In a recent judgement, the UK Court of Appeal has made a clear stance on patenting ways of doing business using computers.

In doing so it has thrown down the gauntlet to Europe to resolve the issue. It also reinforces that business models with underlying developments in technology can be patented.

There has long been a debate in the world of intellectual property over the extent to which the patent system can be used to protect innovative ways of doing business using information technology.

Patent offices all over the world have seen an explosion in applications to patent new business models that, in one form or another, take advantage of advances in technology.

The USA has appeared to lead the way after a landmark Supreme Court ruling in the late 1990s (the State Street Bank case) opened the floodgates to the patenting of pure business methods, even where no new technology is involved.

However, Europe has not followed the US lead. Its law makers have resolutely stuck to the principle that patents should be only awarded for new technology, and have therefore insisted innovative business models are not enough to earn the powerful monopoly protection of a patent, unless the underlying technology is itself inventive.

Many in Europe think this is a sound principle, but drawing the boundaries clearly has proved difficult.

Most patent applications to cover Europe are filed through the European Patent Office (EPO) based in Munich, where the Appeal Boards have developed a large body of case law on what can, and cannot, be patented in this field.

However, the decisions are sometimes inconsistent and the result is that there have been uncertainties about what can be patented.

Many professionals think that the EPO has been too harsh.

The UK Court of Appeal recently looked at two attempts to patent business methods in the UK.

In reaching different decisions in each case, the Court set out a clear approach to deciding what qualifies for patent protection; and gave encouragement to businesses on what can be patented.

The first case was for a way of generating the documents required to set up a limited company, based on the answers to a series of questions.

The second case involved a telecoms system which allowed users to pre-pay on an account and to use the credit to make a call through the system.

The Court of Appeal decided the first was not patentable, as it represented a method of doing business, saying the applicant's method "is for the very business itself, the business of advising upon and creating appropriate company documentation."

In the second case, the patent was upheld. It said that "the important point to note is that the system as a whole is new . . . not merely because it is to be used for the business of selling phone calls. . . . the key to it is a new physical combination of hardware."

A three-step approach was used to decide both cases. After looking at what contribution to the field the claimed invention represents, it must be decided whether the contribution falls solely within excluded subject matter, such as a business method.

The third step is to check whether the contribution is technical in nature. In the telecoms case, the invention clearly made a contribution to the excluded field of the business of selling telephone calls.

However, it also made a technical contribution, as it involved a new physical combination of hardware, and so it was allowed.

The Court of Appeal's judgement confirmed the approach that had been adopted by the UK Patent Office.

But what makes this case different is that, with support from the UK Patent Office, it has challenged the EPO and formulated questions to put to the EPO's most senior ruling body.

Whether this happens remains to be seen, as it requires the support of the EPO president - but with the former head of the UK Patent Office, Alison Brimelow taking on this job in July, maybe the signs are good.

The EPO has traditionally taken a harder line than the UK, but this could change.

SMEs should be encouraged by the judgement to embrace patents. Many innovations related to new business models will involve underlying technological developments.

By patenting these, companies can enjoy added value to their business and an edge over competitors. After all, if you have had to work at solving a technical problem, why let others benefit from it?

Contact: Adrian Samuels, 01865 305100