Business Method Patents in the US and Europe – Diverging Policies and their Effect on Competition

Abstract: The patentability of business methods has been debated over a long period of time, nevertheless the exact requirements for a business method to be patent eligible and their interpretation remain unclear both in the US and Europe. Although the patent eligibility of business methods has not been an obvious matter in the US, the US courts and the US patent office has chosen to adopt a quite liberal stance towards this type of patents. The chief concern of the US courts has been to device a standard that will allow the patenting of business methods without granting a patent on the abstract idea itself. Many different approaches have been debated in case law but one of the most prominent standards is the machine-or-transformation test. Hence the connection to a particular machine, or the transformation of an object into a different state or thing, has been two of the main preconditions discussed in US case law in regards to business methods. Even though the standards applied in Europe to determine the patent eligibility of business methods have varied slightly, the term ”technical” has always been central. The current test to assess the patentability of business methods is often referred to as the ”any-hardware approach”. Despite the fact that this standard has relaxed the requirement for a subject matter to be regarded as an invention, the precondition of inventive step, that can only be judged on the basis of the technical features of an invention, is still a great obstacle to patenting business methods in Europe. Hence, the EPO applies a more stringent policy, in relation to the regime implemented in the US, and the fundamentally different starting points of the US and European patent systems make them difficult to compare. The impact that the diverging regimes regarding business method patents implemented in the US and Europe have on competition is an important matter to discuss. The main motivation for creating a patent system, and thereby restricting competition, is to further innovation. The notion is that greater inventiveness will benefit society in several ways and that the special characteristics of knowledge compel the government to intervene on the market, incurring certain costs. One of the great benefits of the patent system is the possibility to trade knowledge through e.g. licensing agreements. However, there may be other circumstances to consider than the traditional economic rationales when discussing the positive and negative effects that patents may have on competition. The quality of patents is a widely debated matter, especially in connection with business method patents which are often referred to as weak patents. Investigating the welfare implications of licensing weak patents is only one way to discuss some of the possible effects on competition that the diverging policies applied in the US and Europe concerning business method patents might produce.