18 September 2016

Does Australia Have a (US-Style) Two-Step Test for Patent-Eligibility?

Two StepsIn its Mayo/Myriad/Alice series of cases, the US Supreme Court has established a two-step test in order to determine whether a claimed invention defines patent-eligible subject matter or not.  In the first step, the claims are examined to determine whether they are ‘directed to’ a patent-ineligible concept, i.e. an abstract idea, law of nature or natural phenomenon.  If not, then the subject matter of the invention is eligible for patenting.  Otherwise, the analysis proceeds to step two, in which the claims are further analysed to determine whether or not they comprise some additional element, or combination of elements, that is ‘sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.’

In contentious cases the focus has generally fallen upon the second step of the analysis.  This is not surprising, considering that the reason these cases are contentious in the first place is because they are typically those in which the claims appear on their face to encompass ineligible subject matter, e.g. abstract ideas in the case of computer-implemented inventions such as in Alice, or natural phenomena such as the isolated DNA in Myriad or the presence of metabolites in blood samples in Mayo.  It might be said in such cases that ‘the vibe’ of the claim is that it looks like it might be ineligible, and that it is therefore necessary to proceed to step two in order to determine whether or not this initial impression is correct.

However, two recent decisions of the US Court of Appeals for the Federal Circuit (CAFC) confirm that the first step of the Mayo/Myriad/Alice framework is not merely a formality, but must be given proper consideration.  Enfish, LLC v. Microsoft Corp. (Fed. Cir. 2016) [PDF, 605kB] concerned software-implemented methods and systems operating on a new and more efficient database format.  The court found at the first step of the Alice analysis that the claims were not directed to an abstract idea, on the basis that ‘[s]oftware can make non-abstract improvements to computer technology just as hardware improvements can’ and that it is ‘relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea’.  In McRO, Inc. v. Bandai Namco Games America Inc. (Fed. Cir. 2016) [PDF, 341kB] the court found that claims directed to generating automated lip-synchronization and associated facial expressions for 3D animated characters (e.g. in video games) were, similarly, not abstract, and patent-eligible at the first step of the test.

It should not come as any great surprise that the first step of the Alice framework actually has some teeth.  The test is supposed to apply to patent claims in all fields of technology, and clearly there are very many patents and applications that relate to wholly uncontentious subject matter for which patent-eligibility is barely a consideration.  In all such cases, the claims are effectively passing at the first step of the test.  The surprise, for many, is that the CAFC has finally started to recognise and apply this reality in relation to computer-implemented inventions.

This raises the question of whether there is an analogous process that takes place in Australia.  As a practical matter, I believe that there is, however it has not been explicitly set out by the courts, and it remains an unacknowledged aspect of examining patent claims for eligibility.  This is unfortunate, because the existence of an implicit step in the eligibility analysis is an obstacle to consistency and objectivity in the assessment of patent claims.

Contentious vs Uncontentious Subject Matter

In the case of so-called ‘business methods’, whether computer-implemented or not, Full Benches of the Federal Court of Australia have repeatedly emphasised that a technological innovation is patentable, whereas a business innovation is not (see Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 at [100], Research Affiliates, LLC v Commissioner of Patents [2014] FCAFC 150 at [93], Grant v Commissioner of Patents [2006] FCAFC 120 at [24]).

However, as the Full Court also stated in the RPL Central case, at [96]:

The fact that it is a scheme or business method does not exclude it from properly being the subject of letters patent, but it must be more than that. There must be more than an abstract idea; it must involve the creation of an artificial state of affairs where the computer is integral to the invention, rather than a mere tool in which the invention is performed. Where the claimed invention is to a computerised business method, the invention must lie in that computerisation.

There is, in all of this, something closely akin to the US ‘two-step test’.  Claims that are clearly directed to technological innovations are generally not subject to further scrutiny.  This is most apparent in the case of uncontentious subject matter, such as mechanical apparatus, new chemical compositions, or methods of manufacturing tangible products.  For inventions in most fields of endeavour, then, there is an implicit first step by which the subject matter is regarded as uncontentious and, as a practical matter, no further consideration is given to the matter of patent-eligibility.

However, this implicit process of granting a ‘green light’ to inventions regarded as inherently technological is not limited to traditional and uncontroversial subject matter.  There are many classes of computer-implemented inventions that are, equally, waved through without closer scrutiny, presumably on the basis that they are considered self-evidently to have the necessary character of technological innovation.  Inventions with applications in the field of telecommunications, such as that disclosed and claimed in the famous CSIRO Wi-Fi patent, are a case in point.  In my experience, claims directed to such inventions, even when defined in the form of a method that can be implemented in software without reference to specific hardware, are never challenged on subject matter grounds.  The same is generally true of inventions relating to data security (e.g. methods involving encryption and decryption of information) and information coding (e.g. video and audio compression and decompression).  Numerous recently-accepted applications made by Google, Inc, with titles such as Location-Based Searching, Fraud Protection for Online and NFC Purchases, Determining Message Prominence, and Displaying Content Items Related to a Social Network Group on a Map, passed relatively smoothly through examination in Australia without subject-matter objections being raised.

Even Amazon’s notorious ‘1-click’ ordering patent claims barely raised an eyebrow in Australia on subject matter grounds – when an opposition to the Australian application was decided in 2011, the opponent ultimately elected not to pursue this line of attack, and the Hearing Officer apparently did not consider it worth raising (in contrast to what happened just two months later in the initial RPL Central decision [2011] APO 48).

Clearly, then, there are inventions that, despite being in fields closely adjacent to contentious subject matter, somehow pass an implied ‘step one’ test in Australia.  Others, however, fail this test and are then subject to a battery of further considerations to assess patent-eligibility.  These include the following, which Section of the Australian Patent Office Manual of Practice and Procedure states ‘may be relevant to whether a computer related invention is in substance a manner of manufacture’:
  1. whether the contribution of the claimed invention is technical in nature.
  2. whether the invention solves a technical problem within the computer or outside the computer or whether it results in an improvement in the functioning of the computer, irrespective of the data being processed.
  3. whether the claimed method merely requires generic computer implementation.
  4. whether the computer is merely an intermediary or tool for performing the method while adding nothing of substance to the idea.
  5. whether the ingenuity in the invention is in a physical phenomenon in which an artificial effect can be observed rather than in the scheme itself.
  6. whether the alleged invention lies in the way the method or scheme is carried out in a computer.
  7. whether the alleged invention lies in more than the generation, presentation or arrangement of intellectual information.

Implicit Eligibility in the Federal Court

It is not just patent examiners, however, who are guilty of applying an implicit initial subject-matter eligibility test.  The Full Court in the RPL Central case did exactly the same thing in commencing its consideration of the claims by stating (at [96]):

A claimed invention must be examined to ascertain whether it is in substance a scheme or plan or whether it can broadly be described as an improvement in computer technology. The basis for the analysis starts with the fact that a business method, or mere scheme, is not, per se, patentable.

Actually, this is not the starting point for any analysis.  The starting point is to explain why the claims may be said to be directed, in some relevant sense, to ‘a business method, or mere scheme’ in the first place.  There is a presumption in the Full Court’s decision that the invention may be characterised in this manner, and therefore that all of the subsequent discussion and analysis – which serves to assess whether the claimed invention amounts to ‘more than’ an abstract idea – is necessary in order to arrive at a conclusion on patent-eligibility.  Yet nowhere in the decision does the Full Court explicitly justify its characterisation of the the invention as ‘a business method or mere scheme’.  While this was certainly the tenor of the Commissioner’s submissions, it was strongly contested by RPL Central, which characterised the invention, in more concrete and technical terms, ‘as consisting of a sequence of steps and the configuration of a suitably programmed computer system, putting into effect a new application of hardware and software in the field of education and training’ (RPL Central at [95]).

Two Steps in Cases Involving Genetic Technology

The application of an implicit initial assessment of subject matter is not limited to computer-implemented inventions.  For many years the Australian Patent Office routinely considered claims directed to isolated naturally-occurring genes to be patent-eligible, on the grounds that they are simply molecules and that identification, isolation and development of a practical application of a molecule can support the grant of a valid patent.  That is, such claims automatically sailed straight past any closer scrutiny to assess whether or not they were eligible for patenting.

This practice lasted until 2015, when the High Court ruled that the substance of many such claims is the unpatentable information encoded by the genes, and that any reference to a product or molecular structure is nothing more than ‘the medium in which that information resides’ (D'Arcy v Myriad Genetics Inc [2015] HCA 35 at [89]).

As a direct result of the High Court’s decision in D’Arcy, Section of the Australian Patent Office Manual of Practice and Procedure now sets out an explicit two-step procedure for assessing patent-eligibility of claims directed to nucleic acids or genetic information, as follows. 
  1. The first step requires consideration of the substance of the claim.  If the claim is, in substance, genetic information, then it is necessary to proceed to the second step.  On the other hand, if the substance of the claim lies in something beyond the information,  such as a method or process for using a nucleic acid molecule in a method of diagnosis or treatment, then in most cases the claim will be patent-eligible.
  2. In the second step, it is necessary to ask whether the substance of the claim, i.e. the genetic information, is ‘made’.  As the Manual explains, an ‘act of isolation, purification or synthesis is not enough to confer patentability in this situation.’  This is true in any case in which ‘the genetic information in the man-made molecule is the same as that in the genome of an organism, because the genetic information conveyed by the claimed molecule has not been changed, and therefore cannot be considered “made” for the assessment of [patent-eligibility].’
Where the substance of an invention is genetic information it will, however, be patent-eligible where the information has no naturally-occurring counterpart (e.g. genetically-modified organisms) or where the claim is directed to a product which is something more than the genetic information itself (e.g. a nucleic acid microarray).

Conclusion – Making the Implicit, Explicit

No Australian court has set out a two-step test for patent-eligibility in the explicit terms used by the US Supreme Court, particularly in its Mayo and Alice decisions.  Nonetheless, analysis of recent Full Federal Court and High Court decisions in cases relating to computer-implemented inventions and genetic technologies appears to reveal an implicit two-step analysis.  As a practical matter, the approach taken by the courts and by the Australian Patent Office certainly divides patent claims into two categories: those for which the subject matter is seemingly uncontentious, and which are therefore not subject to additional scrutiny; and those regarded as being suspect and therefore required to satisfy one or more additional considerations in order to be found patent-eligible.

In practice, claims falling into the ‘suspect’ category during examination become the subject of very broadly-stated objections, and the onus then falls back upon the applicant to argue that the invention is patentable according to the various considerations gleaned from the court authorities.  In this way, a small amount of work for an examiner can create a large obstacle to the grant of a patent.

In my view, examiners should bear the initial burden of raising an objection that the claims are, prima facie, directed to ineligible subject matter.  This should include a clear and specific statement of what, exactly, is the ineligible subject matter to which the claims are substantively directed, and why this subject matter is ineligible for patenting.  Such objections should engage meaningfully with the language of the claims.  This is now required under the guidance provided to US patent examiners, and I can see no good reason why Australian examiners should not be held to similar standards.

In other words, it is time to acknowledge that in cases of computer-implemented subject matter, as well as in those relating to genetic information, there is an initial process of reasoning that determines whether or not the claimed invention should be subjected to closer scrutiny in relation to eligibility.  It is not enough just to feel ‘the vibe’ of the invention, which is inevitably subjective and examiner-dependent.  Some sort of consistent and objective process is required.  Acknowledging the elephant in the room, i.e. the implicit first step in the analysis, would be a useful starting point.


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