The Rise of the Information Processing Patent

Abstract

Now is the right time to revisit an old but still contentious question: should software and business methods be patentable? On the legal front, the debate hinges over whether a claimed invention consisting of an information processing step plus a trivial physical step can be claimed as a bona fide physical innovation. The Supreme Court ruled three times that it can not, but the Court of Appeals for the Federal Circuit ruled that the combination must be considered as a whole, meaning that it is to be treated like any other physical invention. On the economic front, there is no self-contained information processing industry: every business in every field uses software and business methods. For a multitude of reasons, patents are ill-suited for such massively decentralized industries. Therefore, this paper recommends a return to the distinction that inventions consisting of information processing plus a trivial physical step be barred from patentability.

Keywords: software, patents, software patents, mathematics, patent trolls, tax patents

JEL Classification: O34