In a decision almost a year in the making, the Full Court of the Federal Court has dismissed the appeal of Emmett J’s decision in Research Affiliates upholding both His Honour’s and the Commissioner of Patents’ finding that where a claimed invention being ‘in substance a scheme’, computer implementation will not render such a scheme patentable subject matter within the meaning of section 18(1)(a) of the of the Patents Act 1990 (Cth) (the Act).The first patent application in this matter was filed in January 2005 and a divisional application filed in December 2010. In the Patent Office, the Commissioner’s Delegate concluded that none of the claims in either the Parent or Divisional Applications were for a manner of manufacture and so did not comply with s 18(1)(a) of the Act.
The Delegate found that, while implemented in a computer system, the method of the claimed invention was wholly characterised by constructing data from weighting assets based on using various received data sets. That is, the delegate said, the claim as a whole defines the steps to generate the data to support a passive investment ‘scheme’ per se. Furthermore, the computer implementation was found by the Commissioner to be directed to known computer apparatus and software operating in previously known manner and therefore merely of “incidental use” to the purported invention.
The sole question for consideration by the Court both at first instance and on Appeal was whether the invention as claimed in either of the Parent or Divisional Applications is a ‘manner of manufacture’ within the meaning of s 6 of the Statute of Monopolies. The invention, as set out in the specification, provides a method of constructing data indicative of a non-capitalisation weighted portfolio of assets, the method being implemented in a computer system and comprising a series of steps commencing with the receipt in the computer system of data gathered in regard to a plurality of assets. Other aspects of the invention provide a system for constructing a non-capitalisation weighted portfolio of assets. In each case, a computer is used to receive the data and to provide “weighting means” for weighting each of the plurality of assets.
Both at first instance and on appeal it was deemed that for addressing the sole question of whether the invention as claimed is a ‘manner of manufacture’ it was only necessary to consider claim 1 of the Divisional Application. The invention of claim 1 is recited as:
A computer-implemented method for generating an index, the method including steps of:
(a) accessing data relating to a plurality of assets;
(b) processing the data thereby to identify a selection of the assets for inclusion in the index based on an objective measure of scale other than share price, market capitalization and any combination thereof;
(c) accessing a weighting function configured to weight the selected assets;
(d) applying the weighting function, thereby to assign to each of the selected assets a respective weighting, wherein the weighting:
(i) is based on an objective measure of scale other than share price, market capitalization and any combination thereof; and
(ii) is not based on market capitalization weighting, equal weighting, share price weighting and any combination thereof;
thereby to generate the index
On appeal, the Court focused on clarifying the concept of “invention” as something that incorporates the jurisprudence that has developed in Australia with reference to “the celebrated case” of NRDC, a case from 1959 which is the binding test in Australia for establishing a “manner of new manufacture” under s18(1) (a) of the Act.
The Court endorsed the principles established in NRDC and as applied in two recent cases dealing with s18(1)(a) of the Act, Grant and Myriad. Grant also concerned itself with the patentability of business schemes, albeit schemes that are not implemented by computer, whereas Myriad dealt with the patentability of isolated human genetic materials.
The appellant had accepted that the only physical result generated by the method of the claimed invention is a computer file containing an index. The trial judge at first instance found that the index generated is nothing more than a set of data. The index was found to be simply information, which was “no more a manner of manufacture than a bank balance, whether represented as data in a bank’s computer, written on a piece of paper or kept in a person’s memory”. The trial judge finding that the method of the claimed invention did not involve a specific effect being generated by a computer. The ‘mere’ use of a computer necessarily carries with it the writing of information into the computer’s memory.
The Full Court did not approve of the trial judge’s suggestion that the question of patentability can be answered by the observation that such a method is simply analogised in the writing of the information to memory being the modern equivalent of writing the schemes on a piece of paper as it ignored the utilisation of the power of a computer to generate information. The Full Court being wary that such a finding may also render many methods unpatentable that were in substance inventive uses of a computer utilising previously unknown abilities of software and hardware.
The Full Court however seized on the analogy drawn upon by the primary judge, being that his Honour drew a distinction between ‘mere’ use of a computer and a method involving a specific effect being generated by the computer for the improvement in the operation of, or effecting the use of the computer.
The determination whether the claimed invention is truly “an artificially created state of affairs” in satisfaction of NRDC is made not by some mechanistic application of the criterion of artificiality or physical effect, but by an understanding of the claimed invention itself. The invention is to be understood as a matter of substance and not merely as a matter of form.
The court ultimately looked to the substance of what was being claimed and noting that the established principal that business, commercial and financial schemes, as such, are not patentable (Grant).
It was agreed by the appellant at trial that the only difference between carrying out the method of the claim and using the method to generate the index with pen and paper was that the claim required it to be done on a computer.
The Full Court found in construing the claim that aside from the method being one that is ‘computer-implemented’, there is nothing in the character of the steps comprising the generation of the securities portfolio index that relates the method to any particular hardware or software implementation and on this basis there was no technical contribution to the invention or artificial effect of the invention by reason of the intervention of the inventors.
The Full Court took the words of NRDC, stating:
…the process does not produce “either immediately or ultimately, a useful physical result in relation to a material or tangible entity.” The claimed method, the result of the ingenuity of the inventors, does not produce such a result; the ingenuity is in the scheme. Again, drawing from NRDC, there is a useful result of the claimed process but there is no physical thing “brought into existence or so affected as the better to serve man’s purposes”. There is no “physical phenomenon in which the effect, be it creation or merely alteration, may be observed”.
The Full Court sought to distinguish such computer-implemented schemes from the recent decision of Middleton J in RPL Central, in which the question of patentability centred around a program that enabled the retrieval of relevant data from a remotely located server via the internet and which generated questions for, and presentation of questions to, the user based on this data.
The program in RPL was found to be an artificially created state of affairs as an effect of the process in the claim was experienced by the individual user on a computer and in which “the involvement of the computer in the invention is described in these claims in such a manner that it is inextricably linked with the invention itself”.
The Full Federal Court in the appeal noted that while decisions from overseas are not binding, the theory and purpose of patent legislation has much in common. On this basis the Court saw fit to assess international jurisprudence regarding computer-implemented inventions noting, inter alia, there is a need to ensure compliance with Australia’s international obligations under the TRIPS Agreement. In doing so the court assessed the UK and US positions on computer-implemented schemes by discussing the UK Court of appeal judgments in Aerotel and Symbian and the US courts decisions in Bilski and Alice.
In summary the Court found that the appellant’s claim would not be patentable subject matter in either the UK or the US subject to the reasoning in each of these cases.
This case turns on its facts, and moreover the pending RPL decision is highly anticipated, but by its reasoning it now may becoming clear that under Australian law where a computer is merely the means to implement a process which would otherwise not be patentable subject matter, such as a mere scheme, the use of the computer will not render substance of the claim patentable. In saying this, it should also be noted that there is no provision under the Australian Patents Act that expressly excludes business methods and computer programs from the ambit of patentability.