Historically speaking, inventions directed to "business method" or "mathematical algorithm", were not entitled to patent protection. However, in a 1998 case State Street & Trust Co. v. Signature Financial Group, Inc., the Federal Appeals court laid to rest the old exception to statutory patentable subject matter. According to the court, the focus should be on the invention's claimed practical utility, and an algorithm-containing invention should produce a tangible, useful result in order to be patentable.

The State Street case opened the door to Business Method/Model patents. As a result of this case, the PTO is expected to issue more than 1000 business method patents during fiscal year 1999.

Majority of the business method patents are directed to the manner in which a business is conducted over the Internet. For example, Amazon's I-click method of web shopping feature (U.S. Patent 5,960,411), and Priceline.com reverse-auction technique (U.S. Patent 5,794,207).

Although the business method patents fall in a so called newly-created category of patentable subject matter, they must pass muster in the same manner as , for example, a new mousetrap. Before a patent is granted, an invention must pass through 3 legal hoops of novelty, usefulness and non-obviousness.

If your company, whether a startup or not, has a new way of doing something on the Internet, the cost of obtaining a patent on the business method would be insignificant compared to the amount of money being spent to get the company off the ground. If the method is believed to be commercially viable, a patent could significantly improve the overall value of the company, and thus, its capacity to withstand competition. In fact, as many business method patents seem to have done, a strong patent could allow a company to maintain a strong foothold in the market while keeping the competitors at bay.

While many would argue that business method patents are bogus and should not be granted, one should take heed from the fact that the PTO is receiving an increasing number (more than 2,500) of business method patent applications per year. It is reported that multibillionaire entrepreneur Jay Walker's Stamford, Connecticut-based firm, Walker Digital, churns out an average of 2 highly conceptional patent applications each week.

A strong business model/e-commerce patent can be extremely useful for a company, and particularly a startup, to:

• keep the competition away
• use as a bargaining-chip, if accused of infringement of someone else's patent
• collect royalty by licensing others
• create and maintain a strong, sustainable position in the relevant market
• hold a leadership/dominant position in the relevant industry
• significantly improve the overall value of the company (patents are intangible property)
• have a strong position in acquisition or merger negotiations
• fend-off claims from other parties that they conceived the idea first
• use as a powerful offensive or defensive tool