Patenting Business Models: An Overview

September 5, 2015by S.L.Soujanya0

The successful transition into the post TRIPS era led to the mushrooming of ideas into business models thus creating a whole lot of opportunities and also wealth. The term Business Methods can be defined as an abstract representation of an organization as it involves whole gamut of activities in a commercial or industrial enterprise relating to transaction of goods or services. A recent study conducted jointly by The Associated Chambers of Commerce and Industry of India (Assocham) and Deloitte has revealed that the E commerce industry makes $1.2 million every 30 seconds! The concept of business models has led to the rise in the concept of entrepreneurship and has also amended the ways of conducting the regular business by making it customer centric.

“The concept is king”, this is true for many business models and startups which are built on a central idea or theme. The concept has to pass the litmus test to make it big into the field of E commerce. The success of a business model is primarily dependent on the consumer psychology. When the services are offered at the click of a button the convenience factor does take the front seat but what matters is an online trust. It takes a whole lot of work for a website to earn the label as trustworthy. The consumer needs to get the confidence that the retailer has nothing to gain by cheating, there are safety devices installed in the website and it is easy to use. Offering the right product at the right place and at the right time is the mantra of business.

The patentability of business models has been a debatable issue both in the Indian system and also the systems in the other parts of the world. Since the business model is a new player there have been various amendments in the legal structure regarding its patentability. Unlike before, the USPTO now just does not look into a business model as a software entity but also judges it considering the patentability criteria.

A business model can be patented as long as it gives tangible, concrete results and can be applied successfully. The famous state street case in the year 1998 expanded the patents into the business models. During the dotcom boom big shots like amazon (for its one click method of ordering goods/products online), priceline.com (wherein buyer names the price and the seller bids), open market, Inc. (which provided online secure payments, electronic shopping etc) have won the patent war by getting their methods patented.

The Indian patents act 1970 in its section 3(k) states “a mathematical or business method or a computer program per se or algorithms are not patentable. On August 21, 2015 the Controller General of Patents, Designs and Trade Marks issued a new set of guidelines for issuance of computer-related inventions, which allows the companies to show innovation in just software rather than in both software and hardware as was previously required. This would ease off the ambiguity generated by section 3(k) and subsequent guidelines issued in the year 2008 due to which several patents have been rejected.

Ensuring adequate protection to the business methods is important as they come with certain advantages like:
1) The man of today leads a highly mechanized life and purchasing goods at the click of a button, payment at doorstep, favorable and easy return or exchange policies, apps for hiring a cab, secured payment gateways by well-established banks are a norm.
2) The amount of revenue being generated by the business models is incredible thus leading to the boost in the economy.
3) With the advent of business models the goods are reachable to the remote parts of the world, ex: Through Amazon a person can do the purchasing sitting anywhere in the world.
4)Patenting a business method is like safeguarding a business enterprise which is very important as they put in a huge effort and ideas to develop a model.

Critics have questioned the patentability of the business models by claiming primarily that at the end of the day these models involve the use of computers and software so they can be copyrighted but not patented. The copyright patent dichotomy has always been debatable. Secondly the grant of patent would lead to a two decade monopoly which would slow down the development of various other similar models. The very base of a healthy competitive market would be crushed. Another observation quoted by the critics is that there are still a large chunk of customers especially in developing and least developed nations who prefer a handshake over the click. For example there are lots of people who believe in buying the goods in person than online as they feel that the quality, variety, value for money and most importantly it satisfies them.

Business models have gained a lot of popularity especially in the last decade. Encouraging more of these would lead to investor confidence in the system of the country. For example Alibaba.com’s IPO was the world’s biggest at $25 billion. Ensuring protection would generate a healthy completion that would lead to self-responsibility and improvised business ethics. Since a substantial amount of exports from India are software based there always lies a risk of imitation by the competitors which can be safeguarded by granting an adequate protection thus boosting the innovations in this field.

S.L.Soujanya

S.L.Soujanya

Ms. S.L. Soujanya is a registered Patent agent with an academic background in Pharmaceutical sciences. She holds a Bachelor’s degree in Pharmacy from the Osmania University, Hyderabad and holds a Post Graduate Diploma in Intellectual Property Rights Law from NLSIU, Bangalore.

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