18 August 2011

‘Computer Readable Medium’ Claims – Substance Trumps Form

A recent decision of the US Court of Appeals for the Federal Circuit (CAFC) demonstrates a substantial harmony amongst the laws of jurisdictions including the US, Europe (and the UK) and Australia, regarding the determination of patent-eligibility of claims directed to computer program products (such as recorded CD-ROMs, DVDs, magnetic discs, or similar).

Specifically, in all of these jurisdictions, it is the substance of the ‘underlying invention’ which must be considered, and not the specific form (e.g. method, system, apparatus, software product) in which it is claimed.

Just last week, we reported on the recent decision of the Australian Patent Office in Discovery Holdings Limited [2011] APO 56 (see Computer-Implementation No Insurance Against Rejection).  In that case, the invention was, in essence, an insurance plan, which is not patent-eligible subject matter under the ‘manner of manufacture’ test.  The application also included ‘system’ claims, directed to a physical hardware arrangement comprising a suitably-programmed processor coupled to a memory device, and configured to implement the insurance plan.  Despite the fact that a physical apparatus is, on the face of it, patent-eligible (if also novel and inventive), the Hearing Officer applied a test by which the ‘substance’ of the invention (i.e. the insurance scheme) took priority over the form in which it was claimed.

A very similar approach has been taken by the CAFC in CyberSource Corporation v Retail Decisions, Inc (Fed. Cir. 2011, No. 2009-1358).  Here, the invention in the patent assigned to CyberSource was in essence a method of detecting fraud in online credit card transactions by analysing patterns of transactions involving particular cards against network addresses (such as an IP address) from which the transactions originate.  The court found that the method, as claimed, was ineligible for patent protection under 35 USC § 101 because it was so broad and trivial that it could be performed purely by mental steps.  Indeed, CyberSource’s CEO admitted that ‘before CyberSource created a computer implemented fraud detection system, “[w]e could see just by looking that more than half of our orders were fraudulent.”’


The CyberSource patent also included a claim directed to ‘[a] computer readable medium containing program instructions for detecting fraud in a credit card transaction between a consumer and a merchant over the Internet,’ in which the instructions essentially implement the fraud-detection method when executed by a suitable processor.  Such a claim, sometimes known as a ‘Beauregard claim’ (see below), is intended to capture, as a direct infringement, a product comprising physical medium, such as a CD-ROM or other carrier, on which a copy of a program implementing the invention has been recorded.

Claims directed to ‘computer readable media’, or some equivalent expression of the same concept, are considered allowable in most major jurisdictions. 
Approach in Europe and the UK
In Europe, where ‘programs for computers … as such’ are excluded from patentability under the European Patent Convention, computer program product claims have been granted since 1998 so long as the program stored on the carrier, when loaded and executed on a computer, produces the additional technical effect necessary to qualify as patentable subject matter (IBM/Computer Program Product (1999) T1173/97; IBM/Computer Program Product II (1999) T0935/97).

The logic behind this approach, as expressed by the EPO Technical Board of Appeal in IBM/Computer Program Product (paragraph [9.8]), is that it would be ‘illogical to grant a patent for both a method and the apparatus adapted for carrying out the same method, but not for the computer program product, which comprises all the features enabling the implementation of the method and which, when loaded in a computer, is indeed able to carry out that method.’

The practical commercial significance of computer program product claims was well-expressed by Justice Kitchen in the UK High Court decision in Astron Clinica Ltd & Ors v The Comptroller General of Patents, Designs and Trade Marks [2008] EWHC 85 (Pat), at [9]:

… the applicants all exploit their inventions by selling computer programs stored on a computer readable medium or by Internet download and competitors can, of course, do the same. This presents the applicants with the problem that, without computer program claims, they can only protect their inventions by invoking the contributory infringement provisions of … the Patents Act …. What is worse, those provisions give no protection against the production and sale of programs in the United Kingdom if they are intended for use abroad.
Approach in Australia
In Australia, the current practice of the Patent Office is set out in the Patent Manual of Practice and Procedure (‘Examiners’ Manual’), Section Computer Software Related Inventions and Mathematical Algorithms, which states that ‘executable code for patentable computer software’ is patent-eligible, when claimed ‘in a machine readable form’.  As in Europe, and in a manner analogous to the approach taken in Discovery Holdings, this test requires the decision-maker to look to the substance of the invention, rather than to the particular form of the claim.  That is, whether or not a ‘machine readable medium’ claim is patentable depends upon the patentability of the ‘computer software’ itself.
Approach in the US – ‘Beauregard’ Claims
In the US, computer program product claims have been granted by the USPTO since 1995, following the case of In re Gary M Beauregard & Ors (1995) 53 F.3d 1583.  This is why such claims have become known as ‘Beauregard claims’.  Although it seems to be quite widely believed that the CAFC confirmed the patent-eligibility of computer program product claims in Beauregard, in fact it did so only because the PTO decided not to fight the appeal from the decision of the Board of Patent Appeals and Interferences (BPAI), but that it had been wrong to reject Beauregard’s claims.  Thus there was no longer any controversy for the court to resolve, and it issued the orders requested by the parties, namely that the BPAI decision be vacated.  In re Beauregard is a four-paragraph ‘opinion’ which stands for nothing other than what the parties agreed.

The theory underlying the patent-eligibility of Beauregard claims seems to have been that a tangible carrier – such as a magnetic disc, or CD-ROM – is a ‘manufacture’, and therefore falls within this one of the four statutory categories under 35 USC § 101.  The question of whether the executable code stored on the carrier is sufficient to enable it satisfy the other requirements of the patent law, such as novelty and nonobviousness, is separate from this fundamental enquiry.

Note that under US law the carrier must be ‘tangible’.  Transitory carriers, such as electromagnetic signals propagating in free space, copper cables or optical fibre, are not considered to fall within any of the four statutory categories.  (See In re Nuijten (Fed. Cir. 2007, No. 2006-1371), which concerned claims directed to signals generated by a novel and nonobvious encoding method.)
Decision in CyberSource
CyberSource appears to throw the conventional theory of the patent-eligibility of Beauregard claims into doubt.  Here, the court has decided that the ‘computer readable medium’ claims are not patentable, despite defining a physical article of manufacture, because (slip op. pp 17-18):

Regardless of what statutory category (“process, machine, manufacture, or composition of matter” …) a claim’s language is crafted to literally invoke, we look to the underlying invention for patent-eligibility purposes. Here, it is clear that the invention underlying both claims 2 and 3 is a method for detecting credit card fraud, not a manufacture for storing computer-readable information.

… CyberSource has not met its burden to demonstrate that claim 2 is “truly drawn to a specific” computer readable medium, rather than to the underlying method of credit card fraud detection. …  we have never suggested that simply reciting the use of a computer to execute an algorithm that can be performed entirely in the human mind falls within the Alappat rule. Thus, despite its Beauregard claim format, … we treat claim 2 as a process claim for patent-eligibility purposes.

Here we see a similar ‘form versus substance’ approach to that which applies in Europe, and which has recently been applied by the Australian Patent Office in Discovery Holdings.

It is also notable that, notwithstanding the fact that the CAFC has (to our knowledge) never actually considered the patentability of claims written in the ‘Beauregard claim format’, the wording of the CyberSource opinion appears inherently to presuppose that such claims are patent-eligible, unless the ‘underlying invention’ is unpatentable.


The bottom line is that when considering claims directed to computer program products, a very similar approach applies regardless of jurisdiction (e.g. Australia, Europe, US).

It is fundamentally necessary to determine whether the ‘underlying invention’ (typically expressed as a method or process) is patent-eligible.  Certainly, for any given invention the answer to this question may be different in each jurisdiction.

However, if the invention is patentable, when suitably-claimed as a method or apparatus, then a corresponding claim directed to a ‘computer readable medium’ or the like, bearing program instructions embodying the same underlying invention, will also be patent-eligible.

Conversely, if the underlying invention is unpatentable, it will be of no avail to attempt to claim it in a tangible form, such as a computer program product comprising a recorded medium.


Emma_dddk said...

The courts reasoning is logically incorrect. Unless the 'substance'  being claimed is so broad that the claim covers every possibility of the substance in question, there is no reason to conclude that a specific embodiment of the substance is not patent-eligible.

The claim is either definite or indefinite. This substance vs form business is just another excuse to screw inventors.

Emma_dddk said...

if the formality of disclosure is as important as the substance being disclosed, why the APO never issued formality guidelines? Wouldn't clear guidelines make everyone's life alot easier?

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