Academic

Strandburg on a Business Method Use Exemption to Patent Infringement

By Lawrence Solum

Katherine J. Strandburg (New York University School of Law) has posted What If There Were a Business Method Use Exemption to Patent Infringement? (Michigan State Law Review, Vol. 2008, p. 245, 2008) on SSRN. Here is the abstract:

The Federal Circuit's decision in State Street Bank & Trust Co. v. Signature Financial Group Inc. that business methods are patentable is nearly ten years old, yet the wisdom of patenting business methods remains highly debatable. For example, three Supreme Court justices recently have questioned State Street Bank's useful, concrete, and tangible result test for patentable subject matter. Many commentators have also debated the patenting of business methods, questioning whether patents are necessary to spark innovation in methods of doing business and whether exclusive rights to business methods are impediments to a competitive economy. This short Symposium piece seeks to add a new dimension to this debate by pointing out that at least some business methods are part of a larger category of user innovation for which patent incentives are often relatively less important as a spur to innovation. By user innovation, I mean inventions made for the inventor's own use rather than for sale. In a recent article, I explored some of the implications of user innovation for patent doctrine, arguing that the distinct incentive structures involved in user and seller innovation may call for different treatment under the patent laws. Here I argue that the prevalence of user innovation in the context of business methods makes it at least plausible that it would be socially beneficial to exempt business method use (but not sale) from infringement liability. A use exemption would have at least two potential advantages over a categorical subject matter rejection. First, it would mitigate the difficulty of defining business method patents based on the bare patent application by deferring that question to a specific infringement context. Second, a use exemption continues to protect inventors against competing sellers of business methods - e.g., as embodied in software or in specialized training. Focusing on user innovation leads to some distinctions between activities commonly lumped together under the rubric business methods. Some of what are commonly called business methods, including most notably those protected by the financial patents exemplified by the Hub and Spoke mutual fund of the State Street Bank case, may be more akin to new products than to methods of doing business. It may not make sense to exempt infringing purveyors of such intangible products from liability as users of the associated methods.

Full post as published by Legal Theory Blog on May 28, 2008 (boomark / email).