17 October 2018

Australian Commissioner of Patents to Participate in Major Software Patent-Eligibility Appeal

AddedThe Commissioner of Patents has been added as an ‘interested person’ to the parties involved in the appeal (no. NSD734/2018) by Encompass Corporation Pty Ltd against the decision of a single judge of the Federal Court of Australia in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421.  As I reported back in June, the case involves a pair of innovation patents owned by Encompass, which survived attacks based on alleged lack of novelty and innovative step, only to be found invalid on the basis that they did not relate to patent-eligible ‘manners of manufacture’.  In reaching this conclusion, the judge appeared to be strongly influenced by the state of the prior art, as represented by the evidence upon which InfoTrack relied for its novelty and innovative step cases.

The Encompass appeal is of particular significance, because an expanded panel of five judges has been assigned.  Usually, only three judges sit on a Full Bench of the Federal Court of Australia to hear appeals against decisions of a single judge.  An expanded panel has the power to overrule prior three-judge decisions (such as those concerning the patent=eligibility of computer-implemented inventions in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177), and its decision will be binding on all Australian courts and tribunals (including the Patent Office), other than the High Court.

The nature of the Commissioner’s interest in the outcome of the Encompass appeal is therefore clear.  The eventual decision may determine whether the current approach of the Patent Office to computer-implemented inventions – which is increasingly reliant upon consideration of the state of the prior art – is legitimate, or whether the Office has in fact been denying patents on the basis of flawed reasoning.  (Not that there is anything – other than filing divisional applications and keeping fingers crossed for a change in law and/or practice – that applicants can do about this.)

Furthermore, the Commissioner is currently involved in three appeals before single judges of the Federal Court which will undoubtedly be impacted by the Encompass decision: Rokt Pte Limited v The Commissioner of Patents, NSD1292/2017; Repipe Pty Ltd v The Commissioner of Patents, WAD323/2018; and Aristocrat Technologies Australia Pty Ltd v The Commissioner of Patents, NSD1343/2018.  Of these, the Rokt case has already been heard and is awaiting judgment, so the potential for an outcome that is inconsistent with whatever the expanded Full Court decides in Encompass will be of concern to all parties involved (including, presumably, the judge).  The Repipe and Aristocrat cases appear unlikely to be heard until well into 2019 (a hearing date is yet to be set for Repipe, while Aristocrat is currently set down for hearing in September 2019), making it likely that a decision will be handed down in Encompass in plenty of time for the parties to consider its effect on their positions – with the possibility of this resulting in settlement prior to trial.

It appears that the Commissioner intends to make substantive submissions, and to be represented at the hearing in the Encompass case.  According to orders issued by the Chief Justice on 2 October 2018 [PDF, 160kB], the Commissioner is to file a summary of submissions of up to 10 pages in length by 4.00pm on 17 October 2018, following which both Encompass and InfoTrack will have a week within which to file and serve any submissions in reply, also of up to 10 pages.  The implication is clearly that one or both of the main parties to the appeal may take issue with what the Commissioner has to say.

The Commissioner’s Contribution

The big question, of course, is what position the Commissioner will take.  There are, it seems to me, three main possibilities.  Firstly, the Commissioner could side with Encompass.  After all, the Patent Office certified the claims of Encompass’ two innovation patents in the first place, so to now argue that the patents are invalid represents reversal of opinion.  The problem with this logic is that the patents were originally certified in December 2014 and February 2015 respectively, both prior to the Full Court’s decision in the RPL Central case and more recent changes in Patent Office practice in relation to computer-implemented inventions.  Furthermore, the Australian Patent Office has form in changing its mind n this area, with RPL Central itself being a case of an innovation patent that was initially certified, before the Office did an about-face – entirely of its own volition – on patent-eligibility when the patent was subsequently opposed on unrelated grounds by a third party.

Alternatively, then, the Commissioner could side with InfoTrack, and argue that the Full Court should uphold the original decision and confirm that the Encompass patents claim ineligible subject matter and are therefore invalid.

The third possibility – and I think perhaps the most likely – is that the Commissioner could walk a middle ground, by making submissions on the way in which the legal test of ‘manner of manufacture’ should (in the Commissioner’s view) be applied in cases involving computer-implemented subject matter, without directly addressing the outcome of applying the test to either one of the Encompass patents.

What could be very interesting about this third path is that it might finally compel the Commissioner to articulate some consistent general principles, and a coherent policy basis, for drawing a line between computer-implemented inventions that should be considered patentable, and those that should not.  Otherwise, it is difficult to see what benefit the five judges on the Full Bench of the Court might derive from the Commissioner’s involvement in the case.

Conclusion – What About Everyone Else?

To the extent that the Commissioner is likely to argue for an approach that it broadly consistent with the developing Patent Office practice in relation to subject-matter eligibility – which increasingly involves consideration of the state of the prior art, along with a ‘technical contribution’ approach based upon the four-step UK test developed in Aerotel/Macrossan [2006] EWCA Civ 1371 – the Commissioner’s involvement is unlikely to bode well for Encompass, which may well find itself defending its patents not only against the attack by InfoTrack, but also against unfavourable submissions by the Commissioner of Patents.

The significance of this is not, however, limited to the fate of Encompass’ patents.  The prospects for many current and future applicants for patents on computer-implemented inventions are likely to hinge on the outcome of this case.  It is too much to ask that Encompass bear the weight of defending the future potential patent rights of countless other applicants.  Its legal counsel have one job, and one job only, which is to act in the best interests of their client, without regard to the consequences for other parties now, or in the future.

So who is going to represent all of these other interested parties?  At this stage – and with the hearing dates still set at 8-9 November 2018, leaving little opportunity for any further intervention – it appears that the answer in ‘nobody’.  Perhaps there is still time for that to change.  This is surely an opportunity for an organisation such as the Institute of Patent and Trade Mark Attorneys of Australia (IPTA) to step up and speak for other users of the Australian patent system.  Otherwise we will continue to see policy, law, and practice in this area continue to be developed in a manner that is opaque, eschews consultation, and excludes all of those stakeholders that lack the significant financial means (in the six-figure range) required to pursue their cases through the Australian federal courts.


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