Software, business methods - patentable in Europe?

by Julian Asquith, Marks and Clerk
April 2001

Intellectual property is gaining in profile. Patents are increasingly recognised as strategic tools that can be employed defensively to prevent rivals from copying ideas and devouring market space, but also offensively to enhance financing and valuation efforts, and to generate new revenues through licensing.

Software and methods of doing business are fast becoming two of the most hotly-contested areas in industry, and there is increasing pressure on the European Patent Office to facilitate the granting of patent protection in these areas.

It is a common misconception that while it is possible to patent business methods and software in the US, this is not the case in Europe. In reality, many thousands of patents are in fact granted by the European Patent Office for software inventions, and patents can also be granted for business-related inventions. However, the rules governing which sort of computer and business-related inventions represent patentable subject matter are complex, and vary greatly between different jurisdictions.

In the USA there is now no real requirement for an invention to be technical, resulting in more readily available patents for software and for new and inventive methods of doing business. If present trends continue, the likelihood is that US businesses will come to dominate European companies in their ownership of patented business methods. Our experience is that businesses in Europe are much less aware than their US counterparts of the potential for protecting business methods in the USA. Clearly, given the size and influence of the US market, there are many occasions when European businesses could benefit from the opportunities open to them for protection in the USA.

European businesses should consider all possible strategies to protect their innovative software and business methods. The law in this area is continually changing throughout the world, and such changes are nearly always directed to allow more types of computer and business-related inventions to be patented. Also, it is often worth filing a British or European patent application in order to secure a priority date for the invention, as applications in other jurisdictions will then be entitled to claim that priority date.

With the explosion of e-commerce, the commercial value of software is now greater than ever. This sea-change has provoked concern amongst software companies and internet-related businesses that money is being poured into the research and development of highly sophisticated and costly products for which only limited protection is available. The investment made in researching new products and bringing them to market can often only be recouped if companies are able to access the monopolies granted by the patent system.

Criticism of the current patent regime in the USA usually levels the accusation that some business-related inventions for which patents have been granted in the USA are, particularly from a European perspective, trivial and unmeritorious. This has led some to argue that patents for business methods should not be available at all, because such seemingly trivial inventions would have arisen in any event, without the incentive provided by patent protection. However, such criticisms are really criticisms of the level of inventive step that is required in the test for obviousness applied by patent examiners. It follows that as long as the threshold for the level of inventive step is set at a suitably high level, innovation in the area of new business methods can be fostered by intellectual property protection.