Intellectual Property Management: Protecting Business Methods and Intellectual Property (IP)

There is a famous saying that “successful people are not different, but they do things that are way different from the ordinary.” This resonates with how innovative people find novel ways of accomplishing tasks differently. This brings up an important question in Intellectual Property (IP) law: Can these unique ways of doing things be protected under IP law?

What Are Business Methods?

Business methods are strategies that businesses create to cater to customers’ day-to-day demands and survive in competitive markets. These strategies often involve intellectual deliberations and mental innovations to streamline operations, improve efficiency, and sustain growth. They are fundamental to the functioning of any business.

In recent years, a major question has arisen: Can business methods be patented? Traditionally, business methods have been either part of the public domain or protected under trade secret laws. However, with the rise of information technology and the expansion of e-commerce, the potential for new business models—often using IT to process technical, commercial, and financial data—has spurred ongoing debates about the feasibility of patenting business methods.

How Are Business Methods Protected in India?

Currently, there is no specific statute in India to protect business methods directly. However, several existing laws provide indirect protection to business methods under certain circumstances:

1. Copyright Act

• The Copyright Act offers basic protection to the expression of ideas. If a business method is documented in written form, it may be protected as a literary work under copyright law. However, once modified by another party, the protection may no longer apply.

2. Patents Act

• The Patents Act of India is clear in its stance: business methods are not patentable. Section 3 of the Act specifically excludes business methods from patent protection. This was confirmed in the landmark cases like Yahoo vs. Controller and Rediff.

3. Trade Secrets and the Indian Contract Act

• While India does not have specific legislation for trade secret protection, Indian courts have upheld the protection of trade secrets based on equity principles. These trade secrets are usually safeguarded under contract law, particularly through non-disclosure agreements (NDAs) or employment contracts. Section 27 of the Indian Contract Act restricts individuals from disclosing confidential information obtained during employment.

In the case of Burlington Home Shopping Pvt. Ltd. vs. Rajnish Chibber, the Delhi High Court clarified that copyright protects the expression of business data, while trade secrets protect the underlying data. Both protections often overlap in business data compilations.

Advantages and Disadvantages of Business Method Patents (BMPs)

Advantages

• Protection for Small Businesses & Startups: BMPs offer small businesses a competitive advantage. The protection granted can help them gain confidence, fend off rival companies, and prevent larger businesses from dominating the market. BMPs also incentivize innovation, benefiting both the innovators and consumers.
• Encouraging Innovation: Business method patents encourage creativity and allow businesses to thrive by safeguarding their innovations, providing a period to capitalize on their new methods before competition catches up.

Disadvantages

• Impact on Developing Economies: In capitalist economies, granting BMPs makes sense as businesses aim to maintain their competitive edge. However, in developing economies, granting BMPs could result in stagnation. Small businesses or startups may become complacent after receiving a patent and fail to continue innovating, leading to economic mediocrity and slower growth.
• Lack of Market Adaptation: Excessive protection of business methods could inhibit other businesses from adopting and modifying these methods to meet the market’s evolving needs, resulting in market rigidity and slower business growth.

Advisory: Finding a Balanced Approach

When it comes to the controversial matter of granting protection for business methods, a balanced approach is crucial. Rather than granting long-term protection, a short-term patent of about 3 to 4 years should be considered. This would:

• Protect innovators for a reasonable period, allowing them to capitalize on their business method.
• Encourage further innovation, as other businesses will be able to modify or improve upon the methods after the patent expires, fostering growth and competition.

In conclusion, while business method patents can significantly benefit small businesses and innovation, their impact on the broader economy—particularly in developing countries—should be carefully managed. A middle ground, such as offering short-term BMPs, may provide the optimal balance.

This publication is provided for general information and does not constitute  any legal opinion. This publication is protected by copyright. © 2022 Astrea Legal Associates LLP