16 December 2019

Abstract Ideas and ‘Software Patents’ – Two Sides to the Story

SoftwareI recently wrote about the decision of the Federal Court of Australia in Repipe Pty Ltd v Commissioner of Patents [2019] FCA 1956, in which two innovation patents owned by RePipe were found to be invalid, and thus liable to be revoked, on the ground that neither was for a patent-eligible ‘manner of manufacture’ under Australian law.  In that article, I noted that even when software innovators, like RePipe, make substantial investments and incur significant business risks in devising, developing, and bringing an invention to market, they may find themselves unable to access the same protection under the Australian patent system that is available to innovators in other fields of technology.  I observed that while some relatively trivial, low-social-impact, and low-risk innovations, such as a ‘packing box for shuffled playing cards’, enjoy uncontroversial patent protection, RePipe’s sophisticated, high-impact, high-risk, development of a networked system for improving workplace health and safety, is denied protection on the basis that it is a ‘mere scheme’ implemented using ‘standard’ or ‘generic’ hardware and software.

I questioned the policy basis for this distinction, in view of the classical economic rationale for having a patent system, viz., to provide an incentive for individuals and businesses to engage in the risky process of invention, development, and marketing of new products and services.  Which is all very well when this process of commercialisation actually takes place, and there is a genuine investment to be protected.  But that is not always the case.  Sometimes, the only ‘investment’ is in the preparation and filing of a patent application.  And where the claimed invention is software-implemented, a suspicion may arise that the real ‘work’ of innovation, which would justify the grant of exclusive patent rights under the classical rationale, can be avoided. 

I believe it is this suspicion that has caused courts and patent offices – along with legislators, in those jurisdictions that have chosen to impose statutory restrictions on patenting of ‘computer programs’ – so much angst.  This has led, in turn, to confusion and inconsistency in decision-making, such that the patent system can appear capricious, unpredictable, and discriminatory when applied to software innovations. This is bad for innovative businesses that can add confusion and uncertainty around the availability of patent protection, for themselves and their competitors, to all of the other risks and unknowns that they already face in developing and commercialising new products and services.

The patent system is supposed to be ‘technology neutral’, and capable of adapting to new developments and the emergence of new technologies.  However, it plainly is not.  The primary legal tests for determining what is, and is not, deserving of patent protection – novelty, inventive step, and the provision of a sufficient disclosure of the invention – are proving inadequate to deal fairly and consistently with computer-implemented innovations.  As a result, the blunt instrument of subject matter eligibility has become the tool of choice for striking down claims that are deemed to be unworthy of protection.

14 December 2019

Transformation of the Australian Patent Attorney Profession Turns Ugly with Firms Fighting in Federal Court

BoxingA dispute between the firm of Pizzeys Patent and Trade Mark Attorneys – owned by listed entity IPH Limited (ASX:IPH) – and a firm established by two former Pizzeys principals, has gained public exposure through a decision of Justice Jagot in the Federal Court of Australia: Pizzeys Patent and Trade Mark Attorneys Pty Limited v Bennett [2019] FCA 2084.  The court has determined that Pizzeys is entitled to an order for preliminary discovery, which will compel patent attorneys William Bennett and Martin Richardson, and their new firm RnB IP Pty Ltd, to produce a range of documents that Pizzeys hopes will enable it to determine whether Bennett and Richardson have breached terms of their contracts with, and other obligations to, their former employer, including ‘non-dealing’ and ‘non-solicitation’ restraints.

The basic facts underlying the dispute are straightforward, and uncontested.  As noted, both Bennett and Richardson were principals of Pizzeys, where Bennett was also the managing principal and a patent attorney director.  Both were employed under contracts of employment which included confidentiality and post-employment non-competition, non-solicitation and non-dealing provisions.  On 19 March 2018 and 1 April 2018 respectively, Bennett and Richardson resigned from Pizzeys.  It appears that both were subject to substantial notice periods, and did not actually leave Pizzeys officially until the end of September 2018.  They subsequently established RnB IP, which first filed Australian patent applications on behalf of clients in April 2019.  Additionally, at around the same time, Pizzeys began to receive requests from existing clients to transfer patent files to RnB IP.

According to Pizzeys (although I imagine that this is disputed, given the date at which RnB IP seems to have commenced operations) the non-compete restraint expired on 30 September 2019, while the non-dealing and non-solicitation restraints expire on 30 September 2020.  The non-dealing restraint bars Bennett and Richardson from ‘performing work or providing services of the kind performed or provided by Pizzeys to actual or prospective customers or clients of Pizzeys or the IPH Group with whom [they] had dealings in the period two years preceding the termination of employment’.  The non-solicitation restraint bars them from ‘soliciting or interfering with clients or customers of Pizzeys or the IPH Group.’

In addition to possible breach of these specific restraints, Pizzeys is also concerned that Bennett and Richardson may have breached obligations in relation to use of Pizzeys confidential information, obligations under the Corporations Act 2001, other contractual and equitable obligations, and that Bennett, Richardson and RnB IP may have engaged in an ‘unlawful conspiracy’ to engage in these various breaches.

After reading the court’s decision, I had a look at filing data for Pizzeys and the IPH Group over the past two years, and of RnB IP since it commenced operations.  Based on what I see, I would frankly be surprised if the additional competition from RnB IP is having a significant impact on Pizzeys’ business.  It has experienced no apparent downturn in filings since April 2019.  Almost all of the business in question comprises ‘agency work’, i.e. filing and prosecution of patent applications on behalf of foreign applicants, on instructions from patent attorney associate firms in other jurisdictions.  Most of these associates spread work around multiple Australian firms anyway based on a variety of considerations, including technical expertise, reciprocity, and personal (as distinct from firm-level) relationships.  Unsurprisingly, filings by RnB IP are dwarfed by those of the IPH Group as a whole, particularly following IPH’s acquisition of the former Xenith IP firms (Griffith Hack, Shelston IP, and Watermark) in August 2019.

06 December 2019

Repipe Rebuffed in Appeal Against Rejection of Patent on Computer-Implemented Invention for Workplace Safety

Networked SystemIn a decision issued on 22 November 2019 (Repipe Pty Ltd v Commissioner of Patents [2019] FCA 1956), Justice McKerracher in the Federal Court of Australia has found two innovation patents owned by RePipe Pty Ltd to be invalid, and thus liable to be revoked, on the ground that neither was for a patent-eligible ‘manner of manufacture’ under Australian law.  Coming on the heels of the recent five-judge decision in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161 (for more on which, see ‘Generic’ Implementation of an Abstract Idea is not Patentable, but Does Prior Art have Anything to Do with It?), the Repipe decision is further evidence – assuming any such evidence was needed – of the difficulties now inherent in securing patent protection for computer-implemented inventions, even when the inventions in question satisfy all other requirements for patentability, and reflect considerable investment in the development of innovative and useful technology that was not previously available in the market.

Repipe confirms that where the overall functionality of a computer-implemented invention relates only to excluded subject matter, such as an abstract idea or a business scheme, then the fact that the functionality is embodied via software in a technical system is, in itself, insufficient to confer patent-eligibility.  There must, additionally, be some patentable ingenuity (whatever that might mean) in the implementation itself.  Of course, the relevant implementation details would necessarily be reflected in the claims, and the scope of protection available is therefore correspondingly limited.  This applies regardless of the cost and business risk involved in devising, developing, and bringing the invention to market.

As a result, many software innovators seem to be second-class citizens under the Australian patent system when compared with those working in other fields of technology.  It is difficult to discern any coherent policy basis for this distinction.  The classical economic rationale for having a patent system is to provide an incentive for the risky process of invention, development, and marketing of new products and services.  Once an invention has proven to be commercially successful, competitors can enter the now-established market at considerably reduced risk, even if their production costs are the same as those of the innovator.  Why, then, should patent protection be considered justified for, say, a ‘packing box for shuffled playing cards’, but not for RePipe’s invention of a sophisticated networked system for improving workplace health and safety?  I know which one of these involved the larger investment and business risk in development, and I know which one offers the greater social benefit … and it is not the one that is entitled to patent protection in Australia!

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