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Introduction, The explosion in business method patent applications and grants that occurred in 1999–2001 has abated somewhat, and the legal landscape has changed as a result of several court decisions. However, the many policy questions raised by the response of the financial, e-commerce, and software industries to the well-known State Street Bank decision on the patentability of business methods remain. Many scholars, both legal and economic, wrote on this topic shortly after the decision and the accompanying increase in patents in this technological area. Although much of this literature provided a fairly thorough analysis of individual cases and what they signify, there was relatively little scholarship on the impact of business method patents based on a more broad-based or empirical approach. Notable exceptions are a series of studies of financial method patents by Lerner (2001, 2006a, b) and some studies of business method or financial patents by Allison and Tiller (2003), Hunt (2008), Wagner (2008), and Hall, Thoma, and Torrisi (2009). This chapter examines the evolution of patenting in this area and reviews some of the literature on patents more broadly in an attempt to infer the implications of this literature for business method patents. The focus is on two issues: the role of patents in encouraging innovation and the consequences of low patent quality for the performance of the system. I begin by briefly reviewing the facts about business method patents and then survey what economists know about the general relationship between patent systems and innovation in order to draw some implications for the likely impact of business method patents on innovation in industry. A discussion of the patent quality issue is followed by a summary of the policy recommendations made by those who have followed the evolution of legal standards as both software and business methods have become acceptable subject matter. © Michael Abramowicz, James E. Daily, and F. Scott Kieff 2015.