CURRENT SITUATION OF BUSINESS MODEL PATENT

JULY 15, 2000
HARAKENZO WORLD PATENT & TRADEMARK PATENT LAW FIRM
Patent and Trademark Attorney Kenzo HARA

Business Model Patent: A Hot Subject
1 Computers and the Internet have come into wide use
2 Business opportunity is provided with less investment
3 Money-earning techniques have been patented
4 Patent obtainability depends on countries
5 Concerns over an international dispute have risen

1. Wide dispersion of computers and the Internet
(1) Personal computers, mobile devices, and the Internet have come intowidespread use by the Information Technology (hereinafter referred toas IT) Revolution, and a struggle for dominance over the IT Revolution has intensified, with Asian and European countries following the U.S. which is in the leading position. Especially, Asian countries such as China which aims to be an advanced nation of the IT (the dispersion ratio of mobile devices is No. 3 worldwide, and will be No. 1 in several years), Singapore and Malaysia which are making nationwide efforts to develop industry, and India which has been maintaining its position as a worldwide software exporting country (more than 50% increase ratio has been recorded in eight consecutive years with Bangalore and Hyderabad as a hub of industry, software export amounted to 4 billion dollars in 1999, and is expected to be 6.3 billion dollars in 2000) have been rapidly developing under the promotion policies of the respective governments. [See Examples of major infringement litigations concerning business model patents (a) to (c).]

(2) The Internet population in Japan was 27 million as of the end of 1999, and is estimated to be 76.7 million five years later. The Internet dispersion ratio in the population in Japan is 21.4%, and is estimated to be 60% five years later.

(3) In the U.S., the electronic signature act, which allows a deal that has required a signature on a contract document to be regarded as legally effective even if the deal is made via the Internet, has become effective as of October 2000, resulting in spurring e-commerce.

(4) The shortage of IT engineers has become critical. Especially, Germany and the U.S. plan to introduce IT engineers from foreign countries (especially from India) (high-tech immigrants policy).

2. Types of IT industries IT industries are the industries manufacturing devices, equipment, and software required for e-commerce using the Internet, and providing related service.
(1) Hardware (computers, semiconductors, etc.)
(2) Software and service (programming, computer repair, etc.)
(3) Communication devices (acoustic devices, telephones, televisions, etc.)
(4) Communication service (telecommunication, radio/TV broadcast, etc.)

3. Starting business with less investment Competition in developing technologies has grown mainly in the manufacturing industry, and with the advent of the IT Revolution, the field of the competition among enterprises has expanded from technologies to business ideas. Since e-commerce does not require a satisfactory business location, sales channel, research laboratory, experimental equipment, prototype, etc., a barrier for embarking a new business venture is low.

4. Patent on money-earning techniques
(1) Example 1
Priceline.com Inc. (parent company: Walker Digital Inc.), founded in 1997 by Mr. Jay S. Walker, has been drastically growing thanks to its e-commerce featuring Reverse Auction system. Mr. Walker's private
assets calculated from stocks are approximately 1 trillion yen, and the issued stock assets of Priceline.com are approximately 2 trillion yen (in market price). If the market share of Priceline.com when the company does not obtain patents is assumed to be 50%, its patent portfolio constituted by approximately 300 patents is worth about 1 trillion yen, which means one patent is worth about 3.3 billion yen. (Priceline.com deals with 80,000 airline tickets a week, a 60% increase from the fall of 1999. At present, about 80% of airline tickets are sold via travel agencies, but it is estimated that 60% will be sold via the Internet in 2002) [See Examples of major infringement litigations concerning business model patents (d) and (k).]
[Factors for success]
(i) The dispersion of Reverse Auction system (airline tickets, hotel rooms, cars, rental cars, supermarkets, gas stations, etc.)
(ii) The combination of patents and stocks (Obtain a patent → Collect investment from venture capital → Start up an enterprise → Be listed the stock exchange)
Business model patents (BMPs) are actively used as a tool for fund raising.
(iii) Patent portfolio strategy (Obtain a plurality of patents on a specific subject and organize a patent network → Cut off the competitors' intention to launch a counterattack → Obtain a large amounts of license fees)
Priceline.com has obtained about 40 patents only on the Reverse Auction system.

(2) Example 2
Amazon.com, Inc., having "One-click" patent, started business in 1995. The CEO is Mr. Jeff Bezos, and the number of employees is 7,500. The company deals with 3 million items and sells the items to 17 million clients in more than 160 countries and regions. However, the stock price at present is decreased by 70% from its maximum price (because sales has not caught up with prior investment). Since "cookie" generally used in the Internet is described in a claim of the patent, the patent can be circumvented and its value as a patent has been decreased.
(3) Matsushita Electric Works, Ltd. is inviting BMPs from its employees, offering up to 10 million yen as compensation.
(4) Bridgestone Corporation is inviting BMPs from public, offering an award of one million yen and a status as a business partner. 5. Easiness of patent obtainability
Patent obtainability varies depending on countries, due to the differences in the law/examination criteria/implementation guidelines of the respective countries. There is a disparity between the U.S. and Japan. The difference in inventive step and non-obviousness also has an influence. 6. Concerns on international disputes
Apex BI Net Inc. established a new company for providing specialized consulting service on business model patents in the U.S. and Japan, in partnership with a U.S. patent law firm and the like. The company involves in BMP infringement investigations and verifications. Representative BMPs

1 Reverse Auction patent "Priceline patent"
2 Hub and spoke financial service patent "Signature patent" [State Street Bank case]
3 One-click patent "Amazon.com Inc."
4 Shopping cart patent (a private inventor)

1. Reverse Auction patent (USP5794207): Priceline.com Inc.
This is a patent on the software for bidding a price, which has conventionally been determined by a seller, at auction by a buyer. This business technique is a basic method following "balance between supply and demand", which is a principle of capitalism. [See Examples of major infringement litigations concerning business model patents (d).]

2. Hub and spoke financial service patent (USP5193056): Signature Financial Group, Inc.
This is a system for effectively managing money, saving fund management cost, and obtaining advantages on tax payment, by pooling money from a plurality of funds to a single portfolio, performing data processing on daily changes in the value of the portfolio's investment securities and in the amount of each fund's assets, and determining the allocation ratio of each fund in the portfolio. [State Street Bank case]

3. One-click patent (USP5960411): Amazon.com Inc.
This is a patent on the software which, once a customer inputs personal information such as his/her name, credit card No. abode, when the customer makes the first purchase on the Internet, allows the customer to just one-click a mouse button on and after the second purchase (of course, address and password should be inputted). The patent is effective to ease the customers' anxiety to input personal information (credit card
information) for every order.

4. Shopping cart patent (USP5895454): a private inventor This is a patent on the software for taking a procedure to pay for purchases made at a plurality of sites on a single occasion. [Recent attention-getting business models in Japan]
1. Global Net Inc. has started a service for providing foreign stock transaction intermediary service on the Internet, by connecting security firms in various countries via a network. The commission required in this service is only one fifth, compared with the conventional service via security firms (foreign stock transaction fee = domestic commission + local sales commission + exchange fee).
2. Footwork Express Co. has opened a market for trading transportation space, arranging the use of vacant space on load-carrying platforms of trucks, etc.

Recent Important Trends
1 Examination and implementation guidelines for BMPs have been revised
2 Japan, the U.S., and Europe have reached a consensus
3 Copyright protection
4 The IT Charter was adopted in Okinawa Summit meeting

1. A formal meeting of the trilateral patent and trademark offices was held in June 16, 2000, in which the examination criteria were confirmed. The Examination and implementation guidelines for BMPs were revised in December 2000.

2. Matters for which Japan, the U.S., and Europe have reached a consensus
(1) "Technological aspect" utilizing IT is essential.
(2) Patentability will not be recognized in a business method which just carries out a known transaction method on the Internet.

3. Trends in copyright protection
Japan Copyright Council proposed to incorporate an escape clause on legal responsibility of a provider when a user infringes a copyright in a home page.

4. Early ratification of intellectual property treaty
OECD and other organizations are requested to establish an international rule on international e-commerce (to harmonize the systems of the respective countries) so as to cope with a complaint in the Internet industry that it is unknown whether a lawsuit is filed from which court in the world, to take safety measures, to protect consumers and their privacies, and to promote competition through deregulation, and the respective countries are planning to take steps for early ratification of an intellectual property treaty (the IT Chapter will be adopted in Okinawa Summit meeting).

[Okinawa Summit] July 21 to 23, 2000
Subjects: Competition promotion and deregulation in information communication Harmonization of international criteria by the trilateral patent authorities (financial specialists from the respective countries will also participate)
[Main points of IT Revolution]
1. A consensus that IT Revolution will raise a potential growth rate is to be obtained.
2. An international rule on financial e-commerce is to be arranged.
3. Five principles including the protection of users are to be determined.
4. Financial BMPs are to be discussed from the viewpoint of monopoly prevention.

Legislation in Japan
1 Pro-patent policy
2 Patent requirements (requirements for obtaining a patent/industrial application/novelty/inventive step)
3 Software patent requirements
4 Fields eligible for patent protection
5 Fields ineligible for patent protection

1. Pro-patent policy (to attain quicker grant of a patent/stronger patent effects/broader protection of a patent right) Legislation amendments aiming at extension of patent term, mitigation of specification description requirements, reduction of a patentee's burden of proof (calculation judge system, etc.) have been conducted over several times based on the TRIPS (Trade-Related aspects of Intellectual Property Rights) rule under the WTO (World Trade Organization), and the amount of damages has been increased (a profit rate of a patentee ~ sales quantity of an patent-infringing company).
In consideration of Japan's industrial policy, the Japan Patent Office (JPO) desires to take pro-patent policy in the field where Japan can take the lead, and take anti-patent policy in the field where Japan is inferior to other countries.

2. Patent requirements
(1) Requirements for obtaining a patent
A BMP is not clearly defined, but generally, it is said as "a patent for protecting a business method whereto a computerized processing is a prerequisite." (In the U.S., it is called as a "Business Method Patent".) A question of whether the BMP is effective is attributed to a matter of interpretation as to how we read the phrase "technical ideas by which a law of nature is utilized" [the Patent Law of Japan,
Section 2(1)].
(2) Industrial application
The Patent Law is an industrial legislation, and the ultimate purpose thereof is the "development of industry" (Section 1). There is a description in Patent Law Section 29(1) that "any person who has made an invention which is industrially applicable may obtain a patent therefor".
(3) Novelty/Inventive step
i. An invention made by simply applying a computer to a publicly known business method by using a technique which merely requires daily works is refused on the grounds of showing "no inventive step". However, some business methods may be regarded to have patentability even they are publicly known, by a combination with a new element such as a new hardware, or by a partial addition of a new business method, etc.
In the case of computer processing, some inventiveness is generally indispensable.
Even a customary business method which has been commercially used may be regarded to have patentability if a system which processes the business method using a computer is developed, and there is a concrete description on how to adopt hardware resources (i.e. computers) so as to realize the business method.
ii. A new business method is regarded to have patentability on condition that claims describe how to utilize the computer. Since one claim forms one idea or an invention, patentability of the invention is admitted, provided that an element having the inventive step is included in the claim, even it the element is non-technical one.
(4) Prior art documents
The trilateral patent offices plan to jointly construct a database in which existing BMPs are systematically arranged by 2002, so as to share examination information. Unpatented information will also be converted into electronic form so as to be mutually utilized. Information will be obtained by requesting private enterprises such as software developers to submit in-house documents, by obtaining studies, and the like.

3. Software patent requirements
According to the examination guidelines "Implementing Guidelines for Examination Procedure Applied to a Specific Technical Field,
Chapter 1: Software-related Inventions" issued by the JPO in 1997, the "utilization of a law of nature" in an invention is admitted if the invention meets any of the following three requirements:
1) Control over hardware resources or processing accompanying the control;
2) Information processing based on either a physical property or a technical property of an object; and
3) To conduct processing with hardware resources.
It is necessary to describe how to utilize the hardware resources in claims.
It does not matter if the claims partly include non-technical factors or utilize the other laws except a law of nature such as the economic principles. Further, neither technical effects nor economic effects of
the claims are questioned. Any category of the claims does not affect the course of judgement in respect to what is recognized as an invention.

4. Fields eligible for patent protection
(1) Computer technique, telecommunication technique, data processing technique, network technique, practical applications of software technique to a particular business.
(2) E-commerce and related subjects: "Shopping cart system" (USP5895454), "One-click system" (USP5960411), "Hotel room price matching system" (USP5794207), etc.
(3) Financial services (i.e. bank, insurance, stock/securities) and the related subjects: "Investment trust management system" (USP 5193056), etc.
(4) Advertisement, distribution, stock management, schedule management, production planning, production management, customer management, business operations management, intermediation, entertainment, occupational change, analysis/estimate/evaluation, etc.

5. Fields ineligible for patent protection (not corresponding to "utilization of a law of nature")
Natural laws themselves, mathematics (e.g. calculation methods, etc.), logical rules, economic principles, commercial practices, psychological principles (e.g. hypnotism, etc.), management skills, artificial arrangements (e.g. game methods, etc.)
However, the condition "utilization of a law of nature" is satisfied where a law of nature covers a whole invention even if some parts of the invention do not utilize a law of nature.

6. Categories of computer software-related inventions
(1) Methods
Procedure (algorithm) of a series of processing or operations in chronological order
(2) Products
a. A claim expressing software by one or more than two function(s) thereof
b. A computer-readable recording medium recording a program
c. A computer-readable recording medium recording data having a structure; and the like.
(3) Computer programs (recognized in the revision of the examination criteria in December of 2000)

Notes on preparing BMP specifications
1 U.S. application based on the Japanese application
2 Application anticipating the revision in examination criteria, etc.
3 First-to-file system/enormous profits
1. Conceptual claims as broad as possible, business mode claims to be actually protected, and claims of every thinkable mode such as utilization mode and transaction mode should be prepared. One of the characteristics of BMPs is that each of them includes many claims. For example, "Reverse Auction" patent (USP5794207) of Priceline.com has 44 claims, Mr. Walker's "Insurance policies for foreign exchange losses" patent (USP5884274) has 64 claims, and "One-click" patent (USP5960411) of Amazon.com has 26 claims.
2. It is essential to prepare each claim so as to be limited either to a server computer or to a client computer respectively, in accordance with a doctrine of "one right to one entire invention".
3. Fields of business (e-commerce, finance, securities, insurance, advertisement, distribution, etc.) should be examined.
[Matters to be examined]
・ Category [product (device/recording medium), method, system, and program]
・ Communication means (the Internet, e-mail, LAN, dial-up, cellular phone, etc.)
・ Settlement means (credit card, debit card, electronic money, etc.)
4. Claims should be prepared so as to clearly describe whether each of them relates to software itself or to the combination of software and hardware. The description of embodiments should include a drawing showing the overall structure of a network, a block diagram, a flow chart, data structure, etc. so as to minutely and satisfactorily describe how to utilize hardware resources.
5. Taking U.S. application into consideration, economic effects (for example, how to make a profit) should also be minutely described. Taking European application into consideration, technical effects should be minutely described.
6. Allowing for future revision in examination criteria and implementation guidelines, challenge claims should be prepared.
7. It should be recognized which part of a BMP (service, intermediation, sales, etc.) makes a profit.
8. A claim specialized in a characteristic part is advantageous in infringement indictment, and a claim for an overall system is advantageous in license negotiation. Therefore, it is recommended to prepare both claims.
9. A claim not specialized in a field of business should also be prepared.
10. For U.S. application, a claim excluding unnecessary limitation on how to utilize hardware resources should also be prepared.

Exercise of Right
1 Right infringement occurs over the border
2 Doctrine of "one right to one entire invention"
3 Trial jurisdiction and standing

1. Since e-commerce is dealt with over the Internet, which is a cyberspace having no borders, it is likely that business operation of a Japanese company in the cyberspace may be limited by a U.S. patent. The best way to avoid infringement of a U.S. patent is to prohibit access from the U.S., but it is technically almost impossible to prohibit access only from the U.S. on the Internet. Consequently, it is said there is actually no other way except closing the site.

2. In the U.S., an operation "for business purposes" is not a requirement to be judged as infringement, unlike in Japan.

3. As for international trial jurisdiction, there is no common international regulation, and the Civil Proceedings Act in Japan does not include a regulation, either. In the Internet tradings, it is difficult to limit customers beforehand, or to specify the location where an illegal activity or damage may happen. Early establishment of an international rule through Hague International Private Law Conference, etc. has been sought for. There is a proposal that, if an illegal activity happens in an Internet trading, the trial will be under the jurisdiction of a court in the country where a suffered buyer resides. According to Hauge Agreement, jurisdiction or standing based on U.S. patents related to an Internet trading covers foreign nations including Japan.

4. Judging from the WIPO Copyright Act [corresponding to Berne Convention Section 20 "Special Agreement"] which regulates copyrights on the Internet (Section 8 "Right to notice to the public"), it can be considered in principle that a nature of the infringement is determined in accordance with the law of a country where an server for the Internet is provided. The U.S. government has taken a strong attitude declaring that they will take drastic measures against any incidents of an infringement related to the Internet, even though an Internet server is provided in a country which is not a member of the Act, if a U.S. resident suffers a loss or a service is distributed to the U.S. Japan has also regarded an information distribution activity via the Internet by an unregistered Australian securities firm (its server is also provided in Australia) as an activity similar to solicitation, and is considering to regulate the activity, but there is no means for compulsory exclusion.

5. A case where a server is provided in Japan and a user in the U.S. directly has dealings with the server via a site on the Internet (a case where a program is programmed so that the user has dealings directly with a trader via a computer) is judged as an infringement. A case where a U.S. user just obtains information from a site on the Internet, and has dealings via another medium (telephone, FAX, letter, etc.) is judged as no infringement.

6. Playboy Co. vs. Tattilo Editrice S.A. (Italy) Playboy Co. filed a suit against Tattilo Editrice S.A. in Italy, which operated a site named "PLAYMEN" on a server (provided in Italy) in the Internet and provided service also to the U.S., as an infringement of the trademark. The New York District Court judged
that:
(1) Tattilo Editrice may continue operating the site, but the company should not accept access from customers in the U.S.;
(2) Passwords of the customers in the U.S. should be invalid;
(3) Tattilo Editrice should pay back unused charge to the users in the U.S.;
(4) Tattilo Editrice should pay all the profits obtained from the customers in the U.S. to Playboy Co.;
(5) Tattilo Editrice should improve the site so as not to accept access from the U.S.; and
(6) Tattilo Editrice should pay all the money required for the suit to Playboy Co.

7. At present, U.S. companies are busy taking measures against U.S. competitors, and it is likely that, after they settle suits in the U.S. for the time being, the next target will be Japanese companies. In addition, it can be predicted that U.S. companies strategically keep silent even if a Japanese company infringes a U.S. patent and leave it untouched for a while. Namely, it may be possible that a U.S. company has at the moment given tacit consent to infringements of their patent rights by Japanese companies conducting the Internet trading and wait until their business develop to a larger scale, so as to obtain as much compensation as possible in the near future.

8. In April 2000, a Japanese venture which has obtained a patent on a charging method in the U.S. and Japan gave a warning for an infringement to approximately 60 Internet connecting service companies and on-line security firms in Japan. There is a possibility that the company might file a suit in a court in the U.S., rather than in Japan.

9. Hitachi, Ltd. made a profit of 36.4 billion yen on patents in fiscal year 1998. The company regards patents as "merchandise" and has actively given licenses.

10. IBM in the U.S. stably obtains license proceeds exceeding one billion dollars every year.

Trends of Japanese Companies
1 U.S. application based on the Japanese application
2 Application anticipating the revision in examination criteria, etc.
3 First-to-file system/enormous profits

1. Since the time a business model patent first got into the limelight, Japanese companies have steadily given practice to their strategies prepared for business model patents. Trend of the companies has recently been reported in detail in a Japanese information magazine on science and technology Trigger (January 2000) under the title "Patent bombs set by the USA: business model patents".

2. According to the report in Trigger , Japanese manufacturers, particularly electric manufacturers, have filed numbers of business model patent applications in the JPO in past few years, for the purpose of self-defense

However, it is view that, as far as the subject matters are concerned, the majority of the business model patent applications will only be able to pass an examination in the U.S. but not that of the JPO at the present stage. There are several conceivable reasons for a sudden increase in the number of the business model patent applications in Japan, as follows.
(1) Even if a business model patent application cannot be awarded a Japanese patent, it is still possible to file a foreign counterpart based thereon in a foreign patent office such as the USPTO.
(2) Since examination criteria and implementing guidelines of the JPO are expected to be mitigated in the near future so as to grant more business model patents, it is wise to precedently file the application in Japan as prior investment, in accordance with the first-to-file system, thereby securing a priority of applicant.
(3) In expectation of an arrival of the enormous numbers of existing U.S. business model patents in Japan in the near future, applicant aims to secure a way to survive an expected competition over the Internet business that will be a core industry of the twenty-first century.
(4) In fear of being requested by a U.S. company, etc. having a business model patent, a huge amount of compensation for alleged infringement of the patent right in future, applicant aims to precedently secure a business model patent capable of cross license as a countermeasure.
(5) A business model patent is attractive as it has a characteristic of making an enormous amount of profits, thereby being recognized as a "business method giving birth to a profit earning system".

3. In contrast to the Japanese Internet business market which is still in its infancy, U.S. companies conduct ng the Internet business are now going ahead of Japan to the extent of a few years. Owning basic business
model patents, the U.S. companies have earned large profits by making effective use of an abundant know-how of business and a wealth of funds (made mainly by their own stock whose price has risen remarkably). Many venture business companies plan to extend their business to the newly opened Japanese Internet business market. As in the case of Yahoo, representing such venture business companies, more U.S. companies have actually started a joint venture with a Japanese company in Japan nowadays [See Examples of major infringement litigations concerning business model patents (k)].

Current Situation in the U.S.
1 Patentable inventions
2 Patent requirements (˜101 utility/˜102 novelty/˜103 non-obviousness)
3 Overwhelming number of patents
4 Suits for infringement often filed
5 Enormous amount of profits

1. The U.S. government has actively promoted patent policy in front end technology field such as information technology (IT) and the genetic engineering, regarding that strategy on intellectual property will decide the fate of companies and the nation in the twenty-first century. IT industry was estimated to contribute 30% in average to the U.S. real economic growth rate in 1995 to 1999. Ratio of IT industry to the gross domestic product (GDP) of the U.S. is estimated to be 8.3% in 2000. The inflation rate in all industries except for IT industry averages 2.3% a year between 1995 and 1998, while 1.8% when including IT industry (This is because the enhancement of labor's productivity results in curbing inflation). In 2000, 35% of the U.S. real economic growth rate is expected to be made with 6-odd % of investments in IT industry out of the total investment.
[See Examples of major infringement litigations concerning business model patents (f)]

2. Under 35 U.S.C. 101, it states that inventions patentable include "any new and useful process, machine, manufacture, or composition of matter". It is noted that it excludes a condition as to a law of nature as is provided in the Japanese Patent Law. Business models such as an electronic trading, finances, securities, insurance goods, advertisements and a management of goods in stock are applied to said "process" or "machine" (35 U.S.C. 101) , and criteria for judgment as to whether they are patentable (statutory subject matter) depend on a question if they bring 'useful, concrete and tangible results' . [This criteria for judgment was first indicated in 1998 in the 'State Street' case in connection with the 'Hub and Spoke' patent (US Patent No. 5,193,056) by Court of Appeals for the Federal Circuit (hereinafter referred to as CAFC). Further, in AT&T Bell Laboratories case with regard to invention entitled "Call message recording for telephone systems" (US Patent No. 5,333,184 issued on Jul. 26, 1994), the CAFC ratified the preceding judgment of the 'State Street' case. The U.S. follows the Case Law.] Patentability of an invention is seems to be recognized if 'useful, concrete and tangible results', that is, economic advantages (method for making a profit, and the like) are produced from the entire invention. Since the majority of the business model patents are concerned with a 'profits earning mechanism' and aim at economic advantages by nature, most of U.S. patent applications related to the business models will be patented.

3. Grant of an exclusive technical classification number '705' (data processing related to business practices) to business model inventions by the USPTO in 1997 concedes that the US has recognized a materiality of the business model patents since an early stage. Consequently, it is held that the number of patents applied to the technical classification No. 705 has already reached over approximately four thousand (4,000) cases (4037 cases of business model patent applications (out of the number, 307 cases are filed by Japanese applicants) are filed with the USPTO as of April in 1999, whereas about 2000 cases are currently pending in Japan.).
[See Examples of major infringement litigations concerning business model patents (g) and (h)].
In particular, after the judgment of the State Street case in 1998 , patent applications related to business models enormously increased suddenly, and it is now held that the USPTO has recently granted a business model patent to approximately thirty (30) cases a week, and also, patent infringement lawsuits have been frequently filed. Incidentally, business model patent applications filed with the USPTO in 1997 amount to 920 cases, 1300 cases in 1998, and 2600 cases in 1999 (out of the foregoing total number, 600 cases have been already granted.) The number of examiners exclusive for business model patents is currently approximately 40. Due to a few prior art reference regarding business model patents, it is predicted that the filing rate of lawsuits on the patent applied to the technical classification No. 705 will be two times that of other patent technical classifications. Before the judgment of the State Street case in 1998 , cases with judgement that BMPs are not patentable had been continued from the Hotel Security Checking Co. case in 1908 with regard to invention entitled "method of and means for cash-registering and account-checking", and a principle of business method exception was established. After that, from 1930s to 1980s was anti-patent era. After the U.S. government launched the pro-patent policy, the USPTO gradually opened their door to BMPs. The number of granted BMPs averaged 50 cases a year between 1980 and 1986, and 100 cases in 1987. The number of granted BMPs has increased since 1990, and 200 cases of BMPs were granted in 1993. However, there were almost no BMP cases that enforced patent rights. This was because applicants had concerns that their granted BMPs would have been recognized invalid by Courts in terms of 'principle of business method exception.' Thus, recognition of BMPs' patentability by CAFC is attributed to the fact that the U.S. government, commonly recognized as an advanced nation of the Internet, adopted a strategic IP rights policy and thereby intensified their advantages in terms of taking the lead in the net business. Incidentally, patent applications filed with the JPO in the year of 1996 amount to 401 thousand (401,000), whereas that with the USPTO 224 thousand (224,000). Judging from this ratio obtained by the above comparison, the number of Japanese business model patent applications should have already reached seven or eight thousand (7,000 - 8,000).

4. In the US, in fear of a potential bad influence brought by the flooding business model patents on commercial activities, the U.S. Patent Law was amended in part on November 29, 1999. According to the amended Law, anyone who has actually carried out a business method as well as utilized said business method commercially, more than one year prior to the filing date of a patent application for said business method filed by the others, has right to raise a protest against an allegation of patent infringement (35 U.S.C. 273 (b)(1)). It should be noted that the above have legal effect merely as regards practice and commercial use of a business method taking place in the US and its territories (It is said that in fear of abuse of BMPs, major financial institutions of the U.S. petitioned some members of the Congress for legislating this law).

5. Recent reports
a. Amazon.com obtained a patent for its customer referral system, "associates program", which is generally used in the Internet industry. The Amazon associates program provides a means by which business entities and individuals, who run their websites on the Internet, lead customers to visit the Amazon's website from their sites, and they can receive some commissions for customer purchase of products from the Amazon's website. For example, this is applied to the method that writers having their websites on the Internet lead those who want to purchase their books to visit Amazon's website, and more than 400,000 websites are joining the program. Since only one click makes it possible to move from one website to others on the Internet, the method for introducing customers between websites has been a standard for e-commerce.
b. Mr. Jeff Bezos, CEO of Amazon.com, suggested the legal revision of the shorter duration of business model patents in the range from 3 years to 5 years and application of the shorter duration to the post-grant business model patents. He warns that increase in business model patent that lacks in novelty and has extremely broad scope of the invention results in a rush of patent disputes, thereby inhibiting development of the Internet industry. However, this suggestion has little possibility for realization on the ground such that the U.S., a member of WTO, cannot shorten the patent protection period to less than 20 years, and the shortening of the post-grant patents means the limitation of private property without just compensation, which is against the law of the U.S.
c. The USPTO has taken a course toward restricting the examination criteria and called for harmonization of the U.S. examination criteria with that of Japan and Europe (Nicolas Godici, Director of the U.S. Patent and Trademark Office, made comments: "The shortening of the patent duration cannot be happened as far as the Congress reviews related laws", and "There is no movement for the legal revision").

6. Examples of major infringement litigations concerning business model patents are given as follows:
(a) Signature Financial Group, Inc. v. State Street Bank & Trust
Co. Signature Financial Group, Inc. sued State Street Bank & Trust
Co. for infringement to the US District Court. Following the judgment of invalidity of a patent by the District Court, the plaintiff addressed an appeal to the CAFC in 1998, and thereby a validity of their "Hub and Spoke" Patent (US Patent No. 5,193,056) was confirmed. Although State Street Bank & Trust Co. appealed against decision of the CAFC to the Supreme Court, the Court dismissed it.

(b) AT&T Bell Laboratories (AT&T) v. Excel Communications Marketing, Inc. AT&T sued Excel Communications Marketing, Inc. for infringement to the District Court of Delaware. Following the judgment of invalidity of a patent, AT&T appealed to the CAFC in 1999, and the validity of their patent entitled "Call message recording for telephone systems" ('Long Distance Call Charging method') (US Patent No. 5,333,184) was confirmed. After that, this case was remanded to the District Court of Delaware, and a novelty of the case was denied.

(c) Amazon.com, Inc. v. Barnesandnoble.com On October 21, 1999, Amazon.com, Inc. sued Barnesandnoble.com for infringement to the District Court of Seattle. Infringed patent is a 'One Click' patent of Amazon.com, Inc. (US Patent No. 5,960,411) (Filing Date of an application therefor: September, 1997; and the Date of Patent: September 28, 1999). Amazon.com, Inc. sued Barnesandnoble.com before one month from the grant of '411 patent.
In this case, the Court delivered judgment of provisional disposition for the purpose of suspending the use of said system by Barnesandnoble.com on December 1, 1999 (The judgement was delivered only 42 days after filing). Barnesandnobe.com erased "Easy Ordering" button from their site and made customers to enter personal information for every order.
[N.B.] (1) The apparent shot at a competitor before Christmas selling season provoked a part of consumers, causing boycotting of goods against Amazon.com, Inc. (2) At the moment, Amazon.com, Inc. does not sue any other competitors which provides a similar "One Click" shopping.

(3) Although 'free of charge' should have been a motto of the Internet, the one-click patent imposes the alternative of making a license agreement with Amazon.com, Inc. or giving up the one-click function upon all companies providing on-line shopping site using the same function. It cannot be overlooked here that giving up the one-click function actually means giving up on-line shopping business. Hence, Mr. Richard Stallman, the president of GNU, head of Free Software Foundation (FSF), and founder of free software such as Linux, issued an official statement to criticize the USPTO and CAFC on the ground that they had granted the one-click patent without careful consideration of aftereffects caused by the patent although most business model patents lack in patentability
(d) Priceline.com v. Microsoft Priceline.com sued Microsoft to the District Court of Connecticut for counterfeit on October 13, 1999. More precisely, Priceline.com insisted that Expedia.com, an affiliate company of Microsoft, has imitated their patent on its travel site. Priceline.com Inc., assignee of which is Walker Digital Inc., provides reservation services for airline tickets and hotel rooms with use of the patent "Reverse Auction" patent (US Patent No. 5,794,207). Priceline.com asked Microsoft to enter into license contracts with it; however, the two sides failed to reach an accord, prompting Priceline.com to sue Microsoft.
(e) SBH Inc. v. Yahoo SBH Inc., a patent marketing company whose headquarter is located in St. Lewis, sued Yahoo for infringement on November 10, 1999. SBH Inc. insisted that Yahoo infringed a patent right of their "Shopping Cart" patent (US Patent No. 5,895,454). The trial was based on contingency agreement. SBH have already licensed the patent to AOL (American Online), NTT, and the others.
[N.B. The patent right of the "Shopping Cart" patent was assigned by Juliette Harrington (a proprietor of New Zealand)]
(f) Double Click v. L90, Inc. L90, Inc., a marketing company, sued Double Click for infringement of their patented DART technique on November 20, 1999.
(g) E-DATE v. Dozens of companies E-DATE sued dozens of companies which had denied for license contract for infringement of a patent right of their "system for online-distribution of software" patent
(US Patent No. 4,528,643). The court decided non-infringement in March of 1999. E-DATE appealed to the CAFC. Incidentally, IBM, Adobe System, and the others are licensed the patent by E-DATE. The patent of E-DATE provides the system for selling software online, and the system allows customers to download software for purchase by identifying the catalog code and authorization code of the software of which program is recorded with its catalog code in the host computer.
(h) Allan M. Konrad v. 39 companies Mr. Konrad (individual) sued to the District Court of Texas 39 companies for infringement of his patent right regarding "Remote Access System Based on Client Server Service" patent (US Patent Nos. 5,544,320, 5,696,901, and 5,974,444). The defendants include computer and hardware companies, airline companies, car-rental agents, chains of hotel, etc. Japanese-owned US-based companies such as Honda, Mazda, Nissan, Toyota, NEC, and Toshiba are also included.
(i) Pitney Bowes, Inc. v. E-stamp Corp . Pitney Bowes, Inc., postage-meter giant, sued E-stamp Corp.for infringement of their BMP regarding method for automatic processing of postages.
(j) Marimba Inc. v. Novadigm Inc . Marimba Inc. sued Novadigm Inc. for infringement of their BMP regarding method for updating coded softwares online.
(k) NES v. eBay NES sued eBay for infringement of their BMP regarding software package.

EXISTING STATE IN EUROPE [EPO]
1 Patentable inventions
2 Patent requirements
3 Review of Present Law
1. Patentable inventions are defined under Article 52(2) EPC. According thereto, "European patents shall be granted for any inventions which are susceptible of industrial application, which are new and which involve
an inventive step." However, the following abstract, intellectual activities are excluded because they do not aim at direct technical advantages:
(a) discoveries, scientific theories and mathematical methods;
(b) aesthetic creations;
(c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers ;
(d) presentations of information.
[highlighted by the writer]
However, the above subject matter or activities will be excluded from patentable inventions " only to the extent to which a European patent application or European patent relates to such subject matter or activities as such " (Article 52(3) EPC)
[highlighted by the writer].
As is clear from the above, those relate to business model patents such as the schemes, rules and methods for performing mental acts, playing games or doing business, and the programs for computers are not regarded as inventions insofar as they are claimed as such, as far as European Patent Convention (hereinafter referred to as EPC) is concerned.
2. Implementation of a technical aspect is essential in the EPC so as to recognize a patentability. Hence, in case of a business method (e.g. methods of finance, insurance, advertisement etc.) seeking an European patent, the subject matter claimed should be concrete, and add a contribution of a technical character to the known art. If such requirement is met, the business method will be patented even if it includes a non-technical part.

3. An Examining Division of the European Patent Office (EPO) admits that the 'technical character' can be detected in the subject matter, means, or effects of an invention. Accordingly, in Decision T1173/97 (IBM) of Technical Boards of Appeal, that resulted in recognizing computer program products as patentable, it has been held that inventions to give rise to further technical effects are recognized as patentable.
Consequently, a patentability will be recognized in a business method utilizing a computer when a 'further technical effect' surpassing normal functions and operations of the computer is detected. (All of program patent, program product, program medium, and program element are seems to be patentable.)
The summary of the decision is given as follows:
"Every computer program product produces an effect when the program concerned is made to run on a computer. The effect only shows in physical reality when the program is being run. Thus the computer program product itself does not directly disclose the said effect in physical reality. It only discloses the effect when being run and consequently only possesses the "potential" to produce said effect. This means that a computer program product may possess the potential to produce a "further" technical effect.
It has been clearly established that a specific computer program product, when run on a computer, brings about a technical effect in the above sense, the Board sees no good reason for distinguishing between a direct technical effect on the one hand and the potential to produce a technical effect, which may be considered as an indirect technical effect, on the other hand.
A computer program product may therefore possess a technical character because it has the potential to cause a predetermined further technical effect in the above sense. "

4. Incidentally, it has presently been argued on a revision of Article 52 EPC for the purpose of recognizing 'inventions of any technical fields', and the existing law that has eliminated computer programs and business methods is in the process of reexamination.

5. The following will provide a list of five representative Decisions of the EPO:
(1) 'Ingredients distributing method and practicing device therefor' (T636/88)
(2) 'Automatic self-service apparatus and operating method thereof' (T854/90) (IBM/Card reader) O.J. EPO 1993, 669
(3) 'Computer system for purposes of financial affairs and controlling goods in stock' (T769/92)
(4) 'Determining system for linear arrangement of clients' (T1002/92)
(5) IBM patent (T1173/97)

6. The patent court of Germany made a judgment to recognize cases using computers as patentable.