Since the 2001 Australian decision in Welcome Real-Time SA v Catuity Inc (2001) 113 FCR 110, it has been clear that certain forms of automated business methods may be patented in Australia. However, a number of recent decisions of the Australian Courts (which have been followed by the Patents Office) demonstrate that merely computerising established business methods will not result in a valid patent.

At the most fundamental level, the first requirement to obtain a valid patent is that the invention disclosed must be a “manner of manufacture”, in accordance with section 18(1)(a) of the Patents Act 1990 (Cwlth). This phrase has been a key concept in patent since the Statute of Monopolies in 1624, and a decision of the Federal Court last year has considered its meaning in a context of modern computing.

The leading Australian case on what manner of manufacture means remains National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252, which stated that “manner of manufacture” should not be interpreted as being only an industrial process or procedure that results in a tangible product, as the word manufacture would be conventionally understood. Instead, an invention will be a “manner of manufacture” if it produces an “artificially created state of affairs” that has some economically valuable utility.

A scheme or process that does not result in an artificially created state of affairs, ie a concrete or observable effect, will not be patentable according to the decision of the Full Federal Court in Grant v Commissioner of Patents (2006) 154 FCR 62. But where does that leave patents for an entirely computerised process? It is difficult to know to what extent a process performed entirely by a computer can produce an “artificial state of affairs”.

The Federal Court considered this question in Research Affiliates LLC v Commissioner of Patents (2013) ALR 724. In this case, Research Affiliates appealed against the Commissioner’s decision to reject 6 patent applications on the basis that the applications were not claiming a manner of manufacture. The applications related to a method of constructing an financial index regarding investment assets, by the amalgamation and processing of data available about the assets, and applying a (non-capitalisation based) weight to the information obtained about each security, based on measures other than the asset price. This index was then licensed to large investment companies like Colonial First State, and used to create index funds for investors.

Emmett J considered the history of the term “manner of manufacture”, and ultimately held the true question to ask is whether the invention is “patentable subject matter”. If so, it was a manner of manufacture. It could be the practice or process of making something, or the means and product of that making. However, the “product” could not simply be information; such a product would mean that the method of its creation is just an abstract idea and not patentable. Any practical realisation of the abstract idea would make it patentable.

In the computing context, merely stating a mathematical formula or algorithm for solving a mathematical problem would not be patentable; but a particular application of that mathematical formula or algorithm which generated a commercially useful effect could be the subject of a valid patent. Similarly, business practices and financial arrangements would not be patentable, as they are simply information or ideas and not a practical realisation.

The delegate of the Commissioner had initially refused to grant a patent. The delegate considered that the index-making process claimed by Research Affiliates did create a practical effect in the sense that it modified an electromagnetic charge held in a computer processor. However, the method of the invention was simply constructing data from assets based on received data sets – it merely produced information to support an otherwise unpatentable financial scheme. Research Affiliates argued that the fact that the process produces an end result (the index) makes it a manner of manufacture, akin to a process that culminates in a printout of written characters.

Emmett J considered that the end product was nothing more than information, albeit in the form of a computer file, much the same as a bank balance stored on a computerised system. The specification in the patent applications simply stated that an indexing method was to be performed by a computer, but did not specify any particular way that the computer would implement such a method. What was claimed did not involve a specific effect being generated by the computer, simply writing information to its memory in a typical fashion. What was claimed were the steps of generating the index, which could be done with or without a computer, and not for any steps taken to improve the operation or use of the computer itself.

Ultimately, Emmett J held, all Research Affiliates’ application did was assert that a financial scheme, if implemented by a computer, would become patentable when the scheme itself was not. His Honour rejected that notion, dismissing the appeal.

Research Affiliates has since been applied in other computer-related patent cases. For example, in Re Swiss Insurance Co (2013) 101 IPR 440, a decision of the Commissioner’s delegate, an applicant filed a patent claiming a computer-implemented method to generate a simple output of business performance by assessing different divisions or units within a business organisation, and assigning them a score reflecting their performance or competency, and then weighting and totalling the various scores to generate an output competency rating and graph for the organisation as a whole and each division.

The delegate held that simply using a computer to generate a competency score is not a manner of manufacture, even if it uses a special software product to do so, as it simply provides information to the business or its officers. It does not itself improve the economic performance of the organisation or change how it is managed – that is still left to the consumer of the information to decide. As such, the use of the computer to generate the output is superfluous and the same process could be undertaken by a person, manually, much as in Research Affiliates.

However, the law in this area is by no means settled. Research Affiliates has been appealed to the Full Federal Court - see Research Affiliates LLC v Commissioner of Patents (2013) 101 IPR 128. Argument was heard in November 2013 but the Full Court has not yet handed down its decision. Furthermore, the case of RPL Central v Commissioner of Patents [2013] FCA 871 (decided in August 2013 but also on appeal to the Full Court) also considered the issue of whether a computerised process was manner of manufacture. In that case, Middleton J found that an application for a patent relating to a computerised questionnaire interface for TAFE program to assess the eligibility criteria of potential students did disclose a “manner of manufacture” as required. However, his Honour noted Research Affiliates and distinguished it from his own decision, noting that in Research Affiliates, the applicants had not provided any detail in their patent application as to exactly how the computer would be used, unlike the applicants in RPL Centralwhere the patent application specified how the responses to the questionnaire could be used to automatically determine eligibility.

The first instance decision in Research Affiliates should therefore not be construed as eliminating the possibility for patents relating to the use of computers or computer programs. Provided that the claimed invention does something more than merely record or present information to a user, it can be capable of being a manner of manufacture. For example, a patent could be obtained for software that affects or improves the computer’s operations, or for a method that is materially different when implemented by computer than if the same method was implemented by a human and the details of how the computer is to operate is the subject of the patent and not simply the method itself.

The validity of patents for computerised business methods can be complex. You should obtain expert advice if your business is considering applying for patent protection for such a method or if your business receives notice of a patent apparently covering one of your existing business processes.