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What are the Costs and Benefits for the Marketer?
by Paul Christ, KnowThis.com
December 2004  One October 23, 2004 Dell Inc., the world’s largest online seller of computers, was sued by a small company on grounds of patent infringement. The suit alleges that Dell is violating a patent held by DE Technologies of Virginia, USA, on methods for selling product internationally using the Internet. This suit is just the latest in a long list of suits filed in American courts by companies that have been awarded business method patents by United States Patent and Trademark Office (USPTO).
While such patents have been heavily criticized it is imperative that marketers understand the importance of business method patents in order to gain a thorough understanding for how this form of intellectual property can impact their organization. Failure to fully appreciate the importance of business method patents could significantly jeopardize the ability of a company to perform certain processes that are key to that company’s success. For those new to business methods the following answers to commonly asked questions will familiarize you with the concept. For more information see the KnowThis.com tutorial Marketing Method Patents. What are Business Method Patents?
One of the great misconceptions of patents is that a patent can only be obtained on an invention of a tangible item. In fact, prior to 1998 this was generally the case. However, the now famous (or imfamous!) court decision in the State Street Bank & Trust Co. v. Signature Financial Group, Inc. case changed the patent landscape by allowing patents to be obtained for how a business function is performed, such as, explaining the steps in how a business process is carried out. If such a process meets certain criteria established by the USPTO then this process may be patentable as a business method. Most business method patents that have issued since the State Street case do, in fact, tie a business process to a tangible component, with the majority tied to computer technology such as the Internet. This has led many to dub business method patents as "Internet patents." Even with most business method patents tied to a technology component, the State Street decision appears, though does not explicitly say, that a tangible component is not a requirement for a business method to be patented. What is the value of a business method patent?
Patents awarded in the United States give the patent holder the right to “exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States” for a period that is generally 20 years from the date the patent application is filed. There are several categories of patents, with business method patents falling into the utility patent category, which are patents granted to someone “who invents or discovers any new, useful, and nonobvious process (emphasis added), machine, article of manufacture, or composition of matter, or any new and useful improvement thereof.” Finally, the most important value of a business method patent is the potential it has for providing a competitive advantage since it in effect provides a monopoly for the patent holder by legally excluding others. What is the downside of patents?
Patents are public information available for all to see. For being awarded exclusive rights, patent holders must disclose their invention in such fine detail that will enable “any person skilled in the art or science to which the invention pertains to make and use the same.” This includes providing in-depth written specifications of the invention along with detailed drawings. The implication is that the inventor has nothing to hide and once the patent has expired anyone can duplicate it. Additionally, since patents are publicly available, competitors could determine ways to circumvent the claims in the patent and produce a similar invention that may not necessarily create an infringe situation. What are the criteria necessary to obtain a business method patent?
To be awarded a patent the invention must be novel or, in other words, not previously known. The definition of “not previously known” means that essentially there is no other mention (called prior art), either as something that was previously being used or simply something that was discussed. The idea of prior art is a sticky one and further discussion is beyond the scope of this article but let’s just say it is tricky and requires lots of research and possibly legal assistance to make sure the invention is novel. A second requirement to obtain a patent is that the invention must be useful for something. That is, the invention must offer a useful result for someone. Generally this is not a difficult criterion to meet. The third requirement is that patents must be “non-obvious” meaning that someone who possesses “ordinary skill in the art” would most likely not have thought of it. Clearly this criterion for an invention’s patentability is open for debate as to what is obvious and what is not but suffice to say this criterion for patenting a business method is a highly contentious one. What are some examples of business method patents?
Hundreds and possibly thousands of business method patents have been awarded since the State Street decision, with a large percentage of these related to marketing activities. Some of the best known “marketing method patents” include Amazon’s 1-click purchase, Yahoo’s delivery of ads based on keyword searching, and Priceline’s name your own price bidding method. How do I know if someone already has a business method patent?
To avoid possible infringement or to avoid the potential high cost of applying for a patent, marketers should search the USPTO website. KnowThis.com has a tutorial on this subject that will help those who are unfamiliar with this type of search. As a marketer should I be concerned?
Absolutely!!! The cost of infringing or potentially infringing on another’s patent can be downright devastating since defending against lawsuits or being forced to pay licensing fees can be extremely expensive. The concern may be even greater if a patent holder is quietly holding onto their patent with little intention of taking the invention to market. Rather they may simply be operating as an Intellectual Property company whose goal is to license the use of the patent. With this as a strategy, business method patent holders could potentially be waiting for the right opportunity to spring into action. And if previous suits are an indication of timing, these patent holders may bide their time until a successful business comes into their sights. One additional consideration deals with who owns the intellectual property that is created. In some cases, marketers should make clear to employees or others contracted to do work for the marketer that any developments that lead to intellectual property is owned by the marketer or the marketer’s organization. This may help protect the marketer from rogue patent filers. On the flip side, marketers should know that they may lose a valuable intellectual property asset if they do not patent marketing methods they have created. At the very least marketers should investigate this option either through their own search effort or through the services of an experienced patent professional. Even though business method patents continue to elicit controversy, marketers who fail to investigate the patent option may see a potentially important business asset and competitive advantage slip away. |
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