11 A Comparative Study of the United States, Japan,
and Thailand Laws on Online Business Method Patents(*)
Invited Researcher: Aunya Singsangob(**)

This research focused on a comparative analysis of the U.S., Japan, and Thailand patent laws related toonline business method patents. The purposes of the research include: (i) to study the concepts andcharacteristics of online business methods; (ii) to study the current situation of online business method
patents, their economic effects on software industry and e-commerce growth, and legal controversy on
online business method patents; (iii) to study and compare the U.S., Japan, and Thailand patent laws andjudicial decisions related to business methods; (iv) to study the Agreement of Trade-related Aspects ofIntellectual Property Rights (TRIPS) and European Patent Convention (EPC) regimes towards businessmethod patents; and (v) to analyze whether a business method patent is the best way to promote innovation
for the era of information technology in Thailand.
It is found that business method patents are still debated so far. Regarding the U.S., software andbusiness method patents have been recognized for decades. Recently, both the U.S. courts and the Board ofPatent Appeals and Interferences (BPAI) of the US Patent & Trademark Office (USPTO) adopt the“machine-or-transformation” test to determine whether the claimed business method is a patent eligible
subject matter. In Japan, a “technical feature” is a key element for determining business method patents. To
be eligible for patent in Japan, business methods must use computers which provide concrete means incooperation with software. In Thailand, by contrast, computer programs are excluded from a patent eligible
subject matter. Thus, business methods are ineligible for patent in Thailand.
Keywords— online business methods, patent eligible subject matter, online business method patents,
comparative legal study

Ⅰ Introduction
The development of new technologies andtechniques has not only influenced on national
economics and industry development, but raisedsome controversial legal issues as well. In
particular, in the era of Internet, merchants canuse the Internet technology for e-Commerce by
selling products or offering services over thisopen network with many new techniques,
protocols and systems. This phenomenon causes
the controversy of whether the processes oftechnology development and techniques, i.e.,
online business methods, should be treated as aninvention in the sphere of patent protection.
Methods of doing business are classified as“processes”, because they are not physical objects
likemechanicalinventionsorchemicalcompositions. So far, business methods have no

precise meaning.
Broadly speaking, a business method usuallycombines computer software with businessmethodology. This combination, therefore, isanalyzed in term of patent eligible subject matterby considering at its dichotomy between “abstractidea” and “mathematical algorithms.” (*1)
Accordingly, business methods, unlike otherinventions, concern fundamentally on how to
use data in doing business.(*2) This is the reason
why business method patents have been
controversial so far.
Regarding the legal frameworks of the U.S.,
Europe, Japan, and Thailand, there are different
ways to define and limit the patent eligible
subject matters: (i) the U.S. provides the validity
conditions; (ii) European Patent Convention(EPC) stipulates exclusions to the subject matter,(iii) Japan gives a definition of the term(*)

This is a summary of the report published under the Industrial Property Research Promotion Project FY2008
entrusted by the Japan Patent Office.
(**) Dean, School of Law, Bangkok University.
(*1) Edita Petnycyte, Should Patent Protection be Extended to Business Methods?”,1 International Journal of Baltic
Law 3 (2004): 118.
(*2) Nari Lee, Patent Eligible Subject Matter Reconfiguration and The Emergence of Proprietarian Norms – The Patent
Eligibility of Business Methods, 45 IDEA (2005): 321.

IIP Bulletin 2009

● 86 ●

“invention,” (*3) and (iv) Thailand takes an EPC
approach.
So far, the practices of the US Patent andTrademark
Office(USPTO),Japan
PatentOffice(JPO) and European Patent Office(EPO)
have shown that acceptance of the patenteligibility of a computer program makes it difficult
to deny the patent eligibility of business methods.

Ⅱ Historical Background of Online
Business Method Patents andtheir Economic Effects
Business methods are a kind of innovation,
which comprise of pure business methods andcomputer program-related business methods. (*4)
Basically, online business methods have two
types of goals: (i) to “reduce costs and raise
productivity by finding improved techniques for
managing processes;” and (ii) to “reducetransaction costs between firms and consumers,
largely through the Internet.” (*5)
However, the term “business methods” has
never been officially defined by any patent law sofar. The term of “business method” is usuallyinterpreted as the methods for commercial
activities including the methods or processes ofcomputing or processing administrative,
financial and management data, computing
technique used for commercial activities,
especially, for e-business strategies.
Business methods can be categorized into
two types: (i) “administrative methods,” which
include “back-office methods that increase
productivity or reduce organizational or
production costs in a firm”; and (ii) “customer
service methods,” which render “services thatare consumed by customers or methods related topricing,
advertisingorothermarketingconcerns”.(*6)
In terms of economic views, online businessmethods patents are opined that they encourage
R&D investment for newer and better techniques
for organizing business. Notwithstanding, opponents
argued that the patents are not always promote a
new invention of online business methods because(i) there are alternative mechanisms, which include
being the first to bring an innovation to market (ahead start advantage); trade secrets -- also provide
enough incentive for inventors to invest in thecreation of new and useful business methods; (ii)the market provides enough incentive for thesekinds of inventions. (*7)
Regarding the U.S., the USPTO had denied
the business method patents for years until in1998 with the State Street decision. With thisregard, the USPTO have updated “Manual of
Patent Examining Procedure”(MPEP). Moreover,after the Supreme Court in State Street validated
business method patent as a patent eligible
subject matter under 35 U.S.C. § 101, the USPTO
has put “business method technology” in Class
705 of the Manual of Classification (MoC) entitledas entitled as ”Data Processing: Financial,Business Practice, Management, or Cost/Price
Determination.” (*8) The Class 705 includes
sub-categories for industries such as health care,insurance,electronic
shopping,
inventory
management, accounting, and finance.
In 2000, the USPTO announced the“Business Methods Patent Initiative: An Action
Plan” to improve the quality of examination in thetechnologies related to business methods. (*9) The
Action Plan was consisted of industry outreachand quality improvement. (*10) In 2005, thank to
the Ex parte Lundgren decision, (*11) the USPTO
issued “Interim Examination Guidelines” to(*3) Ibid.
(*4) Petnycyte, supra note 1.
(*5) Keith E. Maskus and Eina Vivian Wong, Searching for Economic Balance in Business Method Patents. 8 Wash.
U. J.L. & Pol'y: 289; available from <http://www.law.wustl.edu/journal/8/p289Maskusbookpages.pdf> (accessed
August 14, 2008).
(*6) Michael J. Meurer, Business Method Patents and Patent Floods, BU Law Working Paper 02-02 May 7, 2002;
available from<http://www.bu.edu/law/faculty/scholarship/workingpapers/abstracts/2002/MeurerM050702abstract.html>(accessed August 21, 2008).
(*7) Maskus and Wong, supra note 5 at 296.
(*8) The United States Patent and Trademark Office, U.S. Patent Classification System - Classification Definitions(as of June 30, 2000); available from <http://www.uspto.gov/web/offices/ac/ido/oeip/taf/def/705.htm> (accessed
September 2, 2008).
(*9) Miku H.Metha and Laura Moskowitz , Business Method Patents in the United States: A Judicial History&Prosecutor Practice, AIPPI Japan - April 2004; available from <http://www.sughrue.com/files/Publication/5
4011fba-0904-4dfe-83af-e5c4b0d1c538/Presentation/PublicationAttachment/5869b571-51c7-451b-bbd1-ed552fe8ed
c6/BusinessMethodPatentsAIPPIprosprac.pdf> (accessed August 17, 2008).
(*10) The United States Patent and Trademark Office, Business Methods Patent Initiative: An Acton Plan; available from<http://www.uspto.gov/web/offices/com/sol/actionplan.html> (accessed September 4, 2008).
(*11) The Board of Patent Appeals and Interferences (BPAI), Appeal No. 2003-2088.
● 87 ●IIP Bulletin 2009

assist its examiners in determining whether the
subject matter as claimed is eligible for patent
protection.(*12) Later, in 2007, the USPTO
announced a pilot project, The Community Patent
Review Project, also known as “Peer to Patent”
Project (*13) to request information about patentapplications from the public for assessing theclaims of pending patent applications.
In Europe, the EPO initially recognized thatan invention using a computer program was not
excluded from patent eligibility in the Vicomcase.(*14) The EPO concluded that a process was
not excluded from patent eligibility just becauseof being based on an algorithm. But, even if madeof patent ineligibility elements, it might beconsidered as both an invention and patenteligibility as long as a ‘technical contribution’ wasmade to the known. In 2001, the EPO Guidelines
for Examination were updated to bring the
Guidelines into line with EPO Board of Appeal
case law concerning the patent eligibility ofbusiness methods and computer-related inventions
and with current EPO practice on examining such
subject matter. The EPO Examination Guidelines
also illustrate a list of subject matter that, as such,cannot be patented in Part C, Chapter IV, which
explicitly exclude business methods (*15) In 2002,
there was an effort to harmonize EU national
patent laws and practices concerning granting
patent for computer-implemented inventions. The
European Commission (EC) published “Proposal

forDirectiveonthepatentabilityofcomputer-implemented invention (CII Directive 2002/ 0047/COD).” However, the Directive wasrejected in 2005 by the European Parliament
duringSecond Reading. (*16) Still, theuncertainties of interpretation relating to theissue of eligibility of software and businessmethod patent under EPC have led ambiguity toboth inventors and patent examiners so far.
Accordingly,
Brimelow(EPO
President)

attempted to get a certain guideline by addressing
a number of questions to EPO’s Enlarged Boardof Appeal to examine the patent eligibility ofsoftware. (*17)
Regarding to Japan, the JPO has recognizedbusiness methods as a patent eligible subject
matter since 1997. Though, business methods per
se are ineligible for patent unless they are within
the scope of software related inventions and haveinventive step. One of the legal criteria of apatent eligible subject matter under Japanese
Patent Law requires that inventions be “a highly
advanced creation of technical ideas by which alaw of nature is utilized.” (*18) The JPO has
substantively granted business method patents,
On the other hand, the JPO rejects applicationof business methods if “(1) claims are directed toa business method per se ; (2) claims are directed
to a business method where the computer isutilized as a mere tool; (3) where information
processing by software is not concretely realized
by using hardware resources.” (*19)
Besides, in June 2000, the Trilateral Offices –the USPTO, EPO, and JPO - agreed on businessmethod patents that (i) a technical aspect isnecessary for a computer-implemented businessmethod to be eligible for patenting; and (ii) tomerely automate a known human transaction
process using well known automation techniques
is ineligible for patent. (*20)
However, Thai Patent Act explicitly prohibits
computer programs from patent. Therefore, theThai Patent Office (TPO) has not granted any
business method patent so far.

Ⅲ Concept of Online Business
Method Patents and the Legal
Controversy
With a virtual environment, the Internet
challenges a new type of doing online businesses(*12) The United States Patent and Trademark Office, Interim Guidelines for Examination of Patent Applications
for Patent Subject Matter Eligibility, 1300 Off. Gaz. Pat. Office 142 (Nov. 22, 2005); available from<http://www.uspto.gov/web/offices/pac/dapp/opla/preognotice/guidelines101_20051026.pdf> (accessed September 2,2008).
(*13) Developed by the New York Law School Institute for Information Law and Policy in cooperation with the USPTO.
(*14) EPO Board of Appeal decision in VICOM case, July 15, 1986, T 208/84-3.5.1.
(*15) European Patent Office, Guidelines for Examination in the European Patent Office .
(*16) IPFrontline, Computer Implemented Inventions Directive Rejected,; available from<http://www.ipfrontline.com/depts/article.asp?id=4773&deptid=8> (accessed September 28, 2008).
(*17) Alison Brimelow, Referral under Article 112(1)(b) EPC (patentability of computer programs); available from<http://documents.epo.org/projects/babylon/eponet.nsf/0/B89D95BB305AAA8DC12574EC002C7CF6/$File/G308_en.pdf>(accessed November 30, 2008).
(*18) Article 2 of Japanese Patent Act.
(*19) Lee, supra note 2 at 334.
(*20) The Trilateral Cooperation, Report on Comparative Study carried out under trilateral project B3b, available
from <http://www.trilateral.net/projects/other_project/business_method/> (accessed September 17, 2008).

IIP Bulletin 2009

● 88 ●

worldwide. Therefore, online merchants havemade efforts to create some methods of doing
business by using computer software technologies.
There are various business methods used foronline businesses, such as method of selling new
sound recordings, system and method forextension of group buying throughout the Internet,
Internet advertising method and system.
Accordingly, there is a notion that businessmethods need a stronger of intellectual property
protection because they are intangible ideas thatare easily imitated by competitors. Thus, inventors
have tried to file for business method patents.
Since business methods (including online
business methods) are comprised of methods of
doing business and computer software technologies,
thus business entities usually keep their businesspractices confidentially with trade secretprotection.(*21) Meanwhile, computer software is
protected under copyright regime by Agreement on
Trade-Related Aspects of Intellectual Property
Rights (TRIPS) (*22) and WIPO Copyrights Treaty(WCT). (*23) However, trade secret and copyrighthave some weaknesses for business method
protection. Therefore, business entities seek astronger protection by considering software andbusiness method patents. Notwithstanding, there isskepticism whether it is more pragmatic to grantbusiness method patents. Thus, business method
patents have raised a variety of questions including(i) whether business method patents are vital topromote invention and the commercialization of
online business strategies; (ii) whether it iswasteful for granting exclusive rights forinventions that would be developed anyway; (iii)
whether the monopoly right under patent law
should extend to online business methods. (*24)
These issues are also discussed for online businessmethod patents as well.

In the meantime, online business method
patents also established legal controversy as
follows:(1) Whether Patent Is Really Needed toPromote Online Business Methods
Proponents opined that patenting online
business methods will certainly promote
innovation, especially small and medium-sizedbusiness entities and will increase the growth ofelectronic commerce. (*25) In contrast, opponents
pointed out that “patents could be obtained fornearly every method of doing business merely
because it is being practiced on the Internet. In
other words, there has been not true innovation,other than applying an already known businessmethod in cyberspace.” (*26) Besides, it is also
pointed out that online business method patents“threaten the development of the World Wide
Web itself”, since the Internet will be “controlled
by a few large corporations who get the most
BMP’s (business methods patents) and will
monopolize the [I]nternet in the process.” (*27)(2) Whether Online Business Method
Patents Have Inferior Quality
Most opponents argued that online businessmethods patents “are not novel and are ‘obvious’,and should therefore be barred from patent
protection.” (*28) They blamed that “according to
the current laws, every method of doing businesscan be patented just by implementing it over theInternet. Such a broad interpretation generates‘bad patents’.” (*29) Notwithstanding, proponents
argued that there is “no evidence to support theidea that Internet business methods patents wereof inferior quality or of lower value than mostother patents.” (*30)(*21) Steven S. Boyd, Business Method Patents: Adapting to A New Concept, 14th Annual Intellectual Property
Law Course; available from <http://www.lockelord.com/files/News/a1702048-1d5f-4a48-9d63-05daafb8ab26/Pres
entation/NewsAttachment/88acf714-7653-4605-bed8-065e36ce75cb/Business_Method_Patentspdf%5B1%5D.pdf>(accessed August 16, 2008).
(*22) TRIPS, Article 10 (1) “Computer programs, whether in source or object code, shall be protected as literaryworks under the Berne Convention (1971).”(*23) WCT, Article 4 “Computer programs are protected as literary works within the meaning of Article 2 of theBerne Convention. Such protection applies to computer programs, whether may be the mode or form of
their expression.”(*24) Maskus and Wong, supra note 5 at 301.
(*25) Maskus and Wong, supra note 5.
(*26) Cliff MacDonald and Chris Werner, Internet Business Method Patent Issues; available from<http://www.unc.edu/courses/2005spring/law/357c/001/projects/cmac/criticism.html> (accessed August 13, 2008).
(*27) Jwalant Dholakia, Reviewing Business Method Patents (BMP’s): A Strategic Asset For Companies
And Inventors. 6 International Business & Economics Research Journal 1: 49-62 at 59; available from<http://www.cluteinstitute-onlinejournalscom/PDFs/200782.pdf> (accessed September 7, 2008).
(*28) Ibid.
(*29) Ibid.
(*30) John R. Allison and Emerson H. Tiller, The Business Method Patent Myth, 18 Berk Tech. L. J.: 987, 1003-04 (Fall2003); available from <http://papers.ssrn.com/sol3/papers.cfm?Abstract_id=421980> (accessed August 21, 2008).

● 89 ●IIP Bulletin 2009

(3) Whether Online Business Method
Patents Cause Adverse Economic Effectand Social Costs Burden
Proponents commented that “businessmethod patents actually have less potential foradverse effect than other patents and thus impose
less ‘cost’”. (*31) However, the opponents strongly
convinced that the granting of patents not only
incurs social cost, but also incurs administrative
costs, which spend for application process andpatent licensing. (*32)(4) Whether Online Business Methods Are
Within the Scope of Patent Protection
Critics stated that business methods have led
to the dilution of patent standards, which include:(i) a lack of patent examiners; (ii) the increase ofpatents to software and business methods clarifies
that there may not be sufficient written prior art toreject applications on what might seem to be
obvious technologies, coupled with examiners are
not adequately trained in those areas. Accordingly,
the novelty and nonobviousness standards are
weaken applied; (iii) most business method patents,
although suspicious, are reinforced by courts andregulation; (iv) the progressive lowering of theutility standard. (*33) On the other hand, proponents
contended that it is unfair to exclude businessmethods from the auspices of patent protection. (*34)
Besides, they reasoned that there is no concretereason to restrict the business methods to bepatented under the patent law.(*35) They also opinedthat “[o]nce the computer software is accepted asa patentable subject matter, it is logically
impossible not to expand the scope of patentsubject matter to a method of doing business.”(*36)

Ⅳ Statutory Framework and Judicial
Precedents of Online Business
Method Patents: TRIPS, EPC, andPatent Regimes of the U.S., Japan,
ThailandRegarding the international agreements TRIPS Agreement and the EPC, Article 27 (1) of

the TRIPS Agreement states that ……..[p]atents
shall be available for any inventions, whether
products or processes, in all fields of technology,
provided that they are new, involve an inventive
step and are capable of industrial application….”
Likewise, Article 52 (1) of the EPC also statesthat “[E]uropean patents shall be granted for any
inventions, in all fields of technology, provided
that they are new, involve an inventive step andare susceptible of industrial application.”
However, Article 52 (2) (c) of the EPC excludes
schemes, rules and methods for performing
mental acts, playing games or doing business, andprograms for computers to be an invention
according to Article 52 (1) if they are subject
matter or activities as such. These twointernational agreements set the same criteria forpatent protection, i.e., any inventions, whether
products or processes, in all fields of technology.
Among the U.S., Japan, and Thailand, there isno jurisdiction explicitly provides the meaning ofbusiness methods in their patent law so far. The
U.S. provides the broadest scope of patenteligible subject matter for business methods, butsome limitations of patent eligible subject matterby individual judicial cases. Meanwhile, Japan
grants business method patents if the claimed areconsidered as “inventions” under the Article 2 (1)and the claimed inventions rely on thesignificance of a computer program as a means of
implementing this type of information processing.
In contrast, Thailand is taking a step to explicitly
exclude business method as a patent eligible
subject matter.
Regarding the U.S., business method patents
have been validated by the U.S. courts for years.
With the broad scope provided in 35 U.S.C. § 101,the courts had interpreted the scope of patenteligible process in various meanings. Accordingly,
the courts have adopted key tests in considering
whether the business methods are eligible to bepatented as a process under 35 U.S.C. § 101.
Those tests are machine-transformation test,
practical utility test (known as “concrete, usefuland tangible” – CUT Test), and technological arts(*31) Kevin Schubert, Should State Street Be Overruled?- Continuing Controversy over Business Method Patents, 90 J.
Pat & Trademark Off Soc’y (2008): 461, 465.
(*32) Mark A. Lemley et al., Software and Internet Law (Casebook), (New York: Aspen Law & Business Publishers,
2000): 318 at 320.
(*33) Frederick M. Abbott and Carlos M. Correa, World Trade Organisation Accession Agreements: Intellectual
Property Issues, The Quaker United Nations Office (Geneva, 2007); available from<http://www.quno.org/geneva/pdf/economic/Issues/WTO-IP-English.pdf> (accessed August 24, 2008).
(*34) Robert P. Merges and John F. Duffy, Patent Law and Policy: Cases and Materials , 3d edition (Newark:
Lexis-Nexis-Matthew Bender & Company, 2002): 254-258.
(*35) Petnycyte, supra note 1 at 114, 119, 129 and 133.
(*36) Lee, supra note 2.

IIP Bulletin 2009

● 90 ●

test. Accordingly, the USPTO has updately
provided a Manual of Patent Examining Procedure(MPEP) to establish a clear guideline for patenteligibility in Chapter 2100 , which includes patentsubject matter eligibility (2106). The MPEP
clarifies the process of USPTO for determining apatent eligible subject matter within the scope of
35 U.S.C. § 101.
On the other hand, Japan limits the scope of
patent eligible subject matter by defining themeaning of “invention” in Article 2 (1) of the
Patent Act. Therefore, the definition of“invention” is a key factor for determining avalidity of business method patents in Japan. To
be patent eligibility, business methods require “ahighly advanced creation of technical ideas,
utilizing a law of nature”. Thus, pure businessmethods are ineligible for patent. Notwithstanding,according to the Japanese government’s pro-patent
policy, business methods patent claims relying on
the significance of a computer program as ameans of implementing this type of information
processing are eligible for patent. Accordingly,
business methods must use computers which
provide concrete means in cooperation with
software. Besides, the JPO launched in part VII,
Chapter 1 (2) of the Examination Guidelines
establishing the criteria as the basic concept todeterminewhetherthesoftware-related
invention qualifies as a statutory invention.
In contrast, business method patents in
Thailand, without judicial cases, are very difficult
to be patented. The characteristic of businessmethods is usually comprised of methods of doing
business and computer software, but article 9 (3)of Thai Patent Act explicitly excludes computer
program from patent eligible subject matter.
Furthermore, the TPO has advised that a“process” refers to a method that can yield atangible product. Unfortunately, TPO has notprovided any examination guideline for patent
procedure so far.

Ⅴ Findings and Conclusion
In light of online business method patents
controversy, they have been criticized in bothways: pro and con. Critics mostly commented
online business method patents in terms ofchilling effect of the innovation, lower quality, andeconomic cost. In particular, they blamed thatonline business method patents would not only
jeopardize the prospects of small business
entities and open source software developers, butcause chilling effect on e-Commerce as well. In
contrast, the advocates pointed out that online
business method patents provide competitive
advantage, incentive to innovate, opportunity torecoup research and development costs, attract
investors, afford inventors royalty income, andprevent competitors from unfair businesspractices.
The idea of patenting emerging innovationis crucial, but it must be certain that the standard
for protection is unambiguous and does not cause
negative effects in a marketplace. Critics
proposed that the best resolution for businessmethods patents is harmonization of internationallaw and patent law and procedural reform. They
believe that international harmonization ofpatent laws regarding business methods areimportant as business method inventions aremostly used for e-Commerce, which isborderless. Thus, harmonization would allow
inventors to file a patent application, andenforce the rights of a patent owner in different
jurisdiction. Some also proposed a sui generis
protection for business methods.
Nonetheless, Japanese patent standards forbusiness method are reasonable in a pragmaticway. At least to be considered as an invention, it
needs a standard of “highly advanced creation oftechnical idea.” This can guarantee a high quality
patent.
Still, in case of Thailand’s situation as adeveloping country, I concur with the TPO thatthe idea of granting business method patents in
Thailand is premature and awkward. The reasons
include (i) the methods of doing business,particularly for e-Commerce, should not bemonopolized by patent, otherwise it will retard
the growth of online business; (ii) granting
business method patents, without improving thereadiness of prior art search and having sufficientexaminers with professional skills in computer
software, will not only harm the innovation for
Thailand software industry, but may also grant apoor quality of business method patents; (iii) open
source software has played a vital role fordevelopments of software and e-Commerceindustries in Thailand. Accordingly, granting
business method patents will definitely cause
negative effects to both the industries and thesociety as a whole. I think copyright and trade
secret regimes work efficiently for businessmethod protection.

● 91 ●IIP Bulletin 2009