Patenting of software and computer-implemented methods is a controversial area of law.  A recent, much-awaited decision of the Federal Court in Research Affiliates LLC v Commissioner of Patents [2013] FCA 71 found a claim to a computer-implemented method of generating a financial index did not involve a sufficient level of computer integration to be considered patentable subject matter.

The Claimed Invention

The decision focused on a claim to a ‘computer-implemented’ method involving the following steps:

  • accessing data relating to assets;
  • processing the data to identify a selection of assets for inclusion in the index by some objective measure (other than share price, market capitalisation or any combination thereof);
  • accessing a weighting function configured to weight the selected assets; and
  • applying that weighting function to assign each asset a weight, based on some objective measure (qualified to exclude factors such as share price, market capitalisation or any combination or weighting thereof), to generate an index.

Arguments for Patentability

It is well established that, to be patentable in Australia, an invention must involve an artificially created state of affairs in a field of economic or commercial endeavour, and must produce some physical effect. 

Research Affiliates argued that the implementation of the claimed method on a computer involved an artificially created state of affairs, and a physical effect inside the computer. The economic value of the method was not in question – evidence was provided that the ‘Colonial Index’, generated using this method, was licensed for significant fees to owners of assets and to fund managers.

Research Affiliates argued that this reasoning was in line with previous decisions, which had held that computer-implemented methods for graphically representing a curve, or Chinese language characters, or writing information to smart cards comprised patentable subject matter.

Justice Emmett’s decision

Justice Emmett, however, rejected this reasoning.   He stated that merely writing data in a computer’s memory could not be regarded as a physical effect because in that case any scheme implemented using a computer would comprise patentable subject matter.

In making his decision, Justice Emmett took various factors into consideration, including that:

  • the patent specification provided few details about the computer processing steps;
  • the claimed method did not improve the operation of or effect of the use of a computer; and
  • the claimed method could readily have been “carried out manually”, and the computer implementation is 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”.

Ramifications of the decision

Justice Emmett stated that “there is a sharp contrast between a computer-generated curve, or a representation of Chinese characters, or the writing of particular information on a smart card, on the one hand, and the quite unspecified index, on the other.” Unfortunately, His Honour appeared to consider that this contrast is self-evident, so offered little practical guidance to assist future applicants in making this distinction.

This decision may be appealed, and we are still awaiting another Federal Court decision on this issue in RPL Central Pty Ltd v Myall Australia Pty Ltd.  However, in the meantime, patent applicants in this field should be reminded of the importance of preparing patent specifications which emphasise the involvement of a computer, and where possible emphasise technical steps and advantages as well as the broader commercial value of the invention.