U.S. Patent Office Now Rejecting 78 Percent Of Business Method Patents

Ever since the Supreme Court ruling on software patents in the Alice vs CLS Bank case, there seems to be a decline on both patent lawsuits and “business method” patent approvals by the USPTO (United States Patent and Trademark Office). The rejection rate of business method patents has jumped from 24 percent in January of this year to 78 percent this July. It looks like a major shift in the patent battles is about to happen.

The business method patent category has been highly litigious in the past and a preferred tool by patent trolls or even large corporations wanting to make a quick buck on their bogus patents. The business method patents are a relatively new class of patents, which have mostly caused trouble in industries rather than help them grow and innovate. In fact, this class of patents isn’t even recognized in the European Union as inventions.

The business method patents are 12 times more likely to be litigated than chemical patents (such as pharmaceutical patents), despite being of lower value from an invention point of view. However, because they are typically so vague as to cover almost any business, that makes them easy to use in a court – or at least as a threat of lawsuit against companies. In other words, it can be easy money for patent trolls or big corporations, and they can even be used as a weapon to crush new competitors.

There have been efforts in the past to ban business method patents through new legislation, but some companies led by Microsoft and IBM lobbied against it and managed to kill the bill. Microsoft and IBM have large war chests of such patents, and they also tend to be aggressive about getting royalties for them from other companies. That means there is a lot of money at stake which they don’t want to give up easily.

The Alice vs. CLS Bank ruling will affect these companies nonetheless. A recent report from IP data company ktMINE shows that 55 percent of Microsoft’s patents and 49 percent of IBM’s patents could be found invalid because of this ruling.

To avoid testing them in court and potentially end up losing, these companies will need to reconsider what patents they use against others, whether in a lawsuit or when trying to sign a royalty deal. They also need to filter out most of their software patent applications at the USPTO, or they will end up losing both time and money trying to pass them.

After several years of highly mediatized patent battles, and a rise in patent lawsuits, it seems things will finally settle down for a while. The quality of patent applications will hopefully also rise and reflect more real inventions, which was the whole purpose of having patents in the first place.

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