Why All Business Methods
Achieve A Technical Effect?
Internet Patent News Service
San Francisco, US
This is a Conference Paper published on 4 July 2003.
Citation:Aharonian G, 'Why All Business Methods Achieve A Technical Effect? 2003 (1) The Journal of Information, Law and Technology (JILT). <http://elj.warwick.ac.uk/jilt/03-1/aharonian.html> New Citation as as 1/1/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/2003_1/aharonian.html>.
What follows is more of a theoretical approach to justifying the patenting of business methods in Europe. For a practical approach to obtaining a business method patent in Europe, see Erwin Basinski of the US law firm Morrison & Foerster <http://www.mofo.com/news/general.cfm?MCatID=&concentrationID=&ID=141&Type=5>
With regards to the obviousness of business method patents, see Ron Laurie and Robert Beyers' of Skadden Arps paper 'The Patentability of Internet Business Methods: A Systematic Approach to Evaluating Obviousness' at:
<http://www.bustpatents.com/laurie.htm>, which at one point states and reviews that:
There is currently no universally accepted definition of what constitutes 'technology' for either legal purposes or general understanding
Finally, for an update on business method patents, James Morris of Wolf Greenfield and Sacks has prepared a useful Powerpoint presentation, 'An update: US Patents on Business Methods', presented at the 2000 LES Annual Conference in South Africa, at: <http://www.wolfgreenfield.com/news/les_safrica.ppt>
2. What Is Technical?
In a flurry of recent announcements out of European governments (EPO, UK), the Europeans are taking the position that software patents, for the most part, should be permitted, but not business method patents, mostly for political reasons (i.e. that most big and small companies want software patents but not business method patents). They argue that some software ideas and all business method ideas are not 'technical', and therefore not patentable, mostly deferring to a Sept. 2000 decision of the European Patent Office (EPO) Board of Appeals that ruled that an American company's patent for a business method (on a pension benefits calculation system) is not 'technical' and therefore not patentable. The European Patent Convention, Article 52(2) also excludes patenting methods of doing business 'as such', the 'as such' being political language for 'we don't know what we are talking about, and too lazy to investigate further'.
I show that their use, and the decision's use, of the word 'technical' is unnecessarily ill-defined (partly using their own comments). More objective, specific definitions are obtained by viewing 'business methods' as the technology (i.e. useful application) of the science of 'economics' (which as discussed below does partially concern itself with controllable physical forces).
Thus the question 'are business methods technical?' reduces to the question 'is economics a science?' If the answer to the latter is 'yes', then business methods should be patentable, and the EPO's decision should be challenged.
In a 15 Feb 2001 presentation titled 'Protecting Assets in the New Millenium', Heinz Zourek, Deputy-Director General in the European Commission put forth the European Union position against business method patents:
- Under the established case law of the Board of Appeals of the EPO, an invention is not patentable if it does not make a 'technical contribution' to the state of the art. This means that the invention as claimed must provide a 'technical solution' to a problem;
- The implications of the technical contribution requirement for business methods have recently been set out in the decision 'Controlling pension benefits system' (EPO Board of Appeal 8.9.2000);
- The Board held that 'the improvement envisaged by the invention according to the [patent] application is an essentially economic one' which could not contribute to 'inventive step'. Therefore, the appeal against the refusal of the patent application was rejected.
So the EU/EC position against business method patents rests on this EPO decision - that business methods aren't 'technical'. So let's see how the EPO Board defined 'technical' to prove/conclude that business methods do actually satisfy this definition.
3. The Pension Decision
On 8 September 2000, the EPO Board of Appeals, case number T 0931/95-3.5.1 decided the issue of business business method patents, in this case, a pension benefit analysis system for which an EPO patent was sought by an American company based in Florida. The decision is 20 pages long, and while it briefly talks about novelty and obviousness/inventive aspects, the main issue is whether or not business methods are 'technical'. The patent had both method and apparatus claims.
The apparatus claims were ruled to be technical (that is, inherently as an apparatus, getting over the 'technical effect' hurdle) and thus potentially patentable, but rejected for not having an inventive step. This 'inventive step' analysis is not unlike the American 'new & novel' requirement. This inventive step rejection of the apparatus claims was because the 'technical contribution' (the new & novel piece or 'solution to the technical problem') was in the field of economics and therefore deemed to be not technical. I would have no problems with a determination that the inventive step was not novel (a 102 rejection) or was obvious over the prior art (a 103 rejection). But this novelty analysis stopped because the useful, concrete and specific result was in the field of economics, which was declared to be not technical without any justification.
In the first fifteen pages, the Board repeatedly uses the word 'technical' in a variety of phrases to try to establish some criteria to discriminate against business methods:
lacking any technical character;
problem of technical character;
missing any technical definitions;
indicate any technical considerations;
formed the technical basis;
technical effect is achieved;
technical considerations are required;
has a technical character;
using technical means;
solves any particular technical problem
Now the nouns above (character, contribution, definitions, basis, means, etc.) are easily decidable for business methods (being regular patenting terms) once their common adjective 'technical' is defined. By themselves, they contribute little to determining the 'technical' nature of business methods, being little more than decorative semantics to the Board's main argument - that business methods are not 'technical'.
Japanese patent law also makes a fundamental use of the word 'technical', as used in section 2(1) of the Japanese Patent Law in defining an invention as:
'... means the highly advanced creation of technical ideas by which a law of nature is utilized ...'.
which reduces down to an invention being a new 'technical' idea.
So it is clear - some software ideas and all business methods are not 'technical' in Europe. The question is, what does 'technical' mean? After 15 pages of repeatedly using the word, one would hope that they then define 'technical', so the definition can be used to consider the patentability of business methods.
Sadly, on page 16 of the EPO decision do they confess the intellectual inadequacy of the decision:
'It may very well be that, as put forward by the appellant, the meaning of the term 'technical' or 'technical character' is not particularly clear. However, this also applies to the term 'invention'. In the Board's view the fact that the exact meaning of a term may be disputed does in itself not necessarily constitute a good reason for not using the term as a criterion, certainly not in the absence of a better term; case law may clarify thus issue' ,
and on page 17 they try to find support for this position in an equally inadequate German court decision:
'Having regard to the desirable harmonization of patent law it seems appropriate to mention here the decision of the German Federal Court of Justice (BGH) in case XZB 15/98, 'Sprachanalyseeinrichtung', dated 11.05.00, which, although it points out that 'technical character' as a distinctive criterion between patentable and non-patentable subject-matter is a rather vague notion, applies it itself. '
Other confusion is confessed in European commentary. For example, the EPO guidelines for examination of 'business method' applications (seen at <http://www.european-patent-office.org/tws/appendix6.pdf> state in an end note:
There will undoubtedly continue to be debate as to what constitutes a technical problem and what does not. This is exactly the same debate as we had under the 'technical contribution' scheme, we have merely transferred it to a different stage of the examination. .... This scheme makes no mention of the 'further technical effect' discussed in T1173/97. There is no need to consider this concept in examination, and it is preferred not to do so for the following reasons: firstly, it is confusing to both examiners and applicants;
with similar language in the March 2001 UK Patent Office paper 'Should patents be granted for computer software or ways of doing business?':
'However, the Government agrees with those respondents who said that at present the law is not clear enough, and that this is damaging. Clarification is needed. This raises complex and technical questions, but the central difficulty can be expressed simply: how to define the boundary determining when software is, and is not, part of a technological innovation, so that what is patentable will be clear in specific cases in the future.'
with similar use of 'technical' without clarification in the 2001 Activities Report of the President of the European Patent Office:
... However, it has to be stressed that an invention - in the strict interpretation of patent law - must overcome an objective technical problem in a non-obvious way. In other words it is the technical invention which a 'business machine' may relate to which makes it patentable, not simply its commercial ingenuity.
A nice bit of circular reasoning (not) offering a definition of 'technical' from an EPO Board of Appeals judge:
The useful but imprecise adjective 'technical' is a thread which runs through the European and much national case law. What does this mean? The short answer is that if the inventions is taken as a whole and is in sum technical; makes a technical contribution in a field not excluded from patentability; is the solution to a problem involving technical considerations; or produces a technical effect going beyond the normal interaction of a computer and a program, then it is likely to be patentable subject-matter.
or a similar use of technical with no definition from a statement by Dr. Roland Grossenbacher, Chairman of the Administrative Council of the European Patent Organisation, made in Munich on 29 November 2000:
As before, computer-implemented inventions can be patented if they involve a new and inventive technical contribution to the state of the art. Technical solutions for use in data processing or for carrying out methods of doing business therefore remain patentable.
This follows from the concept of invention itself, which draws a clear distinction between technical solutions and non-technical methods. On this basis, patents cannot be granted for computer programs or business methods which are not of a technical nature.
All of these comments reflect a 'pornographic' definition of 'technical' - I know it when I see it, just don't ask me to define it. In short, too many European judges and lawyers are saying that they don't know what the word 'technical' means, but are applying it to legal decisions anyway, even though as the EPO Board Pension ruling concedes on page 7 that such application of the word has little EPC precedent:
'In addition, relying on the 'technical character' of inventions was not justified, since a criterion was not set up by the European Patent Convention as a requirement for patentability.'
Indeed, a private communication to me from a European patent official concurs:
Technical. I'm glad you asked me about that. It's a wonderful word, fuzzy and yet sounds meaningful. We love it. Until 2001, it had no basis whatsoever in the EPC, just a passing mention in a couple of rules. .... I agree that we've never defined 'technical'. It's deliberate and allows us to fine-tune as a consensus develops on what should be patentable. Yes, I do know the correct way to do that is by amending the law, but have you any idea how hard it is to get consensus on amending the EPC? The Japanese definition you quote is not original - it's lifted, as was most of the JP law, from the German law.
' ... we've never defined 'technical'. Then don't use the word. Heck, business methods aren't jabberwocky, and we all know that only jabberwocky is patentable. This last sentence is meaningless, but does it acquire any more meaning by substituting 'technical' for 'jabberwocky' without definitions? If I obsess on definitions, let me remind you of the consequences of one of the most idiotic lack of definitions for a rule that caused one of the biggest horrors in history, especially in Europe - 'Though shall not suffer a witch to live' (the Bible never formally defines 'witch'), a horror that ended only when secular European judges started to define and test the terms being used in the witch proceedings, and found that, surprise, surprise, there were no witches.
One can argue that the EPO Board decision is a boring repeat of a twenty year old American argument. The recent US decision, ATT v. Excel, which further validated business method patents in the United States, cited a 1970 case, In re Musgrave (431 F.2d 882), which decided that some steps in a process don't have to be physical acts applied to physical things. There was one dissenter, Judge Baldwin, who amongst other things wondered:
'First and foremost will be the problem of interpreting the meaning of 'technological arts'. Is this term intended to be synonymous with the 'industrial technology' mentioned by Judge Smith? It sounds broader to me. Necessarily, this will have to be considered a question of law and decided on a case-by-case basis. Promulgation of any all-encompassing definition has to be impossible. This task is before us.'
Twenty years later in EPO's T0931/95-3.5.1, we see the same problems in dealing with the word 'technical'. Will Europe have to wait twenty more years for their courts' reasoning to eventually evolve the way it did in the United States (short of a TRIPS challenge)? Much time could be saved if Europe realizes one flaw in Judge Baldwin's lament - interpreting and/or defining the meaning of 'technological arts' or 'technical' is not a question of law to be decided on a case-by-case basis, as we shall see below, but rather one of science, and indeed a question of science that leads to much more precise definitions than the fuzzy and vague definitions of these European decisions. Of course, one can look back much farther in time, to 1888 U.S. Supreme Court decision, the Telephone Cases, as a precedent for both software and business method patents, both classes of processes, that escape 'technical' concerns:
An art - a process which is useful, is as patentable as a machine, manufacture, or composition of matter. Descriptions of means in the patent is only necessary to show that the process can be used.
(Of course, Americans are just as bad with semantics. In 2001, a bill was introduced in Congress, HR5364 Business Method Patent Improvement Act of 2000, which defined 'business method' as 'administering, managing or otherwise operating an enterprise or organization, including a technique use in doing or conducting business', i.e. a business method is a technique for doing, ....., business. Well I suppose Congressional circular logic is more useful than Congressional illogic.)
There are 'mechanical', more generally, 'physical' aspects of 'technical', as seen in decisions such as the German BGH 1977 decision, 'Dispositionsprogramm', where technical is defined as:
(i) a teaching
(ii) for an action according to plan
(iii) by using controllable forces of nature
(iv) for the causally surveyable achievement of a result
(v) which is without intermediary activity of the human mind
(vi) direct consequence of use of controllable forces of nature
However, as pointed out in a 1998 article by Mark Schar (a former member of EPO's Technical Board of Appeal), 'What is 'Technical?', in the Journal of World Intellectual Property, and by a variety of US court decisions and law review articles, clauses (iii) and (vi) dealing with 'forces of nature' reflect European patenting philosophies shaped when information processing was not considered to be an industry (as opposed to today where it is one of the top 20 global industries), and thus too archaic to be used as a basis for rejecting software or business method patents.
The 1888 Telephone Supreme Court decisions putting non-physical processes on an equal basis with physical inventions is the beginning of a long chain of similar American decisions that the non-physical can be technical in the context of patenting, the most recent being the ATT/Excel business methods patent decision by the US Court of Appeals for the Federal Circuit. In denying patents to business methods, the EC is implying that there is something wrong with this chain of American decisions. The EC should publish its critique.
The problem I have with the EPO, BFG and UKPO use of the vaguely defined word 'technical' is that it can be more clearly defined, if one takes the time to do a little research. In what follows, I use English language texts and dictionaries, and assume that the same semantics appears in the French, German and other European languages. The EPO Board of Appeals has used dictionaries in the past to define fundamental words, for example, I quote from the Philips T1194/97-3.5.2 decision, page 16:
3.7.1 In this context the board refers to the entry under information, sense 3d, in the Oxford English Dictionary, 2nd edition on compact disc, which includes the following quotation from the seminal publication by Claude E. Shannon and Warren Weaver, The Mathematical Theory of Communication (1949): 'The word information, in this theory, is used in a special sense that must not be confused with its ordinary usage. In particular, information must not be confused with meaning. In fact, two messages, one of which is heavily loaded with meaning and the other of which is pure nonsense, can be exactly equivalent, from the present (information technology) viewpoint, as regards information. Information in communication theory relates not so much to what you do say, as to what you could say. That is, information is a measure of one's freedom of choice when one selects a message.'
Thus, let's start with the word 'technical'. Patent laws around the world (especially the US) often use the phrase 'useful arts', but as pointed out in a 1999 article, ''Useful Arts' in the Information Age' in the BYU Law Review, pages 1419-1528, by Prof. Alan Durham, the phrases 'useful arts' and 'technological arts' have become synonymous in the law. He himself so argues the equivalence, writing on page 1456:
'... it seems best to adopt a conservative definition of the 'useful arts' - perhaps defining them as the products, processes and tools of industry or as 'industrial technology' in the language of the first Prater opinion.'
which basically reduces to 'technical', my choice above and below, or 'industry/industrial' which has as one standard dictionary definition 'business'. So let's focus on 'technological/technology/technical'. German case law, which has been used by some to attack software and business method patents, also talks about 'industrial':
... the origin of the 'technical invention' approach in German case law can be traced to the Red Dove decision of 1969 - however, on close reading of that decision, we see that it, in fact, it treats 'technical invention' as merely a concretisation of the need for 'industrial applicability'.
But many have long considered 'industrial' to include business methods. For example, from the 1920s to the 1950s, H.W. Wilson of New York annually published the 'Industrial Arts Index' used by libraries around the world as a 'subject index to a selected list of engineering, trade and business periodicals, books and pamphlets' (in 1958, the titled was changed to the Applied Science and Technology Index).
Throughout the 1920s to 1990s, this index included many business method entries: accounting, administration, advertising, banking, commerce, investments, management, marketing, real estate, securities, etc. All considered 'industrial arts'. Indeed, was the Jaquard Loom a new mechanical device, a new computational device or a new business method? That some of these industries are 'service' industries, producing and manufacturing 'non-physical' products, is a patent law distinction that reduces to that of the physical versus the non-physical being patented.
Most dictionaries define 'technical' in a variety of ways:
pertaining to an art or science;
characteristic of an art or science or profession;
pertaining to the mechanical arts or applied sciences;
having to do with industrial, mechanical or applied sciences.
Ignoring 'art' since increasingly economics and business are being expressed in the languages of science/technology (and the above phrase equivalence of 'useful art' and 'industrial applicability'), mostly ignoring 'applied' which mostly is defined as 'useful' (trivially satisfied by any enabled patent application, for example, satisfying Section 112 here in the U.S.), and ignoring 'industrial' which reduces to either 'business' (using a standard dictionary definition, automatically making business methods to be technical industrial methods) or 'technology' (a circular definition), the general meaning of 'technical' according to most dictionaries and common usage is: - technical: (useful) science or mechanics.
For deciding business method patentability issues, we drop the 'mechanical' definition as being too limited a term (after all chemicals, electrical circuits, and most biotech ideas are not 'mechanical' - and mechanics is a subset of a science [physics - think Hamiltonians and Lagrangians]), leaving us with 'technical' meaning useful or applied 'science'. It reminds me of a joke amongst engineers on why their sex lives are better than those of scientists: scientists do it once, engineers do it millions of times (i.e. scientists build the first transistor, first superconductor
... , after which the engineers build (manufacture) millions and zillions more). For the public, what scientists do is interesting, what engineers do is useful.
One can turn to the US courts to see this equivalence. For example, in a 1998 CAFC decision, In re Roufert, in an article about obviousness combinations, we see (capitalizations are added):
The Board did not, however, explain what specific understanding or TECHNOLOGICAL principle within the knowledge of one of ordinary skill in the art would have suggested the combination. Instead, the Board merely invoked the high level of skill in the field of art. If such a rote invocation could suffice to supply a motivation to combine, the more sophisticated SCIENTIFIC fields would rarely, if ever, experience a patentable TECHNICAL advance. Instead, in complex SCIENTIFIC fields, the Board could routinely identify the prior art elements in an application, invoke the lofty level of skill, and rest its case for rejection.
The use here of 'technical' is something that pertains to the 'scientific', along the lines of the dictionary definitions.
Assuming that the number of times you do something scientific is not a criteria of patentability, what the EPO and BGH courts are arguing is that a business method is not applied-science enough to justify this class of methods being patented. But where is their proof that business methods, as a class, are not an applied science? They have not considered or offered such proof, and hide behind the word 'technical' with its false connotation of 'physical', a popular misunderstanding of 'technical' but one that can be hurled against software and business methods (that they aren't 'physical'). That is a misuse of the law, and is the grounds on which the PTO should challenge these decisions under TRIPS.
Well, first what IS a business method? Certainly in specific cases, it is apparent that a business method is involved (such as in this EPO case with a pension benefits calculation system), especially if there are exchanges of financial instruments in involved (such as money) or exchanges of legal authority (business administration and processes). But what are 'business methods' in general?
Again, the EPO Board decision is silent in not defining what is a 'business method', so that their decision that 'business methods' are not 'technical' with both terms undefined is a decision that should have little precedential value. Their silence in defining 'business methods' is due more sympathy from this side of the Atlantic because the term isn't well-defined here in the patent sense. For example, the U.S. Congress has passed a law treating business methods specifically (the prior use rights act) without actually defining business methods. And well they avoid trying to so define with Congress' usual scientific incompetence, given the difficulties in doing so, as observed by a judge (Newman) on the Court of Appeal of the Federal Circuit.
In a 1994 CAFC decision (In re Schrader, cited in State Street which affirmed business method patents), Justice Pauline Newman observed, in a dissenting opinion, that the method of doing business exception:
'is fuzzy; and since it is also an unwarranted encumbrance to the definition of statutory subject matter in Section 101, my guidance is that it be discarded as error-prone, redundant and obsolete.'
'Any historical distinctions between a method of 'doing' business and the means of carrying it out blur in the complexity of modern business systems.'
It is a complexity the European Patent Office apparently does not want to accept. In their August 2001 amendment to EPO examination guidelines for business methods and computer related inventions <http://www.epo.co.at/news/pressrel/2001_10_05_e.htm>, they state that methods of doing business are abstract and therefore not patentable (not realizing that 'abstract' is even more ill-defined than 'technical'). However, they allow the examination as a whole of methods of doing business if it includes a 'technical process', or if it includes a morsel of 'apparatus' such as a computer. This is exactly the blur that Judge Newman worried about, and led the US courts to ultimately reject such distinctions in State Street and ATT/Excel. EPO has provided no logical grounds to justify making the distinction, and should reject the distinction instead of allowing this loophole you can fly the Concorde through.
Assuming then that 'technical' is 'scientific', how can we define and characterize the set labelled 'business methods' in a way to assess the set's scientific nature (since if the class is scientific, so is any member of the set), to provide less fuzzy definitions? It helps to examine how people talk about economics and business.
For example, each year, the American Economic Association publishes a book titled 'Index of Economic Articles in Journals and Collective Volumes', an index to the world's economics and business literature. I am using the 1995 indexed published in 2000.
The major subject categories (and some sub-categories) are:
C Mathematical and Quantitative Methods
(econometrics, statistics, signals, math programming)
(production, distribution, pricing, decision making)
E. Macroeconomics and Monetary Economics
(investment, prices, cycles, money, banking)
F. International Finance
(trade, factoring, foreign exchange, lending/debt)
G. Financial Economics
(investment analysis, budgeting, regulations)
I. Health, Education and Welfare
(health production, health care, education finance)
J. Labor and Demographic Economics
(time allocation, wages, bargaining)
L. Industrial Organization
(market performance, firm organization)
M. Business Administration and Business Economics
(management, marketing, accounting, personnel)
Q. Agricultural and Natural Resource Economics
(renewable resources, energy, agriculture)
R. Urban, Rural and Regional Economics
(firm location, transportation systems)
(NOTE: Many of these sub-categories correspond to the sub-classes of the USPTO's Class 705 for business methods. The AEA's economics index could be a good basis to restructure the sub-classes of class 705 to align how the economic world classifies business with how the PTO classifies business method, which would facilitate prior art searching by the examiners.)
So are these subjects scientific? Certainly category C is, 'Mathematical and Quantitative Methods', assuming mathematics is a science, for which much (patentable) software is then viewed as applied mathematics. One might argue that a lot of economics is difficult to apply in the real world, but then much the same is said of other sciences, such as theoretical physics.
We turn to categories D through R, and note a priori that some elements of these categories are already generally accepted methods for patenting (such as agriculture, transportation, energy (chemical engineering), i.e., those aspects of economics dealing with the 'physical', i.e. transformations using natural forces. For example, consider the problem of determining the best time of the year, and temperature during the day, to plant seeds at a farm. Is it patentable mechanical invention (a planting process), a patentable biochemical invention (the chemistry of seed growth) or an agricultural business method (which should be patentable)?
The remaining categories are what one might consider to be pure economics (and their business applications). Are they scientific?
Well, if one turns to the economic literature, you will increasingly see papers for categories D to R more and more mostly being mathematics. Terms are defined mathematically, theorems proved, algorithms invented, data collected and analyzed, models built, etc. Many papers, other than the introduction and conclusion, are indistinguishable from mathematics and physics papers. For example, consider category E's aspect of investment, one area of which is called 'technical analysis', i.e., using statistical analysis and signal processing techniques to find and exploit patterns in stocks movements. Is investment technical analysis any less 'technical' than the technical analysis in other areas of science and engineering that use the same techniques? No.
For example, Petri Nets, which are used in engineering and computing areas for system timing, are increasingly being used for modelling business workflow methods. Lucrative calculations for the options markets have some systems that are based on finite element methods from the engineering world. Statistical physicists, in physics publications, are increasingly publishing papers analyzing economic phenomena (such as the stock markets). After all, what is the name of the well-known methods for predicting the movements of financial markets to use to invest billions of dollars every day? TECHNICAL ANALYSIS.
In short, even with having to deal with uncertain humans in their models (fortunately elementary particles have no personalities), economists have made their field of knowledge a science in the sense that a vast majority of what they do is verifiable, repeatable, measurable mathematics with a consistent basis (no Kuhnian criticisms, please). Economics is a science - the mathematics of social choice and utility functions. For example, if one allows mechanical and electrical methods to be patentable as the applied technology of the science of physics, how does one treat methods of econophysics - where physics techniques, especially statistical physics, are applied to economic problems? Is the physics part of the word no longer patentable because it is connected to econo-, or is the econo- part patentable because it is connected to physics? Drawing boundaries is getting harder and harder.
What are business methods but applied economics? And what is an applied science? Technology. Business methods are technical, achieve technical effects, have technical considerations with technical definitions, all stated without the need for fuzzy definitions. But as US court cases and the Japanese Patent Office have both explicitly stated, you can't get a patent on the systemization of existing human transactions - there has to be some invention. As the ever growing body of economic literature demonstrates, there is still ample room for innovation in the science of economics, and therefore with applied economics - business methods. But this is a prior art problem.
Now one can prove this more formally, clearly defining these terms of 'science' and 'technology' and seek out assessments of legal proofs using such terms and arguments. So these European decisions which argue as far as the word 'technical', but no further, are unnecessarily ill-defined and should have no precedential value until they reconsider such decisions in light of more well-defined analyses of terms such as 'science' and 'technology'.
That the patent world grew out of a world solely 'physical' does not mean that patent laws forever have to remain solely in the 'physical' world. The US courts and American industry have repeatedly chosen not to remain solely in the 'physical' world, implicitly or explicitly arguing that business methods (and software) are useful and industrial applications of the science of economics - and thus a patentable technology. This is the fundamental choice the Europeans have to make - whether or not to extend the scope of what is patentable. To date, they have no yet clearly chosen, relying politically on ambiguous language.
In conclusion, as an American unjustifiably speaking for all Americans, please make a clear choice amongst yourselves in Europe, so we then can have a fun transAtlantic legal squabble.
I review some flawed European definitions of 'technical'. First, we have:
A technical process controlled by a computer program on known hardware is an invention if and only if it uses natural forces in a new way to directly cause a success in the production of material goods, such that the causal relation between the means and the end can be reliably validated only by experimentation with natural forces (empirical verification) and not by computational deduction from given set of truths (mathematical proof).
Well, since many software and business methods have to be empirically verified (i.e., tested, software regression testing for example), because their outputs cannot be proved (the Halting problem), this definition of technology is inadequate. That is, if hardware devices involve natural forces validated through experimentation, then so does software (given its formal equivalence to hardware and the (European) view of software as a specific physical device. A related criticism is 'repeatability', but the bookstores are filled with business books on how to repeat the successful business practices of others.
This first definition was probably inspired by a comment in a 1986 book by a European, Krasser:
The 'invention' is defined as a technical teaching, i.e. instructions on how to use natural (physical, material) forces to directly cause a physical/material effect. This can refer to dead or living nature and may extend to new laws of nature as they are discovered, but not to the laws of human reasoning (logics, mathematics etc). 'Rules of Organisation or Calculation' are not technical even when they are executed on a computer, because the problem solution is concluded and verified within the realm of reason before the realm of engineering (the technical field) is entered during the practical application.
Again, the assumption is that a program can be made automatically perfect without real world testing, and therefore is not technical. Business methods are no more a priori determinable than software or hardware. The dot-com boom and crash around the world proves that quite clearly.
In a March 2001 UK Patent Office memo on the patentability of software and business methods, there is the innovation-spurring test:
There is no sign, at least to date, of a want of innovation in computer-implemented business methods, and nor was there in the US before business methods became patentable in 1998. .... The Government's conclusion is that those who favour some form of patentability for business methods have not provided the necessary evidence that it would be likely to increase innovation. Unless and until that evidence is available, ways of doing business should remain unpatentable.
First, business methods did NOT become patentable in the US in 1998. Business method patents date back to the 1970s and 1980s - not many, but some were issued. Second, no other area of technology has ever had to prove that patenting there increases innovation (assuming you can actually measure such a subtle effect). Third, you would eliminate many areas of patenting if you applied such a test to other areas of technology (would no one design new hardware circuits if hardware patents were eliminated?). Indeed, there are Europeans and Americans who use this analogy to argue the radical position that all forms of patenting should be eliminated, hiding behind their attacks on software and business methods.
Getting back to using 'technical' without a definition, they write:
The Government's conclusion is thus to reaffirm the principle that patents are for technological innovations. Software should not be patentable where there is no technological innovation, and technological innovations should not cease to be patentable merely because the innovation lies in software.
Fine - what's 'technological'?