Patenting of Business Methods and Software: Issues and Implications for e-Commerce

M.J. Adeler (Canada)


Business methods patents, software patents, intellectual property, open source, innovation.


In 1998 the case of State Street Bank & Trust Co. v. Signature Financial Group, Inc. changed the traditional resistance of the US federal courts to patenting business methods, ending a long period of jurisprudential disfavour. Since then, mostly large US companies have been awarded business methods and software patents in contrast to small firms that cannot afford to face onerous expenses to file for and contest patents to the extent that larger businesses can and do. The case law renews debate on the patent system itself with competing claims and counterclaims that on the one hand claim patenting promotes innovation and rewards the author and on the other hand claim patenting privileges big corporations displacing small business interests and contradicting antitrust protections among other things. Small software developers and the Internet community supporters of “open source” argue that the software is not a patentable subject matter since it undermines innovation, and warn of the advantages for big technology multinationals that make it much more difficult for smaller companies to create new products and compete on fair terms. Business methods and software fall into the category of sequential cumulative innovation since it depends on prior inventions to work. That means a new business method and software rarely will stand alone and will rely upon software-related inventions because they are intertwined in most cases. Therefore, patenting software that is technologically interdependent to other software overlapping each other makes developers infringe others’ patents at any time. Reviewing the laws and jurisprudence in three key different jurisdictions, this paper aims to explore the different legal solutions of the US, Canada, and Europe to the patenting of business methods and software from a theoretical perspective. The international debate on conflicting interests around software patents and their rationales will be discussed as well as the basic requirements for patentability and their consequences.

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