PATENT BENDING.

The American newspaper business as we know it was born on September 3, 1833, when a twenty-three-year-old publisher named Benjamin Day put out the first edition of the New York Sun. Whereas other papers sold for five or six cents, the Sun cost just a penny. For revenue, Day relied on advertising rather than on subscriptions. Above all, he revolutionized the way papers were distributed. He sold them to newsboys in lots of a hundred to hawk in the street. Before long, Day was the most important publisher in New York.

One thing that Day did not do was patent any of these innovations. Soon after the Sun appeared, penny papers made their debut in Boston and Baltimore; in New York, James Gordon Bennett started the Herald, mimicking the Sun's price and sales methods. By 1840, the Sun and the Herald were the country's two most popular dailies.

This is how American business worked until very recently. Innovators came up with new ways of selling products, handling suppliers, running organizations, or managing information. If the ideas were good, the innovators got rich, but they also got imitated, which made them less rich than they might have been. It was great for everyone else, though. The competition lowered prices and increased quality; the new ideas spread and were improved upon. The mail-order catalogue, the moving assembly line, the decentralized corporation, the frequent-flier mile, the category-killer store--none of these radical ideas were patented.

Those were the days. Now the first thing someone with a good notion does is press the government to protect it. Priceline patented its reverse-auction method for selling cut-rate airline tickets. I.B.M. patented a method for keeping track of people waiting in line for the bathroom. Last month, Netflix, a company that runs an online DVD-rental subscription service, got a patent covering, among other things, the way its customers request titles and the way it sends out DVDs. And eBay is now in court appealing a verdict that it infringed on a Virginia man's patent. The crime? Selling auctioned items at a fixed price. What gall.

For most of American history, it was next to impossible to get a patent on what the U.S. Patent and Trademark Office called "a mere method of doing business." A business method was considered to be an idea--selling newspapers in the streets, delivering packages overnight--and ideas of this sort were not patentable. But in July, 1998, the U.S. Court of Appeals for the Federal Circuit did away with that principle. The case, State Street v. Signature Financial, involved software that Signature had written to enable it to administer mutual funds more efficiently. But the court's language was broad enough to embrace any business process (as long as it was new and "nonobvious" ...