SOFTWARE PATENTS

SOFTWARE PATENTSAustralian courts were traditionally reluctant to to allow patent protection for computer software and algorithms used in software.A difficulty was that computer programs were in many cases regarded as merely reciting a mathematical algorithm, which in itself is un-patentable.If, however, the algorithm is applied to some defined purpose, the program implementing the algorithm may amount to a manner of manufacture.For instance, the following software-related inventions have been allowed:An improved method plus equipment for producing curved images in computer graphics displays. IBM v Comm. (1991).The use of a word processor to assemble text in Chinese characters, where the operation of the keyboard executed a computer program that searched, retrieved and displayed all Chinese characters relevant to the search criteria entered. CCOM v Jiejing (1994).In each case the court applied the NRDC principles and found an artificially created state of affairs with economic significance. What are Algorithms? STEP-BY STEP PROCEDURE FOR CARRYING OUT A TASK OR SOLVING A PROBLEM.AN ALGORITHM MAY BE COMPARED TO A RECIPE.A COMPUTER PROGRAM IS TANGIBLE EMBODIMENT OF AN ALGORITHM.

3Algorithms (contd)Algorithms are the building-blocks or "back-bones" of computer programs, and as such are the essence of the subject matter for which the contentious patents are being sought.A computer program is a translation of an algorithm into a format that the computer can interpret and execute.The word "algorithm" has mathematical origins, but is used in a variety of contexts. At its most general, "algorithm" is used to describe a process or set of rules (even a type of "recipe") for carrying out a procedure, function or task.Algorithms are probably most noted for their association with computer programming, but are also important in mathematics and in engineering, especially manufacturing processes. All step-by-step processes involve algorithms in the broad sense.As a method for solving a problem, an algorithm, standing alone, is nothing more than a concept or idea. Therefore, algorithms are not patentable per se, but when an algorithm is applied to some defined purpose, the program implementing the algorithm may amount to a manner of manufacture. COMPUTER- AND SOFTWARE-RELATED PATENTS IN THE UNITED STATESLeading USA CasesIn Gottschalk v. Benson (1973), the US Supreme Court ruled for the first time on the patentability of a software-related invention, and in doing so set the tone for the Courts view on the patentability of computer programs.The Court invalidated a claim to a process for converting binary coded decimal numbers into pure binary format. The method was well-known, and could be done by pencil, but had not been implemented by computer. The process claim, the Court ruled, was simply too broad and untied to any application, especially in comparison to the contribution of the inventor: Here the process claim is so abstract and sweeping as to cover both known and unknown uses of the BCD to pure binary conversion. The end use may . . . be performed through any existing machinery or future-devised machinery or without any apparatus. In short, whatever was new about the invention was unmoored to any practical application, such that it was so abstract and sweeping as to unduly foreclose follow-on invention, particularly that using after-arising technologies. Gottschalk (contd)The Court suggested a number of reasons that the claimed invention was not patentable subject matter. One argument made by the court was that mathematical innovations should be treated like scientific truths and laws of nature which are inherently non-patentable subject matter. Later in the judgment, the Court emphasised that the claim was so abstract and sweeping as to cover both known and unknown uses, thus hindering the onward march of science through independent invention. The court also posited that the practical effect of allowing such a claim, in the absence of a specific practical application, would be to award a patent for an idea clearly non-patentable subject matter.DIAMOND V. DIEHR (1981)in Diamond v. Diehr, without repudiating Benson, the Court upheld a process for curing rubber even though the process incorporated a well-known mathematical formula about how long to cure rubber.The invention in Diehr was a process for moulding and curing rubber in which a computer iteratively applied a well-known equation to determine the optimum time at which to remove the rubber from the molding press. The constant application of the equation improved the process by taking into account the fluctuating temperature of the rubber inside the mold.DIAMOND V. DIEHR (contd)INVENTIONS INVOLVING SOFTWARE MAY BE PATENTABLE PROVIDED:CLAIMS DO NOT PRE-EMPT NON-PATENTABLE SUBJECT MATTER: LAWS OF NATURE, NATURAL PHENOMENA, ABSTRACT IDEAS.PATENTABLE IF ABSTRACT IDEA OR PRINCIPLE TRANSLATED INTO A PRACTICAL APPLICATION: USEFUL, CONCRETE, TANGIBLE RESULT.CLAIM AS A WHOLE MUST BE STATUTORY SUBJECT MATTER. PATENTABLE EVEN IF CLAIM CONTAINS MATTER THAT BY ITSELF WOULD NOT BE PATENTABLE.Compare Australia: M/MANUFACTURE: ARTIFICIAL RESULT.

DIEHR (CONTD)PATENT FOR COMPUTERIZED PRECISION MOULDING PROCESS, USING PHYSICAL LAWS OF THERMODYNAMICS.PATENTEE HAS MONOPOLY OVER THE CLAIM AS A WHOLE.PATENTEE HAS NO MONOPOLY OVER:COMPUTERIZED PROCESS CONTROL GENERALLY.THE PARTICULAR FORMULA USED.COMPUTERIZED PROCESS CONTROL BASED ON OTHER SCIENTIFIC PRINCIPLES.Diehrs process was tied to a specific practical application of a formula that did not unduly foreclose future innovation relying on the formula.10IN RE ALAPPAT DIEHR FOLLOWED IN IN RE ALAPPAT (1994).ALAPPAT: PRACTICAL APPLICATION (SMOOTH WAVEFORM) OF AN ABSTRACT PRINCIPLE (MATHEMATICAL ALGORITHM.)USEFUL, CONCRETE, TANGIBLE RESULT: SMOOTH WAVEFORM ON COMPUTER SCREEN.GRANTING PATENT DOES NOT GIVE PATENTEE MONOPOLY OVER WHAT IS CONSIDERED PART OF THE NORMAL FUNCTIONALITY OF A COMPUTER.

11 AUSTRALIAAUSTRALIAINHERENT PATENTABILITY THRESHOLD REQUIREMENT: MANNER OF NEW MANUFACTURE (NRDC).END RESULT: (1) ARTIFICIALLY CREATED; (2) ECONOMIC UTILITY.AS IN U.S., TREND IN AU TOWARDS MORE LIBERAL INTERPRETATION OF REQUIREMENTS FOR PATENTABILITY OF SOFTWARE-RELATED INVENTIONS.IBM V. COMM. (1991): FIRST MAJOR AU CASE.COMP. PROGRAM PRODUCING PHYSICAL EFFECT MAY BE PATENTABLE UNDER NRDC.13IBM V. COMM./PAT. (1991)Application for a patent for an improved method of visually representing curve images in computer graphics displays. Coordinate values for the curve image were computed using a known algorithm and the use of integer control points rather than floating point control points produced smoother, more accurate curves.Initially rejected by commissioner.Not manner of manufacture; wholly pre-empted a mathematical algorithm; not directed to industrial process.

14IBM (CONTD)FEDERAL COURT DISTINGUISHED MERE ALGORITHM AND USEFUL, COMMERCIAL APPLICATION OF THE ALGORITHM.Burchett J stated that if a method is regarded purely as the conception of an idea, it can always be said that the product of such a method is merely intellectual information. If, however, in practice the method results in a new machine or process or new functionality in an old machine, that fact should be regarded as the product or the result of using the method, and cannot be disregarded in considering whether the method is patentable or not.If a claim, whatever words are used, namely, whether the claim is for example for a method of transmitting data .. ., a method of controlling a system of computers or a method of operating or programming a computer .. ., is clearly directed to a method involving the use of apparatus modified or programmed to operate in a new way, as the present claims are, it should be accepted ... Claims in this form in truth meet the argument that there must be an artificial end product or effect before a method can be patentable. There is in fact such an effect in this case.

15IBM (CONTD)Burchett J: By requiring "the production of some useful effect, patent law distinguishes between the discovery of a scientific principle and the making of an invention.Use of algorithm in present case is conceptually similar to use of a compound in NRDC. It creates an artificial effect.The NRDC invention involved a new use of a known compound to achieve an artificially created state of affairs with economic utility. The situation in IBM is exactly analogous.Justice Burchett noted that it was not suggested that there was anything new about the mathematics of the invention in the case before him rather, what was new was the application of the selected mathematical methods to computers (and in particular, the production by computer of the desired curve). Just as the NRDC compound was previously known, the mathematics of the IBM invention was well-known.What is new in the IBM invention the is the application of the mathematical methods to the production of a computerized graphic display.

IBM (CONTD) Translating the NRDC principles into the language of computer technologies: The IBM invention is an artificially created state of affairs because it involves steps that are foreign to the normal functionality of computers.The production of an improved digital image is a commercially useful effect in computer graphics.

Burchett J held that a method of producing an improved curve image by a computer utilizing a mathematical formula, which also meets the criteria of novelty and inventiveness, is patentable. 17CCOM V. JIEJING (1994)In 1994, the Full Court of the Federal Court of Australia delivered judgment in CCOM. The invention in that case concerned a character word processor for the storage and retrieval of Chinese language characters. It used a particular method of characterisation of character strokes, applied to an apparatus in such a way that the operation of a keyboard would enable the selection (through a computer) of the appropriate Chinese characters required for word processing in that language. The primary judge held that the invention was not a manner of manufacture.

BACKGROUNDDispute between parties who had initially worked together in the development of computer software for generating text in Chinese characters. CCOM was granted a patent for an invention entitled "Symbol Definition Apparatus.The claim was a combination claim for a "computer processing apparatus for assembling text in Chinese language characters."19THE INVENTIONThe apparatus includes a database, a means of visual display, a keyboard and a search means. The database contains Chinese characters encoded by stroke-type and the order in which the strokes are written, a retrieval program and graphic representations of each Chinese character. Using the keyboard, the database is searched by entering the character stroke-types in the order written by a literate Chinese writer, "whereby upon entry of said search criteria the graphic representation of the Chinese character which meet the said search criteria" are retrieved and displayed on the visual display. 20SUMMARYINVENTION IS WORD PROCESSING PROCESS FOR STORAGE & RETRIEVAL OF CHINESE IDEOGRAMS ON COMPUTER SCREEN.MATERIAL FEATURES OF CLAIM:IDEOGRAMS, ENCODED BY STROKE TYPE & ORDER.SOFTWARE TO RETRIEVE & DISPLAY IDEOGRAM.21CCOM V. JIEJINGCCOM commenced proceedings against Jiejing, alleging patent infringement.Jiejing cross-claimed for revocation of CCOMs patent, arguing that the apparatus was not a "manner of manufacture, therefore not a patentable invention.

22JIEJING: FIRST INSTANCE DECISIONRelying on the IBM case, CCOM submitted that the system constituted an invention as, by assembling Chinese characters on a visual display unit, it produced a useful effect.Court reviewed precedent, including IBM, focusing on interpretation of artificial effect as steps foreign to the normal use of computers.Court found that the present claim did not involve any "steps which are foreign to the normal use of computers" or any procedure for "overcoming any problem in the computer as such or the way in which it operates.According to the court, operation of the system was a conventional function of a computer programmed with a word processing program. Court held that the claim did not disclose a "manner of manufacture." 23FIRST INSTANCE (CONTD)There is nothing claimed as new or unconventional in the input, search or display programs. In essence what is sought to be done is to use the computer to store the result of the linguistic task undertaken outside the computer, which mental process lies in the fine arts and not the useful arts, and to use the computer operating in a conventional way with conventional programs to reproduce the mental process of identifying the desired Chinese character by applying search criteria which represented the linguistic features of the character as determined by the linguist and stored in the memory of the computer.

Compare: Program to calculate energy from E = MC2.Mere computerization of intellectual information.24FULL FEDERAL COURT DECISIONOn appeal, appellants renewed their submission that, as the computer apparatus produced a useful effect by enabling Chinese language characters to be retrieved and displayed for assembly in text, it was a patentable invention.The Full Court said that the question of whether a computer software related invention is a "manner of manufacture" is to be determined in accordance with the principles stated by the High Court in the NRDC case. In undertaking the manner of manufacture inquiry, the Full Court characterised their task as one requiring the application of concepts which have evolved, and are still evolving, in accordance with the classic decision in the NRDC case. The Full Court in CCOM rejected the submission that all that had been done in respect of the invention in issue was to select a desirable characteristic of a computer program, the ability to search, in the manner described, a data base of the type described, and to claim all computers present and future possessing that characteristic.

25FULL COURT (contd)The invention in CCOM was held to be a manner of manufacture in the sense articulated by NRDC namely, a mode or manner of achieving an end result which is an artificially created state of affairs of utility in the field of economic endeavour. The relevant field of economic endeavour in CCOM was held to be the use of word processing to assemble text in Chinese language characters. The end result achieved was held to be the storage, retrieval and display of graphic representations of desired characters, for assembly of text. And finally, the mode or manner of achieving this (which was said to provide particular utility in achieving the end result) was held to be the storage of data as to Chinese characters analysed by stroke-type categories, for search including flagging (and unflagging) and selection by reference thereto.SUMMARYThe NRDC case requires a mode or manner of achieving an end result which is an artificially created state of affairs of utility in the field of economic endeavor.Here, the relevant field of economic endeavor is the use of word processing to assemble text in Chinese language characters.The end result is the retrieval of graphic representations of characters, for assembly in text. The manner in which this is achieved is by storing data relating to Chinese characters arranged according to stroke-type, which can be searched so that the desired character can be selected from those retrieved and displayed.MANNER: STORAGE, RETRIEVAL, DISPLAY.END RESULT: GRAPHIC REPRESENTATION.ECONOMIC UTILITY: WORD PROCESSOR IN CHINESE LANGUAGE.SYSTEM IS PATENTABLE AS MANNER OF MANUFACTURE, BUT INVENTION WAS HELD INVALID ON OTHER GROUNDS: CLAIM NOT FAIRLY BASED ON SPECIFICATION.27CONCLUSIONThe decision in CCOM v Jiejing confirms that most forms of software-related inventions are now patentable in Australia, as computer programs are usually created with the intention of producing some "end result which is ... of utility in the field of economic endeavor. The decision can be expected to lead to a substantial increase in software patenting activity in Australia, similar to that which is occurring in the United States.28 BUSINESS METHOD PATENTSINTRODUCTIONIn 2001 and 1998, resp., courts in Australia and the United States handed down decisions holding for the first time in each jurisdiction that business methods are patent-eligible subject matter.AU: Welcome Real-Time v. Catuity (2001); and USA: State Street Bank & Trust Co. v. Signal Financial Group (1998).However, despite the passing of time since those decisions and the growing number of business method patents granted in each country, the tests against which a business method is measured to determine its patentability remain unsettled in both countries. While this has little impact on inventions that fall within the heart of patent-eligible subject matter business methods that involve some form of physical application or effect, it has significant impact on inventions at its fringes business methods without a physical application or effect (pure business methods). INTRO (contd)WHAT IS A BUSINESS METHOD?SHOULD IT BE PATENTABLE?NRDC does not close the door on business method patents.The NRDC approach is one of flexibility, to allow for excitingly unpredictable and emerging inventions to be patentable. Whilst historically patents were related to engineering, industry and applied science, the scope of patentable subject matter has expanded beyond these traditional areas.31WHAT IS A BUSINESS METHOD?There are two attributes of the expression, business method: It describes what is essentially a commercial activity, andIt describes a process rather than an apparatus or an artifact.E.g. Amazon one-click purchase ordering system.a business method is an artificial process in which the inventive element lies in entrepreneurial strategy and includes a method that is useful in a business and a method designed to run existing aspects of business more efficiently or profitably than before.

32BUSINESS METHODA business method patent is an invention in which the advance over prior art does not yield a new physical object but rather consists of new technology that enables existing physical objects to perform new functions that are useful, novel, and non-obvious. (Professor M. Lemley.)This definition suggests that there is no reason not to grant a patent on the basis of a business method because they are in essence no different from conventional patents. The appropriate questions in respect of business method patents are: Do these methods serve the purpose of patent law? Do they promote innovation?

BUSINESS METHOD PATENTSGOOD BUSINESS MODELS PROVIDE COMPETITIVE ADVANTAGE INCENTIVE TO PROTECT BY ESTABLISHING I.P. RIGHTS.CONTROVERSY: Do B.M. patents encourage innovation and the dissemination of knowledge?Until 1998 it was unclear as to whether business methods were patentable. The United States decision in State Street v Financial (1998) clarified that business methods may be patentable subject matter.Followed in Australia in Welcome Real Time v Catuity (2001) which held that business methods are patentable provided they are an end result which is an artificially created state of affairs of utility in the field of economic endeavor.Other business method patents have followed, including the Amazon one-click patent.34BUSINESS METHOD PATENTSISSUESThe criticisms of business method patents that have been raised fall into three categories:Opposition to business method patents on philosophical grounds; The lack of rigour in examining business method patents; andThe effects of business method patents on small business and competition.35PHILOSOPHICAL OBJECTIONSBusiness method patents are viewed as a soft area of intellectual property that, unlike traditional patentable subject matter, does not involve or promote technological innovation.Should it matter?Floodgates on soft patents? Commentators have expressed concern that enabling the registration of business method patents may pave the way for patenting developments in the liberal arts, social sciences, the law, and other areas of human activity.36LACK OF RIGOURThe lack of a prior art database and the inexperience of patent examiners in business fields means that it can be difficult for patent examiners to assess whether the alleged innovation is actually new.Businesses may be uncertain as to whether they are infringing patent rights because business methods are difficult to define in patent claims.37EFFECT ON COMPETITIONBusiness method patents impose compliance costs on small to medium enterprises.Payment of royalty fees is an added expense to be passed on to consumers; Protection of intellectual property diverts SMEs from their core activity, resulting in a less efficient industry.Resolving patent disputes is expensive and time-consuming.

38IN DEFENCE OF BUSINESS METHOD PATENTSBusiness method patents must be granted only if they serve the purpose of patent law and promote innovation. Without patent protection, there would be little incentive for businesses to continue to develop their business ideas, as those ideas could simply be exploited by others with whom the developer must share their idea in order to develop their business.Business methods may be novel and inventive. There is evidence that before the priority date of Amazons one-click method, most businesses conducting business over the Internet thought that customers had to be slowly and incrementally led to the point of purchase. The focus was on providing adequate means to a customer to back out of a purchase if they wanted to do so. This led to many abandoned shopping carts. Amazon decided to adopt a process which dramatically reduced the number of steps needed to complete an internet purchase. The end result was the one-click ordering process. On the basis of that evidence, a court of first instance was prepared to find that the alleged infringer of Amazons patent was unlikely to succeed in showing the claims were obvious.

39 BUSINESS METHOD PATENTSUNITED STATESBUSINESS METHOD PATENTSUNITED STATESPATENT ELIGIBILITY: 101 PATENT ACT (1952). PROCESS; MACHINE; MANUFACTURE (articles resulting from the process of manufacture); COMPOSITION OF MATTER (e.g. novel and inventive chemical compound).UNTIL 1998, BUSINESS METHODS NOT PATENT-ELIGIBLE.41STATE STREET V. SIGNATURE FINANCIAL GROUP (1998)SEMINAL DECISIONESTABLISHED THAT BUSINESS METHODS ARE PATENTABLE, SUBJECT TO SAME LEGAL REQUIREMENTS APPLIED TO ANY OTHER PROCESS OR METHOD.42STATE STREET INVENTIONThe invention was entitled Data Processing System for Hub and Spoke Financial Services Configuration. It involved a data processing system for implementing an investment structure. Mutual funds (Spokes) pooled their assets in an investment portfolio (Hub) organized as a partnership. This system allowed for consolidation of costs of administering the funds combined with the tax advantages of a partnership. It allocated assets daily for two or more Spokes that were invested in the same Hub. The system determined the percentage share that each Spoke maintained in the Hub, while taking into consideration daily changes both in the value of the Hubs investment securities and the concomitant amount of each Spokes asset.The court held that the production of final share prices for the funds by the hub-and-spoke software, which were relied on by regulatory authorities, constitutes the production of a useful, concrete and tangible result. It satisfied the Patent Act notwithstanding that the result is expressed in numbers, such as price, profit, percentage cost or loss.

43WHY IS THIS INVENTION PATENTABLE?PRACTICAL APPLICATION OF ALGORITHM TO PRODUCE USEFUL, CONCRETE AND TANGIBLE RESULT. Not merely formula, algorithm or idea.CLAIMED A MACHINE, CONSISTING OF:COMPUTER FOR PROCESSING DATA.STORAGE MEDIUM (DISK).LOGIC CIRCUITS TO RETRIEVE AND PROCESS INFORMATION.

44U.S. STANDARD FOR BUS. METH. PATENTSSINCE STATE STREET, USEFUL, CONCRETE, TANGIBLE BECAME STANDARD CRITERION FOR PATENTABILITY OF BUSINESS METHODS IN USA.In the wake of State Street, it was thought that so-called pure business methods were still non-patentable, with all business method inventions being thought to require a technological basis.Pure business methods are business methods claimed in the absence of a technological means, such as a computer, to carry them out.

45LUNDGRENIn 2001, the US Patent and Trademark Office (USPTO) began requiring that inventions for business methods must also apply, involve, use or advance the technological arts, denying patentability to pure business methods.This requirement was eventually removed by the USPTO Board of Appeals in Ex parte Lundgren.Four years later, the USPTO through its Board of Patent Appeals and Interferences in Ex parte Lundgren set forth its position on the scope of State Street Bank and rejected the technological arts requirement. That decision concerned the patentability of a business method of compensating a manager that involved several steps of calculating a proper compensation based on performance criteria and then transferring payment to the manager. The claim recited no hardware/technology. LUNDGRENIn Lundgren, the Board of Appeals considered the patentability of claims to a method of compensating a manager ...of a privately owned primary firm for the purpose of reducing ...incentives for industry collusion.The examiner had rejected the claims on the basis that the invention and the practical application to which it is directed [are] outside the technological arts, namely an economic theory expressed as a mathematical algorithm without the disclosure or suggestion of computer, automated means, [or] apparatus of any kind. The examiner had however withdrawn a rejection on the basis that the claims failed to produce a useful, concrete and tangible result, from which the Board inferred that this State Street requirement had been fulfilled.A majority of the Board held that there is currently no judicially recognized technological arts test to determine patent eligible subject matter under 101. We decline to create one. LUNDGRENThe majority of the Board of Appeals then reversed the examiner's rejection, finding the claim invention to be patentable, despite its not requiring a computer or other electronic device, as it produce[d] a useful, concrete, tangible result without being a law of nature, physical phenomenon or abstract idea. The majority also rejected the technological arts test as having no basis under United States law: Our determination is that there is currently no judicially recognized separate technological arts test to determine patent-eligible subject matter under 101. We decline to create one.

USPTO AFTER LUNDGRENAfter Lundgren, the USPTO guidelines required that a patent should either transform an article or physical object to a different state or thing, or, the claimed method should produce a useful, concrete and tangible result (the latter the case in Lundgren.)

EX PARTE BILSKI A year after its Lundgren decision, the Board of Patent Appeals in Ex Parte Bilski issued its decision in an appeal filed two years before its Lundgren decision. In that appeal, a five member panel issued a decision that essentially abrogates the Lundgren decision. The Bilski patent is directed to a method of managing risk at a reduced cost. Its claims are not tied to any physical structure; do not recite a physical transformation or any electrical, chemical, or mechanical act; and could be performed entirely by human beings without any outside aid. EX PARTE BILSKI The patent application in Bilski described a very specific way to use historic weather data to determine optimal prices for hedging transactions in particular commodities. METHOD OF MANAGING THE RISK OF BAD WEATHER TO CROPS BY MAKING HEDGED TRADES IN COMMODITY MARKET.Its claims are not tied to any physical structure; do not recite a physical transformation or any electrical, chemical, or mechanical act; and could be performed entirely by human beings without any outside aid. NO SPECIFIC ALGORTIHM, NO COMPUTER IMPLEMENTATION.Yet the first claim sought to patent all such hedging transactions, at any price, for any commodity. Like the other patent applicants outlined here, Bilski claimed too broadlyeffectively seeking to control the idea of hedging, unmoored to the practical applications the inventor actually disclosed.The Court therefore correctly rejected Bilskis claimed method of hedging.

EX PARTE BILSKIAPPLICATION REJECTED: non-machine-implemented method claims did not describe statutory subject matter within the scope of 101.CLAIMS DO NOT COVER A PARTICULAR APPLICATION OF A PRINCIPLE, BUT PRE-EMPT THE USE OF A FUNDAMENTAL PRINCIPLE/IDEA.52BILSKI - APPEALIDENTIFIED TEST TO DISTINGUISH WHETHER CLAIMS ARE FOR PARTICULAR APLICATION OR PRE-EMPT AN IDEA.SOLE TEST FOR PATENT MATTER ELIGIBILITY IS WHETHER (1) TIED TO PARTICULAR MACHINE, OR (2) TRANSFORMS ARTICLE INTO DIFFERENT STATE OR THING.PHYSICALITY REQUIREMENT: MACHINE-OR-TRANSFORM TEST.This test delineates between patentable subject matter and that which must be excluded from patentability REJECTED PATENT APPLICATION ON THIS BASIS.Appealed to US Supreme Court.53BILSKI U.S. SUPREME COURTSupreme Court affirmed that Bilskis hedging method is not patentable subject matter.The Supreme Court unanimously rejected the view that the machine-or-transformation test is the sole test for determining whether an alleged invention is patentable subject matter (thereby rejecting the Federal Circuits physicality requirement).Five of the nine judges were of the view that business methods are not an excluded category of subject matter. The remaining four took of the view that they are.The court by a slender majority (5:4) held that Bilskis claims are unpatentable because they are abstract ideas. The remaining four judges preferred to reject the claims on the basis that they are a business method and are thus unpatentable on that basis. MACHINE-OR-TRANSFORM TEST IS USEFUL AND IMPORTANT CLUE AS TO PATENTABILITY, BUT IS NOT THE SOLE TEST.54BILSKI U.S. SUPREME COURTMAJORITY REJECTED USEFUL, CONCRETE, TANGIBLE AS DEFINITIVE TEST.Most helpful aspects of the Supreme Courts decision are (1) that business methods are not an excluded category and (2) that patent law does not impose a physicality requirement.CLS Bank International v. Alice Corp685 F.3d 1341 (Fed. Cir. 2012)THE INVENTIONAlice Corp obtained four patents covering a computerized trading platform for conducting financial transactions to manage the risk that one of two trading partners will fail to meet its obligations. The trading platform relies on a trusted third party to handle settlement risks by ensuring both parties meet their obligations or the transaction fails. Description of the InventionWhen obligations arise from a trade made between two parties, e.g., a trade of stock or a trade of foreign currency, typically, there is a gap in time between when the obligation arises and when the trade is settled.In a number of financial contexts, the process of exchanging obligations, or settlement, is separate from the process of entering into a contract to perform a trade. For example, if two banks wish to exchange large sums of currency, they would enter into a binding agreement to make a particular exchange but would postpone the actual exchange until after the price is set and the agreement confirmed, typically two days.After those two days, both banks would settle the trade by paying their predetermined amounts to each other. But there is a risk that, at settlement time, one bank will no longer have enough money to satisfy its obligation to the other. The asserted patent claims seek to minimize this risk, via the following methodology.Invention (contd)The patents at issue cover a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate settlement risk. Settlement risk is the risk that only one partys obligation will be paid, leaving the other party without its principal. The trusted third party eliminates this risk by either (a) exchanging both parties obligations or (b) exchanging neither obligation.THE CLAIMSSome of Alices claims are in method form. Typical is the claim for a method of exchanging obligations between parties holding a credit record and a debit record with an exchange institution, the method comprising a set of steps.Some claims are in system form. A typical claim is for a data processing system to enable the exchange of obligations, the system comprising a data storage unit and a computer to carry out a series of stated steps.Some claims are in computer media form. A typical claim was for a computer program product comprising a computer-readable storage medium having computer-readable program code embodied in the medium for use in a trading platform to handle settlement risks.THE LAWSUITAlice became aware that CLS Bank was conducting business that implicated its patents. Alice informed the bank about the claimed infringement. Rather than taking a license, CLS Bank filed a lawsuit asking a U.S. court to declare it had not infringed these patents and also that Alices patents were invalid and unenforceable. Alice counterclaimed, asserting its patents were valid and infringed.THE LAWSUIT While this lawsuit was pending, the U.S. Supreme Court ruled in Bilski v. Kappos that a method of hedging the risk of fluctuation in prices of commodities was ineligible for a patent because it was for an abstract idea. CLS Bank likened Alices patents to Bilskis and argued they too were ineligible for patenting. Alice asserted its patents were distinguishable from those in Bilski. A trial judge agreed with CLS Bank. Applying the Supreme Court's decision in Bilski, the district court granted the accused infringer's motion for summary judgment that the asserted claims were invalid for failure to claim patent eligible subject matter. Alice appealed from the ruling that its patents were invalid.APPELLATE OUTCOMEThe Fed. Court of Appeals decided to hear Alices appeal en banc, that is, with all 10 judges participating. Seven of the 10 judges who deliberated in CLS Bank agreed that under Supreme Court precedents, Alices method and computer-media claims were invalid. Two of the seven judges disagreed with the other five, however, over the reasoning that supported these conclusions.APPELLATE OUTCOME Alices system claims split the court even more. Five judges would have upheld these claims because they mention specific machine components and because they are too detailed to be abstract ideas. The other five regarded the system claims as functional equivalents of the method claims. Although these five acknowledged the system claims mentioned computers and data storage, they did so in such generic and functional terms that the use of any general- purpose computer would suffice. The claim details were, in their view, insignificant or conventional, which under Bilski are inadequate.APPELLATE OUTCOME When appellate courts are evenly split, as in CLS Bank on the system claims, the lower court decision is affirmed, but no precedent is established without an appellate majority. The result was that Alices system patents were invalidated as well.Eight of the 10 judges in CLS Bank agreed the method, system, and media claims should rise or fall together. However, five thought all three types of claims should fall, while the other three judges thought all of Alices claims were patentable.PRE-EMPTIVE EFFECTJudge Lourie and four fellow judges picked up on the preemptive effect analysis in Bilski and used that lens to examine Alices patent claims. These judges concluded that Alices claims would have the kind of pre-emptive effect the Court worried about in Bilski.It did not matter which type of claim language was used (that is, method, media, or system) if the substance of the claims was the same.Four other appellate judges relied heavily on the presence or absence of references to computers and memory in effect, applying the Machine-or-Transformation testto judge Alices patents. All four regarded the systems claims as unquestionably patentable because these claims mentioned machine components. The specificity in claim language also persuaded these judges to think Al- ices claims were too concrete to be abstract ideas. The tenth CAFC judge disparaged the effort to distinguish between patentable methods or sys- tems and unpatentable abstract ideas as unproductive. She would have upheld all of Alices patents. BUSINESS METHOD PATENTS IN AUSTRALIABUSINESS METHOD PATENTS IN AUSTRALIAWELCOME REAL-TIME V. CATUITY (2001). First Australian decision holding that business methods are patent-eligible subject matter.The invention involved a process and device for the operation of smart cards in connection with traders loyalty programs.68SMART CARDSA smart card is a credit card-sized plastic card containing a microprocessor capable of receiving, processing and storing information.The microprocessor contains an operating system with software that contains data and runs small programs protected against external access or alteration by a cryptographic security system. The user carries out transactions by accessing a device or terminal that, together with the card, performs the application for which the card is designed. The best known applications are mass-transit cards, information-storage cards (like library cards and medical record cards), phone cards, building or technology access cards (including those with biometric data verification) and the various e-purse systems such as Smart Visa.Example: A microprocessor chip embedded in the Visa Wave & Pay card transmits payment information securely to a terminal reader by radio frequency. The purchase is processed exactly as a swiped transaction would be, and the cardholders account is automatically charged.A normal credit card containing only a magnetic strip for static data storage is not considered to be a smart card.69CATUITY (contd)Welcome was in the business of creating multi-application smart cards, specifically multi-merchant loyalty schemes.The invention in issue was a process and device for the operation of smart cards (being cards containing a microprocessor or chip with the capacity to store and receive information) in connection with traders loyalty programs, which enable traders to promote goods or services by offering rewards to consumers based on prior transactions. Information related to a consumers spending and entitlements under the program would be stored on the card and read at the point of sale terminal where benefits entitled to would be provided.The problem with the smart cards was that they had a small memory capacity, which could only store loyalty-points information in relation to a limited number of traders, being fewer than the number of traders who use loyalty programs.This meant that if a user used one merchant much more than others, the space of that merchant would fill up quickly, while the space allotted to the other merchants would be largely unused.70CATUITY (contd)The invention used an ingenious method to overcome this problem by dynamically storing loyalty-points information on the cards, so they could be used across thousands of merchants each operating their own proprietary loyalty programs, rather than the cards being preconfigured to recognize a limited number of traders.The invention incorporated the ability to dynamically store each merchants loyalty program in a separate record of a file called the Behavior File, a process that occurs at a point of sale terminal the first time that a cardholder uses the card at that merchants store. In contrast to the prior art, behavior information and points for merchants never visited by the cardholder were not added to the card. It was said that this approach allowed chip cards with a small memory capacity to be used with thousands of merchants, each operating their own loyalty program.

CATUITY (contd) Defendant Catuity created a card for similar purposes and adopted a solution similar to that adopted by Welcome, i.e. a file for each merchant allocated at first use, although more information was stored centrally. Welcome sued Catuity for infringement of its patent.Catuity cross-claimed for revocation of Welcomes patent. Catuity argued that Welcomes patent was invalid because it was not a manner of manufacture.Catuity alleged that it is merely a method for using well-known integers in a manner that exploits the well-known properties of the integers.COMBINATION PATENT: SYNERGIES?

72CATUITY (contd)Catuity submitted that working directions and methods of doing things of which the invention was said to be an example, using well-known integers including a chip card, the memory space of such a card, and various computer programs to operate familiar kinds of loyalty and incentive schemes for customers fall outside the concept of manner of manufacture.Catuity sought to distinguish both IBM and CCOM on the basis that in each of those cases, there was a physically observable effect that met the manner of manufacture requirement: the screen curve in International Business Machines and the storage, retrieval and graphical representations of desired characters for the assembly of text in CCOM.CATUITY (contd)The court held that the meaning of manner of manufacture includes methods and processes that produce artificial effects.The court acknowledged that mere new use of a known article in a manner for which the known properties of that article make it suitable is not patentable. [Philips v. Mirabella (1995)] The court held further that to devise a particular method of processing data using a smart card which overcomes difficulties presented by the nature of the card (i.e. limited memory) amounts to more than such a use.

74CATUITY (contd)The invention involved both a method and a device. It did not involve the creation of a physically observable product, but it did involve a method operating to alter the state of the smart cards, which are physical objects. Since the invention involved an alteration of a physical product, this is not what could be described as a pure business method patent. It instead was a business method which involved an interaction with a physical device. Court found that this method and device were patentable.On the question of whether a business method could be patentable, court did not regard the law as necessarily requiring that there be a physically observable effect. 75CHARACTERIZATION OF THE INVENTION BY THE COURTWhat is disclosed by the Patent is not a business method, in the sense of a particular method or scheme for carrying on a business ... Rather, the Patent is for a method and a device, involving components such as smart cards and point-of-sale terminals, in a business; and not just one business but an infinite range of retail businesses. The true heart of the invention is an improvement in the way information is stored on a physical data storage mechanism, rather than any improved method of doing business.The respondents argument for distinguishing CCOM - the supposed lack of physically observable effect - turns on an expression not found in CCOM itself. Nor does such a concept form part of the Full Courts reasoning. In any event, to the extent that physically observable effect is required (and the court stated that it does not accept that this is necessarily so) it is to be found in the writing of new information to the behaviour file and the printing of the coupon.76CATUITY (contd)The court determined that business methods were to be subject to the same legal requirements for patentability that applied to any other process or method and that they were not to be treated as a special class or process not worthy of patent protection.The Court concluded that the invention in question produced an artificially created state of affairs, namely solution of a business problem through technological ingenuity. It enabled cards to be issued making available to consumers many different loyalty programs of different traders as well as different programs offered by the same trader, instantaneously and at each relevant retail outlet. Accordingly the invention involved more than just an abstract idea, or method of calculation, and such a result was held to be beneficial in a field of economic endeavour namely, retail trading.SUMMARYCOURT UPHELD PATENTABILITY OF WELCOMES INVENTION UNDER THE PRINCIPLES OF NRDC.NRDC DOES NOT REQUIRE PHYSICALITY.COURT FOUND STATE STREET PERSUASIVE.PRODUCES ARTIFICIAL STATE OF AFFAIRS: COMPUTERIZED NOVEL AND INVENTIVE SYSTEM OF MANAGING LOYALTY PROGRAMS.BENEFICIAL IN FIELD OF ECONOMIC ENDEAVOR: RETAIL TRADING.HAS PHYSICAL COMPONENT, EVEN THOUGH NOT REQUIRED.SYNERGIES PRESENT.78 PURE BUSINESS METHODSPURE BUSINESS METHODSAn issue currently attracting attention in a number of jurisdictions is the patentability of pure business methods, which are business methods that do not involve a physical aspect. Such methods are not implemented in, or does not cause an alteration to, a physical device such as a computer.It is a question that was not resolved in State Street Bank and Catuity. Both involved computer-implemented business methodsThe Full Court of the Federal Court of Australia has for the first time considered the patentability of a pure business method in Grant v Commissioner of Patents (2006). The invention at issue was a method of protecting an asset from the claims of creditors.If granted, the patent would reserve to one individual the exclusive right to apply certain aspects of the law in a particular way to achieve a useful result.80GRANTS INVENTIONSUMMARYASSET PROTECTION METHOD.OWNER MAKES GIFT TO TRUSTEE.TRUSTEE MAKES LOAN FROM TRUST TO OWNER, SECURED BY ASSET.TRUSTEE HAS PRIORITY OVER OWNERS OTHER CREDITORS.EXAMINER REJECTED APPLICATION: NOT MANNER OF MANUFACTURE.81GRANT V COMM./PAT. [2006]Grants invention is an asset protection method, namely a legal structure designed to allow a person to protect an asset from the claims of creditors.It involves creating a trust, the person making a gift of money to the trust, the trustee lending a sum of money to the person, and the trustee securing the loan by taking a charge over the asset. The aim of the method is that the trustee, by virtue of having taken a charge over the asset, would thereby have priority over other creditors of the person in whose favour debts may arise later in time. The patent, if granted, would involve reserving to the patentee the ability to apply certain aspects of the law in a particular way to achieve a useful result to one individual.The invention is an intangible legal business method, namely a sequence of steps that a lawyer might advise a client to follow to achieve a particular result. It is a purely intangible method that does not produce, operate or alter a physical object or produce a physically observable effect.82PROCEDURAL HISTORYSUMMARYAfter an examination hearing, the Deputy Commissioner of Patents held that the invention is not patentable subject matter. This decision was upheld on appeal by Branson J, a single judge of the Federal Court of Australia. A further appeal was brought by Mr. Grant before the Full Court of the Federal Court. In a controversial decision, the Full Court unanimously rejected the appeal, and in doing so, introduced a new test that in order to be patentable, an invention must disclose a physically observable effect.The Commissioner of Patents, Federal Court and Full Court all rejected the patent, but each for different reasons.83DECISION OF DEPUTY COMM.The Deputy Commissioner introduced a new test: in order to be patentable, an invention must involve the application of a law of nature or the application of technology to implement the method of the invention. DC revoked the patent on the basis that the invention does not disclose either of these elements.The DC categorised the invention as a discovery that resides in the domain of law.He stated that such a method would not amount to an artificially created state of affairs because the law itself is already a state of affairs which has been created by Parliament and is present in the laws of Australia.Granting the patent would take areas of law out of the public domain. The law is for the use by the populace at large and is not for the use of one individual to the exclusion of others.84APPELLATE DECISIONOn appeal, Branson J, a single judge of Federal Court, upheld the decision of the Deputy Commissioner to revoke the patent, but gave rather different and controversial reasons which were largely ignored by both the judges and the parties on further appeal to the Full Court of the Federal Court.Branson J upheld the revocation applying cost/benefit reasoning, stating that an invention should only enjoy the protection of a patent if the social cost of the resulting restrictions upon the use of the invention is counterbalanced by resulting social benefits. This principle is derived from the theoretical justification for the grant of a patent; that is, the assumed value of inventive ingenuity to the economy of the country.85DECISION OF THE FULL COURTThe Full Court of the Federal Court upheld the decisions of the Deputy Commissioner and Branson J, but did so on yet different grounds.The court held that an invention must display a physical phenomenon or effect resulting from the working of a method for it to be a manner of manufacture.The court categorized the invention as being a business method concerned with actions of financial and legal consequence.The method of his patent does not produce any artificial state of affairs, in the sense of a concrete, tangible, physical, or observable effect. A physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required.

86FULL COURT (CONTD)The Court noted that in NRDC, an artificial effect was physically created on the land, and that in each of Welcome Real-Time v Catuity, CCOM v Jiejing and in the United States decisions of State Street Bank & Trust Co v Signature Financial Group and AT&T Corp v Excel Communications, Inc, there was a component physically affected or a change in state or information in a part of a device or machine. In contrast, the Court regarded any method that does not produce a physical result as merely intellectual information and a scheme which has never been patentable.87FULL COURT (CONTD)Finally, the Full Court discarded the contention of Branson J that an invention should only enjoy the protection of a patent if the social cost of the resulting restrictions upon the use of the invention is counterbalanced by resulting social benefits. The court stated that it is not in a position to balance the social costs and public benefits of granting monopoly rights in respect of an invention; and that questions of this nature have already been resolved by the patent system which rewards innovation with a time-limited monopoly where the requirements of the Act are satisfied.88AU PATENT OFFICE MANUALAfter the decision in Grant, the Australian Patent Office Manual of Practice and Procedures was revised to reflect the requirement laid down by the court that for a method to be patentable, the application or operation of the method must have a physical form, but that it does not necessarily require the application of science or technology.

89DOES AU PATENT LAW REQUIRE A PHYSICAL EFFECT?Was the Federal Court was correct in holding that Australian law requires an invention to disclose a physical effect in order to be patentable subject matter?It is well-established that non-physical items such as methods of calculation, discoveries, abstract ideas, laws of nature, scientific theories, intellectual information, and theoretical business schemes are not patentable.Australia uses the manner of manufacture test to determine the scope of patentable subject matter. NRDC (1959).We now consider, does the characterization of a manner of manufacture by the NRDC Court and subsequent courts require a physical effect?90PHYSICAL EFFECT (CONTD)The High Court left open in NRDC the principal issue in dispute in Grant, namely whether an intangible invention is patentable. HCA emphasized that the term, manner of manufacture, is a dynamic concept whose meaning has evolved, and will continue to evolve over time. It said that the principles are to be applied flexibly, as technological developments and inventions are excitingly unpredictable and accordingly, the concept of patentability must be able to accommodate inventions that have not yet been envisaged.In the words of the NRDC Court: A question which appears still to await final decision is whether it is enough that a process produces a useful result or whether it is necessary that some physical thing is either brought into existence or so affected as the better to serve mans purposes. NRDC at 270.91PHYSICAL EFFECT (CONTD)In CCOM v Jiejing , the HCA upheld the validity of a patent for a Chinese language word processor, noting that the CCOM patent, like a number of computer software inventions considered in previous cases, had physical aspects, but did not say that the manner of manufacture test requires that a computer program be embodied in a physical device.Heerey J, in Welcome Real-Time v Catuity, noted that the High Court had not determined the issue of whether an invention requires a physical aspect to be patentable.In dicta Heerey J stated, to the extent that physically observable effect is required (and I do not accept that this is necessarily so) it is to be found in the writing of new information to the Behaviour file and the printing of the coupon. Welcome at 445.92CONCLUSIONPATENTABILITY OF BUS. METHODS: LAW UNSETTLED.GRANT SENDS MIXED MESSAGES.EXAMINER: NOT PATENTABLE, BECAUSE MERE SCHEME OR PLAN.DELEGATE DISAGREED. REJECTED BECAUSE NOT ARTIFICIALLY CREATED STATE/AFFAIRS; PATENT WOULD GRANT MONOPOLY OVER WHAT SHOULD REMAIN IN PUBLIC DOMAIN..PRIMARY JUDGE REBUFFED DELEGATE; FOCUSED ON SOCIETAL COST/BENEFIT.FULL CT. REJECTED COST/BENEFIT TEST; FOCUSED ON PHYSICAL EFFECT.93 RESEARCH AFFILIATES V. COMMISSIONER OF PATENTS [2013] FCA 71 RESEARCH AFFILIATESIn Research Affiliates, the Federal Court held that a computer-implemented method of generating a financial index did not constitute patentable subject matter as the claims were not directed to a manner of manufacture, and therefore not patentable. 95THE INVENTIONThe claimed invention is based on the following steps.Accessing data related to assets.Processing the data to identify assets for inclusion in the index (based on measures other than share price or market capitalization.)Accessing a weighting function to weight the assets.Applying the weighting function to assign a weighting to each asset based on measures other than share price or market capitalization, to generate an index.Research Affiliates used the system to produce an index of Australian shares called the Colonial eRAFI Large Index. It was licensed to fund managers, including Colonial First State Investments Ltd.

96RESEARCH AFFILIATES (contd)The Court considered whether the claimed invention satisfied the two well-established requirements of a manner of manufacture:The method results in an artificially created state of affairs.The state of affairs has application in a field of economic endeavor.Research Affiliates argued that implementation of the method by a computer meant that there was an artificially created state of affairs that produced a physical effect within the computer, and that the index derived from exercise of the method clearly had economic significance.

97DECISIONThe Court accepted the economic use of the Index, but held that the creation of the index did not result in an artificially created state of affairs.This is because the index produced was nothing more than a collection of data or information.Similar to program that computes values according to a formula such as E = MC2.Mere schemes, abstract ideas or information are not patentable without a physical effect.The only physical effect claimed was a computer file containing the index, but the index was only numerical data, no more a manner of manufacture than a bank balance.Although the index could be stored in a computers memory, the same could be said of any data generated by a computer. Therefore, the mere writing of data to a computers memory could not, by itself, create an artificially created state of affairs.

98Precedents - Computer-Implemented MethodsThe Court distinguished Research Affiliates from previous cases where Australian courts had found the following computer-implemented methods to include the required effect to be patentable:A method of representing a curve on a computer screen. IBM v. Comm. (1991).A method of representing Chinese characters in a word processor. CCOM v. Jiejing (1994).A method of writing information to a smart card as part of a customer loyalty program. Welcome Real Time v Catuity (2001).In each of these cases there is a component physically affected or a change in state in a part of a machine.

99Precedents DistinguishedThe Court distinguished these methods from the generation of the index in the method of Research Affiliates. The methods that had previously been found to be patentable were all said to involve a specific effect being generated by a computer, or a practical application for the improved use of the computer.On the other hand, the generation of an index by a computer was found to be no more than the modern equivalent of writing down the index on a piece of paper. The steps could readily have been carried out manually, and the implementation of a computer was nothing more than the use of a computer for a purpose for which it was known to be suitable. Research Affiliates method did not involve a specific effect being generated by the computer. The Court concluded by noting that the modern availability of computers as a method of implementing processes that could have been carried out manually in the past did not bring with it any broadening of the concept of a patentable invention.It is not an artificially created effect, because computer implementation of a formerly manual process is part of the normal functionality of a computer.

100ImplicationsIMPLICATIONS OF THE DECISION

Mere generation and storage of data in a computer will not be enough to create the artificially created state of affairs or physical effect that is required to constitute patentable subject matter.Computer-implemented methods that only involve the processing and storage of data or information that could also have been done manually (albeit more inefficiently) are unlikely to be patentable.For a computer-based method to be patentable, it should produce a specific effect or enable the improved use of a computer, as opposed to the mere writing of data, or if it resulted in improved use of a computer.

101RPL CENTRAL V COMMISSIONER OF PATENTS[2013] FCA 871INTRODUCTIONIn Australia, it is possible for an individual to request that a Registered Training Organization or TAFE assess their current competency relative to the requirements of a training course offered by the institution. The purpose is to determine whether they are entitled to obtain the corresponding qualification without actually participating in the course. This known as an RPL assessment (Recognition of Prior Learning.That process requires assessment of the individuals competency against the standards recognised for the course.Another challenge for the individual is identifying whether their competencies match a course offered in Australia, and if so, what institutions offer the course.THE INVENTIONRPL Central applied for a patent in respect of an invention that claims to automate the process of gathering information about an individuals competency by identifying relevant elements of competency and performance criteria for courses, and converting these into a question and answer format.That information can then be relayed (possibly after further processing) to a relevant institution for the purpose of conducting an RPL assessment.THE CLAIMSThe specification contains five claims.Claim 1 and its dependent claims 2 to 4 are method claims.Claim 5 embodies a physical system that implements the method.THE INVENTIONClaims 1 to 4 relate to a method of gathering evidence for the purpose of assessing an individual's competency relative to a qualification standard. Claim 5 relates to a computer system for doing so:A computer retrieving from the internet a set of criteria for assessment against a qualification standard;An assessment server presenting the questions to the computer of the individual requiring assessment; andReceiving responses from the individual, including attached files from their computer.Figure 1 of the Patent illustrates an embodiment of the invention

FIGURE 1The system (globally denoted 100) includes a server computer (102) known as the assessment server, which is configured to gather information relevant to an assessment of an individuals competency relative to a recognised qualification standard. The assessment server is connected to the internet (denoted 104), in order to enable remote access by users and to provide the assessment server with access to related online resources.The assessment server includes at least one processor (denoted 106), which is associated with random access memory (or RAM (108)The RAM contains program instructions (112) and transient data necessary for operation of the assessment server. The RAM contains a body of program instructions (denoted by the box labelled 112).The program instructions implement a method of gathering information relevant to the assessment of a users competency relative to a recognised qualification standard. The system also includes a remote server computer (denoted 114) which is accessible via the internet, and which contains information relating to recognised qualification standards. COMMISSIONERS SUBMISSIONThe Commissioner was satisfied that the invention was novel and inventive, but decided that none of the claims constituted a manner of manufacture.The Commissioner submitted that the end product of the claimed method is merely intellectual information namely, a completed questionnaire containing evidence relevant to an assessment of an individuals competency, relative to a recognised qualification standard. It was contended that whether such information is stored on paper or in a computer or electronic storage device, it belongs to the fine arts and hence is not patentable subject matter.For similar reasons, the Commissioner submitted that the claims of the Patent do not fall within the category of inventions typified by IBM, CCOM and Catuity. It was said that the computer referred to in the claims of the Patent is merely the modern and efficient tool by which to perform the method of the claimed invention (being a method of performing an aspect of a business), which could be performed without use of a computer. This was said to be unlike the inventions in IBM, CCOM and Catuity, where the method was tied to a machine.COMMISSIONER (contd)The Commissioner further submitted that a different approach should be taken where an invention is a method claim rather than a method and device claim. (Middleton J rejected however, the suggestion that Australian law provides a different test for the two types of claim.)RPL appealed the Commissioners decision. The principal issue therefore was whether the claimed invention constituted a manner of manufacture.

RPLS SUBMISSIONIn originally rejecting the patent application, the Commissioner had applied a test that required of the invention a concrete physical effect that is significant both in that it is concrete, but also that it is central to the purpose or operation of the claimed process, or otherwise arises from the combination of steps of the method in a substantial way.RPL submitted that such a test was improper and not founded on authority.RPL submitted that the Commissioner had erred in failing to consider the invention as a whole, as described in the specification and defined by the claims, to then assess whether a physical effect was produced, in terms of a concrete effect, phenomenon, manifestation or transformation.APPELLATE DECISIONJustice Middleton reviewed the authorities on the topic, noting that historically, mere schemes, plans, and theoretical ideas fell outside the scope of manner of manufacture. So, too, did mere working directions, methods of calculation and process of mathematical operations.Subsequent Australian authorities indicate that the mere fact that an invention is implemented through a computer is not of itself sufficient reason to find that the invention is a manner of manufacture. See e.g. Research Affiliates.Middleton J further observed that NRDC also teaches that it would be impermissible to set forth any prescriptive requirements as to what constitutes a method of manufacture.ANALYSISIn order to determine whether the invention of RPL constitutes patentable subject matter, namely a manner of manufacture, the Court turned to the NRDC criteria, namely an artificial effect and economic utility.It found that RPLs claimed invention satisfied both criteria.Artificial State of AffairsHis Honour found that the invention gave rise to an artificially created state of affairs and a physical phenomenon in which a new and useful effect may be observed, in the sense of a concrete effect or phenomenon or manifestation or transformation.The process achieved artificial states of affairs through the generation of questions, the capture of user responses, and generation of a completed questionnaire containing evidence relevant to an assessment of an individuals competency, relative to a recognized qualification standard. A pre-existing server computer stores information pertinent to a recognised qualification standard. Another computer, specifically programmed to operate in accordance with the teaching of the Patent, retrieves the stored information by conducting data communications transactions via the internet. Artificial State of Affairs Each step in the process involved computer implementation and a change in state of the information in part of a machine, as data are retrieved, transformed and transferred in each step. Accordingly, there were a number of physical effects which occurred in implementing the invention.The effect of this process is experienced by the individual user on is or her computer. The user is then able to respond to these questions, which responses are transferred to the assessment server (step 4 of claim 1). 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.

Invention is Vendible: Useful in Economic EndeavourThe Court found that the invention had value in the field of economic endeavour in the educational sector of the economy. It overcame difficulties in seeking out relevant training providers and enabling the recognition of prior learning.

DECISIONIn deciding that the invention was patentable, the court further found that:the involvement of the computer was described in the claims of the patent in such a way that it was "inextricably linked" to the invention;the patent specification provided significant information as to how the invention is to be implemented by computer, including the programming of the computer that retrieves the assessment criteria and generates the questions, and the programming of the assessment server to present the data to a user;there was no requirement that the "physical effect" produced be substantial or central to the invention.The Court also made clear that there was no binding Australian authority that provides a different test for a method claim as opposed to a method and device claim.Australian law does not require substantiality or centrality of a physical effect.In any event, even if either was a criterion, a computer was a substantial, central, or integral part of each claim.DECISION SUMMARYThe decision indicates that the requirement for a "physical effect" to be present to give rise to patentable subject matter can be met by the transfer and transformation of data in a computer.The court rejected the argument that the required physical effect must be "substantial" or "central to the purpose" of the invention.The court dismissed the concern that such a decision would allow previously unpatentable schemes and methods to become patentable merely by the operation of the method on a computer.Although not essential to the decision, it suggests that a court will look more favourably on a patent specification which details how the invention is implemented by computer, and which inextricably links the operation of the computer to each step of the claimed method.

DISTINGUISHING RESEARCH AFFILIATESMiddleton J distinguished Research Affiliates, which concerned a claimed invention that generated an index of securities or assets by way of computer.In Research Affiliates, Justice Emmett held that a computer- implemented method of generating an index for weighting an investment portfolio was not patentable on the basis that the generation of computer file containing the index did not create "an artificially created state of affairs" as the index was mere data. It was information that could be stored in a computers RAM but that was true of all data.Emmet J stated, [i]f that were sufficient to satisfy the requirement of an artificially created state of affairs, any computer-implemented scheme would be patentable, merely by reason of the fact that it happens to be implemented by a computer.Middleton J distinguished Research Affiliates on the basis that, unlike the specification and claims in that case, in RPL the specification and claims provide significant information about how the invention is to be implemented by means of computer.DISTINGUISHING RESEARCH AFFILIATESIn Research Affiliates, the invention purported to produce an index of securities or assets by way of computer. The only physical result generated by the method of the claimed invention in Research Affiliates is a computer file containing the index. However, the index generated is nothing more than a set of data. The index is simply information: it is a set of numbers. It is no more a manner of manufacture than a bank balance, whether represented as data in a banks computer, written on a piece of paper or kept in a persons memory. While it is true that the index may be stored in the computers RAM, or on a memory device, or can be transmitted, that can be said of any data generated by a computer. If that were sufficient to satisfy the requirement of an artificially created state of affairs, any computer-implemented scheme would be patentable, merely by reason of the fact that it happens to be implemented by a computer. The specification and claims in issue in RPL provide significant information about how the invention is to be implemented by means of computer. The computer is integral to the invention as claimed. Accordingly, the conclusion reached in this case is not at odds with Research Affiliates.DISTINGUISHING RESEARCH AFFILIATESIn RPL Central, Justice Middleton comments on Justice Emmett's decision in Research Affiliates. Justice Middleton points out that Justice Emmett appeared to be influenced by two factors:The same concern expressed by the Commissioner of patents in RPL Central, that is, that if the mere operation of a method by computer created patentable subject matter, any computer-implemented scheme would become patentable merely by reason of being implemented on a computer; andthe patent specifications in Research Affiliates contained virtually no substantive detail about how the method was to be implemented by a computer.Justice Middleton's ultimate conclusion was based on the finding that the transfer and transformation of data in a computer provided the required "physical effect".