Conventional wisdom goes like this: The dot-com boom produced a raft of new ideas for doing business, many of which their developers rushed to patent. An appeals court ruling in 1998 opened the door for so-called business-method patents, which apply to processes rather than formulas or machines. And an overworked and under-educated U.S. Patent & Trademark Office rushed through thousands of patents for business processes related to the Internet that are simplistic, at best.

Like most conventional wisdom, the above is only partly true. Patent applications jumped from 228,000 in 1995 to 315,000 in 2000. That growth has slowed, but the number of patents applied for each year keeps rising.

While the Patent Office readily admits its examiners are overworked, it insists they're not uninformed. "Every one of them must have an undergraduate degree in engineering or applied science," says Stephen Kunin, deputy commissioner for patent policy. "In many of the emerging technologies, they have a master's degree and sometimes a Ph.D. In areas that involve the combination of IT and areas in the field of financial management, examiners typically have experience in those fields or will have an MBA as well."

The Patent Office has a special category for patent applications related to "Data Processing: Financial, Business Practice, Management, Or Cost/Price Determination," known as Class 705. From 1998 to 2000, there were 11,961 patents applied for in Class 705, and 1,904 issued. In 2000, 38 examiners worked in Class 705, according to the Patent Office's Web site. Seventeen had advanced or multiple degrees: four had business degrees, four had law degrees, four had Ph.D.s, and seven had master's degrees.

But the federal government has shown concern over the issue of business-methods patents. Congress recently enacted a bill that, among other things, is intended to "improve patent quality, decrease reliance on patent litigation, [and] protect the small inventor," according to the Patent Office. The bill allows a "third-party requester" in a patent re-examination to appeal a Patent Office decision directly to the Court of Appeals, rather than to have to resort to litigation.

Still, Kunin defends his organization's record, in part for pragmatic reasons. "Most people don't file on frivolous inventions," Kunin says. The average cost for a company to file is $8,000 in official fees, he says, and an equal amount in attorneys' fees.

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