May/June 2005

Business Method Patents May Pose Serious Risks to Nonprofits

by Michael Schreiber, United Way of America

In recent months, the possibility of business method patents seeping into the nonprofit sector has — understandably — generated a lot of discussion and debate. Already a bane in the for-profit sector, business method patents would be even worse for those of us running charitable organizations, the constituents we serve, and the donors who support our important work to make the world a better place.

Business method patents do not protect real technical innovation, yet they penalize nonprofits by making it more difficult and less cost-effective to operate with greater efficiency. That is the opposite of what we need.

Business method patents are a relatively new phenomenon gaining momentum with the growth of the Internet. These patents typically cover processes of doing business on the Internet — including processes widely used in the offline world that now are moving online. Amazon's one-click patent and Priceline's reverse auction patent are well-known examples of business method patents, and, not surprisingly, have triggered a lot of legal controversy.

United Way of America, where I am responsible for overseeing all technology initiatives and infrastructure, is a good example of an organization that increasingly relies on the Internet for a growing array of mission-critical activities. Our mission is to mobilize the caring power of communities. We do this by encouraging the creation of community need agendas, providing volunteer opportunities, managing charitable giving events, supporting work place giving campaigns, and brokering product donations. All of these processes have been refined off line and are now available via our Internet tools.

United Way of America is, of course, only one example. Adoption of Internet technology by the nation's nonprofits is accelerating. There is a growing need to share and make use of technology innovation — not stifle its diffusion throughout the charitable sector.

How real is the threat to nonprofits? I know of nearly two dozen business method patents and applications for such patents that could affect nonprofits' use of the Internet. One of the most troubling applications has sought protection for the following:

"A method for conducting a fundraising campaign by an organization or person over a wide-area network, comprising the steps of: hosting a website including a plurality of linked web pages, the website providing information about the fundraising campaign and soliciting potential donors to make a charitable contribution to the fundraising campaign; registering on the website; contacting third parties via email messages soliciting charitable donations; and providing one or more reports, on the website, including information on the status of the fundraising campaign." (Patent application entitled: "Method and system for an efficient fundraising campaign over a wide area network" application number 764787.)

If this sounds like patenting use of the Internet for communicating with and soliciting constituents to donate — in other words, online fundraising — that's because it is.

Consider what the future looks like for nonprofits operating in a landscape where activities as important and efficient as online fundraising are patented by one company or even a few companies. Nonprofits face a few scenarios, and none of them are good:

• Divert a greater percentage of every dollar raised to cover license fees just to operate — money that previously was earmarked for and still needs to go to programs and services making a positive difference in the lives of constituents.

• Settle for other, less effective and efficient technology solutions to avoid the higher cost of patented solutions as well as the threat of being sued.

This certainly is not how donors envision their contributions being used. Donors do care how their money is leveraged to achieve sustainable societal change.

Nonprofit organizations exist to address complex social, environmental, and educational challenges. The last thing we need is another structural impediment like business method patents that could seriously distract us from the creation of tangible and sustainable change in our communities.

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