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business method patent

A business method patent is part of a larger family of patents known as utility patents, which protect inventions, formulas and processes. A business method, which is considered to be a process under the law, often involves combining software automation with more traditional business methodology. 

Once a company has been granted a business method patent, they are able to license their method and profit from it or use the patent to block competitors. 

Business method patents date back to when Herman Hollerith patented his Hollerith Electric Tabulating System over 100 years ago. To be eligible for a business method patent, an invention must fall into one of the categories listed in the Patent Act of 1952 and must be a "new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." 

To meet the minimum requirement of patent eligibility as a "process," a business method must satisfy the "machine-or-transformation test." This means that the process must either be tied to a particular machine or apparatus, or transform a particular article into a different state or thing. This requirement is currently under review as the judicial system struggles with how to sort patentable business methods from abstract ideas.

One of the most famous Internet-age business method patents is Amazon.com's one-click patent (U.S. Patent No. 5,960,411). Amazon asserted that it was the first to come up with the idea for allowing shoppers to make purchases with a single mouse click by using a pre-defined credit card and address and was granted a patent for the process. Soon afterward, Amazon.com licensed the one-click process to Apple and sued its competitor, Barnes&Noble.com, insisting that Barnes&Noble.com redesign its website. 

Learn more about business method patents:

Business method patents ruling could spell relief from patent trolls
Business method patents have created a legal minefield, but the landscape may be altered by a court decision that could rewrite business method patent law.

How Bilski v. Kappos may define the future of business method patents
The Bilski v. Kappos business method patents ruling may make IT software and services users reconsider strategies for managing patent infringement risk.

Intellectual property lawsuits dog storage industry
The proliferation of patent litigation among data storage companies could stifle technological innovation and drive up costs to the consumer.

Patent Business Methods
This United States Patent and Trademark Office web site is specifically designed to provide current information on business method-related patent issues.

This was last updated in July 2010

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