Australia: Aristocrat v Commissioner of Patents – Much ado about nothing

Due to the High Court's recent "non-decision" in Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents [2022] HCA 29 (Aristocrat HCA), the question of how to determine whether a computer-implemented invention is directed to patentable subject matter remains largely unsettled. In two joint judgments, the High Court divided evenly, both in respect of deciding whether Aristocrat's claimed "gaming machine" was patentable, and further to the approach to be taken for assessing the patentability of computer-implemented inventions generally.

Other Points to Note

• Both the separate joint judgments of Kiefel CJ, Gageler and Keane JJ (Kiefel CJ judgment), in denying the appeal, and Gordon, Edelman and Steward JJ (Gordon J judgment) in allowing the appeal, agreed there is an initial "threshold requirement" that must be met before an assessment can be made as to whether an invention involves a manner of manufacture following the High Court authority in N V Philips Gloeilampenfabrieken v Mirabella International Pty Ltd (1995)183 CLR 655 and D'Arcy v Myriad Genetics Inc [2015] HCA 35. However, importantly the different judgments differed substantially as to how this threshold requirement is to be met.
• Both the Kiefel CJ and Gordon J judgments agreed a necessary first step in assessing any patent claim was that the claim requires proper characterisation following the approach in Myriad. However, again, the separate judgments differ fundamentally as to how this characterisation process is to be carried out.
• Both the Kiefel CJ and Gordon J judgments (Aristocrat HCA at [77], [152]) commented unfavourably on the "proposed alternative approach" of the majority in Aristocrat FCAFC for assessing the patentability of computer-implemented inventions. This approach controversially involved initially asking whether the invention claimed is a computer-implemented invention and if so, can the invention so claimed broadly be described as an advance in computer technology. It would appear the "proposed alternative approach" is no longer an available alternative.
• Both the Kiefel CJ and Gordon J judgments, either implicitly or explicitly, affirmed the earlier Full Federal Court authorities directed to assessing computer-implemented inventions including CCOM Pty Ltd v Jeijing [1994] FCA 396, Grant v Commissioner of Patents [2006] FCAFC 120, Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150, Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177, Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161 and Commissioner of Patents v Rokt Pte Ltd [2020] FCAFC 86.
• IP Australia has issued a statement that it will carefully review the decision but in the meantime will continue its practice to consider that a claimed invention will not satisfy the requirements for manner of manufacture "if it is merely directed to the implementation of an otherwise unpatentable idea in conventional and well-understood computer technology". As an observation, this approach is in line with that adopted in the Kiefel CJ judgment.
• As the proper approach to assessing computer-implemented inventions has not been settled by the High Court, innovators should still look to protect computer-implemented inventions that do not currently meet the test employed by IP Australia, noting that IP Australia's approach is in clear conflict with the Gordon J judgment, and the law may still develop in a manner that is more favourable to computer-implemented inventions. This is especially the case given the changing composition of the High Court in the near future.

Background

This "dispute" between Aristocrat and the Commissioner started with IP Australia refusing to certify four Aristocrat divisional innovation patent applications in late 2017 and early 2018 (i.e., Australian Innovation Patent Nos 2016101967, 2017101097, 2017101098 and
2017101629). This refusal was on the basis that the invention, the subject of each of the innovation patents, was said not to involve a "manner of manufacture" (i.e., not patentable subject matter).

Each of the patents was directed to, and claimed, a "gaming machine" and the manner of manufacture objection was on the basis that the "substance" of the invention was to the game which is not patentable subject matter. Notably, this was the only objection raised against Aristocrat's patents. As an aside, even though this matter concerns the soon to be defunct "innovation patent", the patentable subject matter requirements are framed identically for both innovation and standard patents and so the findings in this case also apply to standard patents.

Aristocrat took the refusal of these patents to a hearing before IP Australia where a Delegate of the Commissioner of Patents agreed with the Examiner in Aristocrat Technologies Australia Pty Limited [2018] APO 45 (Aristocrat IPAU) that the subject of all of the innovation patents did not involve a manner of manufacture as the substance of the invention was nothing more than games and game rules (Aristocrat IPAU at [67]) and further that this deficiency could not be addressed by amending the claims (Aristocrat IPAU at [71]), and as a consequence revoked the innovation patents.

Aristocrat appealed the Delegate's decision to the Federal Court. By this stage, the parties had agreed that consideration of the manner of manufacture issue could be centred around Australian Innovation Patent No 2016101967 (967 Patent) and in particular that if claim 1 of the 967 Patent was held to be a manner of manufacture, then this finding would flow through to the remaining claims of both this patent and to those of the remaining three innovation patents in suit.

Claim 1 of the 967 Patent is set out below:

(1) A gaming machine comprising:
(1.1) a display;
(1.2) a credit input mechanism operable to establish credits on the gaming machine, the credit input mechanism including at least one of a coin input chute, a bill collector, a card reader and a ticket reader;
(1.3) meters configured for monitoring credits established via the credit input mechanism and changes to the established credits due to play of the gaming machine, the meters including a credit meter to which credit input via the credit input mechanism is added and a win meter;
(1.4) a random number generator;
(1.5) a game play mechanism including a plurality of buttons configured for operation by a player to input a wager from the established credits and to initiate a play of a game; and
(1.6) a game controller comprising a processor and memory storing (i) game program code, and (ii) symbol data defining reels, and wherein the game controller is operable to assign prize values to configurable symbols as required during play of the game,
(1.7) the game controller executing the game program code stored in the memory and responsive to initiation of the play of the game with the game play mechanism to:
(1.8) select a plurality of symbols from a first set of reels defined by the symbol data using the random number generator;
(1.9) control the display to display the selected symbols in a plurality of columns of display positions during play of a base game;
(1.10) monitor play of the base game and trigger a feature game comprising free games in response to a trigger event occurring in play of the base game,
(1.11) conduct the free games on the display by, for each free game, (a) retaining configurable symbols on the display, (b) replacing non configurable symbols by selecting, using the random number generator, symbols from a second set of reels defined by the symbol data for symbol positions not occupied by configurable symbols, and (c) controlling the display to display the symbols selected from the second set of reels, each of the second reels comprising a plurality of non-configurable symbols and a plurality of configurable symbols, and
(1.12) when the free games end, make an award of credits to the win meter or the credit meter based on a total of prize values assigned to collected configurable symbols.

The Federal Court's decision of Aristocrat Technologies Australia Pty Limited v Commissioner of Patents [2020] FCA 778 (Aristocrat FCA) allowed Aristocrat's appeal, with the primary judge Burley J finding, contrary to the Delegate, that claim 1 of the 967 Patent did involve a manner of manufacture. The primary judge adopted a two-step analysis that asked as its first question whether the claimed invention was for a "mere scheme" and if this was answered in the affirmative then determining whether invention lay in its computerisation (Aristocrat FCA at [89]-[94]). In this case, the primary judge held that the claimed invention was not to a mere scheme and it was not necessary to go to the second question (Aristocrat FCA at [95])

This decision of a single judge of the Federal Court was subsequently appealed to the Full Court of the Federal Court and the Commissioner prevailed in the decision of Commissioner of Patents v Aristocrat Technologies Australia Pty Ltd [2021] FCAFC 202 (Aristocrat FCAFC), with all three judges hearing the matter allowing the appeal. Perram and Middleton JJ issued a joint judgment, and in their reasons put forward a proposed alternative approach for assessing computer-implemented inventions involving asking two questions, the first being is the invention claimed a computer implemented invention; and if so, can the invention claimed broadly be described as an advance in computer technology (Aristocrat FCAFC at [74]). Nicholas J, while still allowing the appeal, did not agree with the proposed alternative approach but instead required that for an abstract idea or game to become patentable then the idea must be given "practical effect and transformed into a new product or process which solves a technical problem, or makes some other technical contribution in the field of the invention" (Aristocrat FCAFC at [124]).

Aristocrat successfully sought special leave to appeal to the High Court and the hearing was heard in June 2022. Unfortunately, a full bench comprising all seven Justices was not available, with only six of the seven High Court Justices hearing the matter. As such, there was always the prospect that the Court could divide equally and this is indeed what occurred with a first group of three Justices, comprising Kiefel CJ, Gageler and Keane JJ denying the appeal and a second group of three Justices comprising Gordon, Edelman and Steward JJ allowing the appeal.

Since the High Court was evenly split, Section 23(2)(a) of the Judiciary Act 1903 (Cth) came into effect. This section states where there is a tie in the High Court in circumstances such as these the decision of the Court below will be affirmed. As the Full Court of the Federal Court had found for the Commissioner in Aristocrat FCAFC then this decision was affirmed and claim 1 of the 967 Patent went down as not being directed to a claim involving a manner of manufacture (ie, not patentable subject matter). Critically, in these circumstances, and as set out in the Judiciary Act, the Chief Justice of the High Court cannot break the tie. As a result there is no majority or binding decision made by the High Court.

This is not the end of the matter between Aristocrat and the Commissioner as there are still the remaining claims of the four divisional innovation patents to be dealt with by the primary judge who will now have the interesting task of deciding exactly what line of authority to adopt.

Reasoning of the High Court

As referred to above, while there was agreement at a very high level between the two groupings of Justices on topics such as the existence of a threshold test, the requirement to characterise the claim and the correctness of earlier Full Court of the Federal Court decisions in this area, when it came to the detailed legal tests to be applied, the Court was sharply divided in its approach.

Kiefel CJ Judgment

Perhaps the most surprising aspect of the Kiefel CJ judgment is the extent to which the NV Philips decision has informed their Honours' approach to the task of characterising a patent claim for the purposes of assessing patentable subject matter. This is the case even though the NV Philips decision has traditionally been treated as only having very limited application, essentially only operating in those circumstance where there is an admission on the face of the patent specification itself that the described invention does not have the necessary quality of newness or inventiveness. As was made clear in NV Philips, this threshold test was still said to operate notwithstanding that there are separate legislative requirements for novelty and inventive step set out in the Patents Act 1990.

In the Kiefel CJ judgment, this mixing of concepts of novelty and inventive step with the assessment of patentable subject matter that was taken in NV Philips now appears to provide the intellectual underpinning to this judgment's approach of how to characterise a claim. In this approach, the focus is now on those elements of a claim which are not common general knowledge (Aristocrat HCA at [66], [73]). As the Kiefel CJ judgment notes "[t]he claimed invention takes its character, as an invention, from those elements of the claim which are not common general knowledge".

This leads to the rather startling conclusion that an invention that is patentable subject matter at a certain point in time could lose this quality at a later time and this would include physical apparatus such as a ball point pen (Aristocrat HCA at [72]) or a mechanical gaming machine (Aristocrat HCA at [44)).

It was a not a matter of controversy between the parties that a mere scheme or game or abstract idea with nothing more is not good subject matter for a patent. Following, the characterisation approach of the Kiefel CJ judgement, the claimed gaming machine was held to be no more than an "unpatentable game operated by a wholly conventional computer" (Aristocrat HCA at [76]), i.e., all the common general knowledge elements comprising the "wholly conventional computer" were effectively stripped away in the characterisation step.

To understand where the boundary is drawn, the Kiefel CJ judgment stated that the implementation of an otherwise patentable idea or plan or game would require "some adaptation or alteration of, or addition to, technology otherwise well known in the common general knowledge to accommodate the exigencies of the new idea or plan or game" (Aristocrat HCA at [77]) to become patentable.

As noted above, both judgments affirmed the earlier Full Court of the Federal Court authority concerning computer-implement inventions. One of those earlier cases is CCOM which concerned "a claim for an invention which enabled a standard English keyboard to be used to generate Chinese characters for word processing purposes" (Aristocrat HCA at [26]) which was held to be patentable subject matter. The Kiefel CJ judgment drew a distinction between the claim in CCOM and Aristocrat's claim on the basis that "[u]nlike CCOM, the present cannot be said to fall within a category of case in which, as an element of the invention, 'there [is] a component that [is] physically affected or a change in state or information in a part of a machine".

Now, the "computer processing apparatus" of CCOM was understood to be a conventional computer not unlike in principle the conventional "gaming machine" of the 937 Patent. What is difficult to reconcile with the approach of the Kiefel CJ judgment is why characterisation of the gaming machine completely removed all the computing hardware to leave only the unpatentable game while apparently characterisation of the claim in CCOM would still leave aspects of the computing apparatus, which can be physically changed, and apparently meet the test of being an "adaptation or alteration" of the computer "to accommodate the exigencies" of the method for generating Chinese characters for a word processor.

Gordon J Judgment

A motivating concern of the Gordon J judgment appears to be that any assessment of patentability should not treat computer-implemented inventions in a way different from other areas of technology (Aristocrat HCA at [97], [119], [152]-[153]).

While the Gordon J judgment agreed that the starting point for determining whether the requirements of patentable subject matter has been met was the characterisation of the relevant claim (Aristocrat HCA at [101]), they counselled strongly that the "characterisation exercise should not be artificial" (Aristocrat HCA at [103]) and further that the "risk of artificially characterising a claim is particularly pronounced where the claim contains interdependent integers" (Aristocrat HCA at [104]) noting that the "characterisation of the claim at the appropriate level of generality should include all of the matters that properly form part of the idea, as well as its implementation" [Emphasis Added].

The Gordon J judgment criticised the Delegate's characterisation as being "artificially specific", being limited to those elements "that are deduced from the specification to involve alleged novelty and inventiveness" (Aristocrat HCA at [146]), which is the standard approach taken by IP Australia when assessing the patentability of computer-implemented inventions. The Commissioner's characterisation was also criticised as being "extremely specific and narrow" because it ignored the interaction between the game instructions and the player interface (Aristocrat HCA at [146]). Aristocrat's characterisation, which involved considering all the elements of claim 1 and their interrelationship, was also criticised as not "describing the essence of the claim" (Aristocrat HCA at [149]).

Following an observation that the characterisations of the primary judge and both judgments of the Full Court of the Federal Court were reasonable, the Gordon J judgment considered the "best characterisation of Claim 1 is: an EGM incorporating an interdependent player interface and a game controller which includes feature games and configurable symbols" (Aristocrat HCA at [149]).

In respect of the threshold test as expressed in NV Philips, the Gordon J judgment agreed with the Kiefel CJ judgment to the extent that such a test exists, but then departed as to its importance, noting "the threshold necessarily imposes a less stringent requirement than the independent requirements of novelty and inventiveness" (Aristocrat HCA at [97]) and observing in the context of the current matter, that the "game controller" which was characterised out of the "gaming machine" in the characterisation adopted in the Kiefel CJ judgment to leave only the game rules had been "assumed at all stages of this litigation to meet the threshold requirements for an alleged invention" (Aristocrat HCA at [154], see also [146], [150]).

Interestingly, in their discussion of how to properly characterise claim 1, the Gordon J judgment conceded that a claim to a generic gaming machine would fail at the threshold stage as it "would not display even the minimal degree of novelty and inventiveness required for it to be an alleged invention", but this was not the case here (Aristocrat HCA at [145]).

In the Gordon J judgment's review of authorities in relation to the test to be applied for determining whether a claimed invention is to a manner of manufacture, and in particular as to the patentability of games, there was initially a recognition that while the "rules of a game alone are not the proper subject matter of a patent, they may be the proper subject matter when combined with physical materials used for playing the game" (Aristocrat HCA at [118]) and further that "it would be absurd if the application of this principle were any different where the idea of the game is combined with a digital representation rather than a cardboard representation of the game" (Aristocrat HCA at [119]). This apparent dichotomy, i.e. a physically-implemented game is patentable while an equivalent computer-implemented game is not, appears to be a fundamental notion that informs how their Honours formulate their approach, which is to concentrate on the end result, i.e., it produced "an artificial state of affairs and a useful result" consistent with the High Court's authority in NRDC.

In the context of computer-implemented inventions, the Gordon J judgment advances the test of whether "properly characterised, the subject matter that is alleged to be patentable is: (i) an abstract idea which is manipulated on a computer; or (ii) an abstract idea which is implemented on a computer to produce an artificial state of affairs and a useful result. The artificial state of affairs and useful result may be a physical change in something, but it need not be. The artificial state of affairs may be an improvement in computer technology, but it need not be. It is enough that the artificial state of affairs and useful result are created by 'the way in which the method is carried out in the computer" (Aristocrat HCA at [122]).

Applying the test in this case, the Gordon J judgment concluded the claimed invention, as properly characterised, is "not merely the idea of a game, incorporated into a game controller, without any novelty or inventiveness" or a "scheme or idea that is separate from the external or artificial application of that game" further concluding that the "claimed operation of the game controller, displayed through the player interface, is an altered EGM involving an artificial state of affairs and a useful result amounting to a manner of manufacture" Aristocrat HCA at [154]).

While this certainly appears to be a self-consistent application of the test posed by the Gordon J judgment, it is not clear why the computer-implemented inventions considered in other decisions of the Full Court, such as at least in the cases of Rokt and Encompass, where the inventions were rejected as not involving a manner of manufacture, would not meet the "artificial state of affairs and useful result" test of the Gordon J judgment. This is despite the Gordon J judgment endorsing the Full Court of the Federal Court's decision to reject these inventions as not involving a manner of manufacture in both cases (Aristocrat FCAFC at [121]).

Conclusion

Perhaps the main significance of the High Court's split decision is the conceptual divide between the two judgments on such a fundamental question that lies at the heart of patent law, i.e., how to determine whether a claimed invention first qualifies as patentable subject matter before the additional requirements of novelty, inventive step and utility must be met. Clearly, how IP Australia and the courts treat this question can shape economic policy as it potentially prevents innovators active in selected technology areas from obtaining patent protection no matter how inventive a development may be.

On one view, the split decision would appear to provide clear motivation for the High Court to take on this question again should an appropriate case present itself that brings the conflicting approaches of the different judgments into issue. On the other hand, both judgments endorsed the earlier Full Court of the Federal Court authorities of CCOM, Grant, Research Affiliates, RPL, Encompass and Rokt and the High Court may now consider this question to be settled despite the lack of a definitive test. This seems unlikely as the decisions of CCOM and Encompass (as an example) are difficult to reconcile. At least the "advance in computing test" proposed by the majority in Aristocrat FCAFC, and criticised by both judgments, would appear to have been put to rest.