Social Meaning of the Patentable Subject Matter

(IPRinfo 4/2003)
Nari Lee
LL.D., Researcher
Faculty of Law, University of Turku

The boundaries of the intellectual property institution and the scope of its subject matter have been one of persistent topics of academic debates. One example of such topics that has recently received much attention is the patentability of a method of doing business, especially in the context of computers, networks, or as a method of e-Commerce.

One can now easily find patents on various methods in liberal disciplines. For example, patents have been granted on a method of computerised tourism (European Patent No. 846301), a method of advertising on the Internet (Japanese Patent No. 2756483), an automated restaurant business (Japanese Patent No. 2804933) and even on a method of filing a patent application (US Patent No. 6049811).

Together with the debate on the more ”exotic” patents such as a patent for swinging a golf club, (U.S. Patent No. 5616089) and with the more familiar debate on the patent protection of computer programs, business method patenting has generated globally a great number of commentaries and proposals on patent law reforms.

Law texts vary…

Despite the common factual existence of business method patents in the US, Japan and Europe, the law texts on the patent eligibility of a business method seem to be divergent. In the US, a series of recent Federal Circuit courts’ decisions has actively removed the business method exception, allowing the patenting of those methods with practical utility. In addition, the reference to a business method in the prior use defence for the first inventor, provided by the American Inventors Protection Act of 1999 has codified this change indirectly.

On the other hand, in Japan, there still exists the statutory definition of inventions, under Article 2(1) of the Patent Act, which requires the patentable invention to be an industrially applicable ”invention” that is ”a highly advanced creation of technical ideas, utilizing a law of nature.” This, in theory, could restrict patenting of a pure business method. However, reflecting the pro-patent policy of the current government, the patent law revision of 2002 has eased this restriction by explicitly allowing product claim(s) to a computer program (Law No. 24, 17th April 2002)

While the European Patent Convention (Art. 52(2)(c)) explicitly excludes the patenting of a business method, it is only to the degree of the subject matter ”as such”, (Art 52(3)) thereby opening the possibility of patenting other aspects of business methods.

…but practices are not far from each other

In sum, although the texts of the law seem to be divergent, the practices based on the expansive and flexible interpretation of the law suggest that the divergence may exist only at a superficial level.

It has been indicated that this flexibility globally signals a strategic patenting of the firms in the relevant industries, either to avoid, in advance, the troublesome infringement litigations for the methods that they have used in secret, or to secure a first mover advantage.

Is patenting business methods useful, fair or profitable?

Reactions to business method patenting have varied. Many have asked if the subject matter of the patent should include any kind of processing of knowledge, including profitable business concepts, as long as they are useful. Some have argued that business method patenting provides incentives for investments in the industry and that patents will serve as a valuable source of finance for the Small and Medium Enterprises (SMEs), who are the actual innovators.

As the e-Commerce industries fluctuate, an argument has also been made that investments in computer-implemented business methods need a state-backed guarantee that the investment will be protected from imitation other than the market lead-time.

However, the majority of the arguments in favour of the patent protection of a business method came from the argument of ”fairness,” that no industry should be deprived of the benefits of patent protection.

Against these, there have been generally two types of critical reactions visible in the academic literature.

The first was that a business method is not a proper subject matter for a patent, whether it is because of the questionable social utility of patent protection of this subject matter, or because the text of the law prohibits such interpretation of patentable subject matter.

The second critical argument concerned the question of the patent quality: the patent offices are unequipped to deal with the prior-arts of these types to issue valid patents. The familiar or known applications that implement the methods, or the familiarity of the metaphor used in the design have also been the source of questions on the quality and validity of the issued business method patents and the competency of the patent examiners.

While this second approach treats the problem as being of a transient nature, the first approach critically questions if the problem of business method patenting could be more fundamental.

Indicator of crisis in the patent institution?

There are many technologies and innovations that were not imaginable when the IP institution was initially devised. Why then has business method patenting been singled out as an indicator of the crisis in the patent institution by many scholars? One explanation could be found in the essential differences between the traditionally accepted subject matters and a business method. It is from this viewpoint that a more serious question can be raised: that protecting this inherently different subject matter with a patent could ultimately create a different social meaning to the patentable subject matter.

It is generally understood that a patent protects ideas and copyright protects expressions. However, a closer look suggests that what patent law protects may not simply be general ”ideas” but a specific implementation of the ideas. In this sense, ”invention of technology” (TRIPs Art. 27) or ”useful arts” (US Constitution Article I, § 8) are legal expressions which assert the principle that as the subject matter of a patent, an idea should be embodied and manifested in some form of physical means.

On the other hand, a business method is commonly understood as a processing of ”business” knowledge or abstract data, to protect valuable business information and activities. In essence, this process could be viewed as an inherently human process such as thinking and deciding on an action. A business method seemingly lacks the physical finality in its implementation compared to mechanical inventions or even chemical processes that eventually produce a finite tangible product. The ”tangible” result of a business method patent might simply be a commercially valuable number.

Function of patent law: protecting ideas with commercial value or other social meaning?

Thus, the scepticism of the scholars and the general public stems from the intuitive belief that an innovative business method or concept may be inherently different from the invention of technology that the patent law aims to protect with patent property rules. If the patent law is there simply to protect any kind of commercial value-creating action, and if the subject matter of patent law should be any intangible ideas and human activities which create commercial values and which can be repeated by another person, then a business method patent may not be much of a problem. As long as the claimed ”idea” or action can be repeated and the claimed commercial values can be regenerated, it should be and could be the subject matter of a patent.

On the other hand, if the patent law has some other social meaning and if the subject matter of a patent is an implementation of such social meaning, one may argue that the protection of a business method by a patent could create a justificatory problem.

In this sense, one may ask if patent protection, which is based on a property-like rule complete with an injunctive relief, is the most suitable and socially desirable instrument for the protection of any innovation producing a commercially valuable result, such as a method of doing business.

In this regard, the patenting of a business method presents a question of a normative choice. Accepting it as a patentable subject matter or rejecting it, ultimately reflects this very normative choice of a society.

This article is partially based on the author’s doctoral dissertation, submitted to Kyushu University, Japan, entitled ”Patent Eligible Subject Matter Reconfiguration and the Emergence of Proprietarian Norms – The Patent Eligibility of Business Methods,” publicly defended on 31 Aug.2002.