August 2011 Issue

Business Methods in 2011: Business as Usual?


What is a business method?
While there is no single definition of a “business method,” many consider business methods to include inventions that fall into class 705 of the USPTO patent classification system.  Class 705 is defined as “Data processing: Financial, Business Practice, Management, or Cost/Price Determination.”  While recognizing class 705 as the primary home of business method patents, the USPTO notes that business methods may also be classified elsewhere in the USPTO, such as with gaming or teaching methods.

Who gets business method patents?
From 2006 through 2010, eighteen companies received 66 or more patents in class 705.  These companies include large computer companies like IBM and Microsoft; financial institutions such as JP Morgan, Chase Bank, and American Express; business consulting firms such as Accenture; and e-commerce companies like eBay and Amazon.  After a dip in 2002, the USPTO has seen a steady increase in the number of business method patent applications being filed, with nearly 18,000 filed in 2010.

How does the USPTO handle all that work?
As filings have increased, so has the number of patent examiners working on business methods at the USPTO.  In the last ten years, the number of examiners in the group responsible for examining business method applications has more than quadrupled to nearly 325.  The examining group responsible for business method patents is divided into workgroups including business cryptography, e-shopping, health care/insurance, business processing, incentive programs/coupons, and finance/banking.  The business method examiners at the USPTO have a wide range of educational backgrounds, including many with law degrees or masters in business administration.  Some have work experience in related fields such as insurance, software development, marketing, and real estate.

How hard is it to get a business method patent?
In 2001, fewer than 500 patents issued in class 705, compared with over 3,500 in 2010.  In addition to the increase in application filings, the allowance rate of business method patents has risen, reaching a high of 23.5% in 2010.  While this rate has been slowly increasing, it remains significantly lower than the USPTO-wide allowance rate of 47%.  In addition to a lower allowance rate, business method patent applicants also face a longer pendency than applicants in other technology areas.  As of mid-year 2011, a business method patent applicant waits an average of 28.9 months to begin examination, compared with 26.5 months across all technologies.  Likewise, from filing to final disposition takes an average of 42.3 months for business method applicants, compared with USPTO-wide overall pendency of 33.9 months.  While business method applicants generally face a longer prosecution period, the USPTO has been making progress to reduce its backlog and improve efficiency during prosecution.

What is being done to increase quality of business method patents?
Getting the best prior art before examiners is one way the USPTO can improve patent quality.  The business methods examining group has actively sought input from industry to build its collection of prior art.  Organizations have provided databases, books, technical reports, conference proceedings, and web-based resources to assist examiners in finding the best prior art.  Many resources are available on the business method section of the USPTO website, located at

Examiners in the business methods group also participate in the USPTO’s Patent Examiner Technical Training Program to connect examiners with industry experts to learn more about state-of-the-art technology, prior art, and industry standards.  The USPTO invites industry participation in this training program, where topics have included cloud computing, social networking, electronic payment systems, and Internet commerce.  Interested parties can obtain more information and volunteer to participate at

What are some best practices to apply for business method patents?
The USPTO’s current guidelines encourage applicants to avoid claiming general concepts, such as basic economic practices or theories, basic legal theories, mathematical algorithms, mental activities, and human behavior.  Instead, applicants are encouraged to craft claims that capture the practical application of any underlying abstract ideas, such as the use of a machine or apparatus to implement the steps of a claimed process.  However, simple automation of a manual activity is typically found to be obvious, according to the USPTO.  The USPTO also advises applicants who wish to protect business methods using computer-readable media claims to make clear that the media are “non-transitory” to avoid a rejection for nonstatutory subject matter.

Additionally, the mere presence of a machine will not ensure subject matter eligibility.  For example, a claim may not meet the threshold requirements of 35 U.S.C. § 101 if a machine appears in a method claim but does not limit the method according to certain claim interpretation principles.  Instances in which the inclusion of a machine may not limit the method claim include: if the recitation of the machine appears only in the preamble, if the recitation of the machine appears only in expressions of intent or purpose of the positively recited action, or if the recitation of the machine appears only in optional language.

The incorporation of a machine into the claims must be more than nominally, insignificantly, or tangentially related to the execution of the clamed method.  For example, in a method claim that only utilizes a machine in a data-gathering step, the machine may not be more than tangentially related to the method claim.  Thus, such a method claim might not be directed to patentable subject matter.

What’s next for business method patents?
The USPTO has not yet updated its year-old interim guidelines, issued just after the Bilski decision.  Instead, the USPTO is waiting for guidance from the Federal Circuit, which is currently considering several cases involving business method patents.  Decisions in these cases will likely issue in the next six to nine months, so new guidance from the USPTO may come sometime in 2012.  The USPTO is also closely watching the currently pending patent reform legislation, which includes a proposed provision for challenging business method patents.  If the legislation passes, the USPTO could be issuing additional rules and procedures for business method patent challenges within the next year.

Erika Arner is a recognized expert in the area of business method patents and patent-eligibility jurisprudence.  She represented the petitioners before the United States Supreme Court in Bilski v. Kappos, coauthoring the successful petition for certiorari and the petitioners’ briefs to the Court.  She has also advised clients on issues related to patentable subject matter before the U.S. Court of Appeals for the Federal Circuit, U.S. district courts, and the United States Patent and Trademark Office.