On 18 July, 2006, the full court of the Australian Federal Court, in Grant v. Commissioner of Patents  FCAFC 120 made a significant pronouncement likely to add substantial confusion to the borders of possible business method patent protection in Australia.
The claims of Mr. Grant’s patent dealt with a trust arrangement to avoid creditors in bankruptcy. As such, the subject matter was certainly at one extreme of the "business method patent" spectrum.
In a joint judgement, the Court moved to strike the patent down while simultaneously pronouncing that it was not striking down all business method patents. The Court held that Mr. Grant’s claim did not produce "a concrete effect or phenomenon or manifestation or transformation".
Specifically, the question as to whether systems for interpreting and applying the law have the requisite "industrial or commercial or trading character" required for patentability was raised and answered in the negative. In addressing this issue, the Court relied on a number of old authorities, many dating to before the invention of the computer, dealing with a time when "algorithms" did not have significant commercial value.
In conclusion, the court noted that:
It has long been accepted that "intellectual information", a mathematical algorithm, mere working directions and a scheme without effect are not patentable. This claim is to "intellectual information", mere working directions and a scheme. It is necessary that there be some "useful product", some physical phenomenon or effect resulting from the working of a method for it to be property the subject of letters patent.
It would appear that the Court has re-opened the door to the rejection of computer algorithm-related inventions by relying on old authorities that predate the computer age, rather then the sensible judgement of IBM v Commissioner of Patents (1991) 22 IPR 417, which produced the more workable and broader test of: Does the claim produce a "commercially useful effect"?
The Full Court also summarily dismissed the trial judges attempts to dismiss the patent on the new grounds that the patent did not have ‘value to the country … in the field of economic endeavour’.
As a result of this recent decision business method patent applicants seeking protection in Australia will now have to argue that their invention produces "a concrete effect or phenomenon or manifestation or transformation". Nebulous arguments between practitioners and the Patent Office are likely to ensue as the Office attempts to classify business method-type inventions as "intellectual information". Further, it is predictable that computer programs will be characterised as "a mathematical algorithm, mere working directions and a scheme" by those seeking to invalidate a patent in infringement proceedings.
While keeping practitioners busy, in the view of the author, this approach will do nothing to enhance the objectives of the Australian patent system and ultimately can only lead it into disrepute. Unfortunately, given that this is an authoritative Full Federal Court decision, it may be some time before a patent applicant has the will and the financial backing to have this issue heard in the highest court in Australia, the High Court.
The Court appears to have lost sight of the reason the patent system exists i.e. to encourage disclosure of important new ideas of benefit to society (in any area) in return for a time-limited monopoly. Indeed, if the difficulty of obtaining business method patents increases, innovators in this area may feel compelled to exploit their ideas through the trade secrets regime to the detriment of society.
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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