Australian Court says no to business methods

Article  \  12 Nov 2014

In the recent case of Research Affiliates LLC v Commissioner of Patents, the Full Court of the Federal Court of Australia has ruled that a method to create a securities index by means of a computer is not a patentable invention. There is not a lot of guidance on what might be considered patentable in business methods, but there are some useful clues.

Overview of the invention

The invention before the Court related generally to securities portfolio management. The patent applications claimed a new method of constructing data indicative of a non-capitalisation weighted portfolio of assets. The method was implemented in a computer system and contained a series of steps starting with the receipt in the computer system of data gathered in regard to a plurality of assets. Other aspects claimed included 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 was used to receive the data and to provide what was termed 'weighting means' for weighting each of the plurality of assets. The Court asked whether the use of a computer in this way was sufficient to transform an otherwise unpatentable business scheme into a patentable invention.

Comparison with overseas jurisdictions

It was clear that the Court wanted to take an approach to the patentability of business methods in a manner consistent with that taken in the United Kingdom (UK) and the United States (US).

Under Australian law a method claim defining an invention must have as its end result an 'artificial effect' falling squarely within the true understanding of that concept.

The UK has a statutory exclusion for computer programs 'as such'. Nevertheless, the UK decisions were found to be of assistance in understanding the distinction to be drawn in the Australian context between an unpatentable business method and a patentable invention that results in an 'artificial effect'. The Full Court found it helpful to consider the UK analysis of what constitutes a 'technical effect' or 'technical contribution' of a claimed invention.

In the UK Court of Appeal case Aerotel Ltd v Telco Holdings Ltd; Macrossan's Application the decision set out an approach for assessing whether an invention relates to a computer program as such. The four-step test, cited with approval by the Australian Court, is to:

  1. properly construe the claim;
  2. identify the actual contribution;
  3. ask whether it falls solely within the excluded subject manner; and
  4. check whether the actual or alleged contribution is actually technical nature.

The conclusion here is that applying a test of a 'technical contribution' in the UK context can be useful in an analysis of an 'artificial effect' in the Australian context.

Also mentioned, was the relatively recent case of Alice Corporation Pty Ltd v CLS Bank International in which the Supreme Court of the United States invalidated a computer-implemented scheme for mitigating settlement risk. In that case, the Supreme Court concluded that the method claims merely required generic computer implementation and were insufficient to 'transform' the abstract idea into a patentable application. The Supreme Court said it is not a patentable invention to claim an instruction to apply an abstract idea of intermediated settlement using some unspecified generic computer.

The way forward

The Full Court found that the claims did not define a patentable invention under Australian law. Curiously, the Court went on to comment that the claims would not define a patentable invention in the UK and the US either.

Unfortunately, there is little guidance on where the line can be drawn in Australia between an unpatentable business scheme and a patentable invention. It appears that mere computer implementation is no longer sufficient to transform an unpatentable business, commercial or financial scheme into a patentable invention. 'Something else' is needed but it is not clear what 'something else' means.

Perhaps the Australian courts will now be looking for a 'technical contribution'. If so, the approach in Australia does in fact appear to be aligned with the approach taken in the US and the UK.