This post was contributed by Matthew Marquardt, Partner, Norton Rose Canada LLP and Laura Johnson, Associate, Norton Rose Canada LLP
“Business method” patents remain a hot topic in business and legal circles, yet are still too often overlooked – particularly in contexts such as M&A.
As recently as 2011, the Federal Court of Appeal in Canada affirmed that business methods are patentable, quashing the rejection by the Commissioner of Patents of the now infamous Amazon.com ‘one-click’ patent on the basis that the claimed invention was a business method – and therefore not patentable subject matter. Although that decision, along with similar rulings in the US and elsewhere, has had a fair amount of air time at the CEO, CTO, and CLO levels, patents are still too often overlooked when assets are counted in M&A transactions.
The biggest reason business-related patents are often overlooked is that they don’t spring naturally to mind when business assets are being gathered on the table. But patents can, and have frequently been, obtained for a very wide range of business-related improvements: basically, anything related to the conduct of a business has the potential to support a patent application. Business-related patents can be seen as any patents relating to a novel aspects of doing business, including business methods developed either through abstract ideas or software. This can include everything from new ways of funding companies to improvements in bank machines, as well as business-related software or hardware like computer systems.
The second reason is that when IP lawyers discuss “business method” patents, they are discussing a very narrow, technical range of patents – a range that covers a very small percentage of business-related patents. As suggested above, the vast majority of innovations brought to bear in increasing profitability in most businesses are susceptible to patenting, whether related to software, machines, or even potentially pencils: the rumour that “business methods” are not patentable is (a) not true, and (b) distracts attention from the very real fact that patents can, and do, affect most businesses.
Business-related patents can play an important role on both sides of a transaction – on the buy side they can function like the proverbial Rembrandt in the attic, with their discovery dramatically increasing the importance of purchased assets – who wouldn’t like to find, among the dusty boxes of assets purchased in a transaction, a patent that will lay the competition dead? (And yes, that really does happen.) On the sell side, because of their potential strategic use against competitors, they can be used to dramatically affect an asking price: the threat of an auction of patents among the purchaser’s future competitors, for example, can have an electrifying effect on the buyer’s perception of value.