Controversy is seems innately attached to business method patents. Many commentators see the U.S. patent system as a global troublemaker in its acceptance of these patents. For example, The Economist published an Opinion, “Monopolies of The Mind”, November 11, 2004 which considered the business method patent to be a “mistake”. While doom and gloom gets the press, what really is happening in the United States?

The United States Patent & Trademark Office (PTO) categorizes what is considers to be business method patents in Class 705. Class 705 is defined by the PTO as “arrangements” generally used for problems relating to the administration of an organization, commodities or financial transactions. The PTO considers these patents as an “unbroken evolutionary path from mechanical technology up to today's software controlled microprocessors”. In at least one document published on the PTO site, the PTO states that “[t]he business method claim format has been used in various forms throughout that period” (~100 years). The PTO further adds that “[t]he increase in its use today is an inevitable end result of our progress over the last century.

An often cited court decision occurred in 1998 when the United States Court of Appeals for the Federal Circuit affirmed the patentability of business method-related software. This court decision was State Street Bank & Trust Co. v. Signature Financial Group. The rest they say is history. This decision did in fact appear to have a profound impact on the number of Class 705 application filed. According to the PTO document “Class 705 saw about 1% of the total patent applications filed at the PTO in fiscal year 1999. The PTO adds that those “2658 applications did not even place it among the top five Communications and Information Processing technologies”. You have to love statistics, which can be analogized to lampposts for their often ignominious use for support rather than in illumination.

So what has happened in Class 705? Well according to the latest PTO estimates (through FY 2003) a lot. 7800 patent applications in Class 705 were filed in 2000, 8700 in 2001, 6782 in 2002, and 6000 in 2003. The number of Class 705 applications that issued in those years were 585 patents in 1999, 899 in 2000, 433 in 2001, 493 in 2002, and 495 in 2003. The PTO does state that the estimated number of applications filed and issued “do not include Continued Prosecution Applications and Requests for Continued Examination”. This means the numbers would likely be somewhat higher.

Bottom line? Don’t be fooled…with anything there is good and bad, the moderation in Class 705 activity likely reflects the public awareness that business method patents are not a panacea for business success. Likely we are seeing a correction of the filing and issuance of Class 705 applications to a level that corresponds to their actual value in the marketplace. Business method patents can be valuable, and ultimately they will be utilized where they are valuable.