Business Method Patents – Outline

1. Introduction

· Patents on (pure) business methods: Assembly line; fast food system; one-click shopping.

· Brave new world? Brave New Economy?

2. Business Method Patents

· General aspects: 35 USC § 154 – temporary legal monopoly. Protects also from independent discovery.

· Reasons for patents: (1) Incentive. (2) Disclosure to the public. (3) Property Claims. And: (4) Increased readiness for investment (e.g., venture capital).

· Economics of patent system: Schumpeter; Kitch.

· USPTO.

· Business method patent exemption.

· State Street and AT&T.

· Amazon.com v. Barnesandnoble.com.

· Reactions of Congress.

· Are business method patents good or bad? We do not know it at the present moment.

· Presumption of existence of business method patents – definition.

3. Interaction between Antitrust Law and Business Method Patents

· Legislation v. judge made law.

· Evolutionary approach – interaction and selection step by step.

· Business method patents: Can be a separate (and additional) market.

· Intersection between patent and antitrust law – from adversaries to partners; complementary bodies (Atari Games Corp. v. Nintendo of America, Inc.).

· Various “tests” for relationship between patent and antitrust law (Supreme Court; Bowman; Baxter; Kaplow).

· Types of analysis in patent and antitrust law cases: (1) Rule of reason. (2) Market power. (3) Market structure and competitive strategy. Competitive strategy analysis gets new wrinkle by business method patents.

· From “patent misuse doctrine” to “business method patent misuse doctrine” (defensive right)?

· Antitrust law in the New Economy: Embodiment of ideas – intellectual property rights.

· Differences between New and Old Economy: (1) Fundamental economics. (2) Importance of innovation in a dynamic economy. (3) Uncertain durability of market power.

· Business method patents increase scope of New Economy antitrust law issues. Institutional challenges arise (high pace, know-how).

· Business method patents and Sherman Act § 2 – monopolization: (1) Substantial market power. (2) Exercise of that power. How do business method patents meet the test? Existing abuse doctrines apply (Walker Process Doctrine – obtaining patent by fraud; enforcement of patent known to be invalid or enforceable). Additional business method patent specific patterns likely to develop.

· Three main principles of the IP-guidelines: (1) Intellectual property is comparable to other form of property. (2) No presumption that intellectual property rights create market power. (3) Licensing is generally procompetitive.

· Markets affected by licensing agreements: (1) Market for good or service. (2) Market for technology. (3) Market for innovation (R&D). Plus: (4) Market for business method.

· Antitrust “safety zones:” (1) Restraint not facially anticompetitive. (2) Parties have market share of less than 20%. Start with goods market. If necessary, other markets (technology, innovation, business method) must be analyzed.

· Resale price maintenance (RPM): Business method patents may need different assessment and are much more complex than other RPM-settings.

· Tying agreements: Existing framework can apply equally to business method patents. Justifications will resemble existing ones (quality, metering etc.).

· Exclusive dealing: Existing framework can apply equally to business method patents.

· Cross-licensing and pooling agreements: Can be decisive for the commercialization of business method patents. Allow to combine different business methods and to build ventures. Often procompetitive (at least were business method patents do not have a very broad scope).

· Grantbacks: Existing framework should apply equally to business method patents.

· Refusal to deal doctrine (Colgate, Lorain Journal, Aspen Skiing): Single case theory. Framework may apply to business method patents (also such with narrow scope).

· Essential facilities doctrine (offensive right to demand access): (1) Existence of an essential facility. (2) Duty to share it with competitors. (3) Reasonableness for the refusal to share. Essential facilities doctrine is used to obtain access to intellectual property rights (but often unsuccessfully). Can apply to business method patents. Refusal to share will be harder to justify than with tangible assets. Essential facilities doctrine might be essential facility to reduce the scope of very broad business method patents.

4. Conclusions

· Possible edge of a brave new world.

· State Street and AT&T opened the door for business method patents.

· Hundreds of business method patents issued by USPTO.

· A lot of uncertainty about economics of patent system – no generalizing theory; no absolute balancing test.

· Evolutionary approach led by antitrust law.

· Business method patents as separate market and adding new wrinkles to existing antitrust framework.

· New Economy antitrust law issues will dramatically increase.

· Business method patent abuse doctrine – as unifying doctrine of antitrust law and patent law – could be developed.

· New patterns of Sherman Act § 2 monopolization claims likely to arise.

· IP-guidelines apply to business method patents. But, new wrinkles are added and analysis becomes more complex.

· Essential facilities doctrine likely to become paramount for business method patents.