“I am so stupid!”

That’s what I was thinking back in 2000. I was a fresh-faced IT lawyer and Internet business owner, sitting in a seminar with an expert patent attorney as he explained business method patents or, as they’re known in Australia, business process patents.

My goodness, I thought, we could have patented our online service (we sold an online IT security subscription service at the time). An opportunity lost.

But I couldn’t help but think how all too easy it was to patent software or a business method. I mean, was it really possible to patent a process that was so… so… obvious?

Apparently it was, given the avalanche of business method patent applications and patents issued over the last decade.

But a decision by the U.S. Court of Appeals in Washington D.C. may stop all that. Last week, the Court of Appeals ruled that business methods were NOT patentable unless they met rather narrow rules.

According to TechDirt’s Mike Masnick, the U.S. courts will now apply a two-pronged test to determine whether a software or business method process patent is valid:

1. It must be tied to a particular machine or apparatus, or

2. It must transform a particular article into a different state or thing.

The implication is that pure software or business method patents that are neither tied to a specific machine nor change something into a different state are not patentable.

If you’re thinking this has major implications… you’re right. Many patents that have been issued in the past few years are unlikely to be upheld if they ever get appealed.

Source: Erick Schonfeld, “Your Business Method Patent Has Just Been Invalidated”, TechCrunch, October 30, 2008