The Dangers of Business Method Patents

Imagine if your next online fundraising campaign had to include an additional $5 fee per donation because someone had patented the very technique you use to ask your supporters to reach out to friends and family members.

What’s more, imagine that out of every $50 donation you collect, 10 percent of it would go to a company that hired a patent lawyer and got its application through the overloaded and understaffed U.S. Patent and Trademark Office. That’s $5 that never would be used for your mission.

For starters, unlike patents for inventions, the business method patents that endanger the nonprofit community typically do not cover innovations that solve a particular technology problem. Instead, holders of business method patents are claiming to be the first to engage in a transaction over the Internet in a particular way. (One example of a business method patent is Amazon.com’s “1-Click,” which allows a repeat customer to bypass address and credit card data-entry forms, because Amazon can access that information directly from the customer’s account.)

Secondly, business method patents are a new and novel type of patent, legally recognized fewer than 10 years ago. Business method patents, first validated by the courts in the State Street Bank decision in 1998, have produced a lot of criticism about the ability of the U.S. Patent and Trademark Office to adequately review the applications for such patents.

In 2003, the Federal Trade Commission studied the problem of patents in the area of innovative technology and found that “the PTO’s procedures to evaluate patent applications seem inadequate to handle this burden.”

(For a summary, see Page 9 of http://www.ftc.gov/os/2003/10/innovationrptsummary.pdf.)

In this issue of FundRaising Success magazine, you’ll find a wealth of case studies about people who have been very successful using the Internet to raise money for their nonprofits.