Internationally, the patentability pendulum for computer implemented inventions has swung from the ‘technical character’ requirement of the European Patent Office, past the ‘machineor- transformation’ test of the US Supreme Court decisions Gottschalk v Benson, Parker v Flook andDiamond v Diehr to the ‘anything under the sun’ excesses of State Street Bank. It has then swung back to the hard-line ‘machine-or-transformation’ test of pre Supreme Court Bilski, before softening to the post-Supreme Court Bilski series of patentability factors.

In the recent case of Alice Corporation Pty Ltd v CLS Bank International 1, the US Supreme Courtreaffirmed the current US position that systemclaims covering the use of a generic computerto implement an abstract idea do not ‘transform’a patent-ineligible method into a patent-eligibleinvention.

Along the way, the boundaries of what can be protected have been shaped by notions like ‘field of use limitations’, ‘post-solution activity’ and the ‘pre-emption of mathematical algorithms’.

Japan, China and the Republic of Korea have all swung toward the ‘technical’ end of the patentability spectrum, and most countries continue to be influenced by developments notably in Europe and the United States.

Concrete, tangible or observable effect

The Australian Patents Act relies upon the wonderfully adaptive phrase ‘manner of manufacture’ to define patentable subject matter. From NRDC2,we know that ‘manner of manufacture’ is required to involve an ‘artificially created state of affairs in a field of economic endeavour’. We also know from the 1992 decision in IBM3 – which related to displaying a curve from computed curve coordinate values – that software implemented inventions are patentable if they produce a (commercially useful) “concrete, tangible or observable effect”.

Science or technology

Potentially in response to the business method patent explosion and a desire for the Australian patent system to move towards the ‘technical’ end and away from the ‘anything under the sun’ end of things, the Deputy Commissioner of Patents developed the proposition that ‘artificially created state of affairs’ discussed by the High Court in NRDC requires ‘the application of science or technology in some material manner’.

Unfortunately for the Patent Office, ‘the application of science or technology’ test was rejected in the Re Peter Szabo and Associates Pty Ltd decision.4


A ‘physical’ requirement was arguably added to the IBM test in Grant.5 The claimed invention was a pure business method and related to an asset protection method that was not implemented by any technology. The Court decided that the same patentability test should apply for business methods as for any other claimed invention – namely does the invention produce any artificial state of affairs in the sense of a concrete, tangible, physical or observable effect?

A physical effect will exist where a component is physically affected, or a change in state of information in a part of the machine occurs (i.e. a change in data stored in memory). The physical effect need not always be a physically observable end result in the sense of a tangible product.


The Patent Office then chose to get ‘technical’ with the ‘physical’ requirement. The Examiners’ Manual of Practice and Procedure in 2008 stated:

‘Business methods that claim a technical solution or technical advantage, for example, computerised accounting, monitoring, reporting or analysis systems generally satisfy the criteria of a manner of manufacture, as do business methods involving electronic commerce systems. The artificially created state of affairs resides in the technological implementation. This technological implementation satisfies the ‘physical effect’ requirement provided that the implementation is directly involved in the operation of the method …’

Direct involvement

The Patent Office subsequently added a ‘direct involvement’ element, arguing in issued Examination Reports that the mere use of a physical form or device, or a physical effect or transformation that arises incidentally or indirectly in its operation, is not sufficient to change the fundamental character of the subject matter claimed.

Next, the Patent Office started creating its own set of precedents, including the Invention Pathways6 decision. The invention related to an ‘invention specific commercialisation system to facilitate success of inventions’, which included a number of manual steps and just one computer implemented step of storing a checklist. The Patent Office held that in this case ‘the physical effect … is … peripheral and subordinate to the substance of the claimed method which is a scheme for the commercialisation of inventions’. This meant that a method is not patentable because it uses some part of a computer or other physical device in an incidental way, but rather the computer must be central to the purpose or operation of the claimed process.

This decision has probably left us in the position that patentable computerimplemented inventions directly involved some part of a computer or other physical device in a way that was central to the purpose or operation of the claimed process, and produced a concrete, tangible, physical or observable effect. Whatever that means!

However, the pendulum is about to swing again. We currently await decisions from two Full Federal Court Appeals which could once again change the patentability requirements for computer-implemented inventions in Australia.

In Research Affiliates7, the invention was a method for generating an index representing the relative value of a notional portfolio of stocks. The claims defined that the method was ‘computer-implemented’ but otherwise included no technology elements or features. In the decision under appeal, the Court found that merely writing data in a computer’s memory could not possibly be regarded as a physical effect because in that case any scheme implemented using a computer would comprise patentable subject matter.

The Court considered that in this case a computer was not “central to the operation” of the claimed method.

In RPL Central8, the invention was a method of gathering evidence for the purpose of assessing an individual’s competency relative to a recognised qualification standard. The claims extensively defined the use of a computer, the internet and a remote server in the performance of the method steps.

In the decision under Appeal, the Court rejected the premise that Grant and like decisions imposed ‘a separate or new requirement of substantiality or physical effect’. Assessing patentability by firstly stripping away the computer aspects of the claims, and then considering whether what is left is a method for performing an aspect of a business, was also rejected.

The Court noted in RPL Central that: ‘the specification and claims in issue in this case provide significant information about how the invention is to be implemented by means of computer. The computer is integral to the invention as claimed … ’.

This was contrasted with Research Affiliates where the only physical result generated was a computer file containing an index (simply a set of data), and the specification contained virtually no substantive detail about how the claimed method was to be implemented by a computer. The claimed method could readily have been ‘carried out manually’ and the computer implementation was considered to be merely ‘the modern equivalent of writing down the index on pieces of paper,’ and ‘no more than the use of a computer for a purpose for which it is suitable’.

Patent specification is critical

The RPL Central and Research Afflilitates decisions highlight the absolute necessity for patent specifications to be prepared in a manner that increases the likelihood of their validity, in particular by (i) extensively embedding computer and preferably hardware elements in the claims and (ii) highlighting in the description and drawings the central role of these computer and hardware elements in the performance of the invention.

Tougher test applied for now

In spite of the divergence between RPL Central and Research Affiliates decisions, the Patent Office has chosen to apply the tougher Research Affiliates position when examining computerimplemented inventions. The decisions on the appeals from RPL Central and Research Affiliates are due to be handed down any time now.