The patentability of computer implemented inventions has been considered by Australian courts several times over the past 20 years. One of the central questions for the court to consider is whether a computer implemented invention is a "manner of manufacture" under section 18(1) of the Patents Act 1990 (Cth), which has been a fundamental requirement of patentability since the Statute of Monopolies of 1623.

A threshold for patentability

The Courts have held that, to meet the “manner of manufacture” test, a specification for a computer implemented invention must demonstrate that there is a “physical change” in a component of,  or information in, the computer.  For example, these inventions have each been held to include a “manner of manufacture”:

  • a computer representation of a curve;
  • a computer generated system for representation of Chinese characters; and
  • a method for writing information to a computer produced smart card.

In contrast, a method of structuring financial transactions and a method for commercialising inventions have failed to meet this threshold for patentability.

Financial Index not patentable

Most recently the Federal Court has decided (upholding a decision of a delegate of the Commissioner of Patents) that a method of constructing and preparing an index for a portfolio of investments weighted according to certain criteria could not be patented because the invention did not involve a “manner of manufacture”1.

The applicant, Research Affiliates, sought a patent for their "Valuation Indifferent Non-capitalisation Weighted Index and Portfolio", a system that had been licensed for use by fund managers.

The patent specification provided for a computer-implemented method of constructing data and a system for generating by computer a non-capitalisation weighted portfolio of assets, resulting in the generation of an index of such assets.

Research Affiliates argued that the index was patentable because it was a new method, system and computer program for passive investing that was based on indexes built with metrics other than market capitalisation or other measures (such measures being indifferent to the effect of traditional valuation effects).

It was argued that the index was not a scheme, but a specification for a process for producing “an economically valuable, artificially created state of affairs”.

Critical findings

The Federal Court decided that the index was not a manner of manufacture, and did not therefore qualify for patent protection because:

  • to qualify for protection, a process must belong to a “useful art” in the sense of an economic endeavour;
  • the process must produce a result which is an “artificially created state of affairs that is of utility in practical affairs and thus of economic significance”;
  • for computer programs the application of the program must produce a practical and useful result, involving more than “mere information”;
  • the method must produce an artificial state of affairs through a “tangible, concrete, physical or observable effect”, as distinct from an abstract idea, scheme or information;
  • the computer file containing the index which was the result of the process was “nothing more than data or information”;
  • the patent specification contained little information about how the process is to be implemented. For example, the specification did not state how data is accessed, the nature of the processing to identify the selection of assets, how the weighting function is accessed or how the relevant measure of scale is chosen, or how the weighting function assigns a weighting to assets; and
  • the method did not involve a specific effect being generated by a computer, but merely an index of “unspecific information”.

The Court concluded that in this case, the index generated was merely information. It stated that the index “is 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 method of the invention did not involve a specific effect being generated by a computer and did not therefore disclose a manner of manufacture.

Appeal

It seems that the Courts are still in some quandary as to the patentability of computer implemented inventions. On 12 April 2013 Research Affiliates obtained leave to appeal the decision to the Full Federal Court.

Implications

A patent specification for a computer implemented invention must demonstrate more than a method for the processing of information. The Commissioner for Patents and the Courts will consider whether the invention meets the requirement of a manner of manufacture by asking whether it produces a physical effect and an artificially created state of affairs, with an economic value.