Firms plan to patent Internet innovations

The scramble among US companies to patent their Internet innovations will soon be mirrored in the UK, IT lawyers have warned

The scramble among US companies to patent their Internet innovations will soon be mirrored in the UK, IT lawyers have warned

Cathy Cooper

The scramble among US companies to patent their Internet innovations will soon be mirrored in the UK, IT lawyers have warned.

Having followed the US lead in making software patentable, it is only a matter of time before the European patenting authorities start giving the nod to more broadly defined "Internet business methods", legal experts say.

They warn that the development could lead to a few companies establishing monopolies over a small number of crucial ideas.

The issue was highlighted by the Halifax's application earlier this month for a patent for Intelligent Finance, its new online banking venture.

The system allows all investments to be considered together when calculating daily interest, allowing savings to be offset against debts. So the more accounts, loans and credit cards customers have with the bank the more they will benefit.

"There's nothing out there like it," said Julie McClelland, Intelligent Finance's product development director. "With other banks their interest calculations are very much a core part of their application. We have built in intelligent logic which sits on top of the core product applications."

Halifax's patent application is different in that it covers not just the software, but also the way it is used. In other words the firm is aiming to get a 20-year monopoly on the right to use its system to offset loans against debts.

So far no applications for patents on Internet business methods have been successful in Europe, but European firms, including UK companies, have already begun applying for method patents.

Patrick Duxbury, from solicitors Wragge and Co, said firms were hoping European patenting authorities would follow the example of the US Patent and Trademark Office which two years ago began awarding patents for business methods.

Duxbury said the move had lead to an explosion of such patents in the US and European companies were putting "huge pressure" on the authorities to create a level playing field.

But, he warned, "As soon as you get into the terrain of patenting a business method it opens the floodgates to broader and broader claims, to the point where you're seeing patents being granted for all manner of software-mediated concepts, from online insurance policies to electronic voting."

David Roberts, of user body the Technical Infrastructure Forum, warned that the development would "completely eliminate competition". "If this had been around when the Internet was born one company would have got a patent for it and dominated the entire Web," he said.

But David Taylor, president of IT directors' body Certus, said companies investing millions in ideas needed some protection.

Mark Sanderson, of law firm Masons, said patenting of business methods would inevitably come to the UK because the US "sets the pace" in intellectual property practices.

Quentin Sold, partner at solicitors Berwin Leighton, said the development was "very likely".

What IT directors need to do

  • Alert senior directors and board members of the growth of software patents here and in the US and of the explosion of Internet business methods patents in the US

  • Look at the company's systems and assess whether this is a relevant issue for the firm. If the company runs a Web service and uses unique technology, bosses will need to find out whether a patent for the same technology already exists in the US. If it does not managers should consider applying for one

  • If it is decided that this is a relevant issue, an IT specialist should be appointed to take charge of this area. This key person should conduct a review of systems and develop a patents policy

  • If the company does operate a system which has been patented in the US, and the company sells services or products to American consumers, consider making some minor changes to the technology or buying the patent. However, the latter move could leave the company open to litigation

  • If the firm has a system it considers unique and innovative which gives it a competitive advantage it should consider applying for a patent.

    Guidelines from Patrick Duxbury of Wragge & Co.

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