There is, at present, no clear definition of what constitutes a "business method" or what makes it different from other types of methods. The traditional view in Europe is that patents protect technical inventions, and "business", being non-technical, therefore should be excluded from patentability. However, with the rise of e-commerce, it has become more difficult to define the boundary between "technical" and "non-technical". This in turn has led to an increase in the number of software patents and business method patents in Europe.
However, as its name suggests, a business method patent grants to its holder exclusive rights to a particular way of doing business. Until recently, it was widely assumed that business methods were not patentable. As a result, firms enjoyed only limited intellectual-property protection against imitation of their strategies by competitors. Some innovations could be kept secret, and innovators could prevent competitors from learning of those innovations by "improper means."
Most innovations could not practicably be concealed, and competitors were thus free to mimic them. The 1998 decision by the Court of Appeals for the Federal Circuit in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (1998) altered this situation dramatically. That decision upheld a patent on a software program that was used to make mutual fund asset allocation calculations.
In the wake of that decision, companies have been seeking -- and obtaining -- business method patents at a furious pace. The U.S. Patent and Trademark Office (USPTO) reports that, in 1998, 1300 patent applications pertained to business methods, and 420 such patents were issued. In 2000, 7500 applications for business method patents were filed, and 1000 such patents were issued.