There seems to be a strange confusion when talking with patent experts and laypersons alike regarding software inventions and business method inventions. It is not clear how the ambiguity came about, however this ambiguity is no less certain for lack of clear history. Many times, people will use 'software patent' and 'business method' patent interchangeably. These are not the same thing – rather they are quite distinct.
A 'software patent' is typically a patent for a 'computer related invention'. More precisely, a software patent is a patent for a method which is taken up and executed by a microprocessor. The method may relate to any of a number of things as the microprocessor may receive inputs from any of an infinite number of coupled subsystems. Additionally, the microprocessor output may drive any of a number of different coupled subsystems. The method executed by the microprocessor may be patentable. This is a software patent.
A 'business method patent' is distinct from a 'software patent'. While sometimes a software patent may also be a business method patent, and visa-versa, it is most certainly not the case that all software patents are business methods, nor that all business methods are software.
A business method patent is a patent for a manner of conducting business. Also a 'method' type invention, a business method invention relates to the manner of conducting some unique commercial activity. One simple illustrative example is: a method of repaying a loan where the payment due is increased in proportion to the age of the loan. That could be a perfect business method patent. For many years, it was assumed (wrongly) that such methods could not be protected as invention. The US Court of Appeals for the Federal Circuit set everything into play when they settled State Street Bank 149 F.3d 1368 (Fed. Cir. 1998). Inventor Boes for Signature Financial Group applied for a patent on a data processing system for futures trading. State Street Bank brought suit. The Supreme Court relying upon Chakabarty and "everything under the sun made by man" is patentable, ruled in favor of patents for business methods. The avalanche came directly thereafter. In 2010, the Supreme Court had the opportunity to revisit the issue via Bilski. Most observers anticipated a bit of reigning in with regard to the 'useful, concrete and tangible result' test – that the patentability inquiry for business method patents would be somewhat restricted. The opposite happened. The Supreme Court not only said the test is valid, but that it is not the only test and other tests might also apply with regard to business method patentability.
Similarly, software patents have a good solid history in the US courts. Despite very significant world-wide lobbying against software patents, the Courts repeatedly uphold them. Now, we observe this trend also spreading to Europe – at least Germany and the UK. Software and computer inventions are being upheld widely and the rush continues for those in the software industries. Not only are companies vigorously pursuing their own inventions – they are even buying the patent portfolios of related competitors. In 2011, Google purchased Motorola Mobility for 12.5 billion – it is widely believed this maneuver was primarily directed to the acquisition Motorola's extensive patent portfolio. Motorola Mobility has about 14,600 granted patents and another 6,700 pending at the time of the transaction.
It is now safe to declare: software inventions are here to stay.