The Patentability of Software in Australia

Software is generally patentable under Australian law.  It is, however, very important to have a software patent drafted by a patent attorney who is aware of software specific legal issues and tricks to get a software patent application past the patent office.

Here is the inside story.

What is meant by patentable subject matter?

The patentability of inventions has its roots in the statute of monopolies of 1623. Section 6 states:
… Letters patent and grants of privilege for the term of 14 years or under, hereafter to be made of the sole working or making of any manner of new manufacturers within this realm, to the 1st true inventor and inventors of such manufactures, which others at the time of making such letters patent and grants shall not use.

The current patent legislation, the patents act 1990, requires that a patentable invention be a manner of manufacturer. The concept of ‘Newness’ is now captured by the requirements that an invention is novel and inventive.

The meaning of manner of manufacture is not defined by the legislation. Manner of manufacture is defined by the common law.

National Research Development Corporation v Commissioner of Patents (“NRDC” case) [1959] HCA 67.

The watershed case that considered Manner of Manufacture is National Research Development Corporation v Commissioner of Patents (“NRDC” case) [1959] HCA 67.

The invention by NRDC was to a method for eradicating weeds from crop areas containing a growing crop, which comprises applying to the crop area a herbicide of known chemicals. The Commissioner of patents argued that the invention was not a manner of manufacture because:

• the chemicals where known and hence the invention was merely use of a known substance, which does not result in a vendible product as required; and
• all agricultural and horticultural processors are excluded from the concept of manner of manufacture.

Their Honours rejected the Commissioner of Patent’s arguments. Their Honours stated that it was a mistake to ask “is this a manner or kind of manufacture”. It is a mistake which tends to limit one’s thinking by reference to the idea of making tangible goods by hand or by machine. The right question is “is this a proper subject of letters patent according to the principles which have been developed for the application of section 6 of the Statute of monopolies”.

Furthermore, trying to precisely define manufacture is bound to fail. The purpose of section 6 was to encourage national development in a field which already in 1623 was seen to be excitingly unpredictable. It would be unsound to the point of folly to attempt to do so now. The concrete applications of the notion which were familiar in 1623 can be seen to provide only the more obvious not to say the more primitive, illustrations of the concept.

There Honours emphasised that the correct emphasis is that application of a manner of manufacture results in an artificially created state of affairs, and that a manner of manufacture has an industrial, commercial or trading character in that it belongs to a useful art as distinct from a fine art, and consequently its value to the country is in a field of economic endeavour.

These criteria would certainly seem to generally permit the patentability of a computer programmed to perform a task.

Decisions directly related to the patentability of software

International Business Machines Corporation v Commissioner of Patents [1991] FCA 625.

The invention by IBM was to computer graphics and more specifically to a method and apparatus for generating curves on computer graphics displays. The invention solved the problem of generating curves on computer displays without perceptible discontinuities, by using a known mathematical algorithm. His Honour stated that the use of the algorithm is not different conceptually from use of the compounds involved in NRDC. Just as those compounds were previously known, so here, it is not suggested there is anything new about the mathematics of the invention. What is new is the application of the selected mathematical methods to computers. Because application of the algorithm to computers was unknown, and the production of an improved curve is commercially useful and thus in a field of economic endeavour, it was his Honours view that the invention was a manner of manufacture.

His Honour also cited with approval the words of Graham J in the UK decision Burroughs Corporation (Perkin’s) Application (1974) RPC 147 at 161:

“(I)t is not enough to take a narrow and confined look at the `product’ produced by a method. Of course, if a method is regarded purely as the conception of an idea, it can always be said that the product of such a method is merely intellectual information. If .. in practice the method results in a new machine or process or an old machine giving a new and improved result, that fact should in our view be regarded as the `product’ or the result of using the method, and cannot be disregarded in considering whether the method is patentable or not.”

Justice Graham built a bridge between the old ideas of the patentability of mechanical machines and the like and the patentability of the new technology of software patents.

As an aside, Graham J also was of the view that:

“If the bare method or idea is also clothed by the patentee in his specification with a practical garment in the shape of apparatus enabling that method or idea to be realised in practice, it should no longer be regarded as a naked conception, for it has found a practical embodiment in the apparatus. It is then a manner of new manufacture” and “computer programs which have the effect of controlling computers to operate in a particular way, where such programs are embodied in physical form, are proper subject matter for letters patent”.

This suggests that some physical effect is required for patentability. There is ongoing debate as to whether there is a physical requirement in Australian patent law (see, for example Physicality in Australian Patent Law, Ben McEniery, Deakin Law Review Vol 16 No. 2). The Grant decision appears to introduce a physicality requirement, however this is inconsistent with earlier Authority, including NRDC and is questionable.

This case also provides a practical lesson as to how a claim to a software patent should be drafted. Claim 1 does not include features that are manifestly machine features. The claim may be read as a pure algorithm or abstract idea. Claim 1 is:

A method for producing a visual representation of a curve image from a set of control points which define the curve and which are input for each dimension and a number of intervals of the curve to be computed, said method comprising the steps of:
(a) computing a set of scaled vector coefficient integers for each dimension from the set of input control points for that dimension and from a scaling parameter;
(b) computing forward difference interval coefficient integers for each dimension for each interval from the scaled vector coefficient integers for that dimension and the interval integer number;
(c) computing the curve coordinate values for each interval for each dimension from the forward difference interval coefficient integers for that dimension for each interval and the scaling parameter; said computing steps being carried out without the use of floating point arithmetic; and
(d) displaying the curve by displaying curve coordinate points in accordance with the computed curve coordinate values for each dimension and a plurality of straight lines which successively connect said computed curve coordinate points.

The lack of positive computing machine features in the claim enabled the Commissioner of patents to argue that the invention defined by the claim was no more than an abstract idea, or mathematical algorithm which is not patentable. A literal reading of claim 1, giving the words their ordinary meaning, does not insist that the features relate to a computing machine. This provided the Commissioner with an opportunity to attack the claim for lacking manner of manufacture. Fortunately for the patent applicant, the judge gave the claim a purposive construction – that the context of the specification insisted that claim 1 is referring to the operation of a computing machine. His Honour said his view was reinforced by computer related words in the claims, such as “input”, “computing”, “displaying”, and so forth.

This was a close thing and there is a clear lesson. Incorporating features that are plainly computing machine features lessen the opportunity to argue that the claim is to no more than an algorithm or abstract idea, which is not patentable. The more detailed the description of the computer implementation in the body of the specification the more likely a purposive construction of the claims will result in the features being interpreted as computing machine features.

This is a theme in many of the computer software cases. Cases that do not clearly articulate that what is meant is a computer implemented algorithm are vulnerable to attack.

CCOM Pty Ltd v Jiejing Pty Ltd [1994] FCA 1168

The invention by CCOM was to the use of computer technology, for example word processors, to store and retrieve Chinese characters, which are much harder to generate on a computer then alpha numeric characters. The Honours found that contrary to the primary judges decision, following NRDC, the relevant field of economic endeavour is the use of word processing to assemble text in Chinese language characters. The [artificial] end result achieved is the retrieval of graphic representations of design characters, for assembly of text. The mode or manner of obtaining this, which provides particular utility in achieving the end result, is the storage of that as to Chinese characters analysed by/type categories, for search and selection by reference thereto.

The Honours also emphasised that it was incorrect to ask, when determining manner of manufacture, was there anything new and unconventional in computer use. By way of analogy, they stated that while a claim for a ballpoint pen now would fail being neither novel nor obvious, it would still be a claim for a manner of manufacture.

I believe that this supports the idea that a general purpose computer programmed in accordance with new computer software is a manner of manufacture, irrespective of how commonplace the general purpose computer was before the new computer software.

It is instructive to note that computing machine features are incorporated at many positions within the main claim of the patent specification, unlike the main claim in IBM. The computing machine features are underlined in claim 1 reproduced below:

Computer processing apparatus for assembling text in Chinese language characters, said computer processing
apparatus including:-
a memory including character stroke data storage means which stores data relevant to Chinese character stroke-type categories, Chinese characters and the order in which character strokes of respective Chinese characters are written and complementary graphic data storage means from which data relevant to the graphic
representations of each said Chinese character may be retrieved;
display means for displaying Chinese language characters retrieved from said graphic data storage means;
a keyboard having a plurality of input entry keys including character stroke-type category entry keys designated by indicating means indicative of respective ones of said Chinese character stroke-type categories and selection means for selecting one of a plurality of characters displayed by said display
means; and
wherein said character stroke data storage means are searched by entering through said input entry keys search criteria including the entered Chinese character stroke-type categories and the order in which the character stroke-type categories are entered through said input entry keys, whereby upon entry of said search criteria the graphic representation of the or each Chinese character which meet said search criteria are retrieved from the corresponding graphic data storage means and displayed by said display means; and
said selection means being operable to select one of said retrieved graphic representations of Chinese characters whereby text in Chinese language characters may be assembled.

Welcome Real-Time SA v Catuity Inc [2001] FCA 445

The invention by Welcome Real-Time is in the field of smart cards which record the number of points awarded to a person participating in many loyalty programs. Generally each merchant has their own loyalty program. Prior to the invention, it was a problem to store information on every available loyalty program in the smart card because the quantity of memory required to store information on all of the loyalty programs available – which may be thousands – generally exceeded the smart card’s memory. The invention was to add a merchants loyalty program to a file on the smart card the 1st time the cardholder used the card at the merchants point of sale terminal. Consequently, only the loyalty programs that the cardholder participated in were loaded onto the card, greatly reducing the memory requirements.

His Honour followed NRDC and expressed the view that the invention produced an artificially state of affairs, in that the cards can be issued making available to consumers many different loyalty programmes of different traders as well as different programs offered by the same trader. What was involved here is not just an abstract idea or method of calculation. Moreover, the result is beneficial in a field of economic endeavour – namely retail trading – because it enables many traders including small traders to use loyalty programs and thereby compete more effectively. His Honour further was of the opinion that the patent is not to a business method, in the sense of a particular method or scheme for carrying on a business. The patent is for a method and a device, involving components such as smartcards and point of sale terminals.

While his Honour expressed doubt that a manner of manufacture required a “physically observable effect”, his Honour’s comments suggests to me that it is prudent to plainly incorporate computing machine features into the claims to tie the software to a machine as appropriate. Claim 1 of the patent specification is notable for its inclusion of computing machine features:

Method of processing coded information during a purchase or payment operation by a customer, holder of a card (4) with a chip (5), at a trader’s, in which the contents of the memory (14) of the chip card are read and a coupon (12) is or is not printed on the basis of the information arising from the contents of said memory, characterized in that, with the memory of the chip card including [c] a first identification file (18), termed the Member file, identifying the card-holding customer, a second accounting file (22), termed the Points file, and a third file (21), termed the Behaviour file, relating to the behaviour of the card holder towards the user trader or traders, a specified algorithmic processing is performed dependent, on the one hand, on the date of the operation and, on the other hand, on the information contained in said files, including the Behaviour file, the algorithmic processing including a step of incrementing or decrementing the Point [sic] file by a predetermined number of points depending on the frequency and/or the nature of first, second or xth visit by the card holder over a time period of specified duration, the coupon is printed only if the number of points contained in the Points file is greater than a specified value then data is written to the Points file, new information is written to the Behaviour file, and said coupon is or is not printed on the basis of the result of said algorithmic processing.

Research Affiliates LLC v Commissioner of Patents [2013] FCA 71

The Research Affiliates decision is not consistent with earlier manner of manufacture decisions.

The title of the patent specification by research affiliates is Valuation in different non-capitalisation weighted index and portfolio. The invention by Research affiliates, roughly speaking, determines the quantity of a security to be included in a portfolio of securities.

The main claim is:
A method of constructing data indicative of a non-capitalization weighted portfolio of assets, the method being implemented in a computer system having at least one computer processor, the method comprising:
(a) receiving in the computer system data gathered in regard to a plurality of assets;
(b) receiving data indicating of selection of the plurality of assets to create data indicative of an index of assets, wherein said selection is selected based on an objective measure of scale other than market capitalization and share price; and
(c) receiving data indicative of a selection of the plurality of assets to create data indicative of an index of assets, wherein said selection is selected based on an objective measure of scale of said each of said plurality of assets,
wherein said weighting comprises:
(i) weighting at least on of said plurality of assets; and
(ii) weighting other than weighting based on at least one of market capitalization, equal weighting, or share price weighting.

As can be seen, the claim weakly ties the computing machine features to the claim. The computing machine feature is confined to the claim preamble. His Honour was of the view that:

The method of the claimed invention does not involve a specific effect being generated by the computer. The mere use of a computer necessarily carries with it the writing of information into the computer’s memory. There is a stark contrast between a computer-generated curve, or a representation of Chinese characters, or the writing of particular information on a smart card, on the one hand, and the quite unspecific index, on the other. There is no practical application in the method of the claimed invention for the improved use of computers. The effect of the implementation of the method is not to improve the operation of or effect of the use of the computer. There is nothing in the Specification or claim 1 that discloses how to produce the index.

Thus, there is nothing in the Specification or claim 1 to indicate:
• how data is accessed in step 1;
the nature of the processing undertaken in step 2 to identify the selection of assets;
• how the weighting function is accessed in step 3;
• how the relevant measure of scale is chosen in step 4; or
how the weighting function is applied in step 4 to assign a weighting to each asset. The case propounded by Research Affiliates depends upon the proposition that information of economic significance, once entered into or produced by means of a computer, becomes an economically valuable artificially created state of affairs, and thus patentable. That proposition must be rejected. The implementation of the method of the claimed invention by means of a computer, at the level articulated in claim 1, is no more than the modern equivalent of writing down the index on pieces of paper. On the face of the specification, there is no patentable invention in the fact that the claimed method is implemented by means of a computer. The Specification asserts a patentable invention, not in the use of the computer, but in the particular series of steps that give rise to the generation of the index. Those steps could readily have been carried out manually. The aspect of computer implementation is nothing more than the use of a computer for a purpose for which it is suitable. That does not confer patentability.

From his comments, Justice Emmett appears to be highly influenced by the lack of detail in the description of the computer implementation of the method and the weak computing machine feature in claim 1. There are hints, I believe, in the above passage that his decision may have been different if there was a stronger link made out in the specification between the invention and the computing machine implementation. This emphasises again the importance of having a quality and detailed specification prepared by a patent attorney with an eye to detail and experience in detailing computer software inventions.

Some aspects of Justice Emmett’s decision are, with respect, problematic. The execution of the method by a computer system is, in my opinion, an artificially created state of affairs and there is clearly economic value. By NRDC and other authority discussed, the invention is in my view patentable. There is no precedent in Australian law to support the idea that execution of the method must at least one of generate a specific effect (presumably what is meant is a physical effect), improve the operation of a computer or the effect of the use of the computer. This is at the very least conflating the ideas of new with the idea of manner of manufacture, which the Authorities warn against. In CCOM, for example, their Honours where of the view that:

“While a claim for a ball point pen now would fail for anticipation and obviousness, it would still be a claim for a manner of manufacture. Yet in the present case there are passages in the reasons of the primary Judge which suggest he was influenced in the determination of the issue as to “manner of manufacture” by asking whether was claimed involved anything new and unconventional in computer use”

RPL Central Pty Ltd v Commissioner of Patents [2013] FCA 871

The invention by RPL Central is a method of posing questions via the internet and using computers to determine if prior learning should be recognised as meeting a recognised standard, for example a TAFE course.

Justice Middleton used the principles established by NRDC to reject the notion that a computing machine running software merely generates information belonging to the fine arts. Rather, he found the invention had an industrial, commercial or trading character because it solved a problem in a field of economic endeavour – the education section of the economy. Justice Middleton also found that there was an artificially created state of affairs provided when the method was executed by a computing machine.

Justice Middleton noted he did not accept as argued by the Commissioner that Australian law requires a manner of manufacture to exhibit a physical effect that is substantial or central to the invention. Nevertheless, the invention defined by the claims would satisfy such a requirement if it did exist. His Honour found that the magnitude of the task performed by the invention and the express terms of the claims themselves mean that the computer is an essential part of the invention claimed, and was inextricably linked with the invention. Claim 1 is:

A method of gathering evidence relevant to an assessment of an individual’s competency relative to a recognised qualification standard, including the steps of:
A computer retrieving via the internet from a remotely-located server a plurality of assessable criteria associated with the recognised qualification standard, said criteria including one or more elements of competency, each of which is associated with one or more performance criteria;
the computer processing the plurality of assessable criteria to generate automatically a corresponding plurality of questions relating to the competency of an individual to satisfy each of the elements of competency and performance criteria associated with the recognised qualification standard;
an assessment server presenting the automatically-generated questions via the internet to a computer of an individual requiring assessment; and
receiving from the individual via said individual’s computer a series of responses to the automatically-generated questions, the responses including evidence of the individual’s skills, knowledge and/or experience in relation to each of the elements of competency and performance criteria,
wherein at least one said response includes the individual specifying one or more files stored on the individuals computer, which are transferred to the assessment server.

Computing device features are prominent and numerous in claim 1. However, they are no more prominent or numerous than may be ordinarily be expected for a software patent. Again, we see importance of a detailed disclosure of the operation of the computer machine with respect to the method and the inclusion of computing machine features into the claims.

His Honour then distinguished his reasoning from that in Research Affiliates:

It appears that in reaching this ultimate conclusion, his Honour was influenced by [physicality requirements], and the fact that the specifications contained virtually no substantive detail about how the claimed method was to be implemented by a computer (at [68]). Accordingly, his Honour held that although the “mere use” of a computer necessarily carries with it the writing of information into the computer’s memory, “[t]he method of the claimed invention does not involve a specific effect being generated by the computer”. Neither the specifications nor the relevant claims disclosed how to produce the index in question – for example, how the data was to be accessed, or the nature of the processing, weighting or other tasks to be undertaken in the various steps (at [70]). His Honour considered that this was not sufficient in the circumstances to satisfy the requirements of the manner of manufacture inquiry.

It is on this basis that Research Affiliates [2013] FCA 71 can be distinguished from the case presently before the Court. As I have already set out in some detail in these reasons, the specification and claims in issue in this case provide significant information about how the invention is to be implemented by means of computer. The computer is integral to the invention as claimed in this proceeding. Accordingly, I do not consider that the conclusion reached in this case is at odds with what his Honour concluded in Research Affiliates [2013] FCA 71. I need say nothing further as to the correctness of the actual decision in Research Affiliates.” – at 171- 172

His honours comments appear to be a veiled rejection of the principles set out in Research Affiliates.

In any case, incorporating computing machine features in the claims are prudent in light of his Honour’s comments distinguishing Research Affiliates.

The present and future

The Australian patent office’s recent and current practice is to reject software patent applications where a computer executes the steps of a method and, in their view, the computer is not a central or substantial part of the invention. As stated in 2.9.2.7 of the Australian patent examiner’s manual:

Where an invention is directed to the improved operation of a computer, or an advantage achieved by the implementation of a method by computer (as in CCOM supra), then the requirement for a manner of manufacture is likely to be met. However, where an alleged invention refers to computer implementation, but the advantage of the invention does not arise in the operation of the computer, for example if the advantage of a method predominately lies in the assemblage of intellectual information, then this may not be the case.

This practice resulted in the rejection by the patent office of the Research Affiliates and RPL patent applications and the subsequent appeal to the federal court.

Both of these cases are notable in that the patent applications in suit are for inventions that solved business problems (in the fields of applied finance and education), rather than what the patent office may consider technical problems, for example making a machine more efficient or achieve a particular physical or technical effect. It would appear that patent office practice continues to generally treat software that solves a technical problem as being a manner of manufacture.

The RPL and Research Affiliates decisions are both being appealed. It will be many months before the Full Federal Court of Australia publish a decision.

I find it hard to believe that, in view of the strength of the decisions discussed, that the outcome of the appeals will greatly disturb the long established law and practice in relation to the patentability of software. Consequently, I believe that the present practice of the patent office will likely revert to the previous position that generally all software is considered to be a manner of manufacture.

In any case, as the cases discussed demonstrate, it is possible to draft patent specifications to make the computer a central and substantial part of the invention. This is generally within the capabilities of a competent patent attorney with expertise in the drafting of software patents. If properly drafted in view of the discussed decisions, software patents should ultimately be found to be a manner of manufacture.

For further information, feel free to contact Justin Blows.

j.blows@phoenixip.com.au