Market Reaction to Business Method Patents: An Empirical Analysis

Authors

• Charles Holoubek
• Timothy M. Shaughnessy

Abstract

Patents on methods of conducting business have received abundant press since the recent decisions in State Street Bank & Trust Co. v. Signature Financial Group, Inc. and AT&T Corp. v. Excel Communications, Inc. Indeed, the number of patent applications categorized as Business Method Patents ("BMPs") increased from 165 in 1995 to over 7,800 in 2000, more than a 47-fold jump in just five years. In light of State Street's wide-reaching ramifications, both the court's legal reasoning for and the policy implications of allowing the United States Patent and Trade Office ("USPTO") to extend patent rights to business methods have been vigorously debated.5 However, there has been little empirical research on the economic impact of the USPTO issuing BMPs. This paper attempts to add to this developing body of research by exploring a case study of the Amazon.com one-click patent

case. Economic analysis will help examine what quantitative effect, if any, the unfolding of the case had on investors' opinion of Amazon.com's value.

The paper begins in Section Two with a summary of recent developments in patent law related to BMPs. Section Three briefly describes a sample of the articles reviewed that are relevant to the topic. Section Four presents data on the growth of e-commerce, both relatively and in real terms. Section Five reviews the history of the Amazon.com one-click patent case. Sections Six and Seven present and examine the empirical findings for Amazon and a close competitor, Barnes & Noble. Finally, in Section Seven, we present conclusions and make suggestions for further research based upon these research findings.

Recommended Citation

Charles Holoubek & Timothy M. Shaughnessy, Market Reaction to Business Method Patents: An Empirical Analysis, 9 Computer L. Rev. & Tech. J. 279 (2005)