21 December 2011

IP Australia’s Escalating War on ‘Business Methods’

elephant-in-roomWe would much prefer to be spreading Christmas cheer at this time of year, but unfortunately the time has come to address the elephant with which many Australian practitioners in the information technology space have been sharing a room for too long now.

The elephant in question is the alleged controversy over so-called business method patents.

We have written numerous articles about individual cases, and imagine that by now it is pretty clear that we are not in agreement with IP Australia’s current policies and practices in this area.  Recent examples include Another Computer-Implemented Invention Struck Down, Australian Patent Office Shoots Down Another ‘Business Method’, Computer-Implementation No Insurance Against Rejection, and Computer-Implemented Invention Found Unpatentable.

We have now been quoted extensively in a current blog article by Joff Wild on the IAM Magazine web site, in relation to what is now clearly an intentional campaign by IP Australia to challenge the patentability of anything they consider to be a ‘business method’ invention.

Anybody – wherever they may be in the world, but Australian businesses in particular – who invests significant amounts in developing innovative new products and services which find application in the financial services sector, or are directed at improving the efficiency of organisational processes in any sector, needs to be aware of the current question-mark hanging over the availability of  patent protection for such innovations in Australia.

You think maybe we are exaggerating?  Sorry, but we no longer think that there is any scope to give IP Australia the benefit of the doubt here.  We offer the following four examples as evidence that IP Australia is waging a deliberate campaign against ‘business methods’.

1. THE ‘ABOUT FACE’

We wrote briefly back in July about the opposition decision in Myall Australia Pty Ltd v RPL Central Pty Ltd [2011] APO 48 (see Computer-Implemented Invention Found Unpatentable).  We are somewhat restricted in what we can say about this case, because we act for RPL Central, and the decision is currently subject to an appeal to the Federal Court of Australia.

But the following is a matter of public record:
  1. in 2009, the RPL Central patent was examined and certified, with the Patent Office being satisfied that the claims defined a patentable ‘manner of manufacture’;
  2. earlier this year, the patent was opposed by Myall, on the sole ground of lack of novelty;
  3. in a move that is unprecedented in our experience, the Hearing Officer raised the additional ground of invalidity that the claims were not for a ‘manner of manufacture’ (i.e. that they do not relate to patent-eligible subject matter), and requested further submissions from both parties on this point; and
  4. at the hearing, the patentee was easily able to overcome the novelty ground actually raised by the opponent, but the claims were found not to be patent-eligible on the basis of reasoning largely devised by the Hearing Officer.
A key thing to understand here is that there was no change in the law between 2009 and 2011.  The most recent relevant court authority remains Grant v Commissioner of Patents [2006] FCAFC 120, which was decided in 2006.

So claims that in 2009 were considered patentable by IP Australia, somehow had become unpatentable by 2011.

2. THE ‘HEAD IN SAND’

In another case in which we are involved (and about which we must therefore remain a bit vague) we recently received an examination report contending (amongst other things) that the claims – directed to an online system for accessing certain financial services – were not for a patent-eligible ‘manner of manufacture’.

We (and our client) disagreed.  We pointed out, in reply, that the claims were not directed to a financial ‘scheme’ as such, but rather to specific technology accessed by a customer via the internet, enabling them to direct certain transactions and other operations on their accounts that are not possible using conventional internet banking services.

In support of our arguments we cited various relevant authorities – which are binding on the Patent Office – such as the High Court in National Research and Development Corporation v Commissioner of Patents (‘NRDC’) [1959] HCA 67, the Full Federal Court decisions in CCOM Pty Ltd v Jiejing [1994] FCA 1168 and Grant v Commissioner of Patents [2006] FCAFC 120, and the Federal Court in Welcome Real-Time SA v Catuity Inc [2001] FCA 445.

And we pointed out to the examiner that whatever guidance Patent Office decisions might provide, they are not actually binding authority.

If reasons for rejection cannot be persuasively based on legislative provisions and/or court authority, then they cannot be sustained.  We also note that, currently, the applicant is supposed to have the benefit of the doubt in relation to ‘manner of manufacture’.

The examiner’s response?  We cannot quote it here in its entirety, but it starts out as follows:

While there are few Australian authorities (Grant v Commissioner of Patents [2006] FCAFC 120 being one of the few) on manner of manufacture in the area of schemes or business methods, there are several Patent Office decisions…

This report draws on such Patent Office decisions for guidance…

…and then completely ignores the court authorities.  Not one further mention.  Not one attempt to address any of the specific arguments in our response to the first report.  The objection might just as well have stated: ‘here at IP Australia, we have decided that this kind of thing is not patentable, and we do not care what you say, or what court authorities you rely on, we are going to reject your claims on the basis of our own theories.’

Here is a question for IP Australia – how many Australian authorities do you need before you will actually start applying them?  There are already at least three – Grant, CCOM and Catuity – and you are not actually allowed to ignore them!

3. THE ‘PASS THE BUCK’

In November this year, we attended IP Australia’s ‘IP Forum’ event in Melbourne, Fighting the War on Patents.  On of the speakers there was IP Australia’s Director General, Philip Noonan.

Following the formal presentations, questions were invited from the floor.  One question (actually, more of a comment, but that is not the point) came from a software developer who challenged the availability of patent protection for computer programs.

Mr Noonan’s response to the challenge was firstly to reject the suggestion that carve-outs for particular subject matter are a viable solution to such issues (a position with which we agree wholeheartedly).

However, his next comment was telling – he indicated that there were a couple of matters before the Federal Court which IP Australia is hoping will ‘clarify’ the issues around patenting of software and business methods.

We know what these matters are.  One of them is the RPL Central case in which we are involved.  The other is an appeal from the decision in Research Affiliates, LLC [2010] APO 31.

We infer from Mr Noonan’s comments that IP Australia is not unhappy about these appeals.  Indeed, it seems probable that the policy of rejecting claims directed to ‘business methods’ may have been specifically devised to result, eventually, in appeals to the Federal Court in order to generate additional pertinent case law.

This is all very well, unless you are one of the ‘targets’, faced with potential legal bills in excess of A$50,000.00 to defend your patent claims.  It is hardly surprising, then, that very few cases have been appealed.  And for those that have not been in a position to appeal, their prospective patent rights are lost forever, even if IP Australia’s decisions are ultimately not supported by whatever rulings the Federal Court may make.

4. THE ‘SELECTIVE SEARCH’

IP Australia offers an ‘International Type Search’ (ITS) service on Australian patent applications (usually provisional applications, but we believe that the service should be available for any application which could form the basis for a priority claim).

The basis for an ITS is Article 15(5) of the Patent Cooperation Treaty (PCT), which provides that any national patent office may provide a search service on national applications which is similar to the search performed on international patent applications filed under the PCT.  This service can be useful to applicants who have filed a provisional application, to help them decide whether or not to proceed with further national or international applications.

Rule 39.1 of the PCT Regulations permits (but does not require) a national office to refuse to perform an international search in relation to certain categories of subject matter, including ‘schemes, rules or methods of doing business’.  The primary purpose of this provision is to allow a patent office which does not have experience in the relevant subject matter (e.g. because it is prohibited under the local law) to declare itself incompetent to perform a reasonable search.

To our knowledge, IP Australia has not previously invoked this provision, because the Australian law is relatively permissive regarding the extent of patentable subject matter.  However, we have become aware of at least one recent case in which the Office has refused to conduct an ITS on the basis that the claims are directed to a business scheme.

To add financial injury to the insult of refusal, the Office has been willing to refund only 50% of the A$1400.00 fee that it charges for an ITS.  So the applicant – an Australian business – has paid A$700.00, plus attorney fees, to receive precisely nothing of any value.

CONCLUSION

All four of the examples above reflect recent policies and practices of IP Australia.  Two or three years ago, none of these events would have occurred.  The RPL Central case is particularly stark – in 2009 the Patent Office considered the claims patentable; in 2011 it proactively took advantage of a third-party opposition as an opportunity to effectively reverse its earlier decision, despite there having been no change in the law during the meantime.

There has been no formal announcement of any change in practice or policy in relation to ‘manner of manufacture’, but clearly there has been such a change.

IP Australia plays an important role in administering various intellectual property laws and regulations which are intended to support Australia’s broader economic, innovation and foreign policy.  We think that its actions in performing this role ought to be transparent.  We would like to know on whose authority IP Australia has decided that these policy objectives are best served by following practices that are inconsistent with legal authorities, out of step with some of our major trading partners, and which discriminate against local and overseas innovators on the basis of the particular field of economic endeavour in which they practice.

We expect silence in response, but would be delighted to be wrong.  Comments are welcome below, our email address is in the sidebar, and we are even equipped to receive anonymous submissions via our Ask Patentology page.

Go on – somebody surprise us!

14 comments:

Joe said...

Its corruption. The examiners have taken instructions from authorities that care little of the law. Is there a way to find out who these authorities are?

Patentology (Mark Summerfield) said...

I do not censor comments on this blog, but that should not be taken as an endorsement!

I am unaware of any reason to believe that there is 'corruption' involved.  There are many reasons why the Patent Office may wish to change its practices over time.  While there has been no formal announcement of the changes discussed in this article, by the same token they are hardly covert.  The decisions issued by the examiners and hearing officers are available for all to see via eDossier and the AustLII site.

It certainly seems that a decision must have been made at a reasonably high level, and I think we at least have a right to know the details, so that applicants can make sensible, informed decisions about new filings, and the prosecution of existing applications.

Joe said...

"There are many reasons why the Patent Office may wish to change its practices over time."

There aren't that many :-). From the perspective of an inventor, I can think of two, 1) public interest 2) corruption. But there is no evidence that the precedents have violated the public interest, is there?

"....I think we at least have a right to know the details, so that applicants
can make sensible, informed decisions about new filings, and the
prosecution of existing applications."

It seems that IP Australia is deliberately keeping their practice secretive so that patent attorneys and applicants CANNOT make informed decisions.

If the examiners had the intention to assist applicants/attorneys in making informed decisions, wouldn't they have already provided their reasons for ignoring the precedents?

I am not an attorney but hope my reasoning makes sense.

Patentology (Mark Summerfield) said...

Well, 'public interest' as an umbrella reason covers a lot of ground.  The public interest might be served in some instances by refusing patents for particular subject matter.  A computer-implemented method for grooming children on the internet, for example, might not be the kind of thing for which we would want people to get a patent, though it is not entirely clear which of the existing grounds would be a basis for rejection, if the method was novel and inventive!

There's a public interest in patents not being too easy to get, so as not to stifle innovation.  But there's also a public interest in patents not being too hard to get, or they will not perform their intended incentive function.

There's a public interest in all information relating to a patent or application being publicly available.  But also a public interest in a right to privacy, and in not making technical details public early in the process when it might compromise the applicant's competitive advantage, and thus act as a disincentive to using the patent system altogether.

But yes, you're right -- inappropriate influence aside, the main reason the Patent Office should do anything is in the service of public policy objectives.

And I would certainly agree that it is currently extraordinarily difficult for me to advise clients on the patentability of many computer-implemented invention.  Increasingly, I find myself telling people 'well, I believe that is patentable, but I also think that is we asked the Australian Patent Office to examine it right now, they would reject it.'

This is not advice that people find very useful for business planning purposes.  I am not sure, however, who stands to benefit from such uncertainty.

Joe said...

"I am not sure, however, who stands to benefit from such uncertainty."

This seems to be the most confusing part of the plot. Perhaps someone just wants a good laugh from seen attorneys looking helpless and confused? :-D

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Mike Biagio said...

Perhaps IP Australia  should be made to pay the full attorneys costs (and perhaps a punitive amount on top) for those patentees that are forced to appeal to higher authorities because of IP Australia's disregard for Australian law ? 

Its only when they feel it in their own pocket, they will be forced to sit up and do thinsg the way they were meant to.

Patentology (Mark Summerfield) said...

As in any civil litigation, the Federal Court will award costs against the losing party in the current appeals.  Not 100%, of course, but perhaps between 60% and 80% of actual costs.

I am not sure how the government funds these things, but I assume that IP Australia is also currently responsible for the Australian Government Solicitor's costs, and for the fees of the barrister they have briefed in each matter.

These are clearly costs that they have decided they are willing to incur in order to pursue their objectives.

It appears that, on average over the past few decades, the Commissioner of Patents is a pary to a Federal Court judgment once or twice a year, so this may not be seen as a big deal -- all part of the role.  It is an interesting fact that there has not been a High Court decision involving the Commissioner since 1980.

Adamjameslaw said...

Hi Mark - What was the patent claiming?

Patentology (Mark Summerfield) said...

Sorry, I have said as much as I am willing or able to.  The case in which IP Australia refused to conduct an ITS is an unpublished provisional application, and while the one under examination is published (and you are welcome to trawl AusPat looking for it :-), our client would not thank me for publicising their patenting activities!

dk said...

"I am not sure, however, who stands to benefit from such uncertainty."

I know who...

justcause said...

I welcome IP Australia decision to strike down the weak patent as submitted by RPLCentral and I (an the rest of the VocEd community) look forward to the decision being upheld in May...

Simon Smith better have deep pocket because in the (very) unlikely event he wins - he can look forward to a collective action (from everyone who has been on the receiving end of his junk mail courtesy of "Zenith Lawyers" and Smith has been VERY busy making himself unpopular - and we do talk to each other............

Mark said...

Towards the bottom of your first section, you pose the question:

"So claims that in 2009 were considered patentable by IP Australia, somehow had become unpatentable by 2011."

The answer very likely lies in a change of policy by the Australian Patent Office against the background of the "Bilski" decision by the US Supreme Court, as reflected in the following Office decision by Deputy Commissioner Spann: Invention Pathways Pty Ltd [2010] APO 10 (21 July 2010), see especially pars 29-44.

Mark (former Examiner of Patents)
 

Disco Review said...

Summerfield: - ""We are somewhat restricted in what we can say about this case, because we act for RPL Central"

 RPL Central  in "The Age" 25/5/2012

"Victoria
University deputy vice-chancellor Professor Anne Jones says that while
she supports the idea of recognition of prior learning she questions the
way it has been aggressively promoted......One organisation with an elaborate website calls itself RPL Central)"

and

While the Victorian Registration and Qualifications Authority did not respond to inquiries from The Age, the Education Department said in a statement that it would ''put dodgy providers on notice'',

http://www.theage.com.au/national/education/lessons-to-be-learnt-20120524-1z7v0.html#ixzz1vpstlroE

And

RPLcentral web site is TOTALLY off line.....

oh, dear........

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