Is a BM Patent No Longer Valid?
Pine IP
October 7, 2024
.png)
In recent years, interest in BM (Business Model) patents has surged as companies sought to protect innovative business models and maintain a competitive edge amid rapid technological and digital advancements. However, recent changes in global patent laws have raised concerns about the validity of BM patents. This article explores whether BM patents are still viable and whether businesses need to rethink their strategies for protecting business models.
A BM patent, short for "Business Model" patent, refers to a patent that protects a business method or system that integrates information and communication technology (ICT). Unlike a mere business idea, a BM patent focuses on inventions that involve technical elements implemented through the internet, computers, or networks. These patents protect business processes, such as new methods for selling products, innovative service operation methods, or financial transaction systems. They are particularly prevalent in fields like online platforms, fintech, and e-commerce.
BM patents do not protect the business idea itself but rather the specific technological mechanisms or processes that implement the idea. For example, a company introducing an innovative payment method in the fintech industry could protect this business method through a BM patent.
BM patents are an essential tool for maintaining competitiveness. From startups to large enterprises, companies can protect their business models with BM patents, allowing them to secure a monopoly in the market. While technical patents protect tangible products or processes, BM patents provide protection for intangible elements like business operations.
Notable examples of companies successfully utilizing BM patents include Amazon and Google. In South Korea, fintech companies such as Toss and KakaoPay have also leveraged BM patents to protect their business models.
In South Korea, BM patents follow the same application procedures as regular patents. To file a BM patent, the business model must be concretely defined, and the patent specification should clearly explain how the invention is implemented using ICT, including its technical execution and system operation.
According to Korean patent law, a BM invention must be an ICT-based, concretely implemented invention. This means the BM patent must involve a technical element, such as an innovative payment process in an online shopping platform or a new transaction system related to e-money.
The United States was once relatively lenient in granting BM patents, with Amazon’s "one-click purchase" being a prime example. However, the 2014 Alice Corp. v. CLS Bank International decision significantly tightened the criteria for BM patents. The ruling established that "abstract ideas" cannot be patented, leading to the rejection or invalidation of many BM patent applications. This decision cast doubt on the legal validity of BM patents, prompting businesses to reconsider their reliance on them for protection.
The European Union has long imposed stricter standards for BM patents. The EU prohibits patents on pure business models unless they are combined with technical elements. For example, unless a business model involves specific software or hardware technology, it is unlikely to be patentable in the EU.
Similar restrictions are being adopted by other countries, indicating a global trend toward making BM patents harder to secure.
Although the process for applying for a BM patent is similar to that of a traditional patent, there are some distinctions. It's important to understand the patent laws of each country before applying. The general steps include:
One of the biggest limitations of BM patents is their abstract nature. While technical patents protect specific inventions or processes, BM patents seek to protect business ideas, which are often difficult to define concretely. Many business models are minor variations of widely known practices or lack direct ties to specific technologies, making them harder to patent.
Additionally, in today’s fast-paced technological landscape, business models evolve rapidly. This means that even granted BM patents may lose their relevance quickly, raising questions about whether they are worth protecting.
BM patents can be expensive to file and maintain. Keeping a BM patent active in major countries like the U.S. and Europe requires significant financial resources. The rapid evolution of business models also means that the protection period offered by BM patents may be relatively short, reducing their overall value. As a result, companies often find that the cost of maintaining BM patents outweighs their benefits.
BM patents are often subject to litigation due to their abstract nature. In court, the scope of BM patents can be ambiguous. For example, if a business model is deemed an "abstract idea," the court may invalidate the patent. This makes BM patents vulnerable to legal challenges.
As the limitations of BM patents become clearer, companies need to explore alternative ways to protect their business models. Here are a few options:
If a business model is not concretely tied to a technology or service, copyright or trademark protection can be viable alternatives. Copyright protects creative works, while trademarks safeguard a company’s brand and reputation. Through these protections, companies can indirectly safeguard their operational methods.
If a business model involves specific technical elements, applying for a technical patent may be more effective. For example, if a business model depends on a particular algorithm or software, protecting the technology behind the model through a patent can indirectly protect the business model.
Another option is to protect key business models through NDAs rather than disclosing them publicly through patent filings. NDAs are particularly useful when keeping internal processes and methods confidential. Companies can also establish robust internal security systems to prevent the leakage of sensitive information.
Instead of focusing on patent filings, companies can use a first-mover strategy. By quickly entering the market and achieving innovation before competitors catch up, companies can secure a competitive edge. This strategy is particularly effective in fast-changing industries.
In conclusion, a BM patent alone is insufficient to protect business ideas. For a BM patent to be granted, it must involve specific technical elements and systems. Companies that pursue BM patents should carefully explain how their business model integrates with technology and ensure that these details are clearly outlined in the patent specification.
While BM patents are still a valuable tool for protecting business models, understanding their limitations is crucial. Companies must emphasize technological innovation and specific implementation methods to increase the likelihood of patent approval and protection. Additionally, businesses should explore complementary strategies, such as copyright, trademark, NDAs, and first-mover advantages, to ensure comprehensive protection of their business models.
