Nonpatentability of Business Methods: Legal and Economic Analysis

Abstract

In this brief filed in Bilski vs. Kappos, pending before the U.S. Supreme Court, we argue that the "useful Arts" limitation of the the Intellectual Property Clause of the U.S.Constitution restricts the scope of Congress's patent power to technological advances. Beyond this constitutional limitation, Congress has not extended patent protection to business methods. The subject matter provision of the 1952 Patent Act merely codified existing subject matter categories and limitations, including the exclusion of business methods. The First Inventor Defense Act of 1999 did not alter this limitation on patentable subject matter. It did not amend the subject matter provision. It merely created a prior user defense. To read § 273 to override more than two centuries of jurisprudence as well as § 101 without an express statement to that effect would be unwarranted and unwise.

We also address warnings that upholding the business method exclusion would hamper innovation. Economic research indicates that restoring the business method exclusion could well promote progress, innovation, and competition. Although we doubt that these considerations bear significantly if at all on the interpretive questions before the Court, they should certainly not be weighed on the side of extending patent protection to business methods.

The courts and the Patent Office successfully navigated the line between technological and non-technological fields for over two centuries. Patent systems throughout the world continue to do so. Reestablishing technological advance as the touchstone for patent protection in the United States will help to restore confidence in, the efficacy of, and the logic of this vital institution.

Keywords: Patents, Business Methods, Intellectual Property, Constitutional Interpretation, Statutory Interpretation, Innovation, Patentable Subject Matter

JEL Classification: K19, K21, O3, L40