Breaking New Ground

Because of these rulings, business methods and mathematical formulas are now on the same footing as other types of patents, and the software industry now has a powerful new legal tool. "There are no more barriers to patenting software, and because of this, the entire industry is adopting an aggressive strategy in obtaining patent protection," says Jerry Mills, a patent attorney for Baker & Botts in Dallas.

Q. Todd Dickenson, the PTO's Acting Commissioner, has added 20 new patent examiners to the division responsible for reviewing e-commerce patents. Dickenson predicts that by the end of 1999, more than 300 business method patents could be issued.

These new types of patents will be very important and highly valuable to small and start-up companies. Businesses owning such patents will be attractive to investment capital firms looking for investment opportunities. These patents could also be useful to small companies looking to make initial public offerings.

On the other hand, this ruling should cause some concern. Although the worldwide effect of the State Street Bank ruling remains to be seen, traditionally, more patents lead to more lawsuits. Also, entrepreneurs just starting businesses may find, some time down the road, that their way of doing business has been patented by someone else. They'll then need to pay a licensing fee to the patent holder or quit the way they've been doing business.

If your way of doing business is heavily dependent on computer software or a particular business method, you'll need to evaluate your intellectual property and determine whether a patent makes sense for you. Your planning should include not only an evaluation of the valuable opportunity such a patent can bring, but also the risks involved should someone else patent your idea first.

This article was originally published in the May 1999 print edition of Entrepreneur with the headline: Breaking New Ground.