Patents on business ideas can limit consumer choice

Less than 20 years ago, companies almost never claimed that they had invented methods of doing business and could block competitors from copying their practices. In the early 1980s, however, the courts began a series of rulings that favor patents for some business ideas.

Now, the absurdity of the idea is becoming so clear that Congress is discussing measures to address the problem. As American as apple pie, lobbyists are popping up everywhere to protect the I-thought-of-it-first interests who think a good idea should be a ticket to lifetime wealth.

As a Wall Street Journal news story pointed out the other day, the practice of patenting ideas has spread with the digital age. Microsoft and other software firm hold hundreds of patents for unique ideas. Amazon.com has sued a rival on-line bookseller for infringing on a patent for 1-click shopping, a process that makes purchasing items over the Internet easier.

Beyond software, however, there is a much more pernicious form of patenting focused on methods of doing business. One of the more aggressive business-patent firms at is Walker Digital, whose founder Jay Walker believes that many innovations should have been patented. Among them: the credit card, the ATM machine and frequent-flier miles.

One of Walker’s firms holds a patent for a practice currently being licensed to Kentucky Fried Chicken outlets. Clerks offer drinks or menu items at a discount, for the amount of change the customer would otherwise receive.

The patent mania provokes not just amazement but legitimate worries about the effects on consumers. The patents prohibit other companies from offering the same services for 20 years, unless licensing fees are paid. Robert Crandall, the creator of frequent-flier miles while running American Airlines, told the Journal: "It seems to me that if business processes were patentable, you would very severely limit competition."

There are various proposals for limiting the damage to competition, including a much-shorter period of time for patents on business ideas. Two members of Congress, responding to suggestions that some of the patents are being issued mistakenly, have proposed making applications public. That, at least, would give other business people or firms a chance to show that some of the supposed inventions aren’t so original as claimed.

In an age when much of the work force breaks a sweat only at the health club, it is not surprising that people seek to turn a half-clever idea into a personal fortune. If such an approach to ingenuity had been the mark of America in the past, though, we would have had a severely limited economy. We would have had attorneys fighting over who thought of drive-thru windows, express checkout lanes at groceries and clerks who say, "Did you find everything you wanted?" Instead of competing with convenience, taste and service, homegrown Pacific Northwest geniuses might have fought over the exclusive right to serve a "double-tall skinny no foam."

Granted, there could be blessings in a slower spread of some sales practices. What if telemarketing had been limited by being a patented invention? In this case, however, it’s clear that Congress ought to step in and protect consumers from abusive patent practices.

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