Singularity Law

In 1998 the Federal Circuit decided in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), that there was nothing in patent law that prevented business methods from being patented, as long as they met all of the requirements for patentability. Now, ten years later, the Federal Circuit seems ready to revisit the issue and may significantly curtail the availability of business method patents.

For web entrepreneurs, the State Street Bank decision was a mixed blessing. If you were able to obtain a patent on a key online business method, you could create a very profitable business venture. Priceline is a good example. The “name your own price” patent gave Priceline a distinct advantage over other online travel sites.

However, if you are on the receiving end of a patent infringement suit for implementing a business method on your website that allegedly infringes one of these business method patents, you might not think business method patents are such a good idea. In 2001, for example, Microsoft (the owner of Expedia) agreed to pay the owner of the Priceline patent to end a patent infringement suit that had been filed over the patent.

Barnes & Noble is another company that was sued for allegedly infringing a business method patent – this time the “one click checkout” patent owned by Amazon.com. In 2002, Barnes and Noble licensed the one-click patent as part of the settlement of the infringement suit. In October 2007, the Patent Office rejected 10 of the 15 claims of the one-click patent during a reexamination proceeding.

Recently, the Federal Circuit agreed to rehear another business method patent case (In re Bikski) that will give the court an opportunity to rethink the patentability of the issue. In the February 15, 2008 order granting a rehearing en banc, the court set forth as one of the issues on which the parties were requested to submit arguments: “Whether it is appropriate to reconsider State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998) and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir. 1999), in this case, and, if so, whether those cases should be overruled in any respect?”

The Bilski case involves claims to a method of managing the risk of bad weather through commodities trading. The claims are not tied to any particular form of technology, and some would say that they are purely “mental processes.”

This is a very interesting, and potentially important, case that may significantly impact the availability of financing for future e-commerce businesses built around a “business method” technology.