SOFTWARE AND BUSINESS METHOD PATENTS

Historically, many practitioners questioned the patentability of software and most believed that business methods were clearly not patentable under 35 U.S.C. 101. This began to change with In re Alappat 33 F. 3d 1526 (Fed. Cir. 1994), continued with In re Beauregard 35 USPQ 2d 1383 (Fed. Cir. 1995) and reached its present form in State Street Bank & Trust Co. v. Signature Financial Group, Inc. F.3d (Fed. Cir. 1998). In the latter case, a patent (U.S. Patent No. 5,193,056) was directed to a data processing system for implementing an investment structure for mutual fund managers. In litigation involving the issued patent, the Court granted the patentee's motion for partial summary judgement of invalidity for failure to claim statutory subject matter under 35 U.S.C. 101. The Federal Circuit reversed, holding that the transformation of data, representing discrete dollar amounts, through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm because it produces a useful, concrete and tangible result. In discussing the business method exception, the court stated "[we] take this opportunity to lay this ill-conceived exception to rest.... Any historical distinction between a method of 'doing' business and the means of carrying it out blur in the complexity of modern business systems."

The impact of this decision has been significant as industries such as financial services, insurance, medicine and Internet commerce must now re-think their strategy in developing and asserting their intellectual property. In order to accommodate this growing area the Patent Office has recently created a new Class 705 entitled "Data processing: Financial, Business Practice, Management, or Cost/Price Determination." Examples of applications filed in this new Class are computer systems for writing insurance policies, patient record management, market analysis, job performance analysis, inventory management and remote banking.