18 November 2010

Lotto Prize Schemes Not Patentable, Says Australian Patent Office

Iowa Lottery [2010] APO 25 (21 October 2010)

Hearing in relation to examiner's rejection of a patent application – whether the claimed invention a manner of manufacture

In this Patent Office decision, the Commissioner's Delegate, Deputy Commissioner Phil Spann, considered whether claims relating to a lottery prize pool comprised patentable subject matter (ie were for a "manner of manufacture" under the Australian law), concluding that they were not, and rejecting the application.


The application subject of this decision has a chequered past.

Iowa Lottery filed Australian patent application no. 2002305717 via an international application under the Patent Cooperation Treaty (PCT/US02/16710) on 24 May 2002, claiming priority from US patent application 60/293,406, filed on 24 May 2001.  Following entry to the national phase in Australia, the application was the subject of two adverse examination reports including objections that the subject matter claimed was not a manner of manufacture and, having not obtained acceptance under subsection 49(1) of the Patents Act 1990, lapsed at the end of the period prescribed for that purpose.

Patent application 2007240153 was filed as a divisional application on 6 December 2007.  Three adverse examination issued in relation to the divisional application with the last indicating the intention of the Commissioner to set the matter for hearing.  Iowa Lottery filed a number of submissions and proposed amendments in response.  A fee payable for the applicant's response to the second examination report was not paid when due and consequently the divisional application lapsed.  However an extension of time under section 223(2)(a) for the payment of the fee was allowed and the application was restored.  The final date for acceptance is 10 March 2011.

Iowa Lottery was represented at the hearing, arguing against the examiner's rejection on grounds of a lack of patentable subject matter.


The application concerns lottery games, and more particularly lotto type games.  A number of existing games of this type are described in the specification including Keno and Powerball®, which are well known in Australia.  In these games large jackpots are possible, due to the low probability of winning (ie some games may result in no winners).  Additionally, large jackpots are desirable to ensure the interest of a large player base is maintained.

In order to increase the size of potential jackpots, it has been found to be beneficial to pool prizes across multiple jurisdictions.  Traditionally, this has involved different states or territories within a single national jurisdiction, however the patent specification identifies benefits in extending gaming cooperation across national boundaries.

To this end, the application describes and claims:
  1. a prize pool, which is managed across multiple jurisdictions;
  2. a method of paying prizes from the prize pool; and
  3. a method of managing the prize pool.


In assessing patentabilioty of the claims, the Delegate considered the basic priciples set out by the High Court in the NRDC case (National Research and Development Corporation v Commissioner of Patents [1959] HCA 67).

The Delegate drew from NRDC that "the understanding of the 'manner of manufacture' requirement should not be constrained, for example, by existing notions of science and technology.  On the other hand they should also not be taken to justify an expansion of the scope of patentable subject matter to fields that have never been patentable according to the long standing principles governing application of section 6 of the Statute of Monopolies."  These priciples exclude "designs, schemes and plans" (at [10]).

The most recent and relevant decision is that of the Full Federal Court in Grant v Commissioner of Patents [2006] FCAFC 120.  In Grant the Court found that a method of protecting an asset including steps of establishing a trust, making a gift to the trust, making a loan from the trust and securing the loan was not a manner of manufacture.

Iowa Lotteries' independent claims were directed to:
  1. a prize pool for a lottery game played among a plurality of member lotteries (claim 1);
  2. a method of paying prizes in a lottery game to be played among a plurality of groups (claim3); and
  3. a method of managing a prize pool for a multi-group lottery game (claim 12).
Iowa argued that the Grant decision did not apply to claim 1, since this claim is directed to "a prize pool", which is itself an "artificially created state of affairs", and is not a method or process such as the claims in Grant.

However, the Delegate concluded (at [12]) that "[w]hat is claimed, in whatever guise, is a scheme and not an artificially created state of affairs within the principles articulated in the NRDC decision."  He considered the prize pool to comprise only information, which is not patentable subject matter in its own right.  Furthermore, the claimed methods amounted, analogously with the Grant case, to financial and/or legal transactions based on this information, which are also unpatentable under the principles set out in NRDC, Grant, and other cases.

The Delegate considered that there was no subject matter disclosed in the specification that could be considered patentable under these principles, and therefore rejected the application outright (at [19]-[21]).


The Delegate's reasoning in this case is persuasive in light of Grant.  A "prize pool" is merely financial information, and methods of managing the pool and paying prizes are nothing more than abstract processes applied to that information.  The patent specification does not disclose or assert any novelty in the methods or apparatus for playing or operating a lottery game, only in the methods by which prizes are pooled and distributed.

Considering that the Grant scheme was found to be unpatentable, it is difficult to identify any relevant distinguishing features in this case. 

It is increasingly clear that "pure" financial or legal transaction processes (whether or not they are computer-implemented) comprise manipulation of constructs which lack the requisite "materiality" for patentability.  As the Delegate points out in this decision (at [12]): "[i]nformation even if represented in a physical way has never been considered sufficient for patentability save for some material advantage or mechanical effect in the arrangement of the information."

To put this another way, the relevant "artificial state of affairs" must result from the claimed process.  The manipulation of a pre-existing artificial construct will not confer patentability upon an otherwise unpatentable process or structure.

Finally, we note that this is the second ex parte decision of Deputy Commissioner Phil Spann in 2010, relating to the subject matter issue, the first being Invention Pathways Pty Ltd [2010] APO 10, on which we reported here.


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