Commissioner of Patents Files Appeal in Case On Patent-Eligibility of Computer-Implemented Invention

There may have been little rest and relaxation over the Christmas and New Year period for lawyers working on behalf of the Australian Patent Office because, as I predicted back in December, on 16 January 2019 the Commissioner of Patents filed an application in the Federal Court of Australia for leave to appeal the decision of a single judge in Rokt Pte Ltd v Commissioner of Patents [2018] FCA 1988.  In that judgment, Justice Alan Robertson found that a claimed method and system for providing ‘a dynamic, context-based advertising system, introducing a distinction between an engagement offer, without a direct advertising benefit, and an advertisement designed to lead directly to the sale of the product’ is patent-eligible subject matter under the Australian ‘manner of manufacture’ test.  In doing so, he reversed the decision of a Patent Office Hearing Officer, who had found that ‘the substance of the invention in this case amounts to business innovation’, which was not patentable, and therefore refused Rokt’s patent application: Rokt Pte Ltd [2017] APO 34.

There is no great surprise in this move by the Commissioner.  As I have previously noted, judgment is pending in the appeal from Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421 – a case that has been heard by an expanded bench of five judges, and which concerns similar issues to those which arose in Rokt.  The Commissioner of Patents intervened in the Encompass appeal, and the Institute of Patent and Trade Mark Attorneys of Australia (IPTA) also sought to intervene, and filed written submissions.  The outcome in Encompass could well change the understanding of the law relied upon by the judge in Rokt.  The Commissioner will therefore want to ensure that the opportunity to have the facts in Rokt reconsidered under the law to be explained in Encompass is not lost.

The Encompass and Rokt cases are not the only appeals currently before the Federal Court in respect of Patent Office decisions refusing applications for patents on computer-implemented inventions.  The other ongoing cases are:

1. Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents (NSD1343/2018), which is an appeal from Aristocrat Technologies Australia Pty Limited [2018] APO 45, and is scheduled to be heard on 2-4 September 2019; and
2. Repipe Pty Ltd v Commissioner of Patents (WAD323/2018), which is an appeal from Repipe Pty Ltd [2018] APO 42, and is scheduled to be heard on 25-27 June 2019.

With the Encompass judgment expected in the first half of the year, and the Rokt, Aristocrat and Repipe appeals likely to be heard subsequently (assuming they are not resolved between the parties in the wake of the Encompass decision), 2019 could be the year – at last – that we get some clarity around what is, and is not, patent-eligible when dealing with computer-implemented inventions.

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Tags: Appeal, Australia, Business processes, Computer programs, Patent Office, Patentable subject matter

Will Patent Office Practice on Computer-Implemented Inventions Be ‘Rokt’ By Federal Court Ruling?

A judge of the Federal Court of Australia has reversed a Patent Office rejection of a computer-implemented invention – more precisely, a computer-implemented business process relating to the presentation of online advertising.  In Rokt Pte Ltd v Commissioner of Patents [2018] FCA 1988, Justice Alan Robertson found that a claimed method and system for providing ‘a dynamic, context-based advertising system, introducing a distinction between an engagement offer, without a direct advertising benefit, and an advertisement designed to lead directly to the sale of the product’ is patent-eligible subject matter under the Australian ‘manner of manufacture’ test.

The basic idea of the invention, although the details are not important, is to provide a mechanism whereby a user has an opportunity to engage with an offer while accessing a web site before being presented with targeted advertising.  In this way, advertisements are presented only to those users that are most likely to interact with them, and make a purchase.  Since advertisers must often pay for placement of their advertisements within web pages, the invention provides an improvement in that the costs associated with placing advertisements in front of consumers who do not interact with them may be reduced.

A Patent Office Hearing Officer had found that ‘the substance of the invention in this case amounts to business innovation’, which was not patentable, and therefore refused Rokt’s patent application: Rokt Pte Ltd [2017] APO 34.  Rokt appealed to the Federal Court.

In upholding the appeal, the court rejected an approach to identifying ‘the substance of the invention’ based upon comparing discrete claimed elements with the contents of the prior art, and considering only the contribution made by new or unconventional elements, which has increasingly become standard practice at IP Australia in recent times.  On the face of it, then, the Rokt decision should encourage some change in this practice, although the existence of a number of relevant higher court decisions, a pending judgment from an expanded Full Bench of the Federal Court, and a high likelihood that the Commissioner of Patents will appeal the Rokt decision means that any immediate practice change is unlikely.

Perhaps the most interesting – and, in my view, somewhat alarming – aspect of the Rokt case, however, is the extent to which the parties relied upon expert evidence.  Whether or not a claimed invention comprises patentable subject matter, i.e. is the kind of ‘thing’ for which a patent may be granted, is supposed to be a question of law.  Traditionally, therefore, it has not relied upon an extensive factual background, and particularly not upon evidence as to the state of the prior art, which is more properly the province of enquiries into whether an invention is novel and/or involves an inventive step.  However, largely due to the recent evolution of Patent Office practice, and in anticipation of the arguments the Commissioner was likely to run in the appeal, Rokt clearly felt obliged to back up its case with evidence from an expert witness, causing the Commissioner to follow suit.  Rokt’s expert was even cross-examined in court.

This does not seem right.  I therefore think it important to understand how we got here (spoiler alert – in my view it is IP Australia’s fault) and where we might be headed (hopefully back to more sensible ground, but that is in the hands of the Full Court).

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Tags: Australia, Business processes, Computer programs, Patent Office, Patentable subject matter

Computer-Implemented Inventions and the ‘Ball Point Pen Principle’ – Why the Australian Law on Patent-Eligibility is a Mess

The law – and Patent Office practice – relating to the assessment and examination of patents and applications for computer-implemented inventions in Australia is currently a complete mess.  I challenge anyone – whether an inventor, applicant, patent attorney, patent examiner, Patent Office hearing officer, IP lawyer, barrister or judge – to provide a coherent explanation of how to go about deciding whether an invention involving the use of a computer is eligible for patent protection.  I myself cannot do it, so I would genuinely love to have someone explain it to me.

In this article, I will show you where a unanimous Full Court panel of three judges of the Federal Court of Australia – the highest legal authority to have considered patent-eligibility of computer-implemented inventions in this country – clearly stated that it is impermissible to consider the state of the prior art in assessing whether or not the subject matter of an invention is patent-eligible, i.e. a ‘manner of manufacture’ in the terminology used in the Australian law.  Notably, subsequent Full Court panels have thrice accepted the correctness of this decision without criticism.  Then I will show you where a single judge of the Federal Court recently found an invention to comprise ineligible subject matter on the basis that various components of the claims are known from the prior art. 

I will also show you where a Patent Office hearing officer, in upholding the rejection of a patent application by an examiner, expressly stated that it is legitimate to consider the prior art when assessing patent-eligibility of computer-related subject matter.  I will point you to a recent opposition decision in which the hearing officer found that the claimed invention was not patent-eligible, despite an examiner having accepted the application, and the applicant being successful in establishing that the claims involved an inventive step over prior art raised by the opponent.  And I will identify a further four Patent Office decisions – in addition to 13 published since the beginning of 2017 that I listed last November – in which applications for computer-implemented inventions have been refused, including one relating to an application by Google which cites the aforementioned decision to justify considering prior art when deciding subject-matter eligibility.  In these decisions, the Patent Office is continuing to apply its adaptation of the England and Wales Court of Appeals’ four-step test for patentable subject matter, as set out in Aerotel Ltd v Telco Holdings Ltd; Macrossan’s Application, [2006] EWCA Civ 1371 (Aerotel/Macrossan), despite a lack of any clear authority for this approach in Australia.

Meanwhile, one of two Federal Court appeals of Patent Office decisions has been terminated following unsuccessful mediation, while the other has been delayed after the parties decided that expert evidence is required.  Yes – expert evidence to address whether or not an invention is a ‘manner of manufacture’, which is supposed to be a question of law, on which technical experts have no authority.

This is all, frankly, terrible for the state of patent law, and for high-tech innovation, in Australia.  Literally nobody really knows what the law is.  It is not just that patent applicants, and their attorneys, do not agree with the Patent Office about what is, and is not, patentable.  The Patent Office does not agree with itself!  Inventions that are receiving approval in examination are being rejected in opposition.  Attorneys, examiners, hearing officers and judges are finding it all but impossible to extract coherent principles from the relevant Full Court decisions, without exposing inconsistencies in those decisions.  In Federal Court, technical experts are being called in to shed light on something that is supposed to be a legal issue.  As I recently reported, the examination section that deals with inventions related to computing has the lowest acceptance rates in the Australian Patent Office.  All of this speaks to the uncertainty that currently surrounds what is, and is not, patentable when it comes to computer-implemented invention.

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Tags: Australia, Business processes, Computer programs, Innovation policy, Patent Office, Patentable subject matter

New USPTO Data Set Reveals Extent of Patent-Eligibility Confusion and Carnage

A new research dataset released by the US Patent and Trademark Office (USPTO) reveals that since the Supreme Court of the United States (SCOTUS) issued its 2010 ruling in Bilski v Kappos, the rate at which US patent applications are rejected on subject-matter grounds (as compared with other grounds of rejection) has increased from 8% to 13%.  (A hat-tip, by the way, to Dennis Crouch at the Patently-O blog for bringing this new dataset to my attention, and using it to compare rates of anticipation and obviousness rejections over the period covered by the data.)

As interested followers of patent-eligibility (you know who you are) will be aware, during this period the Supreme Court has issued four opinions restricting the scope of patentable subject matter: Bilski v Kappos 130 S.Ct. 3218 (2010), relating to ‘pure’ business methods; Mayo v Prometheus 132 S.Ct. 1289 (2012), relating to diagnostic methods; AMP v Myriad 133 S.Ct. 2107 (2013), relating to isolated genetic materials; and Alice v CLS Bank 134 S.Ct. 2347 (2014), relating to computer-implemented business methods.  Each of these decisions resulted, at least initially, in an increase in subject-matter rejections by the USPTO in the corresponding fields of endeavour.  And while there have been subsequent declines in the rates of Bilski- and Myriad-based rejections, the signs are that rates of rejection based on Mayo and Alice are at least steady, and possibly increasing.

Notably, updates to USPTO examination guidance on subject matter eligibility in July 2015 and May 2016, which were regarded by many as providing much-needed clarification expected to reduce the rates of rejection, do not appear to have had any impact on overall subject-matter rejection rates, or on the rates in the specific fields most affected by Bilski, Alice, Myriad, and Mayo.

Overall, the SCOTUS impact since 2010 appears to have been an increase in the relative number of patent-ineligible inventions for which applications are filed at the USPTO, averaged across all fields of endeavour, of around 60%!  Another, more pragmatic, way of looking at the data is to say that for every 100 applications filed, around five (i.e. one in 20) will now be rejected on subject-matter grounds, that would not have been rejected prior to June 2010.  Of course, the retrospective effect of the Court’s determinations on eligibility means that patents previously granted are not saved by preceding the recent decisions, which is why there has also been carnage in the US Federal Courts.

This all creates additional uncertainty around the availability and value of patents in affected technology areas, to the detriment of investors, innovators, and the patent system itself.

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Tags: Biotechnology, Business processes, Computer programs, Diagnostic methods, Patent analytics, Patentable subject matter, US

Continuing Hostility to Computer Implemented Inventions Lands the Commissioner of Patents in Court. Again. Twice.

If anyone thought that the decisions of the Full Federal Court of Australia in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 would clarify the law relating to patent-eligibility of computer-implemented inventions (CIIs), resulting in greater certainty for patent applicants, then the evidence suggests that those people should be sorely disappointed.  On the contrary, 2017 has seen the continuation of a series of Patent Office decisions that show a persistent gap between applicants’ expectations of what is patentable, and what IP Australia is willing to accept.  Two of these decisions, Todd Martin [2017] APO 33 and Rokt Pte Ltd [2017] APO 34 have now resulted in appeals to the Federal Court of Australia: Todd Martin v The Commissioner of Patents, QUD374/2017; and Rokt Pte Ltd v The Commissioner of Patents, NSD1292/2017.

Furthermore, in the most recent twist of fate for bemused patent applicants, the Patent Office appears to have adopted a version of the England and Wales Court of Appeals’ four-step test for patentable subject matter, as set out in Aerotel Ltd v Telco Holdings Ltd; Macrossan’s Application, [2006] EWCA Civ 1371 (Aerotel/Macrossan).  This approach has been applied in four of the decisions published so far this year rejecting CIIs.  Additionally, on 1 August 2017 the Patent Manual of Practice and Procedure (‘Examiners Manual’) was updated to make a variation of the Aerotel/Macrossan test the primary approach to examination practice in relation to patentable subject matter. 

It appears that IP Australia is continuing to ‘develop’ the law in this area, rather than following the ratio decidendi of the courts’ opinions, as it is bound to do.  It should come as no surprise, then, that this strategy has resulted in appeals to the Federal Court, which is the only way to establish whether the direction being taken by the Patent Office is ‘correct’ under the law.  And with 13 decisions – so far, in 2017 – rejecting claims to CIIs, there has been no shortage of opportunities for applicants to appeal!

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Tags: Australia, Business processes, Computer programs, Patent Office, Patentable subject matter

Principles of Patent-Eligibility Continue to Trouble Applicants and Examiners in Australia

The law in Australia regarding patent-eligibility of computer-implemented inventions was supposedly ‘settled’ in May 2016, when the High Court rejected an application for special leave to appeal against a decision of the Full Bench of the Federal Court of Australia, thus leaving Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 as – for the moment, at least – the last word on the subject.  Yet, clearly, patent applicants and the Australian Patent Office continue to disagree on what, exactly, these decisions mean in particular cases.  In July 2017 alone, there were four decisions issued by the Patent Office resulting from hearings relating to objections against alleged computer-implemented inventions on grounds that each was not for a ‘manner of manufacture’, i.e. patent-eligible subject-matter under Australian law.

In Todd Martin [2017] APO 33, claims directed to a system and method for tracking usage of athletic equipment of an athlete using a GPS-enabled device and a computer server were refused.  In Rokt Pte Ltd [2017] APO 34 claims directed to a computer implemented method for linking a computer user to an advertising message by way of an intermediate engagement offer were refused, following the applicant’s efforts to amend in view of an earlier decision in Rokt Pte Ltd [2016] APO 66.  The claims at issue, and which were also refused, in Discovery Life Limited [2017] APO 36 were directed to a computer implemented method for of managing a life insurance policy with a related medical scheme.  Finally, in Bio-Rad Laboratories, Inc. [2017] APO 38, an examiner’s objections against claims directed to a method of establishing a statistically valid assay mean and assay range for a particular lot of a quality control material were upheld by the Hearing Officer, although Bio-Rad has been provided with an opportunity to amend its application to try to overcome the objections.

I am not particularly surprised by the outcomes in Todd Martin, Rokt, or Discovery Life.  This is not to say that they are necessarily correct – I have not spent the time to review the patent specifications in the detail that would be necessary to form a considered view on the matter.  However, on its face each of the three decisions is consistent with the principles set out in Research Affiliates and RPL Central, i.e. the claims appear to recite the use of generic computer technology as a practical implementation tool, and if this generic technology is disregarded, what is left is a scheme, abstract idea, or business process of the kind that has not generally been regarded as patent-eligible.  The Full Court in RPL Central was very clear about the treatment of such cases: ‘Where the claimed invention is to a computerised business method, the invention must lie in that computerisation. It is not a patentable invention simply to “put” a business method “into” a computer to implement the business method using the computer for its well- known and understood functions’ (at [96]).

Bio-Rad, however, is a different matter.  While the invention in this case involves the development and use of a new statistical analysis procedure, which is conveniently implemented by using a computer for its well-known and understood ability to store information, and to perform computations more rapidly and accurately than a human calculator, it is not apparent that disregarding the computer-implementation leaves only patent-ineligible subject matter.  On the contrary, regardless of how the invention is implemented – and even if it were carried out by a person using a pen and paper for calculation – it would still provide significant economic and technical advantages in terms of reduced cost and resource consumption/wastage in the production of quality control material for use in medical testing.

This is not to say that there are no issues with Bio-Rad’s claims – it is certainly arguable that they are overly broad, and encompass subject matter that does not provide the stated advantages of the invention.  However, these are not conventionally eligibility issues, and it is therefore not clear how or why patent-eligibility came to be the central question in the Bio-Rad case.  This suggests to me that the Patent Office is continuing to grapple with the principles of patent-eligibility set out in Research Affiliates, RPL Central, and D’Arcy v Myriad Genetics Inc [2015] HCA 35, and that applicants therefore still cannot expect predictable or consistent outcomes as examiners endeavour to apply these principles on a case-by-case basis.

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Tags: Australia, Business processes, Computer programs, Patent Office, Patentable subject matter

Identifying Patent-Eligible Software Claims... Using Software

As I have previously reported, the major and immediate impact of the US Supreme Court’s Alice decision in June 2014 was to reduce the rate of ‘business method’ patents issued by the US Patent and Trademarks Office (USPTO) by three-quarters, while having a negligible effect on ‘technical’ software-implemented inventions.  While the data in my earlier article ended in December 2015, I have now been able to update my results to the end of March 2017, as shown in the chart below.  There has been no change in the overall trend during the intervening 15 months, with ‘business method’ patent grants still running at around 50% of 2007 numbers, while technical software patents, and patents across all areas of technology, are issuing at rates nearly twice those of 2007.

In a recent post on the Bilski Blog, US patent agent Mark Nowotarski has made similar observations about the impact of Alice on ‘business method’ patent grants, going on to analyse the characteristics of those patent claims are are still being allowed in the USPTO’s business method Art Units.  He has noted that it is commonly by including ‘physical limitations’ (e.g. reciting hardware such as ‘mobile devices/sales kiosks’ or ‘physical sensors’) and/or ‘software limitations’ (e.g. reciting technical functionality such as ‘graphics/ image processing’ or ‘cryptography/security’) that applicants have been able to overcome Alice-based subject-matter rejections.

This got me thinking.  If there are common forms of technical language that arise in patent-eligible claims, then might it be possible to train a machine-learning system to predict whether a particular claim is, or is not, likely to be patentable?

It turns out that this does indeed appear to be possible.  I built a machine-learning model using data published by the USPTO, including the claims of 24,462 recently-abandoned 4967 recently-allowed applications, all examined within ‘software’ and ‘business methods’ Art Units.  In cross-validation tests (i.e. using a portion of the known data for training, and the remainder to test model performance) I was able to achieve around 75% prediction accuracy.  In trials of a hand-picked ‘random’ sample of more recent patents and published applications, not in the training/test set, the model correctly classified all actually allowed claims (of four examples) as patentable.  It also classified the claims of four abandoned applications as unpatentable, and two published-but-rejected-and/or-amended claims as unpatentable.  In only one case did the model classify a claim that had been rejected on subject-matter grounds as likely-patentable.

The model may thus be capable, with a probability of success of over 70%, of determining whether or not a proposed claim to a computer-implemented invention includes sufficient technical content to overcome a subject-matter-based rejection, at least under the Alice test as it is applied by the USPTO.

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Tags: Business processes, Computer programs, Machine learning, Patent analytics, Patentable subject matter, PEDS, US

New USPTO Data Set Reveals Recent Trends in Software and Business Method Patent Grants and Filings

The US Patent and Trademarks Office (USPTO) has released a new public patent data service, which it calls the Patent Examination Data System (PEDS).  PEDS is intended to replace the PAIR Bulk Data (PBD) service, and has a very similar interface for filtering, viewing and downloading bulk US patent data, as well as an application programming interface (API) for live access.  Although PEDS is still under development, is missing some data fields that are present in PBD, and currently provides fewer filtering options than PBD, it is already ahead in a number of important respects. 

Firstly, where I have previously noted that the PBD set was incomplete in relation to patents granted in 2016, this problem seems to have been resolved in PEDS.  Secondly, PEDS includes the ‘transaction history’ for each application in the data set.  Readers familiar with the USPTO’s Patent Application Information Retrieval (PAIR) online system will be aware that the PAIR interface includes a ‘Transaction History’ tab that displays a list of all actions and events that have taken place on the file, along with their corresponding dates.  This information is now included in PEDS.  The USPTO has indicated that, in future, PEDS may include enhancements to search additional fields, additional data from tabs in Public PAIR, and the Image File Wrapper (IFW).

The availability of this new, and more complete, data set has enabled me to revisit the analysis of software and business method patents that I reported back in January, with the benefit of more than a year of additional data.  As a result, I have been able to observe how the trends in patent grants have progressed since the end of 2015.  In short, there has been no further change.  The rate of grant of patents assigned to software Art Units within the USPTO continues to track – and even slightly exceed – the overall rate of grants across all technologies, while business method patent grants remain in the doldrums, flat-lining at the rate to which they fell shortly after the US Supreme Court’s Alice decision in June 2014.

The additional data has also enabled me to look at trends in filing behaviour, which may be indicative of how applicants have responded to Alice and the USPTO’s subsequent changes in examination practice and guidance as applied to software and business method patent applications.  Interestingly, this data indicates that the rate of applicants filing for patents in relation to ‘business method’ inventions has been in steady decline since June 2014, but that there has been an equally steady increase in the rate of filing of applications for software inventions.

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Tags: Business processes, Computer programs, Patent analytics, Patentable subject matter, PEDS, US

Is This The Exact Day That IP Australia Turned on ‘Business Method’ Patents?

On 30 October 2008, the US Court of Appeals for the Federal Circuit (CAFC) handed down its en banc decision in In re Bilski, affirming the rejection of patent claims directed to a method of hedging risks in commodities trading.  I have analysed IP Australia patent examination data, which provides reason to believe that this specific event triggered an unacknowledged change in examination practice within the Australian Patent Office.  This change subsequently resulted in a number of published decisions in which claims to computer-implemented ‘business methods’ were found to be unpatentable, and two appeals that went as far as a Full Bench of the Federal Court of Australia.  It is also reasonable to suppose that numerous further applications simply lapsed without fanfare following objections raised by patent examiners.

Most readers would be aware that the Bilski case went on further appeal to the US Supreme Court, which again confirmed the rejection in an opinion issued on 28 June 2010.  The Supreme Court decision was almost immediately cited by an Australian Patent Hearing Officer, who found that a claimed method for commercialising inventions does not constitute patentable subject matter under the Australian ‘manner of manufacture’ test: Invention Pathways Pty Ltd [2010] APO 10.

The Invention Pathways decision resulted in an official change to Australian Patent Office practice whereby a claimed invention, to be patent-eligible, would not only need to involve a ‘concrete effect or phenomenon or manifestation or transformation’ (as per Grant v Commissioner of Patents [2006] FCAFC 120), but one that is ‘significant both in that it is concrete but also that it is central to the purpose or operation of the claimed process or otherwise arises from the combination of steps of the method in a substantial way’.

Invention Pathways was the first of a series of Patent Office decisions refusing or revoking patents for so-called computer-implemented ‘business methods’ based on this logic, including Iowa Lottery [2010] APO 25, Research Affiliates, LLC [2010] APO 31 and [2011] APO 101, Myall Australia Pty Ltd v RPL Central Pty Ltd [2011] APO 48, Discovery Holdings Limited [2011] APO 56, Network Solutions, LLC [2011] APO 65, Jumbo Interactive Ltd & New South Wales Lotteries Corp v Elot, Inc. [2011] APO 82, Sheng-Ping Fang [2011] APO 102, and Celgene Corporation [2013] APO 14.  The Research Affiliates and RPL Central matters both ultimately ended up on appeal before a Full Bench of the Federal Court of Australia, which confirmed that the claims in each case were not patent-eligible, albeit for reasons somewhat different from the Patent Office’s ‘centrality of purpose’ test.

While published reasons are the most visible and detailed outcomes of Patent Office decision-making, they typically have their genesis some months – or even years – earlier, with one or more reports issued by examiners.  The original Research Affiliates application, for example, was first rejected by a patent examiner on 28 October 2009, eight months prior to the Invention Pathways decision.  It is also notable that this type of ex parte hearing, i.e. involving only the patent applicant ‘appealing’ an examiner’s decision, has historically been relatively rare.  Prior to Invention Pathways, I count a total of just 11 published decisions of this type under the Patents Act 1990 (which commenced on 1 April 1991).  This number roughly doubled in the three years following Invention Pathways, driven by rejections of ‘business method’ applications.  It is therefore difficult to avoid inferring that something changed in the prior period that led to this unusual spike in hearings.

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Tags: Australia, Business processes, Computer programs, IPGOD, Patent analytics, Patent Office, Patentable subject matter

How the Fate of Software and Business Method Patents has Turned on USPTO Directors and the Courts

The ‘death of software patents’ in the US has been greatly exaggerated.  That is, so long as you exclude patents covering computer-implemented business/financial processes and schemes, which may well be, if not quite yet deceased, for the most part (about 75%, in fact) mortally wounded. 

But for those ideologues who are trying to convince themselves, and others, that software-implemented inventions are simply no longer validly patentable, I am afraid I have bad news.  I have analysed US Patent and Trademark Office (USPTO) data covering millions of patents issued over the past decade, which shows that patents covering computer-implemented inventions, outside the particular fields of ecommerce, business and finance, not only are not in any form of decline, but have never, at any time over the past decade, shown any significant difference in grant rate from the bulk of patents issued by the USPTO across all fields of technology.

Patent claims classified by the USPTO as relating to ecommerce, business methods and finance, are another matter.  The Supreme Court’s Alice decision, issued in June 2014, led to an immediate, dramatic and sustained fall in the number of patents being granted in these fields of endeavour.

Interestingly, the top US Court’s previous pertinent decision, Bilski (issued in June 2010, shortly after I started this blog), had no noticeable impact on the rate of grant of business method patents.  This is, perhaps, unsurprising given that Bilski was the result of an appeal against a rejection of the application at issue by the USPTO, which had already been upheld by the Court of Appeal for the Federal Circuit (CAFC).  Thus it did not represent, or require, any significant change in policy or practice at the Patent Office which the Supreme Court confirmed had been right to reject Bilski’s application.  To the extent that Bilski changed anything with regard to business method patents, it was following the CAFC decision, rather than that of the Supreme Court.

In fact, the last event prior to Alice that had a significant effect on rates of grant of business method patents was the 2009 transition from Jon Dudas to David Kappos as Under Secretary of Commerce for Intellectual Property and Director of the USPTO (via John Doll, who was acting in the role between Dudas’ resignation on 20 January and Kappos’ confirmation on 9 August).  Granting of business method patents had been in decline under Dudas, however this trend was soon reversed under Kappos, with issue of business method patents once again tracking rates across all technology areas by the first quarter of 2010.

My analysis also shows that the CAFC’s Bilski decision and the early months of the Kappos era are associated with an increase in the average word-count of independent claims in granted business method patents, and also in patents directed to other forms of computer-implemented invention, along with a significant jump in the average number of claims in issued business method patents.  These effects are almost certainly a result of changes in examination practice at the USPTO, likely influenced at least in part by Bilski.

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Tags: Business processes, Computer programs, Patent analytics, Patentable subject matter, US

Does Australia Have a (US-Style) Two-Step Test for Patent-Eligibility?

In its Mayo/Myriad/Alice series of cases, the US Supreme Court has established a two-step test in order to determine whether a claimed invention defines patent-eligible subject matter or not.  In the first step, the claims are examined to determine whether they are ‘directed to’ a patent-ineligible concept, i.e. an abstract idea, law of nature or natural phenomenon.  If not, then the subject matter of the invention is eligible for patenting.  Otherwise, the analysis proceeds to step two, in which the claims are further analysed to determine whether or not they comprise some additional element, or combination of elements, that is ‘sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.’

In contentious cases the focus has generally fallen upon the second step of the analysis.  This is not surprising, considering that the reason these cases are contentious in the first place is because they are typically those in which the claims appear on their face to encompass ineligible subject matter, e.g. abstract ideas in the case of computer-implemented inventions such as in Alice, or natural phenomena such as the isolated DNA in Myriad or the presence of metabolites in blood samples in Mayo.  It might be said in such cases that ‘the vibe’ of the claim is that it looks like it might be ineligible, and that it is therefore necessary to proceed to step two in order to determine whether or not this initial impression is correct.

However, two recent decisions of the US Court of Appeals for the Federal Circuit (CAFC) confirm that the first step of the Mayo/Myriad/Alice framework is not merely a formality, but must be given proper consideration.  Enfish, LLC v. Microsoft Corp. (Fed. Cir. 2016) [PDF, 605kB] concerned software-implemented methods and systems operating on a new and more efficient database format.  The court found at the first step of the Alice analysis that the claims were not directed to an abstract idea, on the basis that ‘[s]oftware can make non-abstract improvements to computer technology just as hardware improvements can’ and that it is ‘relevant to ask whether the claims are directed to an improvement to computer functionality versus being directed to an abstract idea’.  In McRO, Inc. v. Bandai Namco Games America Inc. (Fed. Cir. 2016) [PDF, 341kB] the court found that claims directed to generating automated lip-synchronization and associated facial expressions for 3D animated characters (e.g. in video games) were, similarly, not abstract, and patent-eligible at the first step of the test.

It should not come as any great surprise that the first step of the Alice framework actually has some teeth.  The test is supposed to apply to patent claims in all fields of technology, and clearly there are very many patents and applications that relate to wholly uncontentious subject matter for which patent-eligibility is barely a consideration.  In all such cases, the claims are effectively passing at the first step of the test.  The surprise, for many, is that the CAFC has finally started to recognise and apply this reality in relation to computer-implemented inventions.

This raises the question of whether there is an analogous process that takes place in Australia.  As a practical matter, I believe that there is, however it has not been explicitly set out by the courts, and it remains an unacknowledged aspect of examining patent claims for eligibility.  This is unfortunate, because the existence of an implicit step in the eligibility analysis is an obstacle to consistency and objectivity in the assessment of patent claims.

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Tags: Australia, Business processes, Computer programs, Genetic technology, Patentable subject matter, US

Australian High Court Rejects ‘Software Patent’ Appeal

Today, Thursday 5 May 2016, the High Court of Australia dismissed the application by RPL Central Pty Ltd for special leave to appeal last December’s decision of the Full Court of the Federal Court of Australia that its patent claims covering a computer-implemented method of evidence gathering for recognition of prior learning (RPL) were not directed to patent-eligible subject matter (i.e. a ‘manner of manufacture’) under Australian law.

The Court’s decision was made solely on the basis of the parties’ written submissions.  No hearing was conducted.  I understand that this is a relatively recent practice of the High Court, in order to expedite the disposition of many special leave applications, for which a hearing is not deemed necessary.  No reasoning for the decision has been provided as yet, although I understand that brief reasons will be published, and made available via AustLII’s High Court of Australia Special Leave Dispositions Decisions database under the neutral citation [2016] HCASL 84.

The RPL Central case has been a long journey, with more than its share of ups and downs.  The innovation patent (no. 2009100601) was filed in June 2009.  Between August and October of that year it was examined and certified.  No objections were raised regarding the subject matter of the patent.  In March 2011 an opposition was filed, raising only the ground of lack of novelty.  The Commissioner’s Delegate hearing the opposition raised the issue of lack of ‘manner of manufacture’ (i.e. subject matter eligibility), and requested submissions on this ground.  The opponent’s objection of lack of novelty was readily dismissed, but the Delegate found the patent invalid on subject matter grounds. 

This decision was appealed to the Federal Court where, at first instance, Justice Middleton upheld the appeal, and overturned the Patent Office ruling.  The Commissioner of Patents appealed to the Full Court, which reversed the primary judge’s decision in its December 2015 judgment.

With the High Court’s rejection of RPL Central’s application to appeal that decision, all avenues are exhausted.

So this is the way it ends – not with a bang, but a whimper.

Update: Friday 6 May 2016

The brief reasons of the High Court have now been published:

The Full Court was plainly correct and, accordingly, none of the applicant's proposed grounds of appeal enjoys sufficient prospects of success to warrant the grant of special leave to appeal.

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Tags: Appeal, Australia, Business processes, Computer programs, Patentable subject matter

Government Backs Australian FinTech Innovation – It’s Just a Pity It’s Not Patentable!

On 26 February 2016 the Australian Treasurer, Scott Morrison, announced (in Shanghai) that the Australian Government ‘is delivering support to further back Australia's financial services technology – FinTech – in the burgeoning Asian market’.  Morrison further said that ‘FinTech will have an important role to play in Australia's innovation future, that's why the Turnbull Government is backing it in with real support in the world's fastest growing economic region’.  Two days earlier, the Treasurer had made a joint announcement with the Prime Minister, Malcolm Turnbull, about the establishment of a new FinTech expert advisory group chaired by Craig Dunn, Chairman of not-for-profit FinTech hub Stone & Chalk and Director of Westpac Bank. 

None of this is especially new, or a huge surprise.  FInTech has been on the PM’s radar since he toppled Tony Abbott for the top job last September.  In early December 2015, Turnbull (flanked by Morrison, Assistant Treasurer Kelly O'Dwyer and Assistant Innovation Minister Wyatt Roy) fronted an audience of 150 start-up entrepreneurs at Stone & Chalk, saying ‘There has never been a more exciting time to be in FinTech’ and spruiking his government's ‘absolute commitment to innovation and supporting all of your imagination and creativity’.  In his recent statement, the Treasurer confirmed that ‘backing innovation in financial services is a priority for the Government.’

This is all well and good, perhaps, if you are in the Department of Prime Minister and Cabinet, or in Treasury handing out relatively small sums of money to FinTech hubs (Morrison’s special announcement of support in Shanghai included a promise of a somewhat miserly $150,000 for the Stone & Chalk FinTech Asia program).  But I have to wonder whether the Department of Industry, Innovation and Science (DIIS) is on the same page.  Indeed, the apparent inability of government bureaucracy’s left hand to keep track of what its right hand is doing makes me wonder whether the DIIS is even aware that it might not be in lockstep with the PM and Treasurer.  The smiling, supportive presence of Wyatt Roy at last December’s Stone & Chalk love-in suggests perhaps not.

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Tags: Business processes, Computer programs, Patentable subject matter, Public policy

RPL Central Requests Leave to Appeal Software Patent Eligibility Ruling to High Court of Australia

On 7 January 2016, RPL Central Pty Ltd filed an application with the High Court of Australia, requesting ‘special leave’ to appeal December’s ruling of a Full Bench of the Federal Court of Australia that its patent claims covering a computer-implemented method of evidence gathering for recognition of prior learning (RPL) were not directed to patent-eligible subject matter (i.e. a ‘manner of manufacture’) under Australian law.

The fact that the special leave application has been filed has now been published on the Federal Court website.

How Does the Special Leave Process Work?

It is important to understand that there is no automatic right to have an appeal heard by the High Court.  Any party wishing to appeal must persuade the Court in a preliminary hearing that special reasons exist which justify the appeal being heard.  These special leave hearings are brief and potentially brutal.  Under Rule 41.11.3 of the High Court Rules 2004 the applicant (in this case, RPL Central) is permitted just 20 minutes to present its case for the grant of leave.  The respondent (in this case, the Commissioner of Patents) then also has 20 minutes, typically used to argue that the case is insufficiently exceptional to justify a hearing by the High Court.  Finally, the applicant has a further five minutes to reply.  The Court then renders its decision on the application on-the-spot.

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Tags: Appeal, Australia, Business processes, Computer programs, High Court, Patentable subject matter

Australian Appeals Court Kills Another Patent on a Computer-Implemented Invention

On 11 December 2015, a Full Bench of the Federal Court of Australia handed down a unanimous judgment in Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177, overturning the decision of the primary judge and finding a computer-implemented method (which the court characterised as a ‘business method’ or ‘scheme’) to be unpatentable subject matter under Australia’s ‘manner of manufacture’ standard.

Regular readers of this blog will know that I have been involved in this matter from the outset.  I drafted the original patent specification on behalf of Watermark client RPL Central Pty Ltd.  I represented the client in guiding it through examination, resulting in its approval and certification by IP Australia.  I again represented the client in opposition proceedings, in which we successfully defended against allegations that the invention lacked novelty (raised by the opponent), but went down on the basis that the claimed invention was not a patent-eligible ‘manner of manufacture’ (raised not by the opponent, but by the Commissioner’s Delegate, i.e. the Hearing Officer in the opposition).  I have continued as an advisor in the Federal Court appeals, first through the ‘high’ of success before a single judge, and now the ‘low’ of this decision of the Full Court.

It will therefore come as no great surprise that I am disappointed by this decision.  I am disappointed for our client, for whom this has been a roller-coaster ride (which may not be over yet).  I am disappointed for other operators of small, innovative technology businesses, because I genuinely believe that the kinds of innovation represented by the patent in this case ought to be protectable under our patent laws.  I am disappointed on behalf of patent applicants and their advisors, who will find this decision to be quite unhelpful in clarifying where the boundary lies between what is patentable and what is not in the realm of computer-implemented inventions.  And, of course, I am disappointed for myself, because obviously I would have preferred to win!

These are all personal observations, which have nothing to do with the merits of the judgment.  As is my normal practice in cases where I and/or Watermark are directly involved, I shall refrain, for the present, from revealing my own views on the judgment, and stick to the facts of what has been decided. 

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Tags: Appeal, Australia, Business processes, Computer programs, Patentable subject matter

Are Subject Matter Rejections Hurting the Patent System?

The primary requirements for an (alleged) invention to be patentable are that it must relate to eligible subject matter (e.g. not be a law of nature, mathematical equation or abstract idea), it must be new (i.e. possess novelty) and it must not be obvious (i.e. must involve an inventive step).

Subject matter eligibility is currently highly contentious in many jurisdictions.  As recent decisions of the US Supreme Court (in the Alice and Myriad cases) and the Australian Federal Court (in the Research Affiliates and Myriad cases) demonstrate, the most strongly contested subject matter relates to the areas of business processes, computer software and biotechnology. 

But even so, qualification as patent-eligible subject matter remains a threshold test, and should not be a substitute for the proper evaluation of an invention for novelty and inventiveness.

The problem with evaluating novelty and inventive step is that it often involves hard work.  To show that something is not new, or that it is obvious, requires evidence of prior art, which in turn may require diligent searching, extensive reading, and careful construction of legal and technical reasoning to explain why the requirements for patentability are not satisfied.

It is, therefore, so much easier if an invention can be knocked out at the first hurdle, and be deemed fundamentally ineligible for patent protection, without having to go to all the trouble of conducting a comprehensive prior art search.

Recent developments in various jurisdictions (e.g. the US, Australia and the UK) suggest that, in ‘difficult’ fields of technology, the cart is getting put before the horse.  Subjective evaluations of the ‘merit’ of an invention, i.e. that it perhaps seems unworthy of patent protection, may be leading decision-makers at all levels to turn too quickly to subject matter grounds as a basis for rejecting claims.  Legal reasoning may therefore be developed in order to arrive at the desired outcome, without sufficient regard to consistency across different cases. 

Subject matter is becoming a form of ‘obviousness by stealth’ as courts start looking for the ‘inventive contribution’ made by a claimed invention as a basis for assessing eligibility.  The case law is becoming increasingly incoherent, as decision-makers try to rationalise their own findings in light of prior decisions that are themselves inconsistent.  Certainty is eroded as a result, and applicants, patentees and other stakeholders are losing faith in a system that appears increasingly capricious.  I also suspect that the quality of prior art searching may be suffering, with examiners now relying on subject matter rejections in cases that appear ‘too hard’ to search effectively.

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Tags: Business processes, Computer programs, Patentable subject matter

Research Affiliates: A ‘Hard’ Case Making Bad Law

It is sometimes said that ‘hard cases make bad law’.  This is not actually generally true, and good and bad law emerges from a wide variety of different cases.  Perhaps, in fact, the quality of judges, or the quality of argument presented at trial, are more important factors than the difficulty of the case.

That being said, ‘hard’ cases do present judges with special challenges.  In this context, a hard case is one in which the most literal or straightforward application of the law – i.e. the binding precedents and relevant statutory provisions – is liable to produce a result that may strike the judge as illogical, unfair, absurd, unjust, or just plain wrong.

The temptation in such cases must be very great to try to find a ‘creative’ approach to applying the law in order to make the legal outcome match the subjectively ‘right’ decision.

Patent law is not immune from such ‘hard’ decisions.  Sometimes, for example, an alleged infringer’s efforts to ‘work around’ a patent, and escape infringement on a technicality, are so flagrant that judges are inclined to find ways to broaden the interpretation of patent claims in order to capture the infringer’s variation.

So what would happen if a judge (or, indeed, three judges) were to look at an invention and think ‘surely that cannot be eligible for a patent?’  And what if they then looked at the current state of law and found that, in fact, a literal and straightforward application of the law could well lead to the conclusion that the suspect invention is patent-eligible?  The answer might be that you end up with a decision like that of the Full Court of the Federal Court of Australia in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150.

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Tags: Appeal, Australia, Business processes, Computer programs, Patentable subject matter

Australia’s ‘Alice’: Appeals Court Denies Business Method Patent

In a unanimous decision, a Full Bench of the Federal Court of Australia has ruled that the ‘substance’ of an invention trumps the form in which it is claimed, dismissing Research Affiliates’ appeal against a decision of a single judge of the court, which found its invention, relating to the construction and use of passive portfolios and indexes for securities trading, ineligible for patent protection: Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150.

The decision canvasses many of the same issues tackled by the US Supreme Court in its recent Alice Corporation v CLS Bank ruling.

In essence, the Australian court addressed the question of whether an invention that would otherwise be ineligible for patent protection – in this case, a scheme for generating a financial index which can be used, for example, to measure the rise and fall in value of an investment portfolio – becomes patentable when implemented in software.  This has been an open question in Australia since the court’s 2006 decision in Grant v Commissioner of Patents [2006] FCAFC 120, in which it found that an asset protection method was ineligible for patenting.  In that case, however, the court was not required to consider whether the outcome may have been different had all or part of the method been performed using a computer.

In the Grant case the court stated that, for a claimed invention to be patent-eligible, a ‘physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required’.  Where a computer is involved there is always, of necessity, some physical effect or change of state, at least within the electronics of the machine.  The question that the court has not previously addressed is whether or not this is sufficient to confer patent-eligibility? 

In Research Affiliates, the court has answered this question in the negative, finding that describing a scheme – no matter how ingenious it may be – that is not itself eligible for patenting, and merely giving directions to implement it on a standard computer is not sufficiently transformative.

However, while – subject to any appeal to the High Court – this decision would seem to spell an end to ‘do it on a computer’ patent claims in Australia, the Full Court has been cautious (certainly more so that the US Supreme Court in its recent Alice v CLS Bank decision) to ensure that most computer-implemented inventions remain patent-eligible in Australia.

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Tags: Appeal, Australia, Business processes, Computer programs, Patentable subject matter

‘Software Patents’ – Time to End the Uncertainty!

Nobody – other than the most deluded fantasists among the anti-software-patents brigade – actually believes that all computer-implemented inventions are, or should be, unpatentable.  To deny patent protection to an invention merely on the basis that it involves the use of a programmed computer leads to absurd outcomes, such as an improved control system for an industrial process being patentable when implemented using gears and pulleys, or using resistors, capacitors and transistors, but not if it is implemented by way of a microprocessor programmed to provide precisely the same functions.

This is a result of the kind of muddled thinking that treats ‘digital’ as a magical incantation rather than what it actually is – another (admittedly powerful) tool in the engineer’s toolkit.

Having said that, it is also apparent that only the most deluded pro-patent fantasist would believe that absolutely anything created on a computer is, or should be, patentable.  In Europe, and many other jurisdictions with similar provisions (including, very soon, New Zealand), patents are expressly prohibited on computer programs ‘as such’.  The recent Alice decision by the US Supreme Court clearly establishes that there are at least some forms of computer-implemented financial processes that are nothing more than ‘abstract ideas’ accompanied by directions to ‘do it on a computer’, and thus unpatentable.

So, we can conclude with some certainty that some computer-implemented inventions are patentable, and some are not.  The problem is that nobody – not the courts, not the national patent offices, not the law-makers – seems to wish to take any responsibility for deciding exactly where to draw the line.  I have no idea where the line is, despite the fact that I read and write about this subject all the time, and practice in this area on behalf of clients every day.  I do not know anyone, inside or outside the profession, in Australia or anywhere else, who knows where the line is – and I would not trust or choose to work with anyone who claims that they do!

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Tags: Australia, Business processes, Computer programs, Patentable subject matter, US

Is Australian Court Looking to Uncle Sam on Patent-Eligibility?

The question of what kinds of things should be eligible for patent protection is one that has been running in parallel in Australia and the US in recent years. 

Methods of medical treatment came under scrutiny of the US Supreme Court in Mayo Collaborative Services v Prometheus Laboratories, Inc and the Australian High Court in Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (see High Court Rules Methods of Medical Treatment Patent-Eligible). 

The Supreme Court considered gene patents in Association for Molecular Pathology v. Myriad Genetics, Inc, while a corresponding Australian patent came before the Australian Federal Court in Cancer Voices Australia v Myriad Genetics Inc (see Australian Federal Court Declares Isolated Human Genes Patentable). 

And the recent Supreme Court decision on computer-implemented business processes, in Alice Corporation Pty Ltd v CLS Bank International addresses similar issues to those tackled by the Australian Federal Court in Research Affiliates, LLC v Commissioner of Patents (see Research Affiliates Loses Appeal Against Business Method Rejection).

The Australian Myriad and Research Affiliates cases are currently both on appeal to full benches of the Federal Court.  The Myriad appeal was heard on 8 August 2013, less than two months after the US Supreme Court handed down its corresponding decision.  The Research Affiliates case was heard on 18 November 2013, and in the intervening period the Supreme Court has managed to hear and decide the Alice case.  We continue to await decisions from the Australian court in both the Myriad and the Research Affiliates cases.

While the delays in deciding these cases are not inconsiderable, they do not appear to be particularly unusual by current standards of the Full Court – another recently-decided patents appeal, Generic Health Pty Ltd v Bayer Pharma Aktiengesellschaft [2014] FCAFC 73, was heard on 26-27 August 2013, with judgment handed down on 19 May 2014.

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Tags: Australia, Business processes, Computer programs, Patentable subject matter, US