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Business method patents protect some very important things in your business.

Since the Supreme Court’s decision in 1998 to grant patents based on business methods, the Patent and Trademark Office has been inundated with applications of this type. There is currently a four-year wait for patent application approvals.

Before 1998, it was normally the assumption that a method of doing business could not be patented, and only a few property protections were in place. But in 1998, a landmark case between Signature Financial Group and State Street Bank and Trust, handed down a decision that a patent could be obtained based on a method of doing business. The dispute between these two companies involved a way to calculate concerning mutual funds, and the Supreme Court agreed that a particular method for calculating them could be patented under a business method patent.

As the name implies, business method patents refers to the method or the way in which the company does business. Business method patents are not a new major category of patents like plant or design patents, but is instead a type of utility patent. Patents for business methods belong to the same family of utility patents that are granted for new electronic equipment, or pharmaceutical products. The business method patent is classified at the Patent Office as a “Data processing patent (in the) financial, cost, management, or business determination”.

For an example of a business method patent, consider a web site or company that invents a new way of advertising for customers on the World Wide Web.

Business method patent applications have exploded with e-commerce and the Internet. If an e-commerce company can continually generate a profit with a new technique and can also prevent their competitors from using this method for at least seventeen years, then e-commerce of this sort becomes very attractive to many entrepreneurs. Previously, business methods on the internet were fair game for anyone who figured out how to implement them. With a business method patent in place, this changes dramatically!

Since the flood of applications to the Patent Office, various online companies have applied for and been granted patents on a wide variety of methods, many of those involving Internet shopping or Web commerce advertising.

In order to qualify for a business method patent there are various criteria that must be met. First of all, a business method patent is granted for a method or type of business software that is practical in its purpose. This is a criterion which is common for granting of all patents.

Another criterion is that the business method must not be obvious. The Patent Office will not approve applications for methods that they have deemed to be entirely obvious. It is easy to prove that a method is practical, but a little harder to prove it is not obvious.

A third criterion a business method patent must fulfill is that it should be something that is worth patenting. The Patent and Trademark Office will not just approve almost anything that comes through their office, but will scrutinize the applications to make sure they are worthy of being patented. This is the most subjective of the criteria that are applied, but it is not generally difficult to demonstrate that an idea is worthwhile, if it actually is.

Lastly, the method to be patented should be something that is new to the industry. The Patent Office will not patent anything that has been in use for a long time. The method or software must have been in use no more than one prior to the date of the patent application.

Like the other patent applications, the costs of the business method patent can vary from $2,000 to $10,000 or more depending on the costs of the patent lawyer’s fees (if you use one). Since the business method patent is a form of a utility patent, the patent owner must pay maintenance fees for the patent. These fees are approximately three times the application fee, spread over the course of the life of the patent. Usually the business method patent is valid for an average of twenty years. However, with the popularity of this type of patent, expect at least a two to three years’ wait before the patent is approved.

Make sure you consider a business method patent if you have unique business methods.

- Leon Edward

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