Patentability of Business Methods

Following a Decision in the UK Court of Appeal with respect to the patentability of business methods, the Patent Office issued a Practice Note, the link to which is http://www.patent.gov.uk/patent/p-law-notice-subjectmatter

Abstract: The Appeal Court findings and the Practice Note & commentary provide an excellent synopsis of events leading up to the Appeal Court decision. They also provide a valuable comparison of how different legislative authorities both inside and outside Europe view business method patents. In fact, so persuasive were the findings of Jacob J that the Patent Office considered that the Aerotel/Macrossan decision “must be treated as a definitive statement of how the law on patentable subject matter is now to be applied in the UK”. It further states: “It should therefore rarely be necessary to refer back to previous UK or EPO case law”. The link to the Aerotel/Macrossan case is http://www.bailii.org/ew/cases/EWCA/Civ/2006/1371.html

The matter of Patentability – and the new UK position

The matter of patentability of business methods has always been the subject of controversy, especially in Europe where there is a strong lobby seeking to maintain a free playing field without barriers to enter the marketplace, which is a necessary consequence of granting patent rights. On the other hand, those firms who are innovators rightly expect to be rewarded for their innovation through the patent system.

In the Court’s, and now the Patent Office’s view, it is necessary to determine the patentability of business methods (and any other invention for that matter) by following a four step test. The steps being:

(1) properly construe the claim

(2) identify the actual contribution

(3) ask whether it falls solely within the excluded subject matter

(4) check whether the actual or alleged contribution is actually technical in nature.Steps 2 & 3 appear to be the most critical.

Step 2 instructs us to identify the inventor’s actual contribution to the art. Specifically, the “Court equated the second step to identifying what the inventor has really added to the stock of human knowledge”, [rather than the inventor’s perception of his contribution]. The Court re-affirmed that in identifying the inventor’s contribution: “it is the substance of the invention that is important rather than the form of the claim adopted”. Again, we are brought back to earth about the nature of Patent documents – that they deal with real things, are not just a paper exercise, and are read through the eyes of the technically skilled.

Step 3 instructs us to ask whether it [the invention] falls solely within the excluded subject matter. The Court states: “Thus, if the contribution falls wholly within one or more of the listed categories, it is not a patentable invention. If it falls partly within one or more of the listed categories and partly outside, it passes the third step”. This wider interpretation of what is patentable falls somewhere between the narrow viewpoint taken by the Boards of Appeal of the EPO and the broader stance adopted by the USPTO and Australian authorities.

The European situation

The EPO, who examine patent applications on behalf of the 25 contracting states, categorically rejects patent applications which are lacking in “technical character”. This means that an invention must relate to a technical problem and have technical features. Methods of doing business without this technical character are excluded from patentability. To put it in clearer terms, patents to apparatuses are accepted, but a patent to a computer (technical means) which performs a series of novel processing steps is not.

Among other things the EPO decision has only resulted in Patents being drafted in cleverer and cleverer ways to cover areas already the subject of equivalent patents in more enlightened jurisdictions. More than anything, they become an exercise in semantics.

The US Situation

The position adopted by the US is completely different from the approach taken in Europe. The US, rather refreshingly, have given the issue of patentability a wide interpretation so that it includes “anything under the sun that is man made”. Here the emphasis is that something has to have been made. If the invention is a mere theory, natural law or an abstraction it remains unpatentable.

The Australian Situation

The Australians, similar to the US, use a broad interpretation as to those inventions which are patentable and those that are not. The Statutory definition, derived from case law is that to be patentable an invention must relate to “An artificially created state of affairs of utility in the field of economic endeavour”. Australia therefore allows both computer related inventions and business methods. However, there is now no doubt that to be patentable it is necessary to have a physical means to perform the invention. The subject matter is also still required to provide sufficient disclosure to enable the normally skilled technician to make and use the invention.

The New Zealand Situation

The New Zealand view is somewhat in a state of flux. Computer software is currently patentable provided it embodies a novel concept and has a commercially useful effect. Business methods are also currently patentable in New Zealand provided they produce both a commercially useful effect and an artificial state of affairs. Ordinarily, the business method will interact with some tangible apparatus, or other material, to fulfill the “artificially created state of affairs” requirement. There are no coherent guidelines on the subject – and euphemistically, each case is taken on its own merits. It is clear however, that mere schemes or plans, scientific theories, discoveries or laws of nature are inherently unpatentable.

The Japanese Situation.

Japan, like the US & Australia, has set their stall fairly and squarely to allow methods of doing business. Patentable subject matter is accepted if it is to “a technical idea utilizing a law of nature”. Thus, in Japan, business methods are regarded as software related inventions and are of a technical nature.

The Indian Situation.

India still prohibits the patenting of pure business methods and amended its laws in 2006 to clearly exclude software patents.

The Canada Situation.

Pure business methods cannot be patented in Canada as they are considered to fall under the umbrella of specific exclusions which forbid the patenting of a scheme, rule or method for performing a mental act, playing a game or doing business, or a program for a computer. However, a business method patent may be patented in Canada if the patent is claimed in a manner which provides that an apparatus is involved in the doing or working of an invention which is novel, has an inventive step and is industrially applied

If you have any thoughts, comments or additions to the above discussion please e-mail icockburn@piperpat.com to begin a dialogue, or conversely consult an IP professional to determine best fit patent strategies for your firm.

Disclaimer: PIPERS endeavors to be as accurate as possible when preparing its articles and has taken all reasonable steps to ensure that the information contained herein is accurate. The contents of this article are for purposes of information only. If you require any clarification, please seek the advice of an IP professional or contact http://www.piperpat.com