Australia: Business Method Patents – Australian Full Court Clarifies Patentability

Last Updated: 21 July 2006
Article by Duncan Bucknell

Grant v Commissioner of Patents [2006] FCAFC 120

Take home

To be patentable in Australia:

  • A business method must produce a ‘useful product’ - a physical phenomenon or effect resulting from the working of the method. It must be more than mere ‘intellectual information’.
  • An alleged invention need not be an application of science or technology. However schemes relating to the operation of the law are not suitable subject matter for patent protection.

Grant v Commissioner of Patents [2006] FCAFC 120 (18 July 2006).


Patent drafting practice

Due to international jurisprudence, it has always been good practice to ensure that business method patent specifications include at least some physical manifestation or technical element. The simplest way to effect this is of course to include embodiments which utilize a computer or computerized network in order to work the invention. This practice has now been fully validated in Australia.

While Mr Grant may choose to appeal to the High Court, it is unlikely that leave would be granted. Consequently, this is likely to be the last word on patentability of business methods from the Australian appellate courts for some time to come.

What is a ‘physical effect’?

The definition of a ‘physical effect’ is obviously critical as it defines the boundary of patentability. The Full Court did not provide a detailed definition of this term, perhaps leaving this to the interpretation of future judges in the context of each case as it arises – and rightly so.

However, the Full Court provided guidance by stating amongst other things that:

  • the required physical effect must be a concrete effect or phenomenon or manifestation or transformation;
  • in NRDC, an artificial effect was physically created on the land;
  • in Catuity and CCOM as in State Street and AT&T, there was a component that was physically affected or a change in state or information in a part of a machine

In relation to Mr Grant’s asset protection method, the Full Court stated:

‘By contrast, the alleged invention is a mere scheme, an abstract idea, mere intellectual information, which has never been held to be patentable, despite the existence of such schemes over many years of the development of the principles that apply to manner of manufacture. There is no physical consequence at all.’


History of the proceedings

The decision is the second appeal from a decision of the Deputy Commissioner of Patents: Stephen John Grant [2004] APO 11 (26 May 2004).

In the original decision, the Deputy Commissioner revoked Innovation Patent No. 2003100074 entitled ‘Asset Protection Method’ on the basis that the invention claimed did not involve a manner of manufacture. The second instance appeal (to the Federal Court) affirmed revocation of the patent: Grant v Commissioner of Patents [2005] FCA 1100 (12 August 2005)

(The patent in issue was an Innovation Patent, but this has no bearing on the question of patentability as the same test for patentability applies.)

The claimed invention

Claim 1 of AU 2003100074 read:

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

(a) establishing a trust having a trustee,

(b) the owner making a gift of a sum of money to the trust,

(c) the trustee making a loan of said sum of money from the trust to the owner, and

(d) the trustee securing the loan by taking a charge for said sum of money over the asset.’

Other non-patentable methods

The Full Court gave the following examples of non-patentable methods:

  • systems for arrangement of known things, such as a plan relating to the layout of houses in a row or terrace so as to prevent overlooking (Re ESP’s Application (1944) 62 RPC 87);
  • an arrangement of buoys for navigational purposes (Re W’s Application (1914) 31 RPC 141);
  • a system of business even though its implementation involved the use of a printed envelope with a particular arrangement of words (Re Johnson’s Application for a Patent (1901) 19 RPC 56 at 56); and
  • a method of preventing the fraudulent re-use of sales book dockets and books used in that connection (Re Brown (1899) 5 ALR 81).

Interestingly, the Full Court referred to similar cases in the UK and USA to support its view:

  • Burroughs Corp (Perkins’) Application [1974] RPC 147
  • International Business Machines Corporation’s Application [1980] FSR 564
  • State Street Bank & Trust Co v Signature Financial Group Inc 149 F 3d 1368; 47 USPQ 2d 1596 (Fed Cir 1998)

© Duncan Bucknell 20 July 2006

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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