March 4, 2002	Monday	Zilhaj 19, 1422

FOR those who have been waiting since 1911 may still continue to do so, as even the new patent law of Pakistan promulgated recently has no provisions to patent business methods.

It is rather sad to see that in terms of the exclusions for what cannot be patented under Section 7(2)(c) specifically bar patenting of business methods. This statutory restriction, however may only be a stroke away from a Supreme Court judgment pronouncing that the patent law’s requirements of a “new and useful process” can include business-related software. As the US Supreme Court did in 1998.

Need of the commerce and international developments are to the contrary. The fact is that in the last couple of years a new device has emerged on the legal scene to protect novel ways of conducting commerce. It’s called the business method patent, and it typically covers some combination of software and business methodology, like innovative online ordering processes. When you get a business method patented, you stop others from using it for 20 years. And you can exploit it by licensing it out to others for a fee. Companies are scrambling to obtain them to use as both defensive and offensive weapons. Because business method patents are generally tied to computer systems, it’s crucial for management to know where they come from, how they work and how to avoid getting tangled in their web. What are business method patents?

Business method patents involving computer software functions are a new development; they have been around only since the late-1990s, and they are a product of a long-standing quandary over software’s place in the world of intellectual property law. Initially, software as a written product that includes elements of expression was protected by copyright law. But software never fit neatly into this sphere because copyright law doesn’t protect the functions that the programmes perform. Meanwhile, software never fit neatly into patent law either.

It was July 1998 when everything on business patenting changed. The US Court of Appeals for the Federal Circuit eliminated the exclusion of “manner of doing business” from the US Patent laws with respect to computer software. In the leading State Street Bank & Trust Co vs Signature Financial Group, Inc, case the court upheld a patent for a method of calculating the net asset value of complex mutual funds. The court determined that patents had to be considered based on the Patent Act’s requirements of a “new and useful process, machine, manufacture...or any new and useful improvement thereof.” Because business-related software fell within the “new and useful process” requirement, it could be patented. This significant change in the interpretation of patent law opened the floodgates for business method patents. Combined with the exponential growth of e-businesses (which utilize computerized business methods), this new position on software greatly expanded the number of patent applications and patents on business methods. As the flood has continued, business method patents have been catching headlines, from Priceline.com’s patent on an online reverse auction to Amazon.com’s patent on the “one-click process” which has increased the controversy surrounding such patents. Amazon.com Business Method Patent

The famous Amazon.com’s famous “1-click” patent, the US Patent No. 5,960,411 was issued on September 28, 1999, and is directed to a system and method for placing an order to purchase an item via the Internet. The patent is essentially directed to a methodology whereby information associated with a user is pre-stored by a web site, and the user may thereafter order items from the web site with only one click of the mouse (clicking on a link associated with the item). In December 1999, Amazon.com successfully obtained an injunction against its online competitor, Barnesandnoble.com (bn.com), forcing Barnesandnoble.com to replace its own one-click system with a slightly more complicated ordering system. While this injunction has since been lifted, the underlying litigation is still pending.

Claim 1 of the Amazon.com 1-click patent reads as follows:

A method of placing an order for an item comprising:

* under control of a client system,

* displaying information identifying the item; and

* in response to only a single action being performed, sending a request to order the item along with an identifier of a purchaser of the item to a server system;

* under control of a single-action ordering component of the server system,

* receiving the request;

* retrieving additional information previously stored for the purchaser identified by the identifier in the received request; and

* generating an order to purchase the requested item for the purchaser identified by the identifier in the received request using the retrieved additional information; and

*fulfilling the generated order to complete purchase of the item

*whereby the item is ordered without using a shopping cart ordering model.

As can be seen, it’s a bit more complicated than just “1-click.” The claim (which defines what is protected by the patent) goes into a fair amount of detail as to what is displayed to the user, what actions are taken by the user of a client computer, what actions are taken by the server, and the results of all those actions. Like any patent, to infringe this claim, another person or business must perform all of the steps recited in the claim.

The Amazon.com 1-click patent is often cited as a classic example of a “business-method patent.” While the validity of this patent may be argued one way or another, it’s classified as a business-method patent because it includes concepts for conducting a business transaction (allowing a person to purchase goods online, in a specific way). Beyond this explanation, there is no explicit definition of “business method,” and business-method patents are treated for patentability purposes just like any other patent.

Other notable examples of business method patents include Priceline “Reverse Auction” Patent for a “method and apparatus for a cryptographically assisted commercial network system designed to facilitate buyer-driven conditional purchase offers. DoubleClick Banner Ad Patent for a “method of delivery, targeting, and measuring advertising over networks” and Open Market Electronic Shopping Cart Patent for a “network sales system”

Conclusion” The business model patent has arrived on the stage at the precise moment when the high-tech investors called out its cue. It started to provide them and their entrepreneurs with the added measures of security needed to fuel the fires of Internet investment and increase the momentum of e-commerce. It will continue to foster increased litigation within the eBusiness world. Start-ups will need to deal with the additional vexing problem of effectively researching prior art for business models. Internet businesses in countries outside the ones issuing business methods patents will wonder whether they should be responding to foreign infringement lawsuits- and ultimately many will likely be forced to respond because of the pervasive nature of the Internet.

The development of the business method patent has become recognized as a major factor in the new economies of eCommerce and the Internet. It will require a corresponding level of sophistication and participation from those in the intellectual property profession if we are to serve our clients well, particularly in the international arena. Until the day when the major countries of the world take a unified approach in handling business method patents, we will need to stay abreast of the disparate business method patent developments in at least several key jurisdictions.