Patentability of Computer-Implemented Business Methods
Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150
This is an appeal decision of the Full Bench of the Federal Court of Australia in relation to a decision of the primary Judge in Research Affiliates LLC v Commissioner of Patents (2013) 300 ALR 724; [2013] FCA 71.
The issue of concern relates to what is considered patentable subject matter, and, in particular “whether computer implementation of an otherwise unpatentable business scheme is sufficient to make the claimed method properly the subject of letters patent”.
The Patent Application
The Patent is entitled “Valuation Indifferent Non-Capitalization Weighted Index and Portfolio”. The field of the invention is stated as pertaining:
“…generally to securities investing and more specifically to construction and use of passive portfolios and indexes”
The summary of the invention, as set out in the specification as a first aspect of invention, is that it provides a method of constructing data indicative of a non-capitalisation weighted portfolio of assets, the method being implemented in a computer system and comprising a series of steps commencing with the receipt in the computer system of data gathered in regard to a plurality of assets. Other aspects of the invention provide a system for constructing a non-capitalisation weighted portfolio of assets and a computer-implemented non-capitalisation weighted portfolio of assets construction system. In each case, a computer is used to receive the data and to provide “weighting means” for weighting each of the plurality of assets.
Claim 1 defines:
A computer-implemented method for generating an index, the method including steps of:
(a) accessing data relating to a plurality of assets;
(b) processing the data thereby to identify a selection of the assets for inclusion in the index based on an objective measure of scale other than share price, market capitalization and any combination thereof;
(c) accessing a weighting function configured to weight the selected assets;
(d) applying the weighting function, thereby to assign to each of the selected assets a respective weighting, wherein the weighting:
(i) is based on an objective measure of scale other than share price, market capitalization and any combination thereof; and
(ii) is not based on market capitalization weighting, equal weighting, share price weighting and any combination thereof;
thereby to generate the index.
It is noteworthy that the Full Bench made the following observations regarding the present specification at [84]:
“Aside from the method being one that is ‘computer-implemented’, there is nothing in the character of the steps comprising the generation of the securities portfolio index that relates the method to any particular hardware or software implementation. There is no description in the specification providing the detail of computer implementation.”
Relevant Law Considered
Section 18(1)(a) of the Act provides that an invention is a patentable invention if, so far as claimed in any claim, it is a manner of manufacture within the meaning of s 6 of the Statute of Monopolies 1623 (Imp) (Statute of Monopolies).
“Invention” is defined in Schedule 1 of the Act as “any manner of new manufacture the subject of letters patent and grant of privilege within s 6 of the Statute of Monopolies, and includes an alleged invention”. Section 6 of the Statute of Monopolies provides that what is patentable is “…any manner of new Manufactures”.
The Full Bench reiterated that guiding principles relating to a “manner of new manufacture” are set out in the landmark case of NRDC and include:
• There is a ‘manufacture’ whenever a process produces, either immediately or ultimately, a useful physical result in relation to a material or tangible entity;
• The method the subject of the relevant claim must have as its end result an artificial effect falling squarely within the true concept of what must be produced by a process;
• To fall within the limits of patentability, the process must be one that offers some advantage which is material in the sense that the process belongs to a useful art as distinct from a fine art and that its value to the country is in the field of economic endeavor.
A summary of Australian authority on claims relating to computer implemented methods was also provided by the Full Bench in reviewing CCOM , Catuity , Grant and RPL .
Importantly, the Full Bench, appeared to endorse the findings in RPL in which a computer operated business method was found patentable because “the involvement of the computer…is inextricably linked with the invention itself”; and that the specification and the claims provided significant information about the invention which was to be implemented by means of the computer and that the computer was “integral” to the claimed invention.
Primary Submissions
Research Affiliates
Research Affiliates fundamental submission is that the claim, considered as a whole, meets the requirements of NRDC, in that its subject matter results in an “artificial effect”, it consists of “an artificially created state of affairs” and the significance of the artificially created state of affairs is economic. It points to the relevance of the submissions in NRDC (at 268) that “a process produces, either immediately or ultimately, a useful physical result in relation to a material or tangible entity” and that, consistently with authority, a relevant artificially created state of affairs may be constituted by operating a computer in a particular way.
The Commissioner of Patents
The Commissioner, distinguished the present circumstance from the reasoning in NRDC, where the claim was to a method and the result of the effect or the product of the method was an artificial effect. The present case claims a method where the result of the method is an index and an index is not patentable subject matter per se.
The Commissioner submitted that the index is in the category of subject matter which, has never been considered to constitute a patentable invention, as it falls in the class of “mere records of intelligence”. The Commissioner argues that while Research Affiliates’ approach might represent a better method of constructing an index intellectually, it has no physical effect on “the computer architecture”. Further, it is argued that to implement an unpatentable method in a standard computer does not convert what is otherwise inherently unpatentable into something that is patentable.
The Court’s Considerations and Findings
The Appeal by Research Affiliates was rejected by the Court and the claims found not to be to a patentable invention under s18(1)(a) of the Act.
In reaching this conclusion, the Full Bench made the following relevant observation at [105]:
“The use of a computer necessarily involves the writing of information into the computer’s memory. This means that there are a number of “physical effects” in the sense of transformed data and memory storage during the claimed process. The claimed index in this case is data that exist in computer-readable form. The question is whether this is sufficient to make the claimed method properly the subject of letters patent”
In answering this question, the Full Bench noted that the analysis of the invention should not be a mechanical application of the criteria set out in NRDC, but the invention is to be understood as a matter of substance and not merely as a matter of form .
To that end, the Full Bench found at [117]:
“The computer-implementation is an essential integer of the claimed process. That is, of course, important… However, in examining whether a claimed invention is properly the subject of letters patent, it is necessary to look not only at the integers of that claimed invention but also at the substance of that invention.”
The Full Bench determined that the invention set out in the specification is directed to the generation of index itself; and that the method is not one that has any artificial or patentable effect other than the implementation of a scheme which happens to use a computer. It found that the computer itself is only described in the specification in general terms and without any indication that any unusual technical effect, or steps foreign to the normal use of a computer is used. (Emphasis added). It also noted that the specification in a preferred embodiment describes that the invention may be implemented on a computer, but not necessarily only by a computer.
The Full Bench found that, whilst the invention may have been directed to an inventive idea, the idea was abstract and any inventive step arises in the creation of the index as information and as a scheme. It was found that there is no suggestion that any part of the inventive step lies in the computer implementation or in improving computer technology .
Consequently the Full Bench found that the process does not provide “either immediately or ultimately, a useful physical result in relation to a material or tangible entity” per NRDC.
Summary
It is clear that the Court does not support the idea that an otherwise unpatentable business method or scheme will be afforded patentability by the mere implementation of the method on a computer in a standard manner.
The Full Bench makes it clear that despite the claims defining “A computer-implemented method…”; the substance of the invention in the specification as a whole is key to determining whether such a method is directed to patentable subject matter.
However, the Full Bench has “left the door open” for computer implemented methods to be deemed patentable if there is evidence in the specification that the computer is inextricably linked to the invention, or the method steps result in an improvement in what it calls ‘computer technologies”.
The Australian Patent Office has indicated that it will continue to assess whether a computer is inextricably linked to the invention rather than ‘incidental’ to the invention; and whether there is a specific effect generated by the computer or an improvement in the operation of the computer using the method.
Lars Koch
Partner, Engineering and ICT Group
Pizzeys Patent and Trade Mark Attorneys
Australian Patent Law 