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Patents in the Knowledge-Based Economy (2003)

Chapter: Internet Business Method Patents

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Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

Internet Business Method Patents1

John R. Allison

Emerson H. Tiller

McCombs School of Business

University of Texas at Austin

INTRODUCTION

The large number of Internet business method patents applied for and received since the mid-1990s has raised considerable concern among policymakers, academics, business, and other interested observers. That business methods are patentable subject matter seems to be beyond question after the decisions in State Street Bank & Trust Co. v. Signature Financial Group, Inc.2 and AT&T v. Excel Communications.3 Nonetheless, criticisms of these patents have been numerous. Some commentators attack the practice of patenting business methods rather than technology,4 with Internet business methods taking the brunt of the criticism given that they make up the bulk of newly granted business method patents. At another level, many critics argue that granting patents on Internet-related software and business methods “closes” the Internet environment, making it more difficult for the diffusion of ideas, innovation, and entrepreneurial activity that are often associated with the Internet.5 This criticism is especially relevant for those who argue that larger business organizations are patent mills, able to squeeze out small entrepreneurs with new property rights over Internet business activities. Others see Internet-related patents as an expansion of software patents more generally, some-

1  

The authors thank Thomas Bohman and Xinlei Wang of the Information Technology Services at the University of Texas for statistical consulting.

2  

149 F.3d 1368 (Fed. Cir. 1998).

3  

172 F.3d 1352 (Fed. Cir. 1999).

4  

John R. Thomas observes that recognizing the patentability of business processes opens the door for patenting new developments in all of human experience and that patents should remain grounded in science and engineering, areas that traditionally have been viewed as “technology.” He fears that we may have paved the way for patenting developments in the liberal arts, social sciences, the law, and other indeterminate areas of human activity (Thomas 1999). See also Durham (1999) using similar reasoning to argue that software-embodied business method patents should not be patentable subject matter.

5  

Lessig (2001).

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

thing critics have attacked as duplicative of copyright protection and harmful to innovation. There are also concerns from the international community that U.S. firms may be gaining an unfair advantage in patenting in this area, especially over Japan and Europe, who have been slower to adopt a pro-patent stance to business methods.

Critics from all sides argue that Internet business method patents are too easily granted and are “weaker” than other patents because of inadequate reference to prior art in the patent applications. The main target of this criticism has been the U.S. Patent and Trademark Office (USPTO), the institution in charge of granting patents and ensuring the quality of the patents that eventually issue. There is special concern about whether the USPTO has adequately reviewed Internet business method patent applications and whether the prior art references in those patent applications are sufficient to warrant patent issuance. In the areas of software patents generally, and business method patents particularly, there has been much concern that the corps of patent examiners has been insufficiently populated with those qualified to seek out nontraditional sources of prior art and to knowledgeably examine these patents. Some observers argue that examiner inexperience has been and continues to be a major problem in these areas.6 Only recently has the USPTO begun to hire examiners in software and related fields7 and, even more recently, to institute programs for training and providing more access to literature on the business disciplines.8

Because much of the criticism of Internet business method patents focuses on their perceived differences from other patents granted by the USPTO, it is important to know whether these patents do in fact differ from the more general patents that issue from the USPTO and, if they do differ, in what ways. Our study compares characteristics of Internet-related patents with a random set of more general patents issued by the USPTO during a contemporaneous time period to see whether there are observable differences that would justify the criticisms. The main motivation of this study is to inform the debate over Internet business method patents with facts, rather than speculation, about the differences between these patents and more general patents granted by the USPTO. We conclude that criticisms of Internet-related patents that focus on prior art in particular should be taken with some caution, as we find the statistical differences between these patents and more general patents to be small and, if anything, to suggest that Internet-related patents are well supported by prior art references.

We note that this study looks primarily at quantitative data from patents rather than the quality of the information provided in the patents. Among other data, we collected information on the total number of patent and nonpatent prior art references, the amount of time a patent spent in the USPTO before issuance, and the

6  

See, e.g., Ross (2000).

7  

See, e.g., Cohen and Lemley (2001).

8  

See United States Patent & Trademark Office (2000).

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

country of origin of the invention. Our data on number of references, for example, do not tell us anything about the quality and relevance of the references or how well differentiated the claims are from the relevant prior art. The information we gathered would best be used in conjunction with other indices of quality. With some caution, we do provide additional measures that may further the quality of the inquiry—such as the type of nonpatent prior art reference cited (e.g., academic vs. popular press) or the type of Internet patent being examined (i.e., business models vs. business techniques vs. software techniques). The data, and the motivation behind including each type of data, are discussed below.

THE DATA

We compared two data sets in this analysis. The first—data on a random set of general patents issued by the USPTO—was generated in a previous study by John R. Allison and Mark A. Lemley.9 That data set (General Patent Data Set) consisted of a random sample of 1,000 patents issued by the USPTO between mid-1996 and mid-1998. For each patent in the sample, Allison and Lemley obtained a wide variety of information including, among other items (1) the number and type of prior art references cited on the face of the patent; (2) the invention’s state or country of origin; (3) the time spent in prosecution; (4) small or large entity status and type of entity owning each patent; and (5) the number of inventors.

The second data set (Internet Patent Data Set) was developed especially for this study. It generally mirrors the data categories from the General Patent Data Set, with a few additions.10 We list below the data elements collected from each Internet patent and our motivation for including each element.

9  

Allison and Lemley (2000).

10  

To create the Internet Patent Data Set, we used the Lexis-Nexis database of full-text patents. The word search request that we ultimately used was “Internet or World Wide Web” within three USPTO classifications, 705 (“Data Processing: financial, business practice, management, or cost/price determination”), 707 (“Data Processing: database and file management, data structures”), and 709 (“Electrical Computers and Digital Processing Systems: Multiple Computer or Process Coordinating”), with a date parameter of 1/1/90 to 12/31/99. This search produced over 2,800 patents, most of which were actually issued during 1998-1999, thus making our Internet Data Patent Set essentially contemporaneous with our General Patent Data Set. Although we found that some software patents clearly targeted at use with the Internet could be found in older computer technology USPTO classifications, such as 345, 365, 370, and 375, by far the greatest concentration of these patents was found in the more recently created “Data Processing” classifications in the 700 series. We concluded this after running the search terms across all USPTO classifications. More particularly, most patents were concentrated in classifications 705, 707, and 709. If the written description of the invention in these three classifications clearly demonstrated that the invention was targeted at the Internet, it was included; otherwise, it was discarded. We approached the study of these patents with the attitude that we would take the inventors at their word as to whether the invention was Internet-related. After discarding approximately 50% of the patents found with our search strategy, we ended with a data set of 1,423 patents to be studied further for data extraction and analysis.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×
Number of Prior Art References (Backward Citations)11

In patent applications, the referencing of prior patents and other published resources (“nonpatent references”) describing related technological advances are considered key in establishing that the invention is novel12 and nonobvious.13 Much of the criticism surrounding Internet business method patents relates to the inadequacy of prior art cited in these patents. Evidence in various patent litigation studies suggests that uncited prior art—prior art that was not before the patent examiner—is the most common basis for court decisions invalidating U.S. patents.14 It would seem to follow that fewer prior art references in patents would tend to decrease the probability that they would be held valid if challenged in court. Stated differently, a larger number of prior art references may point to a more serious effort by the applicant to differentiate its invention from the prior art and perhaps to a more thorough examination in the USPTO, resulting in a stronger patent more likely to withstand challenge.15 Some research also suggests that,

11  

There is stronger empirical evidence that the number of forward citations is a predictor of patent value (Hall et al., 1998; Harhoff et al., 1999b; Trajtenberg, 1990). The term “forward citations” refers to later patents that cite the patent in question as a reference. We did not measure forward citations because the patents in our data set were so recent, the great bulk of them having been issued during 1998-1999. Our study design and data collection began early in 2000 and ended before the middle of 2001. Collection of data on forward citations should be done when sufficient time has passed for these data to be meaningful for the entire data set, especially for those patents issued toward the end of 1999.

12  

Other types of prior art consist of evidence that an invention had been in public use or had been placed on sale either before the conception of this particular invention, 35 U.S.C. § 102(a) (2000), or more than 1 year before the patent application for this invention was filed, 35 U.S.C. § 102(b).

13  

The requirement of novelty in section 102 of the Patent Act is that the invention be different from anything previously revealed in a single piece of prior art. The requirement of nonobviousness, 35 U.S.C. § 103, is that the invention be different enough from what is taught by the cumulative prior art to represent a significant, “nonobvious” advance over that art.

14  

See, for example, Allison and Lemley (1998), examining litigated patents leading to final written decisions on validity or invalidity during 1989-1996.

15  

Patent references are listed in the patent by both the applicant and the examiner, but it is not feasible to determine for a large number of patents which references were cited by the applicant and which by the examiner because one must study the prosecution history in the USPTO to make this determination. However, there are reasons to believe that the great majority of prior art referenced in patents has been cited by applicants rather than by the USPTO examiner. See Allison and Lemley (2000). Allison and Lemley found that U.S. patents on foreign-origin inventions cite much more foreign-origin prior art and much less U.S.-origin prior art than do U.S. patents on U.S.-origin inventions. There is reason to believe that these foreign applicants for U.S. patents have more access to foreign-origin prior art in their language. However, if very much more prior art were cited by the U.S. patent examiner, one would expect it to be English-language prior art. The fact that this did not appear to occur supports the inference that most of the prior art, at least in this subset of U.S. patents, is cited by the applicant and not the examiner.

Another observation clearly provides strong support for this conclusion. One finds wide variations in the number of patent and nonpatent prior art references among U.S. patents in the same area of technology. We certainly found this to be true in the case of Internet patents. Unless all or most of this

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

on average, there is likely to be a correlation between the number of references and patent value. The number of prior art references should relate positively to the resources devoted by the applicant, and possibly by the patent examiner, to the patenting process, thus supporting an inference of greater patent value. One study found empirical support for the notion that the number of prior art references is positively correlated to patent value,16 although others found no statistically significant relationship.17 In addition, most observers would expect Internet business method patents to cite fewer patent references than patents in general (given the short time for which business methods have been recognized as patentable subject matter). They would also expect software-related inventions (most Internet-related patents fit into this category) to rely more on citations to other software and industry publications—nonpatent prior art references—than would more general patents given the shorter cycles of innovation involved with software. In our study, a finding that Internet business method patents contain fewer total references, and especially fewer nonpatent prior art references, would add strength to the criticisms that Internet business method patents are being granted without sufficient review by the USPTO. We consider together and separately the number of both patent and nonpatent prior art references.

Additionally, data were collected on the number of nonpatent prior art references in eight categories of nonpatent prior art for 285 of the 1,423 Internet patents (20 percent random sample). Before taking this 20 percent sample, we performed a trial study of approximately 100 patents to ascertain the different types of nonpatent prior art and ultimately group them into these eight categories. The purpose of this data collection effort is to give us a better understanding of what types of nonpatent prior art are being cited in Internet patents. Some may argue that certain types of nonpatent prior art references are “better” than others, or at least that the types of nonpatent prior art cited in Internet patents are different from those cited in general patents. We created the following eight categories of nonpatent prior art.

  • Academic and Trade: This category includes academic and trade books, book chapters, articles, and proceedings papers. We did not differentiate between academic and trade publications because in this field there is much overlap and collaboration between academic and industry researchers. This category represents publications characterized by the existence of an intermediating influence

   

prior art is cited by applicants, patent examiners in the same technology area do not have access to the same resources, they do not communicate with each other, there is little supervision by primary examiners, or all of the above. There is absolutely no reason to believe any of these possibilities, and, therefore, most prior art is probably cited by applicants.

16  

Harhoff et al., (1999a).

17  

Lanjouw and Schankerman (2001); Lanjouw and Schankerman (1997).

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

such as an independent reviewer or editor to increase the probability of objectivity.

  • Company and Industry: This category includes company- and industry-sponsored publications, press releases, web sites, and advertisements. These are so categorized because they have no independent intermediating influence to increase the probability of objectivity. This category does not include software and software documentation.

  • University Publications: This category includes publications from universities or consortia of universities, such as those from university research labs, departments (such as computer science), and individual faculty, as well as theses and dissertations.

  • Government Documents: This category includes government documents, publications, and web sites, except for published patent applications and searches. It includes U.S. and foreign government publications, as well as those of international government organizations such as the World Intellectual Property Organization within the United Nations (WIPO).

  • Software: This category includes software programs and software documentation.

  • Popular Press: This category includes not only newspapers, magazines, and other publications of general interest, but also news publications aimed at general business and legal audiences.

  • Published Patent Applications and Search Reports: This category includes published patent applications from any patent office that publishes them and published patent office search reports, which are most commonly those done pursuant to the PCT (Patent Cooperation Treaty) and which often are issued by the European Patent Office (EPO).

  • Other: This category includes sundry items such as individual web pages, but most references placed in this category are those in which insufficient information was provided to determine what the item really is, even after we conducted a very thorough Web search of key names and terms in the incomplete reference. One example is a reference to a partial title of an item, followed by “found on the web on x date.”

The General Patent Set did not contain comparable data on nonpatent prior art references.

Entity Status of Patent Assignee

The entity status of the owner of the patent including Individual, NonProfit (such as a university or a foundation), Small Business (500 or fewer employees), or Large Entity was collected. If large businesses receive more Internet patents than patents in general, then criticisms that the Internet is being dominated by big business and that entrepreneurs are being shut out gains some credence.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×
Geographic Origin of Patent

The geographic origin of the invention (by country) was determined from the residences of a majority of the inventors (or plurality if no majority). We measured this variable partly to see whether the ratio of U.S.-origin to foreign-origin inventions receiving U.S. patents is greater for Internet-related patents than for general patents. If so, those observers suggesting that the United States is dominating Internet patents may be correct.

Days in USPTO

We also measured the amount of time that the patent application spent in the USPTO from the original U.S. priority filing date to the time of issuance to see whether Internet patents were receiving the same amount of attention, in terms of time, as general patents. Greater pendency times may relate both to the seriousness of the applicant and the resources it is willing to devote to obtaining a patent and to the thoroughness of the examination process.

Internet Patent Subtype

We evaluated each Internet patent for inclusion into one of three Internet patent categories that we created. Through discussions with companies that have Internet-related patents, a review of the popular press and literature on Internet patents, and a review of a subset of Internet-related patents, we came up with a typology of Internet patent subtypes. We broke the patents into three subtypes. The first two subtypes we call Internet Business Model (I-Business Model) Patents and Internet Business Technique (I-Business Technique) Patents. These two groups together constitute what most people believe to be “Internet business method patents.” Well-known examples of each include Priceline.com’s patent on the “Name Your Own Price” method of doing business (we identify this an I-Business Model because it can be a stand-alone business or a distinct line of business) and Amazon.com’s patent on “1-Click” checkout (which we identify as an I-Business Technique because it is unlikely ever to be a stand-alone business). The final subtype is Internet Software Technique (I-Software Technique) Patents, which are clearly aimed at the Internet but which purport only to be technical software advancements. Our categorizations of patent subtypes were based on the written description of the invention contained in each patent. The description typically reveals the inventor’s (and, perhaps, her supervisor’s) vision of what the patent is actually projected to do.18 The Appendix to this chapter gives a more

18  

Claims in such patents often, but not always, read like technical software patents. Had we been focused on validity or infringement, we obviously would have looked to the claims. In placing Internet-related patents within these categories, however, the best information source was the description.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

complete description of how these Internet patent subtypes were determined, along with some examples.19 The reason we created these subtypes was to (1) identify the Internet patents that were more business concept than technology driven, because the former may be more controversial than the latter, and (2) see whether entity size was related to the level of business concept or technology of the patent, in other words, does large business dominate the business concept patents at the expense of small business or individual inventors?

DATA ANALYSIS

Our goal for these comparisons was to examine continuous and categorical patent attributes by patent type (Internet-related compared with General, or Internet Business Methods compared with General) or Internet patent subtype (I-Business Model, I-Business Technique, or I-Software Technique) compared with General. For continuous variables, we used models that assume a normally distributed outcome and employ nonparametric tests (e.g., the Wilcoxon, Savage, and median tests) that make less stringent assumptions about the distribution of the dependent measures. By including both, we “triangulated” the analyses, which provided more evidence of the correct statistical conclusion. The statistical methods are described more fully as the results are presented in the chapter.

Prior Art References

We first look at our main variable of interest—prior art references. As stated above, much of the criticism surrounding Internet-related patents has been the perceived absence, or inadequacy, of prior art. Critics of Internet-related patents would expect any likely deficiency to show up in the number of prior art references, especially nonpatent prior art references. In comparing the General Patent Data Set with the Internet Patent Data Set, we look at total number of references, number of patent prior art references, and number of nonpatent prior art references. A finding that, compared to general patents, Internet-related patents have fewer total references, and/or that Internet-related patents have fewer nonpatent prior art references, would strengthen the critics’ position.

Comparison of All Internet-Related Patents and General Patent Data Set

We first look at the full Internet Patent Data Set and compare it against the General Patent Data Set. The reason to look at the full set (which includes not

19  

We note here that our categorization of Internet patent subtypes should be taken with great caution. Although we believe the categories make intuitive sense, we coded the patents ourselves (because of the resource constraints of this study). Distinguishing between I-Business Models and I-Business Techniques was especially challenging. A more valid study of these patent subtypes would require multiple coders from Internet business backgrounds.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

only business methods but also Internet software techniques) was to (1) address the broader debate about patenting (“closing”) the Internet generally and (2) allow for an alternative, and more inclusive, set of Internet patents should our definitions and coding of each Internet patent subtype be flawed in our subsequent analyses. Table 1 shows the untransformed means and standard deviations of the three measures of patent references by patent type.

Two initial analyses were performed: an Independent Groups t-test and a Wilcoxon nonparametric test.20 On the basis of the descriptive analysis of the distributions of the three measures of Patent References, log transformations were useful for normalizing Number of Patent References (PatRefs) and Total Number of References (TotRef), but not for Number of Nonpatent References (Non-PatRefs). The log transformation was used to normalize the distributions in order to satisfy the normality assumption for the Independent Groups t-test. The homogeneity of variance assumption can be tested precisely by using the F-test of the difference in two or more variances. We report the results of this test and use the t-test with the Satterthwaite correction to the degrees of freedom when this assumption is violated.

Number of Total Prior Art References: The Independent Groups t-test using the log-transformed Total References showed that there was a statistically significant difference between General (mean = 2.47) and Internet (mean = 2.68) patents [t(2255) = 6.59, p < 0.0001].21

TABLE 1 Patent References (General Patent Data Set Compared with Internet Patent Data Set)

Internet

N

Variable

Mean

Std Dev

Min

Max

General Patents

1,000

TotRefs

15.16

16.29

0

163

 

 

PatRefs

12.79

14.13

0

154

 

 

NonPatRefs

2.37

6.56

0

68

Internet Patents

1,423

TotRefs

23.03

48.53

0

457

 

 

PatRefs

14.23

23.30

0

353

 

 

NonPatRefs

8.80

34.43

0

391

20  

The basic assumptions of a t-test are (1) randomness (the units of analysis in the study must be sampled at random); (2) independence of errors (units of analysis sampled must be randomly assigned to the different groups); (3) normality of errors; and (4) homogeneity of variances (variation around mean is equivalent in the two groups). The normality assumption can be examined by visually examining the distributions of the outcome variables.

21  

The t-test used the Satterthwaite adjustment to the degrees of freedom to account for the unequal variances between groups [F(1422, 999) = 1.18, p < 0.0044]. In addition, a nonparametric Wilcoxon test was performed with the unadjusted values, which also showed that there was a statistically significant difference between the number of total prior art references cited in general patents and Internet patents [Wilcoxon test statistic = 1103312, Z = 6.42, p < 0.0001].

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

Number of Patent Prior Art References: The Independent Groups t-test using the log-transformed Patent References did not show a statistically significant difference between General (mean = 2.30) and Internet (mean = 2.35) patents [t(2421) = 1.51, p < 0.1301].22

Number of Nonpatent Prior Art References: The Independent Groups t-test using the untransformed nonpatent references showed a statistically significant difference between General (mean = 2.37) and Internet (mean = 8.81) patents [t(1567) = 6.87, p < 0.0001].23

In sum, we find that the full set of Internet-related patents are supported by more total references and more nonpatent references than General patents. However, there is no statistical evidence to show that Internet-related patents are supported by more or fewer patent references. These findings suggest that criticisms of Internet-related patents that are based on the amount of prior art cited (especially nonpatent prior art) are not supported by the data.24

Comparison of Internet Business Method Patents and General Patents

Excluding Internet software patents from the data set and looking only at Internet business method patents (both I-Business Model and I-Business Technique patents), gave us similar results. Looking at only the Internet business method patents eliminates any confounding effects from the software patents and focuses the empirics on the most controversial types of Internet-related patents.

Table 2 shows the means and standard deviations of the three measures of patent references by patent type.

Based on the descriptive analysis of the distributions of the three measures of Patent References, log-transformations were useful for normalizing Number of Patent References (PatRefs) and Total Number of References (TotRef) but not for Number of Nonpatent References (NonPatRefs). We used Independent Groups t-tests to compare means between General and Internet business method patents for all three reference measures.

22  

The t-test used the pooled degrees of freedom because there appeared to be equal variances between groups [F(1422, 999) = 1.01, p < 0.8083]. In addition, a nonparametric Wilcoxon test was performed with the unadjusted values, which also showed that there was no statistically significant difference between the number of patent references cited in general patents and Internet patents [Wilcoxon test statistic = 1191252, Z = 1.23, p < 0.2206].

23  

The t-test used the Satterthwaite adjustment to the degrees of freedom to account for the unequal variances between groups [F(1422, 999) = 27.54, p < 0.0001]. In addition, a nonparametric Wilcoxon test was performed with the unadjusted values, which also showed that there was a statistically significant difference between the number of nonpatent references cited in General patents and Internet patents [Wilcoxon test statistic = 971925, Z = 14.89, p < 0.0001].

24  

Using multiple regression techniques, we examined other variables that may affect the total number of references beyond the mere classification of the patent as General or Internet.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

TABLE 2 Prior Art References (General Patent Set Compared with Internet Business Method Patents)

Internet

N

Variable

Mean

Std Dev

Min

Max

General Patents

1,000

TotRef

15.16

16.29

0

163

 

 

PatRefs

12.79

14.13

0

154

 

 

NonPatRefs

2.37

6.56

0

68

Internet Business

Method Patents

1,093

TotRef

24.90

53.15

0

457

 

 

PatRefs

14.90

23.76

0

314

 

 

NonPatRefs

10.00

38.56

0

391

Number of Total References: The Independent Groups t-test using the log-transformed Total References showed that there was a statistically significant difference between General (mean = 2.47) and Internet business method (mean = 2.72) patents [t(2089) = 7.22, p < 0.0001].25

Number of Patent References: The Independent Groups t-test using the log-transformed Patent References did show a statistically significant difference between General (mean = 2.30) and Internet business method (mean = 2.38) patents [t(2091) = 2.27, p < 0.0235].26

Number of Nonpatent References: The Independent Groups t-test using the untransformed Nonpatent References showed a statistically significant difference between General (mean = 2.37) and Internet business method (mean = 10.01) patents [t(1161) = 6.44, p < 0.0001].27

We note that there are many Internet business method patents with no nonpatent prior art and a few Internet business method patents with many nonpatent prior art references that could bias our results (that Internet business

25  

The t-test used the Satterthwaite adjustment to the degrees of freedom to account for the unequal variances between groups [F(1092, 999) = 1.27, p < 0.0001]. In addition, a nonparametric Wilcoxon test was performed with the unadjusted values, which also showed that there was a statistically significant difference between the number of total references cited in general patents and Internet business method patents [Wilcoxon test statistic = 948361, Z = 7.15, p < 0.0001].

26  

The t-test used the pooled degrees of freedom because there appeared to be equal variances between groups [F(1092, 999) = 1.07, p < 0.2447]. In addition, a nonparametric Wilcoxon test was performed with the unadjusted values, which also showed that there was a statistically significant difference between the number of patent references cited in General patents and Internet business method patents [Wilcoxon test statistic = 1016904, Z = 2.18, p < 0.0291].

27  

The t-test used the Satterthwaite adjustment to the degrees of freedom to account for the unequal variances between groups [F(1092, 999) = 34.53, p < 0.0001]. In addition, a nonparametric Wilcoxon test was performed with the unadjusted values, which also showed that there was a statistically significant difference between the number of nonpatent references cited in General patents and Internet business method nonpatents [Wilcoxon test statistic = 856133, Z = 14.62, p < 0.0001].

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

method patents have more prior art references than General patents) in favor of Internet business method patents. In addition to the statistical methods used,28 we also looked at the percentage of patents in the General Patent Data Set and the Internet business method patents group that contained zero nonpatent prior art to help determine whether such bias might exist. We concluded that it did not, finding that 62.1 percent (621 of 1,000) of the General Patent Data Set had no nonpatent prior art, whereas only 32.2 percent (352 of 1,093) of the Internet business method patents had no nonpatent prior art; 1.4 percent (14 of 1,000) of the General Patent Data Set had no patent prior art, whereas 2.1 percent (23 of 1,093) of the Internet business method patents had no patent prior art; and 0.20 percent (2 of 1,000) of the General Patent Data Set had no prior art references from patent or nonpatent sources, whereas 0.27 percent (3 of 1,093) of Internet business method patents had no such prior art. In short, and most significantly, we found that Internet business method patents are less likely than general patents to have zero nonpatent prior art references in the patent.

In sum, we found that Internet business method patents are supported by more total references, patent references, and nonpatent references than general patents. The parametric and nonparametric tests were consistent in their findings. These findings suggest that those criticisms of Internet business method patents that are based on the amount of prior art cited (especially nonpatent prior art) are not supported by the data.

Our analysis does not answer all questions, however. It has been suggested that Internet business methods patents would be more likely to fail a novelty and nonobviousness hurdle in a commonsense (as opposed to legal) fashion because the patents could possibly cover practices and products (nonpatent prior art) that already exist, but not in any archived form. Our data could not address this contention. There is, however, no reason to believe that this is more likely to be the

28  

The data analysis strategy used first visually examined the distributions of each outcome including references (total, patent, and nonpatent) with histograms and quantile-quantile (QQ) plots. On the basis of visual examination of the reference distributions, this issue was identified and two data analysis strategies were employed to ensure that the small number of patents with large references did not overinfluence the analysis. First, the number of references was transformed with natural logs. On the basis of visual inspection of the log-transformed distribution, this appeared very effective in reducing the influence of the small subset of patents with large numbers of references. The Independent Groups t-test using the log-transformed values provides a valid test of the central tendencies (e.g., mean) of each distribution after minimizing the effect of the patents with large references. Second, we also used nonparametric tests that test whether the medians are different between groups. Median tests are resistant to extreme values because the median value represents the value for which 50% of the observations are above that value and 50% are below that value. Therefore, the analyses examined both means of log-transformed values and medians and typically arrived at similar conclusions, which strengthened our confidence in the results. Results also included the unadjusted means to help with interpretation, although they were never directly analyzed.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

case for Internet business method patents than for patents generally. Indeed, previous research has shown that trade secret protection is preferred over patents in almost all technologies as a means for appropriating returns on R&D investment, thus indicating that there is much “secret prior art” in all areas. Although our analysis does not completely put to rest the possibility that there is a good deal of nonpatent prior art that is being missed, the same possibility exists for patents of all types, and attempting to pursue the idea of “commonsense novelty” will place one on a slippery slope that is contrary to the fundamental norms of patent law. This is simply not the way to determine novelty or nonobviousness.

Comparison of Internet Patent Subtypes and General Patent Data Set

Taking the analysis one step deeper, we looked individually at all Internet patent subtypes: I-Business Model Patents, I-Business Technique Patents, and I-Software Technique Patents. It may be that certain types of Internet business method patents are especially controversial or problematic. For example, I-Business Models may be more controversial than I-Business Techniques because they may allow more easily for monopolies on complete lines of business or an industry. In some cases, their only innovation may be that they happen to be practiced via the Internet. They may also be more likely to involve prior art given their breadth and relationship to physical world business practices. I-Business Techniques, by contrast, may be more acceptable because they are more likely tied to particular Internet technologies.

Table 3 table shows the untransformed means and standard deviations of the three measures of patent references by patent type.

Based on the descriptive analysis of the distributions of the three measures of Patent References, log transformations were useful for normalizing Number of Patent References (PatRefs) and Total Number of References (TotRefs), but not for Number of Nonpatent References (NonPatRefs). The Independent Groups t-test using the log-transformed Total References showed that there was a statistically significant difference between the log TotRefs means of General patents (mean = 2.47) and I-Business Model patents (mean = 2.85) [t(524) = −6.96, p < 0.0001], and I-Business Technique patents (Mean = 2.67) [t(1529) = −5.15, p < 0.0001], but not I-Software Technique patents (Mean = 2.55) [t(1328) = −1.68, p < 0.0934]. The Independent Groups t-test using the log-transformed number of Patent References (PatRefs) showed a statistically significant difference between the log PatRefs means of General patents (mean = 2.30) and I-Business Model patents (mean = 2.53) [t(1343) = −4.54, p < 0.0001], but not between General patents and I-Business Technique patents (mean = 2.31) [t(1746) = −0.31, p < 0.7602] or I-Software Technique patents (mean = 2.25) [t(623) = −1.10, p < 0.2721]. Finally, the Independent Groups t-test using the untransformed number of Nonpatent References (NonPatRefs) showed a statistically significant difference between the log NonPatRefs of General patents (mean = 2.37) and I-Busi-

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

TABLE 3 Mean of Patent, Nonpatent, and Total References (General Patents Compared with Internet Patent Subtypes)

Patent Type

N

Variable Name

Mean

Std Dev

Minimum

Maximum

I-Business Model

345

PatRefs

17.15

22.50

0

313

 

 

TotRef

27.25

48.78

0

454

 

 

NonPatRefs

10.10

35.26

0

389

I-Business Technique

748

PatRefs

13.86

24.27

0

314

 

 

TotRef

23.82

55.04

0

457

 

 

NonPatRefs

9.96

40.01

0

391

I-Software Technique

330

PatRefs

12.03

21.59

0

353

 

 

TotRef

16.86

27.48

1

376

 

 

NonPatRef

4.83

13.03

0

169

General Patents

1,000

PatRefs

12.79

14.13

0

154

 

 

TotRef

15.16

16.29

0

163

 

 

NonPatRefs

2.37

6.56

0

68

ness Model patents (mean = 10.10) [t(352) = −4.05, p < 0.0001], I-Business Technique patents (mean = 9.96) [t(777) = −5.14, p < 0.0001], and I-Software Technique patents (mean = 4.83) [t(386) = −3.29, p < 0.0011].

Restated, I-Business Model patents are supported by more total references, patent references, and nonpatent references than General patents. I-Business Technique patents are supported by more total references and nonpatent references than General patents. I-Software Technique patents are supported by more nonpatent references than General patents. The t-test and Wilcoxon tests were consistent for all of the above findings.29 Those prior art-related criticisms aimed at the broadest type of Internet business method patents—the Internet business model—would seem to find no support in the data. Moreover, in terms of prior art generally and nonpatent prior art specifically, there is no evidence to support the

29  

The t-tests used the Satterthwaite adjustment to the degrees of freedom to account for the unequal variances between groups.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

contention that any type of Internet-related patent is weaker than patents in general when prior art is used as the measure.30

Comparison of the Types of Nonpatent Prior Art

We compared the nonpatent prior art for Internet patents based on subtypes and entity status (Tables 4 and 5). We did not have comparable data for general patents. The analysis was conducted separately for Internet Patent type and Owner Status (Table 6) and used both descriptive statistics and the Kruskal-Wallis nonparametric tests because none of the variables was normally distributed or easily transformed into a normal distribution. Among the Internet Patent subtypes, we found that there were no significant differences except for popular press (PP), where there were statistical differences between I-Business Model and I-Business Technique and between I-Business Model and I-Software Technique (p < 0.05). These results were statistically significant (p < 0.05). For Owner Status (i.e., large business, small business, and individual), we found no significant differences in the use of various types of nonpatent prior art. We did find that the largest percentage of nonpatent prior art references in the Internet patent data set was in the academic/trade publication category.

TABLE 4 Nonpatent Prior Art References in 20 Sample

Nonpatent Reference Category

Mean

Median

Acad/Trade

4.44

1.0

Comp/Indus

1.9

0

Univ. Pubs

0.17

0

Gov Doc

0.12

0

SW

0.46

0

PP

0.73

0

Pat Apps/Searches

0.08

0

Other

0.13

0

30  

In a multivariate analyses, we considered the effects of several other variables not fully discussed here and found no significant differences between General patents and Internet patents. For example, the presence of two statistically significant interactive effects were included (Patent Type by Number of Figures and Patent Type by 4-Digit IPC). This resulted in the main Internet effect on Total References being statistically nonsignificant. Caution is warranted in reading the multivariate results because (1) we did not disaggregate the three Internet patent subtypes for comparison with the General patent set and (2) these interactions may share overlapping variation with the difference between Internet and General patents. In any case, there was no evidence to suggest that Internet-related patents were ever weaker in terms of total prior art references or nonpatent prior art references.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

TABLE 5 Nonpatent Prior Art References by Internet Patent Subtype

Internet Patent Subtype

N

Nonpatent Category

Median

Mean

Std Dev

Minimum

Maximum

I-BusMod

70

AcadTrade

1.5

5.07

13.09

0

85

I-BusTech

149

AcadTrade

1

4.89

21.1

0

245

I-SWTech

66

AcadTrade

1

2.74

7.17

0

53

I-BusMod

70

CompIndus

0

1.5

4.96

0

37

I-BusTech

149

CompIndus

0

1.36

3.83

0

34

I-SWTech

66

CompIndus

0

0.48

0.96

0

5

I-BusMod

70

GovDoc

0

0.13

0.51

0

3

I-BusTech

149

GovDoc

0

0.17

0.81

0

6

I-SWTech

66

GovDoc

0

0

0

0

0

I-BusMod

70

Oth

0

0.19

0.73

0

4

I-BusTech

149

Oth

0

0.11

0.46

0

4

I-SWTech

66

Oth

0

0.09

0.42

0

3

I-BusMod

70

PatAppsSearches

0

0.06

0.29

0

2

I-BusTech

149

PatAppsSearches

0

0.12

0.57

0

5

I-SWTech

66

PatAppsSearches

0

0.02

0.12

0

1

I-BusMod

70

PP

0

0.89

2.46

0

13

I-BusTech

149

PP

0

0.97

10.25

0

125

I-SWTech

66

PP

0

0.05

0.21

0

1

I-BusMod

70

SW

0

0.4

2.27

0

18

I-BusTech

149

SW

0

0.52

2.01

0

20

I-SWTech

66

SW

0

0.38

1.13

0

7

I-BusMod

70

UnivPubs

0

0.07

0.26

0

1

I-BusTech

149

UnivPubs

0

0.16

0.53

0

4

I-SWTech

66

UnivPubs

0

0.29

0.86

0

5

Note that a larger amount of the nonpatent prior art references in Internet business method patents are attributable to patents filed by small business. And for this group, the nonpatent prior art concentrates in three of the nonpatent prior art categories, namely “academic and trade,” “company and industry,” and software. This could mean that one set of Internet business method patentholders pays even greater attention to nonpatent prior art than other groups (although these other groups still have as much or more nonpatent prior art than patents generally). An obvious question that we cannot answer here is, why do small enterprises appear to pay much more attention to nonpatent prior art?

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

TABLE 6 Nonpatent Prior Art References by Internet Patent Owner Status

Owner Status

N

Nonpatent Category

Median

Mean

Std Dev

Minimum

Maximum

Individual

33

AcadTrade

0

2.12

4.01

0

16

LargeEnt

204

AcadTrade

1

3.99

17.89

0

245

SmallBus

47

AcadTrade

2

8.11

18.02

0

85

Individual

33

CompIndus

0

0.33

0.74

0

3

LargeEnt

204

CompIndus

0

0.91

2.23

0

22

SmallBus

47

CompIndus

0

3.06

7.72

0

37

Individual

33

GovDoc

0

0.15

0.62

0

3

LargeEnt

204

GovDoc

0

0.08

0.56

0

6

SmallBus

47

GovDoc

0

0.28

0.93

0

5

Individual

33

Oth

0

0.3

0.92

0

4

LargeEnt

204

Oth

0

0.08

0.35

0

3

SmallBus

47

Oth

0

0.21

0.75

0

4

Individual

33

PatAppsSearches

0

0.12

0.42

0

2

LargeEnt

204

PatAppsSearches

0

0.07

0.47

0

5

SmallBus

47

PatAppsSearches

0

0.09

0.35

0

2

Individual

33

PP

0

0.12

0.33

0

1

LargeEnt

204

PP

0

0.75

8.76

0

125

SmallBus

47

PP

0

1.11

3.01

0

13

Individual

33

SW

0

0.3

1.57

0

9

LargeEnt

204

SW

0

0.32

0.99

0

7

SmallBus

47

SW

0

1.17

3.99

0

20

Individual

33

UnivPubs

0

0.09

0.29

0

1

LargeEnt

204

UnivPubs

0

0.2

0.65

0

5

SmallBus

47

UnivPubs

0

0.09

0.35

0

2

Other Variables of Interest
Entity Status and Size

Small businesses own a larger share of Internet business method patents (Table 7) (19.4%) than general patents (10.7%).31 Large entities own a smaller

31  

Nonprofits were also an identified entity, but they received so few patents in the set that we do not include them in the table.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

TABLE 7 Patent Entity Status (General Patents Compared with Internet Business Method Patents)

Owner Type

Number of Internet Business Patents (%)

Number of General Patents (%)

Pr > ChiSq

Individual

179 (16.38)

175 (17.5)

0.494

Large Entity

690 (63.13)

707 (70.7)

0.0002

Small Business

212 (19.4)

107 (10.7)

<0.0001

share of Internet business method patents (63.13%) than general patents (70.7%). These results were statistically significant (p < 0.05).32

When looking at Internet patent subtypes we found that, with respect to I-Business Model Patents (Table 8), individuals owned a greater share of I-Business Model patents (29.9%) compared to individual ownership of general patents (17.5%). Likewise, small business owned a greater share of I-Business Model patents (27.0%) compared to small business ownership of general patents (10.7%). Large entities owned a much smaller share of I-Business Model patents (41.2%) than large entity ownership of general patents (70.7%). We also found that individuals owned a smaller share of I-Business Technique Patents (10.2%) compared to individual ownership of general patents (17.5%). Small business owned a larger share of I-Business Technique patents (15.9%) compared to small business ownership of general patents (10.7%). Finally, with respect to I-Software Technique patents, individuals owned a smaller share of I-Software Technique

TABLE 8 Entity Status for Internet Patent Subtypes

 

I-Business Model

I-Business Technique

I-Software Technique

Individual

103

76

10

 

29.86%

10.16%

3.03%

Large Entity

142

548

287

 

41.16%

73.26%

86.97%

Small Business

93

119

32

 

26.96%

15.91%

9.7%

32  

When all Internet-related patents are combined, a smaller share of Internet patents are owned by individuals (13.3%) compared to individual ownership of general patents (17.5%). A larger share of Internet patents are owned by small business (17.1%) when compared to small business ownership of general patents (10.7%). These results were statistically significant (p < 0.05).

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

patents (3.0%) compared to individual ownership of general patents (17.5%). Large entities owned a larger share of I-Software Technique Patents (87%) compared to large entity ownership of general patents (70.7%). These results were statistically significant (p < 0.05).

What one could conclude from these data is that large entities are not dominating the patenting of Internet business methods. Individuals and small businesses own a larger share than they own in the General Patent Data Set. Individuals are strongly represented among the I-Business Model patents and Small Business among the I-Business Technique patents. Where large businesses do dominate is in the patenting of I-Software Techniques. In sum, the data do not support a conclusion that small business, entrepreneurs, and individuals are being squeezed out by the patenting power of large business organizations.33

Geographic Origin

With respect to international competitiveness, some observers have suggested that U.S. companies are being awarded a disproportionate share of Internet-related patents. There is ample evidence to support that suggestion. Table 9 shows that inventors in Europe (Internet 2.3%; General 17.3%), Japan (Internet 5.0%; General 21.4%), and Other Foreign countries (Internet 0.5%; General 5.9%) obtain significantly fewer Internet business method patents than patents in general, whereas U.S. companies obtain more. These differences are all statistically significant at p < 0.05. Only Canada has no significant difference.

A similar conclusion may be drawn from an analysis of the broader set of all Internet-related patents: Inventors in Europe (Internet 2.9%; General 17.3%),

TABLE 9 Patents Compared by Region (General Patent Set Versus Internet Business Method Patents)

Region

Number of Internet Bus Method Patents (%)

Number of General Patents (%)

Canada

17 (1.6)

17 (1.7)

Europe

25 (2.3)

173 (17.3)

Japan

55 (5.0)

214 (21.4)

Other Foreign

6 (0.5)

59 (5.9)

United States

990 (90.6)

537 (53.7)

33  

This, of course, does not take into account the greater ability of large firms to actually litigate and enforce their patents, which, in the end, may give them more power than is evident from mere ownership numbers. However, the same would hold true for general patents, where large business organizations hold an even larger share of issued patents.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

Japan (Internet 5.1%; General 21.4%), and Other Foreign countries (Internet 0.5%; General 5.9%) all obtain significantly fewer Internet business method patents in general. These differences are all statistically significant at p < 0.05. The same conclusion holds true for the individual patent subtypes—Japan and Europe were issued each type in significantly smaller proportions than their overall ownership of general patents. All of these results are quite expected in view of the fact that software and business methods are recognized as patentable subject matter to a much greater extent in the U.S. than elsewhere.

Days in the USPTO

The data generally do not support the hypothesis that Internet business method patents spend less time in the USPTO than general patents, although the data are more equivocal.34 This result also holds for the Internet patent subtypes and the full set of all Internet-related patents. The Independent Groups t-test using log-transformed Days in USPTO (Table 10) showed there was no statistically

TABLE 10 Days In the USPTO

 

N

Mean # of Days

Std Dev

Min

Max

General Patents

1,000

1,011.9

662.5

243

6,626

Internet Patents

1,423

889.7

245.7

154

2,428

Internet business method patents

1,093

885.56

244.35

154

2,198

I-Business Model

345

884.94

245.92

154

1,692

I-Business Technique

748

885.84

243.80

238

2,198

I-Software Technique

330

903.40

249.89

361

2,428

34  

For the various Internet patent categories, the t-test for log Days In USPTO produces a different result than the nonparametric Wilcoxon or median test: the t-test shows that there is no statistically significant difference in the time in USPTO between Internet and General patents, whereas the two nonparametric tests show that there is a significant difference. The Wilcoxon nonparametric test assumes that the two groups’ distributions are similar with a shift in the location parameter (median). Unlike the previous tests, the two distributions here do not look similar. The median test makes a less restrictive assumption about the distributions and does show a statistically significant result. However, the median test also does not take into account the fact that General patents have been in existence longer and therefore would likely show a greater length in USPTO (e.g., the extreme values). Overall, the t-test result is the most conservative decision basis to use, and the overall conclusion is that the data do not support that the Internet patents spend shorter time in the USPTO than General patents.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

significant difference between General (log-transformed mean = 6.77) and Internet (log-transformed mean = 6.75) patents [t(1441) = −1.03, p < 0.3049], no statistically significant difference between General (mean = 6.77) and Internet business method (mean = 6.74) patents [t(1572) = −1.33, p < 0.1825], and similarly for the Internet patent subtypes.

A finding that Internet patents spend less time in pendency at the USPTO might have indicated a less thorough examination by the USPTO and less willingness by applicants to devote significant time and resources to obtaining these patents. Moreover, a finding of more or less pendency time would definitely have implications for the term of patent protection. After log-transformation of means to adjust for extreme values, however, no significant difference was found in pendency times.

CONCLUSION

Many criticisms of Internet business method patents rely on perceived differences between Internet business method patents and the more general set of patents that issue from the USPTO. Those criticisms are focused primarily on the perception that Internet business method patents have not been properly researched for relevant prior art. For the time period we studied (primarily late 1990s), we found little support for those criticisms when we compared Internet patents with a large sample taken from the general population of patents. Internet-related patents overall, Internet business method patents, and Internet patent subtypes that we identified all proved to have as much, if not more, prior art as patents in general. The major difference in Internet patents and general patents with respect to prior art was the amount of nonpatent prior art cited in Internet patents, with those patents having significantly more nonpatent prior art citations than the general population of patents. Although some observers criticize Internet business method patents for other reasons (such as allowing them to be patentable subject matter at all), criticisms focused on prior art and the USPTO’s handling of these particular types of patents are not well supported by our analysis of the data.

We also found that individuals and small companies do quite well, compared to large business organizations, in getting Internet business method patents. In other words, when compared to the distribution of a set of general patents, the results of our research do not support the contention that large business organizations are dominating Internet business method patents. We did find, however, that U.S. inventors and companies overwhelmingly dominate their Japanese and European counterparts in receiving Internet business method patents. Japanese and European inventors and companies receive a far greater share of total U.S. patents than of Internet business method patents.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

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Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

APPENDIX: INTERNET PATENT SUBTYPES

1. Business Model: The described method would likely stand on its own as a business on the Internet or a distinct line of business. This is the broadest subtype. Note that we do not include patents in this category if the only likely business model is licensing out what we describe below as a business technique. The business method itself as described in the patent, rather than the licensing out of the method, must be capable of being a business model or distinct line of business.

Example (1): Walker Asset Management Limited Partnership—Method, apparatus, and program for pricing, selling, and exercising options to purchase airline tickets.

An apparatus, method, and program for determining price of an option to purchase an airline ticket and for facilitating the sale and exercise of those options. By purchasing an option, a customer can lock in a specified airfare without tying up his money and without risking the loss of the ticket price if his travel plans change. Pricing of the options may be based on departure location criteria, destination location criteria, and travel criteria.

Example (2): IMX Mortgage Exchange—Interactive mortgage and loan information and real-time trading system.

The invention provides a method and a system for trading loans in real time by making loan applications, such as home mortgage loan applications, and placing them up for bid by a plurality of potential lenders. A transaction server maintains a database of pending loan applications and their statuses; each party to the loan can search and modify that database, consistent with their role in the transaction, by requests to the server from a client device identified with their role. Brokers at a broker station can add loan applications, can review the status of loan applications entered by that broker, are notified of lender’s bids on their loans, and can accept bids by lenders. Lenders at a lender station can search the database for particular desired types of loans, can sort selected loans by particular desired criteria, can bid on loan applications, and are notified when their bids are accepted. Broker stations, lender stations, and the transaction server can be coupled using multiple access methods, including Internet, intranet, or dial-up or leased communication lines.

Example (3): NCR Corporation—Newspaper vending machine with online connection.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
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A system which comprises a self-service newspaper vending machine (2) includes an electronic control means (34) with an on-line connection (36) to a news-providing organization (38) from which a newspaper containing up to the minute news can be purchased. A customer is attracted by news stories shown on a display (6). The customer is then given the opportunity of purchasing a newspaper or part of a newspaper. Communication between the customer and the vending machine (2) is by the display (6) and a keyboard (8). The newspaper can be purchased by either inserting a banking or credit card in a card reader (52) or inserting coins into a coin slot (50). The vending machine (2) would then print out the up to the minute news requested.

2. Business Technique: Typically would not be a stand-alone business; rather, it is a more narrow method of doing business over the Internet.

Example (1): Amazon.com, Inc.—Method and system for placing a purchase order via a communications network.

A method and a system for placing an order to purchase an item via the Internet. The order is placed by a purchaser at a client system and received by a server system. The server system receives purchaser information including identification of the purchaser, payment information, and shipment information from the client system. The server system then assigns a client identifier to the client system and associates the assigned client identifier with the received purchaser information. The server system sends to the client system the assigned client identifier and an HTML document identifying the item and including an order button. The client system receives and stores the assigned client identifier and receives and displays the HTML document. In response to the selection of the order button, the client system sends to the server system a request to purchase the identified item. The server system receives the request and combines the purchaser information associated with the client identifier of the client system to generate an order to purchase the item in accordance with the billing and shipment information, whereby the purchaser effects the ordering of the product by selection of the order button.

Example (2): Lucent Technologies—System and method for scheduling and controlling delivery of advertising in a communications network.

A system and a method for scheduling and controlling delivery of advertising in a communications network and a communications network and remote computer program employing the system or the method. The system includes (1) a time allocation controller that allocates time avail-

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

able in a particular advertising region in a display device of a remote computer between at least two advertisements as a function of one of a desired user frequency, a desired time frequency, or a desired geometry, for each of at least two advertisements and (2) a data communication controller, coupled to the time allocation controller, that delivers at least two advertisements to said remote computer for display in the advertising region according to the allocating of the time.

Example (3): Citibank, N.A.—Method for electronic merchandise dispute resolution.

A system for open electronic commerce having a customer trusted agent securely communicating with a first money module and a merchant-trusted agent securely communicating with a second money module. Both trusted agents are capable of establishing a first cryptographically secure session, and both money modules are capable of establishing a second cryptographically secure session. The merchant trusted agent transfers electronic merchandise to the customer trusted agent, and the first money module transfers electronic money to the second money module. The money modules inform their trusted agents of the successful completion of payment, and the customer may use the purchased electronic merchandise.

3. Software Technique: Patent focusing on more technical Internet functionality and not conditioned on a particular business application. These patents are often targeted at making the Internet more efficient and effective for conducting electronic commerce.

Example (1): Compaq Computer Corporation—Method and apparatus for reassigning network addresses to network servers by reconfiguring a client host connected thereto.

The present invention provides a method and an apparatus for reassigning network addresses to a plurality of network servers by reconfiguring a client host coupled to the network servers. According to the invention, when there are changes to network connections, the IP addresses (i.e., network addresses) of the individual network servers can be reassigned automatically at the client host without powering off the network servers. According to the invention, in reassigning a new network address to a port of the network server, a bootstrap protocol (BOOTP) request is first issued by the client host to the network server. The BOOTP request is received by the network server, which then sends a BOOTP response to the client host to request a new network address. After the client host

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
×

receives the BOOTP response, it sends a BOOTP reply to the network server. The BOOTP reply includes a new network address for the port of the network server. The above procedure is repeated for each port of the network server. Thus each of the network server is reassigned with a new network address. In this way, reassignment of IP addresses of network servers is more efficiently performed. Furthermore, the work efforts are substantially reduced and are centralized.

Example (2): International Business Machines Corporation—System for checking status of supported functions of communication platforms at pre-selected intervals in order to allow hosts to obtain updated list of all supported functions.

An apparatus for dynamically providing a host information about all functions supported by a communication platform provided in a computing network environment. The computing network environment also has a gateway device besides the associated communication platform, which can be of any specific type, as well as at least having an initiating host and at least one receiving host that are electronically connected to the gateway device. The apparatus comprises a special function table for storing all possibly available functions that can be provided for all available commercial communication platforms as well as a memory location accessible by said gateway device for storing said special function table. Determining means then will obtain a list of all supported functions provided by said particularly associated communication platform and through the use of a comparison component provides information about all supported functions in the same special function table. All supported functions are then checked by a monitoring component to modify the function table in case of additions or deletions. In this manner, any host can obtain an updated list of all available and supported functions at any time and even select an option from the list if desired.

Suggested Citation:"Internet Business Method Patents." National Research Council. 2003. Patents in the Knowledge-Based Economy. Washington, DC: The National Academies Press. doi: 10.17226/10770.
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