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 The Inventor's Mentor

July 2013

Patenting Software and Methods of Doing Business

Modern developments such as computers, the Internet and the greater complexity of our economy have lent more importance to the development and patent protection of new business methods and complex computer software. The number of awarded software patents has skyrocketed in recent years, growing from about 3000 in 1990 to 16,000 in 2005. However, these awards have been controversial. Over the years, the courts have swayed back and forth, alternating between being permissive and being strict in granting such patents. Should these inventions be protected by patent law?


The patent law states


Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.(35USC 101)


Business methods and software can be viewed as processes and processes, according to the law, are patentable. But then, why this ambivalence? It all hinges on how the word “process” is defined. Depending on how this word is interpreted, your invention may or may not be eligible for patent and as an inventor you need to know why.



The first financial patent was granted on March 19, 1799, to Jacob Perkins of Massachusetts for an invention for “Detecting Counterfeit Notes.”

A patent, possibly the first software one, was granted on August 17, 1966 in the United Kingdom for a method of efficiently managing a computer memory for a mathematical algorithm.  It was titled “A Computer Arranged for the Automatic Solution of Linear Programming Problems.”


Infamous “Method of Doing Business” Patent

One of the most talked about patents of all time was the one-click patent awarded to Amazon in September 1999. This patent allowed Amazon’s customers to make a purchase with a single click of the mouse without having to re-enter their credit card information. After a reexamination of this patent, the patent office in October 2007, accepted some of the claims and rejected others, thus limiting the scope of the invention.


Last Court Decision

On October 30 2008, the pendulum swayed back toward a much stricter interpretation of the law as the courts came up with a long-awaited decision. The Federal Circuit handed down its “en banc” decision in In re Bilski. This ruling invalidated many business-method patents granted in the last decade and made more precise the kind of patents that can or cannot be allowed.


Patentable Subject Matter

Processes that transform material articles such as iron ore, or food ingredient, from one state or thing to another, are patent-eligible.


Processes that transform non-material articles such as electromagnetic signals or electrons flowing through a wire, are patent-eligible. However, given the uncertainty in the courts it is better to associate those processes with actual material objects such as radio receivers or computer memories.


Processes moving bits of information around in a dedicated machine such as the microprocessor running your car’s ignition system are potentially patentable but the bit processes need to have tangible results.             

Non-Patentable Subject Matter

Processes such as algorithms transforming bits of information from one format to another in the memory of a general purpose computer are non-patentable. These include, for example, financial or scientific data computation. Processes taking place in a human brain (i.e., ideas) are not patentable. Non-patentable subject matter includes (but is not limited to):

  • Laws of nature
  • Natural phenomena
  • Scientific principles
  • Abstract ideas

To be safe, always tie the process describing your business method or the software that you have invented to a material transformation or to a particular machine.


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This newsletter should not be construed as legal advice.                                     ©2013 by George Levy