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No Patents on Thinking ... Yet

By defintion, a patent is a set of exclusive rights granted by a state to a patentee for a fixed period in time for the disclosure of an invention. The invention must be new, innovative, useful, and cannot be obvious to the type of business. Yet I wonder whether some patents granted are really characterized by this description.

Back in 1952, the Supreme Court created a Patent Act that essentially made "everything made under the sun" patentable. And so the U.S. began a long streak of patenting that led to the protection of business methods and expanded the kinds of ideas that could be patented. Along the way, companies acquired patents that were extremely obvious ways of doing business.

For example, the "one-click checkout" method that (Nasdaq: AMZN  ) got a patent for and subsequently bludgeoned Barnes & Noble (NYSE: BKS  ) with would qualify. And MercExchange wrangled $35 million out of eBay (Nasdaq: EBAY  ) , after the company violated a MercExchange patent with its "Buy It Now" feature. Because of the nature of the businesses these companies run, these processes don't strike me as being particularly innovative.

The U.S. Patent Office and courts don't agree with me, however, since companies like the ones mentioned above have been able to slap a patent on processes that aren't out of the ordinary for a company's line of business. Yet maybe they're starting to come around; a recent ruling by a specialized patent court has put a small speed bump on the patent highway.

Stephen Comiskey is a lawyer who tried to patent the idea of mandatory arbitration for things like wills and contracts. His non-revolutionary idea was denied, as the system was simply a mental process and the court ruled that stand-alone mental processes are not patentable. Congress has recently been under pressure to tighten its standards on which business processes receive patents, and this is one step in the right direction.

Protecting ideas, processes, and inventions has been key to fostering innovation in this country. But, over the years, the U.S. Patent office has taken the idea to the extreme and patented a few too many ideas. Still, it seems like the Supreme Court is now spending more time deciding whether a company has really infringed on a patent, rather than automatically issuing an infringement. The eBay case is a great example, since the company is still allowed to use its "Buy It Now" feature after facing an injunction. And a recent ruling this past August involving Seagate Technology (NYSE: STX  ) redefined what is considered patent infringement.

To paraphrase Supreme Court Justice Potter Stewart, "I know an obvious business process when I see it." Issuing patents for apparent business processes hinders competition, so it's great that restrictions are finally being considered for patents on obvious processes.

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10/26/2016 4:00 PM
AMZN $822.59 Down -12.59 -1.51% CAPS Rating: ****
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