01 July 2012

IP Australia Has Lost Perspective On ‘Business Method’ Claims

Jump the SharkWe recently reported the Australian Patent Office decision in Celgene Corporation [2012] APO 71, relating to a system for dispensing drugs with significant safety issues (such as thalidomide).  In doing so, we indicated that we agreed with the outcome (i.e. that the system as claimed was not a patent-eligible ‘manner of manufacture’), but not with the Hearing Officer’s reasoning.

In this article, we go into further detail about where we think the Hearing Officer – and indeed the Patent Office generally – has been led astray, as well as why we think the Celgene claims are not patentable.

It seems that the Patent Office has now built up such a body of its own decisions on the patentability of ‘business methods’ (a term which now appears to apply to a range of computer-implemented inventions which do not necessarily have to relate to financial data processing) that it is in clear danger of losing sight of the basic principles underlying the ‘manner of manufacture’ test.

As we shall explain, the Celgene claims can be shown to be unpatentable based upon some very simple and long-standing principles.  However, by arriving at a conclusion via a circuitous route involving previous Patent Office decisions, the Hearing Officer produces a line of reasoning that just does not add up.  If we remove the specifics relating to the information content in Celgene’s system, leaving only a generic statement relating to structure and function, then paragraph [15] of the recent Celgene decision says something absurd:

The system in claim 1 can be a computer system. While a computer system is a tangible article, in the present case that computer is characterised solely by the processing that it carries out. As a consequence, the essence of the claimed system is the processing of information about X, and the generation of a Y. The purpose of the processing is Z. While this is clearly a sensible thing to do, the way in which it is achieved by the system does not lie in the useful arts, or the field of economic endeavour.

The logical conclusion of this reasoning is that no computer-implemented invention would be patentable. Not only is this not the current state of the law in Australia, it is not even consistent with IP Australia’s current public position on ‘software patents’.

PATENTABILITY AND SOFTWARE

When Deputy Commissioner Phil Spann got up to speak in Sydney, at the recent IP Forum event on software patents (which can now be viewed on YouTube), he said a few things which are pertinent to the question of patent-eligibility and software:
  1. ‘It is not a patent examiner’s job to decide whether a patent for a particular product is economically justifiable, or socially justifiable.’
  2. ‘Software per se is not patentable.  It is what the software does, what its effect is in the machine, that is patentable.’
  3. The Patent Office ‘routinely grants’ patents for software inventions, on the strength of the Federal Court decisions in IBM v Commissioner of Patents (a method and apparatus for producing curves on a computer graphics display) and CCOM v Jiejing (apparatus for assembling text in Chinese characters).
This tells us a few things.  Firstly, examiners are not supposed to be making value judgements.  By way of example, suppose two patents include claims with a similar form, in that they are (say) methods of processing electroencephalogram (EEG) signals.  Further suppose that one of the two claims is directed to providing control signals to a video game console, while the other provides control signals to a patient risk warning system in a hospital.  It cannot be the case that one of these claims is patent-eligible, while the other is not, even though the corresponding products are not on an equal economic or social footing.

Secondly, since ‘what the software does’ is the thing which is patentable, the fact that a computer-implemented invention may be characterised solely by the processing that it carries out cannot disqualify it from patentability.  Both IBM and CCOM involved of inventions in which the input and output means were entirely conventional, and which were totally characterised by the processing carried out by a general-purpose computer under instruction from a suitable software program.

Thus if the ‘essence’ of an invention is that it involves ‘the processing of information about X and the generation of a Y for purpose Z’, the mere selection of X, Y and Z cannot be the determining factor of patentability.  It cannot be the case that if X is ‘points’, Y is ‘curve’ and Z is ‘more efficiently generating the curve on a display’ (as in IBM) then the claim passes the ‘manner of manufacture’ test, but if X is ‘registration of persons and the risk to a patient’, Y is ‘prescription approval code’ and Z is ‘minimisation of the risk of harm to patients’ (as in Celgene) then it does not.

Nor can it be said – with a straight face – that the practice of medicine, and the safe dispensing of medications, does not lie in ‘the useful arts, or the field of economic endeavour.’

What matters is not the identity of X, Y and Z, but the nature of the ‘processing’ and ‘generation’ aspects.  In the words used by the Full Federal Court in Grant v Commissioner of Patents [2006] FCAFC 120, ‘a physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required’ (at [32]).  Again, this is not about X and Y (which are, inevitably, just going to be some form of data records in any practical application), but about the aspects of the invention that can bring about change or creation.

CELGENE’S CLAIM

Celgene’s claim 1, to which the Hearing Officer’s statement above purportedly refers, is in the following terms:

A system for dispensing a drug to a patient in need of the drug, so as to minimise or prevent the occurrence of an adverse side effect known or suspected of being caused by the drug, the system comprising:
  1. means for receiving, from a remote pharmacy via a client application, an approval request for a prescription for the drug presented by the patient including:
    1. a unique patient identification number corresponding to the patient, the patient having been prescribed the drug by a prescriber;
    2. pharmacy registration data from the remote pharmacy; and
    3. data representing factors which influence risk of occurrence of a known or suspected adverse side effect if the patient receives the drug;
  2. a computer readable storage medium storing thereon a database including:
    1. patient registration data, said patient registration data including the unique patient identification number assigned to the patient by a risk management system;
    2. prescriber registration data;
    3. pharmacy registration data; and
    4. a prescription approval code for association with the prescription to be dispensed upon verifying from the database that the:
      1. patient, prescriber and remote pharmacy are registered in the medium; and
      2. risk of occurrence of a known or suspected adverse side effect in the patient is acceptable; and
  3. means for communicating the prescription approval code associated with the prescription to the client application of the remote pharmacy.
This is, quite simply, not a claim directed to ‘the processing of information about X and the generation of a Y’, however you try to define X and Y.

WHY THE CELGENE CLAIM IS NOT PATENT-ELIGIBLE

The above claim is not for a manner of manufacture for the very simple reason that it does not define any meaningful function, processing or generation whatsoever.  There is an input device (‘means for receiving’) which is capable of accepting input in the form of patient and risk information from a pharmacy.  There is a storage medium (e.g. a hard disk) containing a database which stores collections of information, all of which appears to be either predefined, or merely the same information received via the input device.  Finally, there is an output device (‘means for communicating’) which is capable of sending information, in the form of a ‘code’, back to the pharmacy.

The input device, storage medium and output device are a mere – and wholly conventional – collocation of parts doing precisely the job they do in every single computing device ever made.  In themselves, they provide nothing functional which could contribute in any way to patentability.  The information received, stored, and sent, as it is defined in the claim, has absolutely nothing special about it, and there is no new working relationship created between the parts within the terms of the claim.

As Section 2.9.2.8 of the Australian Patent Office Manual of Practice and Procedure clearly and correctly states: ‘Any presentation of information characterised solely by the content of the information has traditionally been not patentable.’  Equally clear and correct is the statement in Section 2.9.2.16.1 of the Manual that an unpatentable collocation is ‘a number of known integers, process steps, or the association of materials or substances in such a way that no working interrelationship or potential working interrelationship exists between its various constituent parts. That is, each part performs its normal function, and is not functionally dependent on any other part.’

The only remotely ‘functional’ element of the claim is the fact that the ‘prescription approval code’ is ‘for association’ with the prescription ‘upon verifying from the database that’ the parties are all registered in the database, and the risk level is acceptable.

In fact, we would argue that this is not actually at all functional as claimed.  The claim is written using passive voice, and specifies only a use to which the available information may be put.  No actual processing is defined.  Even read as defining ‘potential processing’, the most that could be involved is a mere comparison of information which is already available in the appropriate form for making the comparison.

The claim contains no language that could be said to result in anything being processed, transformed or created.  If the claimed invention processed information, and re-presented it in a different and useful form, then it might be patentable.  In this case, however, there is nothing brought into being by the operation of the invention that did not exist beforehand in exactly the same form.

The Hearing Officer is wrong to say that the claim is directed to a computer which is ‘characterised solely by the processing that it carries out’.  The claim is actually directed to a collocation of computer peripherals characterised solely by the information content that they receive, store and transmit.  And for this simple, and very traditional reason, the claim does not define a manner of manufacture.

It is equally incorrect to say that ‘the essence of the claimed system is the processing of information about registration of persons and the risk to a patient, and the generation of a prescription approval code’.  Where in the claim does it say that a prescription approval code is ‘generated’?  What ‘processing’ is performed?  The registrations are either present or they are not, and the risk information is already part of the received input data.

Worst of all, the statement that ‘minimisation of the risk of harm to patients’ is ‘a sensible thing to do’ but ‘the way in which it is achieved by the system does not lie in the useful arts, or the field of economic endeavour’ is not only inaccurate, but dangerously so.  Whatever deficiencies the claimed ‘invention’ may have, there is absolutely no question that its intended application lies in the ‘useful arts’.  This particular terminology comes from the High Court’s decision in the NRDC case (National Research Development Corporation v Commissioner of Patents [1959] HCA 67, at [22]):

The point is that a process, to fall within the limits of patentability which the context of the Statute of Monopolies has supplied, must be one that offers some advantage which is material, in the sense that the process belongs to a useful art as distinct from a fine art … that its value to the country is in the field of economic endeavour.

The problem in this case, as we have explained, is not that the alleged invention is not directed to a ‘useful art’.  The problem is more fundamental: the claims do not recite any patentable functionality (i.e. the ‘process’ required by the above passage from NRDC) which could belong to any sort of ‘art’ at all!

Unfortunately, however, seemingly ‘clear’ explanations, such as the Hearing Officer’s reasons for rejecting the claims in this case, have a bad habit of coming back to bite later applicants.

CONCLUSION

The Australian Patent Office appears to have become so fixated on its own string of recent decisions, rejecting claims for not meeting the ‘manner of manufacture’ requirement, that it has completely lost sight of the basic principles involved.

In this case, the Hearing Officer was presented with claims that can be shown to be unpatentable based upon simple principles – the ‘collocation’ principle, and the ‘mere presentation of information’ (or ‘printed matter’) principle – which predate even the High Court’s NRDC decision.  Instead, in his eagerness to rely on his own earlier decision in Celgene Corporation [2012] APO 12, as well as the Patent Office decisions in Invention Pathways Pty Ltd [2010] APO 10 and Jumbo Interactive Ltd & New South Wales Lotteries Corp v Elot, Inc. [2011] APO 82, the Hearing Officer produced a decision which may be correct in its outcome, but where the reasons bear little relationship to what is actually claimed.

Indeed, as our analysis above demonstrates, the approach in this case has led to a conclusion with regard to claim 1 which not only misrepresents the claim, by suggesting that it actually involves some ‘processing’ which ‘generates’ something, but in doing so is demonstrably at odds with the principles developed by the courts, and with IP Australia’s own publicly-stated position on software patents.

It is time to go back to basics:
  1. properly construe the language in the claims;
  2. determine what is actually being claimed as the invention; and
  3. apply the principles which have been developed by the courts for the application of section 6 of the Statute of Monopolies.
If a patent attorney can do it, then so can a patent examiner.  Yet every time the Patent Office issues a new decision attempting to apply reasoning from its own previous recent decisions on manner of manufacture, it moves a little further from the basic sources of the law, and creates a little more confusion for examiners, hearing officers, applicants and advisors.

We know that there are IP Australia staff reading this blog.  Last month 574 distinct visits to the site have come from within Australian federal government agency networks.  We beg you: please put a stop to this madness.  It has gone far enough!

What we need is coherent and consistent decision-making which will allow users of the patent system to make meaningful decisions about investment in, and protection of, innovative technologies.

20 comments:

Name said...

They are not going to stop this madness and there is nothing we could do about it.

There are interest groups that do not want to see these patents issued and the examiners who rejected the applications based on absurd reasoning were simply following instructions. The examiners couldn't care less about what was actually been claimed since the goal was to reject the applications anyway.

Patentology (Mark Summerfield) said...

I hope that a few examiners are reading these comments also. It is very easy, particularly within our legal system, for attorneys and examiners to adopt adversarial positions. This is especially true in Australia, where examiner interviews are the exception rather than the rule, and almost all examination is conducted wholly on the written record, which encourages an argumentative approach on both sides.

But we attorneys are here to represent the interests of our clients. We are agents in the process, and what the Patent Office does to us, it does in reality to the applicants with whom the examiner may have little contact. I doubt that examiners care very much if they annoy a patent attorney, which is fair enough, although some of us care very much about our clients, and take rejection quite personally!

But a loss of faith in the system, as expressed by end-users such as yourself, is something the Patent Office should take to heart, as a real consequence of the way it is handling certain applications. I know from experience that you are not alone in your views, and I have clients that are all but giving up on Australia, knowing that they have a better chance of getting a patent in the US which is, in any event, a bigger market for both customers and investors.

Having said that, Phil Spann presented a very reasonable face of IP Australia in the recent IP Forum, and if you have not yet watched the recording on YouTube (http://www.youtube.com/watch?v=30R1uVeP6X0 ), I recommend that you do.

Name said...

Thanks Mark. Do you think that patent attorneys have a duty to inform their clients or potential clients about IP Australia's hostile approach to computer implemented inventions?

Name said...

Phil Spann's presentation says nothing about IP Australia's hostility towards software patents and the absurd and confusing reasoning that the examiners and hearing offices must produce in order to reject applications that satisfy the legal requirements.

Yes, Phil presentation does present a "very reasonable face of IP Australia" but the information from Phil is absolutely useless because we still don't see the REAL face of IP Australia from his presentation.

Patentology (Mark Summerfield) said...

A patent attorney always has a responsibility to provide a client with the best possible advice on the protection of their intellectual property.

It is not a question of 'hostility' (which is an unduly emotive word), but more generally the requirement to ensure that the client has realistic expectations of their prospects of success with a patent application, based on the attorney's best understanding of the current relevant laws and practice.

This is currently very difficult for any attorney dealing with Australian applications in relation to a range of computer-implemented inventions.

Patentology (Mark Summerfield) said...

There is no one 'real' face of IP Australia.

Examiners and Hearing Officers are people, too. At least some of them are probably as confused as we are about the real limits of patentability under the current policy. It may be, however, that there is some perceived pressure on examiners, if in doubt, to err on the side of rejection.

Name said...

did you ever tell your clients that their chances of obtaining a patent in the field of computer-implemented methods is very low?

Mark, since you dont believe that there is corruption in IP Australia, how would you explain to your clients if their applications were rejected without a clear explanation based on law or evidence? Perhaps the examiners have gone insane or that the examiners did not receive proper training when they were hired?

Gavin Adkins said...

To be clear, the examiners at IP Australia are thoroughly trained and supervised - they are not insane or incompetent - to suggest otherwise is just plain wrong.


Reasonable minds can (and do) differ on what are pretty complex questions of law.

Patentology (Mark Summerfield) said...

Well, quite aside from any considerations of professionalism, it is not true that examiners are 'insane', or have not been properly trained. I do not imagine that implementing the current policy of the Patent Office is easy for examiners. They probably have a pretty good idea of the general nature of subject matter that they are expected to call into question, but very little practical guidance on specific grounds for objection in particular cases. It is not about 'corruption', it is a matter of policy.

If I think that a client will have difficulty obtaining a patent under the current practices of the Patent Office, I am up-front about this. The greatest difficulty over the past couple of years has been dealing with cases that were filed based on our understanding of the law according to the Full Federal Court in Grant, prior to the Patent Office decision in Invention Pathways.

The RPL Central case has been the worst, and while I cannot say too much while it is under appeal, it is a matter of public record that the claims were certified under the previous Office practice, and then revoked under the current practice. That is, without question, a difficult conversation to have with a client. So, if there are readers wondering why I am passionate about this issue, you need look no further!

However, a professional advisor's job is to be practical, and to support the client's business objectives. When a client has an invention that is likely to be problematic under the current Office practice, I would recommend strategies to maintain pending rights while we await clarification from the Federal Court. Depending upon the status of the application, this might involve divisional filings, PCT filing (with Korea as the Searching Authority, given that IP Australia has taken to refusing to search claims that it deems to encompass unpatentable subject matter), or initial filing in a foreign jurisdiction, such as the US.

I also encourage clients, where practical, to focus on markets where patent protection is more certain, and/or to ensure that, where possible, they have backup business strategies that are not predicated on formal IP protections.

Patentology (Mark Summerfield) said...

However...

Reasonable innovators and patent applicants can, and do, become genuinely emotional when they feel that they have been betrayed by the system.

The fact is that the Patent Office changed its practices without notice or explanation. Reasonable minds may well differ on whether the prior or current practice is a more accurate reflection of the law (and the learned minds on the bench of the Federal Court will have their say in due course).

Examiners are real people. So are inventors, innovators, investors and entrepreneurs. As patent attorneys we sit in the middle and try to do the best job we can to advise and advocate for our clients.

The 'reasonable minds' argument does not absolve anybody from an obligation to try to see the issues from the perspective of other stakeholders in the system.

I appreciate that our friend here is angry, and I can understand why. I wonder whether there is anybody in the Patent Office who can say the same? I hope so.

Name said...

You are telling us that the patent law is so complex that different people may have different interpretations of the law. What happens when an examiner's decision has no factual or legal support and when the examiner was unable to explain how the decision was formed?

Name said...

the 'real face' is what you and your client have experienced in the last couple of years. The numbers presented by Phil does not help us understand the process of rejecting or granting patents in IP Australia. University courses would never teach students how IP Australia change their practices in secrecy.

Paul Green said...

Lord Hoffmann gave an interesting speech on Software Patents at the 2009 IPSANZ conference in Auckland. I'm not sure whether the speech has been published, but at any rate, he identified two principles that help to determine patent eligibility. The first he called the practical application principle, and the second, that you cannot patent a manner of human behaviour.
Regarding the first principle, he says that you cannot have a patent for producing information which may be useful for some practical purpose, but which you do not yourself describe. He sees this principle reflected in the European exclusion of scientific theories, mathematical methods and presentations of information.
Included in the second principle, Hoffmann says are ways of carrying on a business at a profit, tax avoidance, and ways of playing games such as football.
Perhaps Celgene's patent would fall foul of Lord Hoffmann's first principle. While his conference speech is not a source of law, it's worth considering.

Mark W said...

Good use of jumping the shark btw

Patentology (Mark Summerfield) said...

:) Glad you liked it!

Name said...

Our federal government and its spy network are once again working
together to cause trouble and misery. This is what they do when they are
bored, when they have nothing better to do...

asdf said...

what are your thoughts on:
WIldTangent v. Ultramercial (Supreme Court 2012)
CLS Bank International v. Alice Corporation Pty. Ltd. (Fed. Cir. 2012)
and the likely impact, if any, in the future of business method applications in Australia

Patentology (Mark Summerfield) said...

Ultramercial, CLS bank and CyberSource v Retail Decisions are the three most recent decisions of the US Court of Appeals for the Federal Circuit (CAFC) most likely to be relevant to the current software/ business method patent-eligibility cases on appeal to the Federal Court of Australia. It seems certain that all of these cases will be raised in submissions to the Federal Court, and also that they will be influential, just as State Street has been in the past. The problem is that these three decisions are not easily reconcilable, with Ultramercial and CLS bank favouring a more permissive approach to patent-eligibility, and CyberSource representing a more restrictive approach.

Of course, at this stage we do not know what the status of all these cases will be when they come to be considered in Australia. Presently, the CAFC appears split into a permissive faction (including Judges Rader, Linn, O'Malley and Lourie) which tends to give the benefit of the doubt to the patentee on patent-eligibility, leaving the novelty and obviousness requirements to do the 'heavy lifting' of separating the patentable from the unpatentable, and a restrictive faction (including Judges Dyk, Bryson and Prost) which would prefer to place the onus on the patentee to establish that any potentially 'abstract' subject matter is, in fact, sufficiently concrete to be patent-eligible.

The test applied by the CAFC in CLS Bank (and, to a lesser degree, Ultramercial), requiring that a claim must be 'manifestly abstract' before it will fall foul of 35 USC 101 seems to me to be too weak to be adopted by the Australian Federal Court. The requirement under Australian law is that a patentable invention must be a 'manner of manufacture' according to the principles that have been developed by the courts over four centuries. The test is not whether the claimed invention is not manifestly not a manner of manufacture (if you will excuse the confusing double negative).

In the meantime, the US Supreme Court has remanded Ultramercial back to the CAFC for reconsideration in light of the Prometheus decision. I can't see this changing the outcome, considering that Prometheus is about the application of a law of nature, and not about the abstractness (or otherwise) of a computer-implemented method and system. But whatever the result of the remand, it seems quite likely that the decision will again be appealed to the Supreme Court. CLS Bank may also be appealed.

The state of the law in the US is therefore currently uncertain, giving both sides in the Australian appeals some material to work with. It may be more or less uncertain by the time a decision is issued in any of the Australian cases, depending upon how the remanded and appealed cases progress in the US.

A.Non said...

Examiners must follow the manual. The product quality standards (available on line) demand it and thus their hands are tied. With internal checking done by the quality inspectorate, examiners can be engaged in many days of painful arguments with the inspectors and board of arbitration, defending their reports sent to applicants. Being "reasonable" can get examiners into whole world of pain so I hear. Therefore, much easier to toe the party line.


You have a problem with the party line: write to the Director General. Don't blame the examiner who is only following orders.

Patentology (Mark Summerfield) said...

Thank you for your insight.

I certainly do not blame the examiners, although there seems to be more to the current practice than just following the Manual. The main guidance in the Manual in relation to computer-implemented so-called 'business methods' is Section 2.9.2.10, which discusses the application of NRDC, Grant, CCOM and Welcome Real-Time. However, most recent rejections of subject matter that I have seen are based on the Patent Office decisions listed in Section 2.9.2.18.

The Manual provides guidance. It does not provide the 'answer' in relation to any particular claim. The Office should be following court authorities, i.e. Section 2.9.2.10 should take precedence over Section 2.9.2.18. In my recent experience, this is not the case.

If what you say is true, then the quality inspectors are enforcing policy, not quality.

Oh, and thanks for the laugh - 'write to the Director General'. LOL!

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