Abstract

The decline of the business method exception to patentability will increase the frequency of patent floods. By patent flood, I mean a dramatic jump in the number of patents filed covering a specific class of inventions, as we now observe in e-commerce. Floods are likely to become more frequent as future entrepreneurs respond to the appearance of a new market with a spate of business method patent applications claiming new methods tailored to the new market. In Part II of this Essay, I recount the story of the recent demise of the business method exception to patentability and categorize different business method patents. Some “method patents,” as defined by patent law, really protect product features. These ersatz “method patents” pose the greatest risk of patent floods and threat to competition. In Part III, I predict that as markets open in the future, we will often see a flood of business method patents. In Part IV, I describe the problems that follow from a patent flood: low quality patents, increased litigation, exclusionary conduct, and delay of cumulative innovation. In Part V, I address the history of patent pools and cross-licensing agreements that emerged in response to previous patent floods as well as the benefits of pools compared to the risk that pools may facilitate cartelization or other antitrust problems. Finally, in Part VI, I discuss the patentable subject matter requirement and the nonboviousness standard in determining the validity of business method patents and regulating future patent floods.

Keywords

Patents -- Economic aspects, Business, Patents, Business method patents