IPONZ, the body within the Ministry of Economic Development which processes copyright trademark and patent applications, says the Patents Act 1953 does not explicitly exclude software or business methods from patentability.

“If applications are not granted, then it is generally because the application has failed to meet one or more of the requirements specified in the act for an application,” says IPONZ examination services manager Mark Robinson; or, more particularly, failed to meet one or more of the three fundamental requirements of being novel, not obvious and having utility.

Patent applications that have been criticised as being obvious or not novel are British Telecom’s claim on hyperlinking, Sun’s on online shopping carts and Amazon’s on one-click shopping.

Moon believes business-method patents will eventually be accepted in most markets, though he says more funding will be needed worldwide to process the increasing number of applications and employ the best staff.

Robinson says our patent office is resourced appropriately for the number of patent applications that New Zealand receives. IPONZ applies a five-day turnaround period for the initial examination report for a New Zealand patent application but a longer period for applications originating overseas.

  • Moon suggests that patent offices researching software and business-method patents would benefit from databases that “give them access to all of the in-house publications of IBM and all of the other software companies over the last 30 years” so that they can see if so-called new applications are in fact new.
  • He often counsels organisations to bypass a local patent for one in the US, particularly cash-challenged software companies looking to do business offshore. “Some are talking to US venture capital firms, and a New Zealand patent application means nothing to those sort of firms.”
  • Patents are necessary to reduce “freeloaders” and protect the strategies and overall concepts behind software inventions, says Moon. “They’re sinking R&D investment money and they don’t want their competitors to freeload on the back of that without having to do all that R&D themselves. Copyright they get automatically and that’s free, but it’s really only protecting the code.”
  • Overseas e-commerce patents should definitely be a cause for worry for New Zealand IT firms, says Moon. As reported late last year (E-commerce faces patent threat)Virginia-based DE Technologies applied for a patent in New Zealand (in 1997) and about 30 other countries covering “a process for carrying out an international transaction … using computer-to-computer communication”. Any New Zealand company intending to operate a business involving electronic international transactions should consider carefully before doing so, noted Baldwin Shelston Waters intellectual property lawyer Breon Gravatt. The USPTO indicated to DE Tech owner Ed Pool in May that it would issue a broad patent for issue about August or September of 2001. Subsequent enquiry found Pool had been in contact with software developer Jade, the WoolPro division of the Wool Board and Trade NZ among others in recent years.
  • Moon advises those confronted by someone like Pool to first ask to see the patent. If the patent is likely to cover the direction in which an organisation is moving, it should get legal advice before considering negotiating a licence, trying to develop in a different direction or seeking to invalidate the patent claim.
  • Patent specifications are made public at different stages in different countries, says Moon, though he says they are beginning to converge on making details public 18 months after the patent’s first appearance.

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