Is software patentable in Australia: The Australian patent examiner’s manual

It’s been a bumpy ride for those trying to protect their software invention with an Australian patent during the last few years, but some clarity – albeit still somewhat limited – appears to be emerging.

IP Australia determines the Australian examination standards (but not the law) which are set out in the The Australian Patent Office Manual of Practice and Procudure, better known as the Australian Patent Examiner’s Manual. 
The two sections of the manual that are immediately relevant to the patentability of software are 2.9.2.7 Computer implemented inventions – Schemes and Business Methods, and 2.9.2.10 Mathematical Algorithms. The later of these are relevant, I believe, because software often implements mathematical algorithms.  
The fact the IP Australia has explicitly split these two sections is interesting.  IP Australia appears to distinguish between:

  • scheme and business methods (which in my experience IP Australia generally, but not always, has issues with); and
  • mathematical algorithms. 
The sections Computer implemented inventions – Schemes and Business Methods and Mathematical Algorithms as they are today are copied below.

Mathematical Algorithms
I think that everyone would agree with IP Australia’s position that a pure mathematical algorithm without application is not patentable – it is in effect an abstract (and hence non patentable) idea.

IP Australia calls on the authority of the IBM decision: the application of a mathematical algorithm to a computer that is foreign to the field of computing is patentable. In the case of IBM, the mathematical algorithm produces a curve on a computer display.  I think that is reasonable, because it advances what I call here “computer technology”, even when the technology is software based.

At the same time, however, I think that great care must be taken when drafting patent applications for software based computer technology, so that it is clear that the technology is indeed related to a computer, and not divorced from the technology by the use of overly abstract (or mathematical) language. Have a look at this post about the IBM case, for example.

In the IBM case, 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 not being patentable. 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.

The patent examiner’s manual also states that the presence of a mathematical algorithm in an otherwise patentable claim should not attract an objection, with an example in relation to annealing a tungsten alloy. 
Schemes and business methods
It’s no secret that IP Australia dislikes “schemes” and “business methods” that are implemented by software on a computer, and that is reflected in the patent examiner’s manual.  
At least the patent examiner’s manual does not rule out the patentability of “schemes” and “business methods”, if they “involve new applications of computer technology” (whatever that means) or a useful physical effect.  I can’t see the later being usually applicable.
At least they have left open the possibility of “a new application of computer technology” that is software based.
To be honest, I find the section of the patent examiner’s manual on computer implemented schemes and business methods somewhat shrill and not really self confident, and I think that the reliance on NRDC is, frankly, grasping at straws as many people read the NRDC case in support of software inventions.  
I think IP Australia’s position boils down to this one piece of authority:

Consequently, where it is clear from the specification as a whole that an invention is truly a scheme, an abstract idea or mere intellectual information, which are not patentable themselves, then implementing that invention on a computer is not an artificially created state of affairs that can be held to be patentable (Research Affiliates at [115]).  

That’s from the Research Affiliates case, my post for which is here.  The judges were of the opinion that if the software “improved” the computer, then the software invention was patentable.

I also highlight “the specification as a whole”, because that clearly directs a patent attorney to emphasis the computing aspect of the invention throughout the specification, including the body and the claims.

There is a huge gulf between software that “improves a computer” and software that “merely implements a scheme or business method”.

Where is the line that divides the gulf between patentable and non patentable subject matter?  That’s still not clear.

EXTRACTS FROM THE PATENT EXAMINER’S MANUAL

2.9.2.7 Computer implemented inventions – Schemes and Business Methods


Under Australian law, there are no specific exclusions to inventions that are implemented as computer software or a related product.  However, they are only patentable if they meet the requirements for a manner of manufacture and in particular are not mere schemes, abstract ideas or mere information.  Business schemes as such are not patentable.  However, methods relating to business or finance may meet the requirements if they involve new applications of computer technology or other useful physical results within the meaning of National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252; (1961) RPC 134 (NRDC).

Schemes and Business Methods
In NRDC at [22] the High Court stated that:
“The point is that a process, to fall within the limits of patentability which the context of the Statute of Monopolies has supplied, must be one that offers some advantage which is material, in the sense that the process belongs to a useful art as distinct from a fine art (see Re Virginia-Carolina Chemical Corporation’s Application (1958) RPC 35, at p 36) – that its value to the country is in the field of economic endeavour.”
Implementation of an invention on a computer has been said to provide an artificially created state of affairs.  However, in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150, the Full Federal Court found (at [101]) that:
“The characterisation of patentability by reference only to the description in NRDC of a product which consists of an artificially created state of affairs of economic significance was part of the High Court’s reasoning but did not represent a sufficient or exhaustive statement of the circumstances in which a claimed invention is patentable.”
They noted (at [8]) that the question to be asked, which was articulated by the High Court in NRDC (supra), was:
“Is this a proper subject of letters patent according to the principles which have been developed for the application of s. 6 of the Statute of Monopolies?”
The invention in Research Affiliates was a method of generating an index of securities to create a portfolio of assets.  The Court in Research Affiliates found that, where the subject matter of the invention was a scheme merely implemented on a computer, then it was the invention in substance that needed to have the requisite characteristics of a manner of manufacture.
The Court in Research Affiliates noted that NRDC:
“spoke in terms of a separate result achieved by the claimed method that has its own economic utility consisting in the improvement.  By this reasoning, the High Court directed attention to the subject matter to which the claimed method was directed, which needed to exhibit the required characteristics of a manner of manufacture to be patentable” ([115]),
and the Court found that the invention did not have:
“any artificial or patentable effect other than the implementation of a scheme, which happens to use a computer to effect that implementation. There is no technical contribution to the invention or artificial effect of the invention by reason of the intervention of the inventors. To take the words of NRDC at 268, the process does not produce “either immediately or ultimately, a useful physical result in relation to a material or tangible entity.” The claimed method, the result of the ingenuity of the inventors, does not produce such a result; the ingenuity is in the scheme. Again, drawing from NRDC at 270, there is a useful result of the claimed process but there is no physical thing “brought into existence or so affected as the better to serve man’s purposes”. There is no “physical phenomenon in which the effect, be it creation or merely alteration, may be observed” (NRDC at 276).” ([114])
Consequently, where it is clear from the specification as a whole that an invention is truly a scheme, an abstract idea or mere intellectual information, which are not patentable themselves, then implementing that invention on a computer is not an artificially created state of affairs that can be held to be patentable (Research Affiliates at [115]).  
While the use of a computer necessarily involves the writing of information into the computer’s memory, and it could be said that this means that there are a number of “physical effects” in the sense of transformed data and memory storage during the claimed process, that is not determinative of whether the invention is truly an artificially created state of affairs as required by NRDC.  The Court in Research Affiliates at [106] made it clear that to consider such effects as sufficient to create the artificially created state of affairs was an impermissible “mechanistic application of the criterion of artificiality or physical effect”.  It elevated form over substance.  In other words the Court determined that the mere implementation of a scheme on a computer does not change the fact that the invention, properly construed, was a non-patentable scheme or abstract idea.
Research Affiliates indicated at [102] that:
“transformation of data occurring in the computer at each stage of the process, of accessing data, processing data, accessing the weighting function and applying the weighting function, culminating in the creation of an index”
are examples of mere implementation of a scheme that will not provide the requisite manner of manufacture.
It should be noted that the fact that computer implementation of a scheme is described in extensive detail does not necessarily mean that the requisite effect is achieved if this is merely a recital of standard computer hardware or software.  Nor does the presence of elements of computer processing within the claims mean that the computer is integral to the invention for the purpose of determining whether a manner of manufacture is claimed.  This would be raising form over substance.
Rather, it is necessary to consider the substance of the invention claimed in light of the description including the role and effect of computer implementation.
The same applies where a method operates on, or with, a physical object, or otherwise in a physical environment, other than a computer.  The fact that some physical consequence or effect can be identified is not sufficient in itself to meet the manner of manufacture requirement.
For example, an invention such as a method of protecting an asset including steps of establishing a trust, making a gift to the trust, making a loan from the trust and securing the loan, as was the case in Grant v Commissioner of Patents [2006] FCAFC 120, will not be patentable if it is merely implemented on a computer or includes the step of constructing the asset (e.g. a house) protected by the method.
In contrast, an invention that involves an improvement in the operation of, or effect of the use of, the computer will more likely be a manner of manufacture. For example, the Full Federal Court has considered that a claim directed to computer processing apparatus for assembling text in Chinese language characters (CCOM v Jiejing 28 IPR 481; (1994) AIPC 91-079) is a manner of manufacture.  As a further example, the production of an improved curve image by computer (see International Business Machines Corporation v Commissioner of Patents (1991) 33 FCR 218) was held to be patentable.  In each of these inventions the result was clearly a new and improved computer.  The invention, as properly construed with regard to the specification as a whole, was not a scheme implemented by a computer.  That is, these Federal Court decisions demonstrate that the invention was inextricably linked with the computer itself.
Patentable computer related inventions may be claimed in different forms.  For example:
processing apparatus characterised by its method of operation;
software or programs in a machine readable form causing a computer to operate in an improved or better way when executed;
a computer, when programmed with code (source or executable) to operate in a particular way;
a computer readable medium containing program instructions to implement a particular method; or
a computer implemented method.
Regardless of the form that the invention is claimed in, if the invention is truly a scheme implemented on a generic computer, using standard software and hardware, then the invention will not result in an artificially created state of affairs and will lack a manner of manufacture.
Examiners are encouraged to consult OH&L if they are unsure whether to take a manner of manufacture objection following the principles of Research Affiliates.

2.9.2.10 Mathematical Algorithms

A mathematical algorithm is a procedure for solving a given mathematical problem, commonly applied in the field of computer software related inventions.
In Grant v Commissioner of Patents [2006] FCAFC 120, the Full Court stated:
“It has long been accepted that “intellectual information”, a mathematical algorithm, mere working directions and a scheme without effect are not patentable.”
However, while a mathematical algorithm per se may not be a manner of manufacture, the presence of such an algorithm within the steps in an otherwise patentable method does not exclude a claim from patentability. For example, in Re International Business Machines Corporation v Commissioner of Patents [1991] FCA 625 the Court, in considering a method for producing a visual representation of a curve, found (at [16]) that:
“In the present case, it seems to me that the use of the algorithm is not different conceptually from the use of the compounds involved in National Research and Development Council. 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, and in particular, to the production of the desired curve by computer. This is said to involve steps which are foreign to the normal use of computers and, for that reason, to be inventive. The production of an improved curve image is a commercially useful effect in computer graphics.”
The distinction to be drawn is between a claim to an algorithm (or scientific principle or natural phenomenon) in the abstract sense and the application of the formula to a process such that it produces “some advantage which is material, in the sense that the process belongs to a useful art as distinct from a fine art”.
Examples of inventions involving mathematical algorithms that would be patentable are:
any otherwise-patentable process which uses a specific algorithm or mathematical formula, e.g. a claim to a method of annealing a tungsten alloy where:
the heating time (seconds) = 6.78 mass of ingot/temperature (C).
a method of operating a computer which makes the computer faster or requires less hardware resources by using a mathematical algorithm, e.g. a claim to a computer that calculates frequency spectrum values using a new fast Fourier transform.
An example of an invention involving a mathematical algorithm that would not be patentable is:
a pure mathematical formula (unapplied), e.g. a claim to a method of calculating a value c, where:
c = ex sin (t)
Note: c, x, and t are pure variables with no defined significance to the real world.

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