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The rise of business method patents in the late twentieth century, and the controversy that has accompanied such patents over the last decade, has often been cast as being precipitated by novel judicial precedent that radically departed from traditional understandings of patentable subject matter. In particular, the Federal Circuit's decision in State Street Bank & Trust Co. v. Signature Financial Group has often been described, especially by opponents of business method patents, as an example of judicial activism that introduced patents into a field where patenting was unwanted and unnecessary. This Article demonstrates that such an explanation for the rise of business method patents is not accurate. The rise of business method patents was generated not so much by any court decision or other change in the legal system, but rather by fundamental technological and industrial changes that, during the second half of the twentieth century, began to transform many business fields into branches of engineering. This Article documents those technological and industrial changes and shows that the rise of business method patents is in fact an excellent case study in which the law followed, and accommodated, dramatic changes happening elsewhere in society.

John F. Duffy


In a landmark decision, the Federal Circuit Court of Appeals in Signature Financial v. State Street Bank held that business methods may be patented. Recently, the US Supreme Court in Bilski v. Kappos left the door open for the availability of patents for business methods. These holdings, together with the explosive growth of electronic commerce and technology, make the business method patent an important growth area of intellectual property.


Now in a revised Looseleaf format, this completely updated Second Edition of Business Method Patents is your guide to the unique opportunities and risks in this emerging area of intellectual property law.


Business Method Patents, Second Edition is your authoritative source for expert guidance on:

Business Patents—The Controversy

  • 1.01 Drive-Thru Windows

  • 1.02 State Street Bank Unlocks the Shackles

  • 1.03 Judge Rich Is the Tipping Point

  • 1.04 Business Patent Filings Explode

  • 1.05 Business Method Patents Raise Concern

  • 1.06 Congress Reacts to State Street Bank Decision

  • 1.07 Some in Congress Urge Further Action

  • 1.08 Will Business Model Patents Lead to Downfall of Civilization?

  • 1.09 The Patent Office Pushes Back


State Street Bank v. Signature Financial—Judge Rich’s Legacy

  • 2.01 Judge Rich's Legacy

  • 2.02 State Street Bank Litigation in the District Court

  • 2.03 State Street Bank Argues the Signature Claims Exalt Form Over Substance

  • 2.04 Signature Financial Counters—Arguing that the Alappat Decision Compels a Finding that the Patent Is Valid

  • 2.05 Special Interest Groups Attempt to Influence Outcome

  • 2.06 Holding in State Street Bank

  • 2.07 A Short Biography of Judge Giles S. Rich

  • 2.08 How Would Judge Rich React to Bilski


A Philosophy For Business Model Patents—The Statutory Subject Matter Issue

  • 3.01 Society’s DNA

  • 3.02 Writing—the Foundational Technology

  • 3.03 Where Did Our Concept of Statutory Subject Matter Come From?

  • 3.04 Is a Bucket Brigade Statutory Subject Matter?

  • 3.05 A Philosophy for Understanding Statutory Subject Matter

  • 3.06 The Patent on a Method of Putting

  • 3.07 Application of the Philosophy to Business Methods

  • 3.08 Another Example to Test the Statutory Subject Matter Philosophy

  • 3.09 Should a Patent System Reward Inventors of Low-Tech Business Inventions?


Supreme Court Decisions On Statutory Subject Matter

  • 4.01 Precomputer Era Supreme Court Decisions

  • 4.02 Early Computer Age Supreme Court Decisions

  • 4.03 Supreme Court Grapples with Statutory Subject Matter — Post State Street Bank

  • 4.04 The Supreme Court Rejects Bilski Claims but Leaves Business Method Patent Door Open

  • 4.05 A Closer Look at Bilski’s Patent Application


Federal Circuit Decisions That Shaped Business Method Patents

  • 5.01 Past Battles Over the Statutory Line

  • 5.02 In re Comiskey—Some Business Methods Are Nonstatutory Abstract Ideas

  • 5.03 In re Bilski— En Banc Federal Circuit Reconsiders Business Method Patents

  • 5.04 Prometheus v. Mayo — Medical Diagnostic Methods Revisited After Bilski

  • 5.05 Classen Decision Delayed on Procedural Grounds §

  • 5.06 Research Corp. v Microsoft — Functional Computer Applications Are Not Abstract Ideas

  • 5.07 In re Ferguson Dissent Sheds Light on How Future Courts May Treat the Abstract Idea

  • 5.08 Patenting the Organization of Data

  • 5.09 In re Warmerdam

  • 5.10 In re Lowry

  • 5.11 Transforming Data

  • 5.12 Arrhythmia v. Corazonix

  • 5.13 AT&T v. Excel

  • 5.14 Is There a Technological Arts Requirement? —The Current Answer Is No.

  • 5.15 In re Nuijten Explores Whether Signal Claims Are Statutory

  • 5.16 In re Johnston— Record Keeping Apparatus Rejected

  • 5.17 In re Chatfield— Judge Rich Interprets Benson

  • 5.18 In re Deutsch—Controlling Oil Refinery Plants

  • 5.19 In re Maucorps—Optimizing Sales

  • 5.20 Paine Webberv. Merrill Lynch—the Musmanno Patent

  • 5.21 In re Grams—Medical Diagnostics §5.22 In re Schrader—Competitive Bidding


Judicial Decisions—Before State Street Bank

  • 6.01 Why Study the Early Business Method Cases

  • 6.02 Coupon Bond Tracking System—Munson v. The Mayor, Etc., of New York

  • 6.03 Business Forms—Waring v. Johnson

  • 6.04 Book Publishing Format—Dugan v. Gregg

  • 6.05 Bank Account Ledgers—Thomson v. Citizens' Nat. Bank of Fargo

  • 6.06 Insurance—United States Credit System Co. v. American Credit Indemnity Co.

  • 6.07 Recording Deeds—Johnson et al. v. Johnston

  • 6.08 Anti-Fraud Restaurant Menus—Benjamin Menu Card Co. v. Rand, McNally & Co.

  • 6.09 Perforated Bookkeeping Forms—Safeguard Account Co. v. Wellington

  • 6.10 Numbering Scheme for Insuring Against Shipping Loss—Hocke v. New York Cent. & H. R. R. Co.

  • 6.11 Anti-Fraud Cash Registering—Hotel Security Checking Co. v. Lorraine Co.

  • 6.12 Electronic Commerce in 1910—Berardini v. Tocci

  • 6.13 Script for the Traveler, A New Form of Money—Rand, McNally & Co. v. Exchange Scrip-Book Co.

  • 6.14 Commuter Transfer Tickets—Cincinnati Traction v. Pope

  • 6.15 Anti-Mold Fruit Treatment—American Fruit Growers, Inc. v. Brogdex Company

  • 6.16 Buying and Selling Stock—In re Wait

  • 6.17 National System for Fire Fighting—In re Patton

  • 6.18 Drive-in Movies—Loew's Drive-in Theatres, Inc. v. Park-in Theatres, Inc.

  • 6.19 Converting Bank Checks into Promissory Notes—In re Wiechers

  • 6.20 Codes for Processing Transactions at the Grocery Checkout Register—In re Howard

  • 6.21 Performing Traffic Studies on Telephone Lines—In re Waldbaum

  • 6.22 Distribution of Recorded Audio—In re Fox

  • 6.23 Assigning Budget Categories to Bank Reports—In re Johnston

  • 6.24 Assigning Priorities in Data Processing Systems—In re Chatfield

  • 6.25 Controlling Oil Refinery Plants—In re Deutsch

  • 6.26 Optimizing Sales—In re Maucorps

  • 6.27 Cash Management Accounts—Paine, Webber, Jackson & Curtis, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc.

  • 6.28 Accounting Method—Ex parte Murray

  • 6.29 Medical Diagnostics—In re Grams

  • 6.30 Competitive Bidding—In re Schrader


USPTO View On Business Method Patents and The BPAI Reporter

  • 7.01 USPTO - 101 Guidelines—After Bilski

  • 7.02 USPTO -101 Guidelines Before Bilski [Now Superseded]

  • 7.03 The BPAI Reporter

  • 7.04 Discussion of Noteworthy BPAI Cases


The Origins Of Commerce

  • 8.01 The Internet and Money

  • 8.02 Barter and Proto-Money

  • 8.03 Lydians Invent Coins

  • 8.04 Chinese Invent Coins Independently

  • 8.05 The Greeks Spread the Lydian Invention of Money Throughout the Western World

  • 8.06 Money Marches Throughout the Roman Empire

  • 8.07 The Chinese Invent Paper Money and Discover Inflation

  • 8.08 The Knights Templar Invent Banking

  • 8.09 Italian Banking Families Exploit the Bill of Exchange

  • 8.10 Spanish Gold Floods Europe and Bankrupts Spain

  • 8.11 The United States Government Is Founded and Enters the Banking Business

  • 8.12 Wildcat Bankers Scatter Coherent Banking Strategy to the Wind

  • 8.13 The Panic of 1907 Spawns the Federal Reserve System

  • 8.14 The Stock Market Crash of 1929 Brings Major Changes in U.S. Monetary Controls

  • 8.15 The Bretton Woods Agreement

  • 8.16 Nixon Pulls Out of Bretton Woods and Takes the United States Off Gold Standard

  • 8.17 Alternate Forms of Money Are Invented


The Nature Of Commerce Today

  • 9.01 Understanding Commerce

  • 9.02 A Generalized Commerce Model

  • 9.03 Fundamental E-Commerce Building Blocks

  • 9.04 Interviewing the Inventor—Different Vantage Points for Assessing E-Commerce Business Models

  • 9.05 Tracking the Value Flow

  • 9.06 Examples of Electronic Commerce Innovations


E-Commerce Technology

  • 10.01 E-Commerce Technology Building Blocks

  • 10.02 Secure Electronic Commerce

  • 10.03 XML—The Lingua Franca of the New Internet?

  • 10.04 Evolution of Technology — Predicting What’s Next

  • 10.05 Mobile Computing

  • 10.06 Search Technology


Pure Business Model Patents

  • 11.01 Pure Business Model Patents

  • 11.02 Just-in-Time Production

  • 11.03 Model for Reducing Financial Risk

  • 11.04 Model for Improving Janitorial Services

  • 11.05 Service Business Management System

  • 11.06 Microsoft Marketing to Influential Rumormongers

  • 11.07 Business Model for Strategic Management of Lawsuits

  • 11.08 Buying and Selling Capacity in the Semiconductor Manufacturing Market

  • 11.09 Music Popularity Rating

  • 11.10 Mediating Purchase Transactions Over a Network

  • 11.11 Administration of Life Insurance Business

  • 11.12 Determining Insurance Rates Based on Geographic Location

  • 11.13 The Never-Ending Subscription

  • 11.14 Separating Product Pricing from Product Distribution

  • 11.15 Upgrading Your Airline Seat

  • 11.16 Reserving a Place in the Restroom Line

  • 11.17 Preparing Grade School Students for Junior High

  • 11.18 Giving Someone a Haircut

  • 11.19 Drafting a Patent Application

  • 11.20 Going Fashion Shopping

  • 11.21 Swinging on a Swing

  • 11.22 Exercising a Cat


Prior Art

  • 12.01 The Importance of Prior Art

  • 12.02 Patent Classification System

  • 12.03 Patent Classification Procedures

  • 12.04 Classification of Business-Related Patents

  • 12.05 Conducting a Prior Art Search—Defining the Scope of Search

  • 12.06 Internet Technology as Prior Art

  • 12.07 Early Electronic Commerce Technology as Prior Art


Claiming Business Model and E-Commerce Inventions

  • 13.01 Legal Requirements

  • 13.02 Claim Drafting Process

  • 13.03 Finding the Invention

  • 13.04 Testing Claims for Proper Scope

  • 13.05 Thinking Outside the Box

  • 13.06 Claim-Drafting Templates

  • 13.07 Drafting Statutory Process Claims

  • 13.08 Article of Manufacture Claims

  • 13.09 Internet Patent Claim Templates

  • 13.10 Some Specific Examples of Internet Patents

  • 13.11 How the Patent Office Construes Claims

  • 13.12 How Courts Construe Issued Claims

  • 13.13 Using Means-Plus-Function Claims for Business Inventions

  • 13.14 Use of Means-Plus-Function Analysis to Bolster Specification


Drawings For E-Commerce and Business Model Patents

  • 14.01 Drawings in a Patent Application

  • 14.02 Legal Requirements for Drawings 

  • 14.03 Practical Considerations Prior to Litigation

  • 14.04 Flowcharts 

  • 14.05 Pseudocode

  • 14.06 Entity-Relationship Diagram

  • 14.07 Booch Notation

  • 14.08 Use of Object-Oriented Notation to Illustrate Business Systems

  • 14.09 Data Flow Diagram

  • 14.10 Representing Data Structures

  • 14.11 Patent Drawing Checklist

  • 14.12 Unified Modeling Language


The Patent Specification

  • 15.01 Purpose of Specification

  • 15.02 Statutory Requirements of Specification

  • 15.03 Regulations Governing Specification Content

  • 15.04 Case Law on Specification Content

  • 15.05 Written Description Requirement

  • 15.06 Enablement Requirement

  • 15.07 Best Mode Requirement

  • 15.08 Form and Style of Specification

  • 15.09 Mechanics of Specification

  • 15.10 Defining the E-Commerce or Business Model Invention

  • 15.11 Describing E-Commerce Invention

  • 15.12 Describing the Business Model Invention

  • 15.13 Using Means-Plus-Function Analysis to Strengthen Specification

  • 15.14 A Section 112 Checklist


Litigating the Business Method Patent

  • 16.01 Jurisdiction Issues Involving Business Model and E-Commerce Patents

  • 16.02 Infringement and Territorial Issues Involving Internet Patents

  • 16.03 The Special Defense to Business Method Infringement


Exploiting the Business Method and E-Commerce Patent Portfolio

  • 17.01 Introduction

  • 17.02 Developing Strategic Portfolios for the Future

  • 17.03 The Strategic Pyramid

  • 17.04 Neutralizing a Competitor's Portfolio with Business Model Patents

  • 17.05 Service and Flow Economy

  • 17.06 A Systematic Approach to Portfolio Development

  • 17.07 Portfolio Mapping Techniques


International Protection for Business Methods

  • 18.01 How Business Method Patents Fare Throughout the World Today

  • 18.02 European View of Business Method Patents—A Negative Reaction to State Street Bank

  • 18.03 EPO Actions

  • 18.04 Japanese View of Business Method Patents—A Positive Reaction to State Street Bank

  • 18.05 Japanese Law

Internet Business Model Patents: Obvious by Analogy

Margo A. Bagley, Emory University School of Law



This Article contends that part of the problem of Internet business model patents is the narrow view of analogous art employed by judges and USPTO examiners which largely excludes relevant "real-world" prior art in the determination of non-obviousness under § 103 of the Patent Act. Consequently, part of the solution lies in helping courts and the USPTO properly to define analogous art for a particular invention. To do so, judges and examiners must recognize the interchangeability of computer programming (i.e. "e-world" activities) to perform a function, with human or mechanical performance of the same function (i.e. "real world" activities). Such recognition is consistent with binding United States Supreme Court precedent and requires a reversal of the trend towards narrow analogous art definitions in the obviousness inquiry. This Article also identifies an increased potential for abuse of the doctrine of equivalents in the Internet business model context due to a combination of factors that impact the usefulness of traditional controls on the application of the doctrine of equivalents. Such factors include a dearth of properly trained business method USPTO examiners, and a lack of business method and software prior art readily available to examiners to consult in assessing the patentability of such methods. To the extent such factors result in Internet business model patents with the scope, by default, of "pioneer" patents, limitations on application of the doctrine of equivalents are necessary. To lay the groundwork for this dual analysis, Part I of this Article provides a look at Internet business model patents in light of key patentability requirements mandated by the Patent Act. Part II traces the evolution of the analogous art component of the non-obviousness determination and illustrates how the malleability of the doctrine, as exemplified in several Court of Appeals for the Federal Circuit decisions, has particular relevance to prior art definitions for Internet business model patents. Part III of this Article then examines the doctrine of equivalents and explores how the likelihood of improper application of this doctrine in the Internet business model context is increased. Recognizing that feasible solutions are not limited to doctrinal remedies, this Article also mentions other, more drastic ways of addressing the Internet business model conundrum. It concludes, however, that rational exercise of the elasticity present in both the doctrine of analogous art and the doctrine of equivalents provides a better approach to defining proper Internet business model claim scope.

Recommended Citation

Margo A. Bagley, Internet Business Model Patents: Obvious by Analogy, 7 Mich. Telecomm. & Tech. L. Rev. 253 (2001).

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