One issue that is knocking around in Australia at the moment is the scope of the concept of ‘patentable subject matter’. In particular, there has been a debate – and differences between the Patent Office and at least parts of the profession over whether, to be patentable, a claimed invention has to relate to a ‘field of technology’.

The issue is whether ‘pure’ business methods – business methods which are not ‘implemented’ in the form of some kind of technology (like computer software/hardware) can be patented – or whether they aren’t really inventions in a ‘field of technology’. The issue has been raised in a new US decision of the Board of Patent Appeals and Interferences.

In Australia, the issue was raised squarely by a recent case in the Federal Court, Grant v Commissioner of Patents [2005] FCA 1100 (12 August 2005), in which Branson J determined an appeal from a decision of the Deputy Commissioner of Patents. The invention in Grant was described as follows:

1. an asset protection method for protecting an asset owned by an owner, the method comprising the steps of:
(a) establishing a trust having a trustee,
(b) the owner making a gift of a sum of money to the trust,
(c) the trustee making a loan of said sum of money from the trust to the owner, and
(d) the trustee securing the loan by taking a charge for said sum of money over the asset.’

In Grant, Deputy Commissioner of Patents Herald said:

‘This invention raises directly the question of whether there are any limits on subject matter for the grant of a patent. In particular, can a patent properly be granted in a situation that involves no discovery of a law of nature, or application of technology in any manner or form.’

The DPC rejected the patent, in part because:

‘The history of the development of the concept of manner of manufacture has consistently involved either the discovery of laws of nature or the application of technology based on the laws of nature. The present invention is fundamentally different in that there is no new law of nature, and there is no application of technology (in the broadest possible sense of the word) to implement the method of the invention. Rather the invention is a discovery in relation to the laws of Australia, useful in the affairs of the populace.’

Branson J took a different view: she decided that the Grant patent did not satisfy the requirement “that its value to the country is in the field of economic endeavour” – Virginia-Carolina Chemical Corp’s application (1958) RPC 35. The economic utility of the ‘invention’ was of value only to those whose assets are protected. Patentability must be interpreted, Branson J said, in accordance with the fundamental policy objectives of the patent system – including whether the grant of a patent provides sufficient benefit to society to outweigh the social cost of the patent monopoly. In this case, the claimed invention did not have the requisite economic utility in terms of adding to the economic wealth of Australia or otherwise benefiting Australian society as a whole.

I blogged about the Grant decision here. So did Warwick Rothnie (far more extensively than me!). David Clark, a partner at Blake Dawson Waldron, has also commented – in a document that, most annoyingly, I can’t directly link to. You can find it by going to the Blakes page here, and searching for “Grant” and “patents”.

Grant should also be seen in the context of another decision, by the same Deputy Commissioner of Patents, In Re Innovation Patent No 2004100848 in the name of Peter Szabo and Associates Pty Ltd [2005] APO 24 (May 2005) (‘Szabo’). In Szabo (which involved a kind of financial scheme for a ‘reverse mortgage’), the DPC outlined a requirement, in patent law:

‘The purpose of s.6 of the statute of Monopolies was to encourage development in the fields of science and technology. To be a manner of manufacture an invention must contain some material element that relates to science or technology. This might occur as a result of the application of a discovery of a law of nature, or a principle of science. It might be by way of creation of a new device, chemical entity, electromagnetic field or other entity, or related processes. Or it might make use of some device or entity for some purpose. Failing this, such an invention cannot be the proper subject of letters patent according to the principles which have been developed for the application of s.6 of the Statute of Monopolies.’

In summary, in Australian law at the moment, there is a tussle going on about the patentability of so-called ‘pure’ business methods – ones that aren’t ‘instantiated’ in some kind of technology (like computer software, or hardware). The Patent Office is rejecting them, using this ‘technical effect’ or ‘technology and science’ requirement. Their information sheet on business methods says:

‘Essentially a patent may be granted for a business method where there is something artificially created to implement the method. That is, the implementation of a business method may require the interaction of a physical system or process with the method. There should also be sufficient detail given in the description about the specific operation’

The only ‘business methods’ case we have so far in the courts (apart from Grant) is the Catuity case, which involved smart card technology. ACIP reported on the issue of business method patents – the report was released in February 2004. In May 2005, the government responded to the report (basically, agreeing with ACIP that no changes would be made to the Act, and that the matter would continue to be ‘monitored’). Some members of the profession, like David Clark at Blakes, have criticised the current attitude of the Patent Office, arguing:

‘In this era of knowledge-based economies and and globalisation there is a strong argument that any prohibition on business method patents would be short-sighted. History has shown that controversial patented subject matter, such as methods of medical treatment of humans, are now accepted standards. If an innovation satisfies the requirements of novelty and inventive step then, provided it is not contrary to law, or covered by a statutory exclusion such as human beings and the biological process for their generation, it should be suitable for patent protection. (BDW Patent Alert, June 2005; currently available on the BDW website – go to publications and then Patent Alert).

For more commentary, see Rothnie’s views. There’s also academic controversy over the issue: see, for example, Merges’ 1999 paper, ‘As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform’.

Why am I talking about this all again?

For simply this reason: currently, Grant is on appeal (NSD 1573/2005). Leave has been granted to appeal. So the issue is a live one.

And into that mix, it’s worth injecting this decision of the Board of Patent Appeals and Interferences of the US Patent and Trademark Office: Ex parte Carl A. Lundgren. The claimed invention in the case was described as follows:

‘1. A method of compensating a manager who exercises administrative control over operations of a privately owned primary firm for the purpose of reducing the degree to which prices exceed marginal costs in an industry, reducing incentives for industry collusion between the primary firm and a set of comparison firms in said industry, or reducing incentives for coordinated special interest industry lobbying, said set of comparison firms including at least one firm, said primary firm having the manager who exercises administrative control over said primary firm’s operations during a sampling period, wherein privately owned means not wholly government owned, the method comprising the steps of:
a) choosing an absolute performance standard from a set of absolute performance standards;
b) measuring an absolute performance of said primary firm with respect to said chosen absolute performance standard for said sampling period;
c) measuring an absolute performance of each firm of said set of comparison firms with respect to said chosen absolute performance standard for said sampling period, said measurement of performance for each firm of said set of comparison firms forming a set of comparison firm absolute performance measures;
d) determining a performance comparison base based on said set of comparison firm absolute performance measures by calculating a weighted average of said set of comparison firm absolute performance measures;
e) comparing said measurement of absolute performance of said primary firm with said performance comparison base;
f) determining a relative performance measure for said primary firm based on said comparison of said primary firm measurement of absolute performance and said performance comparison base;
g) determining the managerial compensation amount derived from said relative performance measure according to a monotonic managerial compensation amount transformation; and
h) transferring compensation to said manager, said transferred compensation having a value related to said managerial compensation amount. ‘

Note that there are some similarities in the kind of claim this represents, and the claims considered in the Grant case.

The examiner rejected this application for patent under 35 U.S.C. § 101 (non-statutory subject matter), saying that “both the invention and the practical application to which it is directed, [were] outside the technological arts, namely an economic theory expressed as a mathematical algorithm without the disclosure or suggestion of computer, automated means, apparatus of any kind”.

The Board of Patent Appeals and Interferences, by majority, have rejected this view, holding that there is no separate “technological arts” test in determining whether a process is statutory subject matter. There is no such requirement to be found, they held, in the statute or the case law, and none should be created.

There’s some interesting discussion, particularly in the dissent, about the relationship between the idea of ‘technological arts’ and ‘useful arts’. So if you’re thinking about Grant, and what might happen in it, this US decision is probably worth a read.

UPDATE: Patently-O has some comments on the decision here. Importantly, according to Patently-O, this is a ‘landmark’ decision (in other words, no, Australia does not have to adopt this decision, which is expansive even by US standards). As Crouch states:

‘This decision will once again expand the role of business method patents by freeing them from being tied to a computer or other electronic device. At the same time, this decision widens the gap between the US and many other countries who are still debating patentability of software.’