Federal Court reviews patentability of business methods in Australia

Federal Court reviews patentability of business methods in Australia

Federal Court reviews patentability of business methods in Australia

The Australian Full Federal Court has recently clarified the extent to which business methods can be patented in Australia.1 A business method will be patentable provided it involves a physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation.2 It cannot be a mere scheme, abstract idea or mere intellectual information.3 The court also made it clear that an invention did not have to be within an area of science or technology to be patentable.4

The Full Court reviewed the development of the law on patentable subject matter, and relied upon the principles in the Australian High Court’s decision in NRDC5 and the US decisions in Diehr6, State Street7 and AT&T.8 Patentable subject matter was to be determined by the application of flexible principles, and is not to be fettered by contrived constraints or a strict test.9 This is a direct contrast to the difficulties experienced in Europe with explicitly defined exclusions. The Full Court found that in both the US and Australia, the courts had adopted a broad approach to determining patentable subject matter in order to adapt to new technology and inventions, but this did not mean that there were no restrictions on what is patentable.10 The court said it did not matter whether an invention was referred to as a business method or business system, as all that mattered was that the principles for determining patentable subject matter needed to be applied.11

The Full Court referred to a number of previous Australian decisions confirming the patentability of software12 and, together with NRDC, State Street and AT&T, considered a common element to be a component that was physically affected or a change in state or information in a part of a machine, which could all be regarded as physical effects.13 By contrast, it was considered that the alleged invention involved a mere scheme, an abstract idea, or mere intellectual information which has never been patentable.14 There was no physical consequence at all. The invention related to a method of asset protection and the main claim read:

An asset protection method for protecting an asset owned by an owner, the method comprising the steps of:

  1. establishing a trust having a trustee,
  2. the owner making a gift of a sum of money to the trust,
  3. the trustee making a loan of said sum of money from the trust to the owner, and
  4. the trustee securing the loan by taking a charge for said sum of money over the asset.

The Full Court referred to the Deputy Commissioner of Patents decision in Szabo15 which said that NRDC required the application of science or technology in some material manner. The court did not think that this was correct and felt that to determine what was part of science or technology presented many difficult questions. They felt that to erect or use this requirement risked the very kind of rigidity that NRDC warned against.

The primary judge of the court had determined the matter by balancing the social cost of granting a patent against the benefit the invention brought to Australian society as a whole. The Full Court dismissed this as being irrelevant16 and considered a court was in no position to determine the balance between social cost and public benefit.17

The asset protection method was considered unpatentable not because it was a business method but because it was a mere scheme and did not constitute patentable subject matter according to the principles that had been developed. It was felt necessary that there be some physical phenomenon or effect resulting from the working of the method for it to be patentable, and this was missing from the claim.18

End notes

  1. Grant v Commissioner of Patents [2006] FCAFC 120, 18 July 2006
  2. Id, para 32
  3. Ibid
  4. Supra n1, para 38
  5. National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252
  6. Diamond v Diehr 450 US 175; 67 L Ed 2d 155 (1981)
  7. State Street Bank & Trust Co v Signature Financial Group Inc 149F 3d 1368; 47 USPQ 2d 1596 (Fed Cir 1998)
  8. AT&T Corp v Excel Communications, Inc 172 F 3d 1352; 50 USPQ 2d 1447 (Fed Cir 1999)
  9. Supra n1, para 7, 8 & 12
  10. Supra n1, para 24
  11. Supra n1, para 26
  12. International Business Machines Corporation v Commissioner of Patents (1991) 33 FCR 218, CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260, and Welcome Real-Time SA v Catuity Inc (2001) 113 FCR 110
  13. Supra n1, para 32
  14. Ibid
  15. Re Peter Szabo and Associates Pty Ltd (2006) 66 IPR 370
  16. Supra n1, para 44
  17. Supra n1, para 45
  18. Supra n1, para 47