03 August 2022

Eligibility of Computer-Implemented Inventions Behind Unprecedented Numbers of Patent Office Rulings

image Once upon a time – not so very long ago, in fact – it was rare for the Australian Patent Office to issue a formal published ruling on the patent-eligibility of claims submitted for examination.  Indeed, ex parte decisions (i.e. those involving only the applicant and the Office) were generally in the minority, and most of those related to pharmaceutical extensions of patent term, allowability of amendments, and extensions of time to meet various deadlines.  Historically, the overwhelming majority of decisions have related to inter partes proceedings, such as patent oppositions.  That is, however, no longer true.  Following a peak in 2015, inter partes decisions have been falling, while ex parte decisions have been generally on the rise since 2011.  In 2021, ex parte decisions outnumbered inter partes decisions for the first time.  And in 2022 more ex parte decisions have been issued so far (i.e. up until the end of July) than in any past full year, with inter partes decisions once again lagging behind.

The sole driver of the growth in ex parte decisions has been patent-eligibility according to the ‘manner of manufacture’ test under Australian patent law.  The number of published Patent Office decisions relating to subject-matter eligibility of patent claims has risen from fewer than one per year in the 2000-2009 decade to 19 decisions in 2021 and 21 decisions in just the first seven months of 2022.  Since 2010 there have been 115 published decisions on eligibility, with the claims at issue being found ineligible in 100 of those cases.  Almost all of these have related to computer-implemented inventions.

The issue here is not that some subject matter is ineligible for patent protection.  That has always been, and will always be, true.  But the massive increase in published decisions is indicative of a more insidious problem.  Applicants rarely request hearings to appeal rejections by a patent examiner, and when they do it is usually because they genuinely believe that the examiner has got it wrong, and that the additional effort and expense is justified by good prospects of a better outcome when the matter is considered by an experienced hearing officer.  The unprecedented rise in applicants requesting hearings on patent-eligibility is due to a lack of clarity and coherence in the law.  And the fact that those applicants are so frequently wasting their time and money reflects the fact that the Patent Office has been championing an interpretation of the law that is at odds with the way in which it is being interpreted by the applicants and the patent attorneys advising them.

To be clear, the Patent Office on the one hand, and applicants and their attorneys on the other, are looking at exactly the same case law, and arriving at completely different conclusions as to how that law applies to particular claims.  Over the period during which this situation has arisen, there have been five Full Bench decisions of the Federal Court of Australia that should have served to clarify the law, but which appear to have had the opposite effect.  (For the record, those decisions are Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150, Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177, Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161, Commissioner of Patents v Rokt Pte Ltd [2020] FCAFC 86, and Commissioner of Patents v Aristocrat Technologies Australia Pty Ltd [2021] FCAFC 202.)

The Aristocrat decision is currently before the High Court, where it was heard on 9 and 10 June 2022 (transcripts at Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents [2022] HCATrans 103 and [2022] HCATrans 104).  While it might be hoped that the High Court will provide the clarity that has been lacking in the Federal Court decisions, I am not so optimistic.  Looking at what has been happening at the Patent Office over the past few years, I fear that whatever the High Court may have to say about the specific claims at issue in Aristocrat will be equally open to different interpretations when applied to different claims in other cases.

27 July 2022

SMEs, Universities and Research Organisations Most Disadvantaged by Lack of a Patent Filing Grace Period, says EPO Study

Seeking graceOver the past two decades or so, the number of major jurisdictions offering some form of general ‘grace period’ for filing of patent applications has grown significantly.  This has largely been driven by bilateral agreements (e.g. free trade agreements involving the United States), and regional agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), including provisions requiring the parties to provide a 12-month grace period.  With former hold-outs such as New Zealand, Japan and South Korea now having implemented grace periods in their national patent laws, Europe and China are currently the only two major jurisdictions in the world without a full-fledged grace period.  To my mind, it is an anomaly in this day and age of instantaneous global communication and publication that there are still countries that impose a strict novelty requirement, with the result that any public disclosure of an invention – accidental or deliberate – prior to filing remains fatal to the prospects of securing patent protection.

A new study recently published by the European Patent Office (EPO), The European patent system and the grace period: an impact analysis, is therefore a welcome contribution to ongoing debate as to whether, and how, the European patent system should harmonise with other major jurisdictions by introducing a general grace period.  Through surveys of users of the system between 2018 and 2020, the study seeks to:

  1. evaluate the impact that the lack of a general grace period in Europe has on applicants in various categories, including European companies, universities and research organisations, and foreign applicants from the US, Japan and South Korea;
  2. estimate the extent to which applicants would take advantage of any European grace period, and how this would depend upon the design of a grace period system; and
  3. compare the perceived level of legal uncertainty that would be generated by the introduction of a grace period under different design options.

The survey sample is not unbiased.  For example, it does not include, by definition, entities that did not file applications during the selected three year period due to prior disclosures that precluded obtaining European patent rights in the absence of a grace period.  Even so, it appears that many participants have experience with grace periods across different jurisdictions, and have been affected in various ways by the lack of a grace period in Europe.  The results are therefore interesting, and appear likely to be indicative of wider experience, although they may underestimate the demand for the introduction of a European grace period.

The study found that the absence of a grace period has forced many applicants to postpone disclosures, with the most heavily affected being European small and medium enterprises (SMEs) at 10.4% and European universities at 12.1%.  For these entities, around two-thirds of these postponements had adverse consequences.  Universities reported a negative impact mostly on reputation or other aspects of their operations (such as delayed research publications).  For SMEs, the negative impact was roughly equally split across development/commercialisation and reputational factors.

Nonetheless, European businesses (small and large) are generally successful in avoiding pre-filing disclosures, reporting less than 1% of cases in which an application was prevented by a disclosure.  European universities, on the other hand, reported 7.8% of European applications being prevented due to a pre-filing disclosure, presumably reflecting the difficulty of enforcing disclosure restraints in an academic environment.  US companies also reported being heavily hit by the lack of a European grace period, with 7.2% of applications prevented by a pre-filing disclosure.

The study further found that the extent to which applicants would take advantage of a grace period, should one be introduced in Europe would be substantially affected by its design.  An unrestricted (i.e. ‘US-style’) design – with no declaration requirements, or preservation of prior user rights – was estimated to result in just over 25% of all European patent applications relying on the grace period (which seems like a very high proportion to me).  On the other hand, an ‘Australian-style’ system – which preserves rights for third parties that commence use of an invention following a disclosure, but before filing of a patent application – was estimated to result in under 10% of applications relying on the grace period.

While grace periods obviously benefit applicants, they create additional uncertainty in that the maximum delay between disclosure of an invention and publication of any patent application revealing the extent to which the invention may receive legal protection is extended from 18 months to as much as 30 months.  The study found that the perception of legal uncertainty among surveyed users of the European patent system was relatively high, driven primarily by European companies which harbour the greatest concerns by a significant margin.  ‘Perception’ is a nebulous concept, however, and there are good reasons to suspect that fear of the unknown is a major driver of survey responses here.

Overall, I would suggest that this EPO study bolsters the case for the introduction of a general grace period in Europe.  The leading argument in favour remains that of international harmonisation, with most other major jurisdictions now providing some form of grace period.  Adding to this, the study indicates that the lack of any similar provision in Europe has an adverse impact on a small, but not insignificant, number of applicants and prospective applicants.  The major counter-argument is that grace periods create legal uncertainty.  However, it is mainly European businesses that – when asked – perceive this as a significant consideration.  European universities and research organisations, along with applicants of all kinds from other jurisdictions which already provide grace periods (the US, Japan and South Korea), have far fewer concerns.

06 June 2022

Aristocrat’s EGM Inventions Set for Showdown in the High Court

Arm WrestleOn 10 March 2022, the High Court of Australia granted Aristocrat’s application for special leave to appeal the decision of a Full Bench of the Federal Court, which found its claims directed to an Electronic Gaming Machine (EGM) implementing a new ‘feature game’ to be ineligible for patenting under Australia’s ‘manner of manufacture’ test of subject matter.  The case – which is Case No. S40/2022 – has since been making rapid progress.  Aristocrat filed its written submissions [PDF, 711kB] on 20 April 2022.  Two parties have applied for leave to appear as amici curiae: the Institute of Patent and Trade Mark Attorneys of Australia (IPTA), which filed its written submissions [PDF, 483kB] on 5 May 2022; and Fédération Internationale des Conseils en Propriété Intellectuelle (FICPI), which filed its written submissions [PDF, 382kB] on 4 May 2022.  The Commissioner of Patents filed her written submissions in response [PDF, 718kB] on 11 May 2022.  Finally Aristocrat filed its reply [PDF, 310kB] on 20 May 2022.  The scene is now set for a hearing, which is set down to take place on 9 and 10 June 2022 before a Full Court of seven judges, which is somewhat unusual (a panel of five judges is more common) and suggests that the High Court may have decided that it is finally time to settle the question of patent-eligibility of computer-implemented inventions in Australia.

The Aristocrat case raises interesting questions.  The claims of the patents at issue recite various hardware elements, some of which are common to all computers and some of which are specific to EGMs, along with software-implemented processes comprising the ‘feature game’.  (A ‘feature game’ is a secondary, or bonus, game triggered by the occurrence of a defined event in the ‘base’ game of spinning reels.)  It is common ground that the hardware elements are well-known in the field of electronic casino gaming, and that the new and inventive contribution resides wholly in the feature game implementation. 

At first instance, the primary judge (Justice Burley) considered that the appropriate approach to such a case involves a ‘two step’ analysis.  The first step is to construe the patent specification, from the perspective of the person skilled in the relevant art, to identify the claimed invention.  This is to be determined as a matter of substance, and not merely based on the particular form of the claims.  If the invention thus identified comprises patent-ineligible subject matter, such as a mere scheme, idea, or business method, then the second step involves an enquiry into whether the claimed computerisation involves some further contribution sufficient to render the invention patent-eligible.  Applying this approach to Aristocrat’s claims, Burley J found at the first step that Aristocrat’s claims were for ‘a machine of a particular construction which implements a gaming function’.  As a result, the question of patent-eligibility was resolved immediately – an EGM is not a mere scheme or a business method, and is thus a ‘manner of manufacture’.  There was, the judge concluded, no need to proceed with step two.

On appeal, a Full Bench of the Federal Court rejected the test proposed by the primary judge.  The majority (Middleton and Perram JJ) proposed an alternative two step test which asks firstly whether the claimed invention is ‘a computer-implemented invention’ and then – if so – ‘can the invention claimed broadly be described as an advance in computer technology’.  They determined that Aristocrat’s EGM was in substance a computer-implemented invention, and that the asserted contribution of the claimed invention ‘pertains only to the use of a computer’ and not to ‘the development or advance of computer technology’, such that the claims were not directed to patent-eligible subject matter.  In a separate judgment (which Aristocrat characterises as a ‘dissent’), Nicholas J arrived at the same ultimate conclusion, but disagreed with the majority that ‘an advance in computer technology’ is necessary for a computer-implemented invention to be patent-eligible.  In his view, such an invention may be patent-eligible if it results in innovation in ‘different fields of technology’ where technical problems that lie ‘outside the computer’ may be solved using ‘generic computing technology.  He proposed that the proceeding therefore be remitted to the primary judge to consider whether the inventions may be patentable as an advance in the field of gaming technology.

With all of these different lines of reasoning present in the judgments of the lower courts, the stage is surely set for a showdown before the High Court.  So what are the main arguments that each of the parties will be relying upon?

31 May 2022

Privately-Held Attorney Firms Have Built Filing Share Over the Past Decade, Thanks Largely to IPH!

Building While some doomsayers predicted that the rise of publicly listed groups of patent attorney firms would lead to terrible problems, including a reduction of competition, in the Australasian market for IP services, the sky has yet to actually fall.  After a few years of upheaval in the profession, two listed holding companies – IPH Limited (ASX:IPH) and QANTM IP Limited (ASX:QIP) – have established themselves, while the number of mid-sized firms has fallen slightly, as a result of acquisitions and mergers within the listed groups. 

Despite this, however, there is no evidence of any lessening of competition.  On the contrary, patent filing data shows that IPH’s strategies, in particular, have resulted in an increase in the share of new applications being handled by non-IPH, independent, firms.  Indeed, in the present financial year, a greater proportion of Australian patent applications have been filed by smaller independent firms than was the case a decade ago.

How has this happened?  Based on the data, I speculate that IPH’s strategies of acquisitions and mergers have resulted in its stable of firms becoming generally smaller – in the sense that they now collectively employ fewer attorneys than before acquisition – but also more efficient.  They can therefore be more profitable, despite attracting a smaller share of new filings.  Meanwhile, many of the attorneys who have left the IPH group firms have rejoined the independent sector, either as employees of established firms, or in a number of cases by establishing their own new firms.  The net effect is that IPH’s overall share of filings has risen – although by less than would have been the case if the firms it acquired had maintained their own individual shares – while the share of filings going to new and established firms in the independent sector has also risen.

As a result, rather than lessening competition, the rise of the listed groups may have strengthened the viability of many existing independent firms, while also contributing to the successful formation of a number of new independent firms.  It seems counter-intuitive, but that is what the data tells us is happening.  Of course, these gains have not come from nowhere, and it is probably fair to say that the ‘losers’ have been the firms, such as Fisher Adams Kelly, Callinans, Cullens, Watermark, Baldwins, and Shelston IP, that have been acquired and ‘integrated’ out of existence.

In this article, I will present the data that underlies my speculation.  In particular, I have analysed the share of Australian standard patent application filings by firms over the past decade (i.e. since before the public listings), to evaluate the relative performance of firms that are now incorporated into the listed groups, before and after acquisition, as against that of independent firms and attorneys.  You can decide for yourself whether you agree with my conclusions.  I would welcome any thoughts, in agreement or otherwise, in the comments.

26 May 2022

Division and Conversion – the Continuing Life of the Australian Innovation Patent

It's a convertible - geddit?!In the Patents chapter of its recently-published 2022 IP Report, IP Australia provides the usual annual filing statistics for 2021.  According to the report, there were 23,371 Australian standard patent applications filed as National Phase Entries (NPEs) from international applications under the Patent Cooperation Treaty (PCT), 9,026 standard applications filed directly in Australia, making up a record total of 32,397 new standard applications.  There were also 4,297 provisional applications filed, and 7,844 innovation patent applications ‘including … standard patents converted to innovation patents’.  On IP Australia’s figures, the top five applicants in 2021 were LG Electronics (259 applications), Huawei (255), OPPO (197), Nestle (157) and Apple (151).

All patent data is a moving target.  The patent office database is a living entity which is updated daily with new applications, and changes to existing applications, including status updates, completion of missing information, and even occasional backdating of records for reasons such as correcting errors or actioning successful applications for extensions of time to complete various actions.  It is not surprising, then, that there are some minor discrepancies between figures in the IP Report and numbers that I published back in January, when the dust was still settling on 2021.  The most notable difference is probably that I awarded the top filing spot to Huawei because, at that time, LG had only 251 filings officially recorded – an additional eight LG applications filed in December 2021 were yet to be fully processed.

A more substantial discrepancy is that I counted only 7,657 innovation patent filings in 2021.  A difference of 187 applications is hard to explain as a consequence ‘late year’ filings, given that most new innovation patent applications were filed prior to 26 August 2021, when the phase-out of the innovation patent system commenced.  The key to this difference is in the words I quoted from the Report above in italics – IP Australia’s numbers include applications that were converted from existing applications of other types, as well as newly-filed applications.

Whether conversions should be included with new filings or not really depends upon what you are trying to count.  On the one hand, converting an existing application to an innovation patent application does not add to the total number of applications in progress, because the original application is effectively replaced by the conversion.  On the other hand, the converted application is assigned a new number and a record of the original application remains in IP Australia’s database, and can be found via the AusPat online search system.  And, from IP Australia’s perspective, the ‘new’ innovation patent application has to be processed through the formalities examination, and granted as a patent, in exactly the same way as a ‘fresh’ filing.

A better approach may be to look more deeply at the circumstances in which conversions are occurring, and to try to account for the applicant behaviour in detail.  It is then possible to make an informed decision on how to account for all applications, depending upon your purposes.  Conversion of other application types to innovation patents remains relevant because, despite the phase-out of the system, it remains possible to convert any pending application filed prior to 26 August 2021.  It also continues to be possible to file new innovation patent applications as divisionals of any standard patent application with a filing date prior to 26 August 2021.

In this article I will therefore look at both division and conversion to innovation patents, and the circumstances in which these strategies have been used, as an insight into the continuing life of the Australian innovation patent during the phase-out period.  I will also endeavour to provide a ‘definitive’ count of new applications filed in 2021.

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