July 14, 2011 | By Julie Samuels

In Patent Reform Legislation, Congress Starts to Slowly Chip Away at Business Method Patents

The patent reform legislation that continues to snake its way through Congress makes one thing clear: many in Washington don’t like business method patents anymore than we do. (Business method patents cover a merely a "method" or "process," as opposed to something tangible.)

Now that the House and Senate have each passed their own version of the bill, the two will need to be reconciled. The big issue standing in the way is fee diversion: whether the Patent Office can keep the additional fees it brings in that exceed its budget (Senate bill), or whether Congress can use that money to fund other government programs (House bill).

Issues like fee diversion and the shift from first-to-invent to first-to-file continue to get the lion’s share of the press, but there are some smaller provisions that caught our eyes. For example, both bills include a provision that would allow banks and other financial institutions to more easily challenge business method patents when those patents are asserted against them in litigation. And both the House and Senate bills would prohibit patents covering “any strategy for reducing, avoiding, or deferring tax liability,” which are currently considered patentable business methods.

While many decry reforms like these – especially the one relating to banks – as nothing more than Washington, D.C., political game-playing and Wall Street favors, each in its own right highlights the larger problem with business method patents: instead of spurring innovation (as the patent system is intended to do), they often harm businesses by imposing additional costs (in the form of licenses or litigation), which in turn harms the consumer, as well as the economy at large. So instead of blaming Congress, we applaud any effort to limit business method patents (something the Supreme Court failed to do in Bilski) – and just wish the legislation went further in curbing the often harmful business method patents.

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