France On January 7, 1791, the French revolutionary
National Constituent Assembly passed a patent law that stated that "Any new discovery or invention, in all types of industry, is owned by its author". Inventors paid a fee depending upon the desired term of the patent (5, 10, 15 years), filed a description of the invention and were granted a patent. There was no preexamination. Validity was determined in courts. 14 out of 48 of the initial patents were for financial inventions. In June 1792, for example, a patent was issued to inventor F. P. Dousset for a type of
tontine in combination with a
lottery. These patents raised concerns and were banned and declared invalid in an amendment to the law passed in 1792.
Britain In Britain, a patent was issued in 1778 to John Knox for a "[p]lan for assurances on lives of persons from 10 to 80 years of age". At this time in British law, patents could only be issued for manufactured objects, not manufacturing processes.
United States Patents have been granted in the United States on methods for doing business since the US patent system was established in 1790. The first financial patent was granted on March 19, 1799, to Jacob Perkins of Massachusetts for an invention for "Detecting Counterfeit Notes". All details of Perkins' invention, which presumably was a device or process in the printing art, were lost in the great
Patent Office fire of 1836. Its existence is only known from other sources. The first financial patent for which any detailed written description survives was to a printing method entitled "A Mode of Preventing Counterfeiting" granted to John Kneass on April 28, 1815. The first fifty years of the U.S. Patent Office saw the granting of forty-one financial patents in the arts of bank notes (2 patents), bills of credit (1), bills of exchange (1), check blanks (4); detecting and preventing counterfeiting (10), coin counting (1), interest calculation tables (5), and lotteries (17). On the other hand, cases such as
Hotel Security Checking Co. v. Lorraine Co., 160 F. 467 (2d Cir. 1908), which held that a bookkeeping system to prevent embezzlement by waiters was unpatentable, were often read to imply a "business method exception", in which business methods are unpatentable. Another such case was
Joseph E. Seagram & Sons v. Marzell, 180 F.2d 26 (D.C. Cir. 1950), in which the court held that a patent on "blind testing" whiskey blends for consumer preferences would be "a serious restraint upon the advance of science and industry" and therefore should be refused.
The change in practice in the 1990s For many years, the USPTO took the position that "methods of doing business" were not patentable. With the emergence in the 1980s and 1990s of patent applications on internet or computer enabled methods of doing commerce, however, USPTO found that it was no longer practical to determine if a particular computer implemented invention was a technological invention or a business invention. Consequently, they took the position that examiners would not have to determine if a claimed invention was a method of doing business or not. They would determine patentability based on the same statutory requirements as any other invention. The subsequent allowance of patents on computer-implemented methods for doing business was challenged in the 1998
State Street Bank v. Signature Financial Group, (47
USPQ 2d 1596 (
CAFC 1998)). The court affirmed the position of the USPTO and rejected the theory that a "method of doing business" was excluded subject matter. The court further confirmed this principle with
AT&T Corp. v. Excel Communications, Inc., (50 USPQ 2d 1447 (Fed. Cir. 1999)). The USPTO continued to require, however, that business method inventions must apply, involve, use or advance the "technological arts" in order to be patentable. This was based on an unpublished decision of the U.S.
Board of Patent Appeals and Interferences,
Ex parte Bowman, 61 USPQ2d 1665, 1671 (Bd Pat. App. & Inter. 2001). This requirement could be met by merely requiring that the invention be carried out on a computer.
The reaction against business method patents after 2000 In October 2005 the USPTO's own administrative judges overturned this position in a majority decision of the board in
Ex parte Lundgren, Appeal No. 2003-2088 (BPAI 2005). The board ruled that the "technological arts" requirement could not be sustained, as no such requirement existed in law. In light of
Ex parte Lundgren, the USPTO has issued interim guidelines for patent examiners to determine if a given claimed invention meets the statutory requirements of being a process, manufacture, composition of matter or machine (35 USC 101). These guidelines assert that a process, including a process for doing business, must produce a concrete, useful and tangible result in order to be patentable. It does not matter if the process is within the traditional technological arts or not. A price for a financial product, for example, is considered to be a concrete useful and tangible result (see
State Street Bank v. Signature Financial Group). The USPTO has reasserted its position that literary works, compositions of music, compilations of data, legal documents (such as
insurance policies), and forms of energy (such as data packets transmitted over the Internet), are not considered "manufactures" and hence, by themselves, are not patentable. Nonetheless, the USPTO has requested comments from the public on this position. In 2006, Justice
Kennedy of the
US Supreme Court cast aspersions on business method patents when he commented that some of them were of "potential vagueness and suspect validity". This was expressed in a
concurring opinion to the case of
eBay Inc. v. MercExchange, L.L.C. There has been considerable speculation as to how this opinion might affect future business method patent litigation, particularly where a patent owner seeks an injunction to stop an infringer. In 2006, three Justices (Breyer, J., joined by Stevens and Souter, JJ.) dissented from the dismissal of
certiorari as improvidently granted in
Laboratory Corp. of Am. Holdings v. Metabolite Labs., Inc., arguing that
State Street enunciated an erroneous legal test under which processes that the Supreme Court had held patent-ineligible would be held patent-eligible.
The Bilski case – 2010 In
Bilski v. Kappos, 561 U.S. 593 (2010), the Supreme Court held that the
machine-or-transformation test is not the sole test for determining whether a claim comes within the "process" subject matter of the Patent Act and is thus patent eligible. Rather than being an exclusive test for eligibility, the machine-or-transformation test is "a useful and important clue", an investigative tool, for determining whether some claimed inventions are processes under § 101. With respect to the facts of the case before it, the Supreme Court affirmed the Federal Circuit's
en banc rejection of an application for a patent on a method of stabilizing cost inputs in the energy industry by hedging price rises against decreases. The Court held that the investment strategy set forth in the application was an "abstract idea", making it ineligible under that exception to the general subject-matter areas listed in the Patent Act. The Supreme Court's decision in
Bilski v. Kappos affirmed but sharply qualified the Federal Circuit's 2008
en banc decision in
In re Bilski. The decision announced a "machine-or-transformation" test of patent eligibility that, if it had been accepted as the exclusive for process patents, would have made ineligible many business-method patents granted in the last decade. Although the Supreme Court rejected its exclusive use, the test is still important as a "useful and important clue" for determining patent eligibility of claimed process inventions. Under this test: first, processes that transform an article from one state or thing to another are patent eligible regardless of whether their use requires a machine. Processes involving transformation of abstract financial data, such as that claimed in machine format in
State Street, are probably patent ineligible. Second, processes that do not make patent-eligible transformations are patent eligible only if they are claimed to be carried out with a "particular machine". It appears that a programmed general-purpose digital computer is not a
particular machine for this purpose. It is unclear from
Bilski whether a particular machine must be novel and nonobvious, and specially adapted for carrying out the new process. The Supreme Court's decision in
Parker v. Flook seems to call for that, but the
Bilski court did not choose to opine on this point at that time. The majority opinion in
In re Bilski refused to hold business methods categorically ineligible on any ground. Judge Mayer's dissent, however, seconded by Judges Dyk's and Linn's concurring opinion, insisted that the US patent system is limited to technology and therefore it excludes trade and business expedients. Judge Mayer equated the US Constitution's limitation of patent grants to the "useful arts" to a limitation to technology, relying on
case law stating that technology is the modern equivalent of useful arts. In November 2007, the United States
Internal Revenue Service proposed rules that would require tax filers who paid a license fee for a
tax patent to declare that to the IRS.
The Alice case, 2014 Several years later, in
Alice v. CLS Bank, the Supreme Court readdressed the patent eligibility of a business method. It held patent ineligible a method of securing intermediated settlement—a form of electronic escrow. In invalidating Alice's patent, the Court announced a two-step test based on the Court's earlier decisions in
Mayo v. Prometheus and
Funk Bros. Seed Co. v. Kalo Inoculant Co. This test first determines whether the claimed invention is directed to an abstract idea, law of nature, mathematical formula, or similar abstraction. If it is, the court is to proceed to the second step—determining whether the way the claimed invention implements the abstraction contains an inventive concept, as contrasted with being routine and conventional. Under the
Alice test, the claimed invention is patent eligible only if it contains an inventive concept. The USPTO business method examining art units responded quickly to the
Alice decision. Allowances per month for patents related to finance dropped to 10% of their pre Alice value. The
Patent Trial and Appeal Board has reacted in a similar manner. Only about 20% of the appealed business method rejections by patent examiners are getting reversed by the board. == Jurisdictions ==