In this second article on business method patents we're going to continue our discussion on what happens when two companies are battling it out for the same patent.

There are two ways that an Internet patent can be used. The first way is to use it offensively against a major competitor to help eat into their market share. The second way is to use it defensively against a major competitor who is threatening to sue based on one of their patents. Case studies show that most companies are less likely to go to court when the opposing company can show that it has a patent. Usually these companies agree to a truce by cross licensing each other's patents.

Here is an example of this.

Company A and Company B both sell tickets online. This includes services for exchanging unwanted tickets and also earning rewards for being a frequent purchaser. Company A happens to hold a patent on a method of exchanging tickets. Company B has a patent on a way of exchanging rewards points. Even though each company believes that the other company is infringing on their patent neither one goes to court over it. Instead they decide to cross license their patents so that each company can perform both services, exchanging tickets and rewards points.

So how is it determined who gets a patent? What happens when business A applies for a patent but business B can show that it was using the method for a year prior to filing? Business B can either stop the patent from going through right then and there or it can wait and invalidate the patent at a later time. The key to this whole procedure is that the use of business B's method MUST have been public knowledge prior to business A filing for a patent. If business B used the patent confidentially then business A will be granted the patent even though business B used the method first. However, in a 1999 amendment to this law, even though business A gets the patent, business B can still use the method without any penalty.

An example of this is as follows. Business A has been using a certain method of accounting for many years but never disclosed it to the general public. Company B, over the course of time and totally unaware that business A has already created this method, develops the method themselves and files for a patent. When company B finds out that company A has been using this accounting method they file a lawsuit against company A. Company B is granted their patent but company A is allowed to continue its use of the method without any penalty of law.

Just as a note. If company A had been using the method publicly before company B filed for the patent, the patent issued to company B would have been invalidated or possibly would have never been granted at all.

In the next article in this series we're going to discuss the legal requirements for getting a business method patent.

Michael Russell

Michael Russell has been involved in online business since early 2001, and whilst spending countless hours each month running his business still finds time for various hobbies and interests.