Practice Area

Once upon a Click - A story of Amazons One Click patent and Indias emerging Business patent policy

Author: Yamuna Chengappa

Introduction

The reason why men enter into society is the preservation of their property-     John Locke.

India’s economic reforms in the 90s brought in a surge of subsidiaries, research units and business back offices of both Indian and foreign multinational companies. Consequent to these reforms India’s software sector has grown at incredible speeds in the last two decades.

Meanwhile, digital revolution changed forever how information and technology is transferred the world over. Under such circumstances companies have gradually begun to understand the need for developing as well as protecting their respective Intellectual Properties under various Intellectual property laws of their countries, especially patents and software.

In India, while patents are protected under the Patents (Amendment) Act, 2005, software and computer programs are protected under the Indian Copyright (Amendment) Act, 2012.

Patents

Patents are exclusive rights granted to a person who has invented a new and useful article or an improvement to an existing article or a new process of making an article. Patents also apply to concepts and ideas, including business practices and methods. For a patent to be granted it must be new, non-obvious, and it must serve a purpose or be useful (“The NUN test”). There are six different types of patents that are used in the tech industry. These include Utility, Design, Business Method, Plant, Reissue, and Defense Publication patents.

Business method patents are a class of patents which disclose and claim new methods of doing business. This includes new types of e-commerce, insurance, banking, tax compliance, etc. Still in its natal stages business method patent is a controversial type of patent wherein various countries interpret it differently and consequently varied protection is granted. Nonetheless these patents have become an integral part of most business IP assets.

Amazon one-click Patent case

One Click is a unique technique that allows customers to make online purchases with a single click, with the payment information needed to complete the purchase already entered by the user previously. This patent was granted to Amazon.com on September 28, 1999 in the United States. It was also granted in Australia and New Zealand but not in Europe as it was felt by the European Patent Office that Amazon's 'one-click' system was "too obvious" to patent as it relied on existing inventions, called 'prior art' in patent law.

In Canada the Canadian Federal Court of Appeal (FCA) held that the “one-click” method patent claims described a business method that had a practical application and that construction of the claims should be undertaken anew by the Commissioner, with a mind open to the possibility that a novel business method may be an essential element of a valid patent claim.

Business Method Patents in India

The Indian Patents Act, 1970 defined an “invention” as any new and useful article, process, method or manner of manufacture; machine, apparatus or other article; or substance produced by manufacture; including and new and useful improvement thereto. Thus, it was clear that only methods for the manufacture of a vendible or tangible product were patentable. Therefore, methods implemented by software inventions and software per se and business methods were not patentable. In India, software is not protectable under Patents law unless integrated with hardware.

Under the Indian Patents (Amendment) Act, 2005, Section 3 (k) states that mathematical and business methods, computer programs per se and algorithms are not patentable. A particular method is considered as a business method if it involves a monetary transaction or mere marketing or sale purchase methodology. Further, Section 3 (m) states that “a mere scheme or rule or method of performing a mental act” is not patentable, such as software innovations that do not involve hardware limitations.

Recently the case of Yahoo v Controller of Patents, Overture Services Inc. was deliberated under the purview of business method patent. The Court considered whether the subject matter was excluded by Section 3 of the Indian Patent Act, 1970 (as amended by the Patents Act, 2005)

The Intellectual Property Appellate Board (IPAB) invalidated Yahoo’s claim and held that the claimed ‘invention’ “is nothing but doing the advertisement business electronically. Even the technical advance that is claimed over the existing art is only an improvement in the method of doing business and S.3 (k) is clear that business method cannot be patented, the fact that there is an advance has not improved the case”.

Though business methods are excluded under section 3 (k) and case laws like Yahoo’s reaffirm that business methods cannot be granted patent protection in India, few application at the Patents office speak otherwise -

Patent was granted to Huawei Technologies for “a method devised to monitor and manage economic arrears in the field of post-paid telephonic services”. The present ‘invention’ creates a method by which the credit worthiness of the subscriber is assessed before the call is made rather than a control after the end of the call, thus making the model economically viable.

Another interesting example of a business method patent that was granted was Afton Chemical Corporation’s patent. The patent was granted for “a method of enhancing fuel value of used or waste lubricating oil”. Surprisingly, the patent protected not only the method of enhancing fuel value but also protected a business method for distributing and using waste oils.

Even if it is assumed that these programs have some ‘technical effect’, the ‘inventions’ are prima facie business methods and regardless of the result of the software they have been granted protection.

Recommendations for Businesses to register Business Method Patents in India

One sure shot way of protecting one’s business method is to enter into a Non Disclosure Agreement/ Confidentiality Agreement with its employees/ business partners, etc.

Further, it would be safe to conclude that recent trends, few of which are highlighted above, has shown a drastic shift in India’s patent policy wherein a number of patent applications that were initially objected to under Section 3 (k) for innovations involving software or algorithms, were eventually granted by the Patent Controller.