IP Australia’s Escalating War on ‘Business Methods’

We 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!

Tags: Australia, Business processes, Patent Office, Patentable subject matter, Politics