UK: Patenting Business Methods In Europe Opportunities And Difficulties

Recent decisions of the EPO and of the UK Patent office have highlighted the problems faced by inventors of new business methods and seeking patent protection in Europe.

EPO Appeal Board decisions fall into three categories: those selected for publication in the Official Journal, those important enough to be circulated to all appeal board members and presumably to be mentioned in the next available edition of the book entitled Case Law and published by the EPO appeal boards, and those of minor importance which are circulated to appeal board chairman only. The decision in T 0931/95 Controlling pension benefits system/PBS Partnership falls into the second category, and is highly instructive about the attitude of the EPO towards business methods inventions.

The application in issue, published as EP-A-0332770, is the European counterpart to US-A-4750121. The applicants, who were based in the US aimed to provide a system which fully complied with all of the latest Congressional and judicial mandates and provided a novel fully funded pension benefits system which imposed considerably lower and fixed determinable financial burdens upon the employer and relieved him of all administrative and fiduciary responsibility, while also providing expanded, accurately predictable, and increasing benefits to all enrolled employees. Benefits were expanded in that, in addition to periodic retirement payments after age 65, both death and disability benefits were also provided. Rather than being fixed or completely undeterminable, all benefits provided by the present system were projectable from the onset of a program with any subscriber employer so that each enrolled employee could determine his future benefits resulting from death, disability, or retirement and be assured that because of a built-in fixed percentage of increasing benefits, that the benefits he receives will keep pace with inflation, retaining his purchasing power. The above advantages were, in large part, achieved by a unique implementation of life insurance to fund future payable liabilities by a master trust. Rather than terminating life insurance at employee retirement, each policy was maintained in force by the master trust until the employee's death, the proceeds flowing into the master trust to assist in paying all future periodic benefits.

The EPO had to examine main independent method and apparatus claims reading

"1. A method of controlling a pension benefits program by administering at least one subscriber employer account on behalf of each subscriber employer's enrolled employees each of whom is to receive periodic benefits payments, said method comprising:

• providing to a data processing means information from each said subscriber employer defining the number, earnings and ages of all enrolled employees of the said subscriber employer;
• determining the average age of all enrolled employees by average age computing means;
• determining the periodic cost of life insurance for all enrolled employees of said subscriber employer by life insurance cost computing means; and estimating all administrative, legal, trustee, and government premium yearly expenses for said subscriber employer by administrative cost computing means;
• the method producing, in use, information defining each subscriber employer's periodic monetary contribution to a master trust, the face amount of a life insurance policy on each enrolled employee's life to be purchased from a life insurer and assigned to the master trust and to be maintained in full force and effect until the death of the said employee, and periodic benefits to be received by each enrolled employee upon death, disability or retirement."

"5. An apparatus for controlling a pension benefits system comprising:

• a data processing means which is arranged to receive information into a memory from each subscriber employer defining the number, earnings and ages of all enrolled employees, said data processing means including a processor which includes:

1. average age computing means for determining the average age of all enrolled employees;
2. life insurance cost computing means for determining the periodic cost of said life insurance for all enrolled employees of said subscriber employer;
3. administrative cost computing means for estimating all administrative, legal, trustee, and government premium yearly expenses for said subscriber employer;

• the apparatus being arranged to produce, in use, information defining each subscriber employer's monetary contribution to a master trust; the face amount of each life insurance policy to be issued and made payable to said master trust by a life insurer on the life of each enrolled employee and to be maintained in full force and effect until the death of the said employee; and periodic benefits payable by said master trust to each enrolled employee upon death, disability, or retirement."

The opposition division held that the claimed invention was unpatentable since it related only to features of a commercial or managerial character and lacked any technical features. The applicants appealed, contending that the claims were directed to the processing of data which was a physical entity within the meaning set out in T 0208.84 Computer-related invention/VICOM, that the requirement for technical character was now outdated having regard to the abandonment in a number of non-European countries of the exclusion of business methods as exemplified by the US decision in State Street bank & Trust v Signature Financial Group (CAFC, 1978), and that the field of business methods had been opened to patent protection in cases T 0769/92 General Purpose Management System/SOHEI and T 1002/92 Queueing System/Petterson.

The Appeal Board rejected the argument that a requirement for technical character had become obsolete, and commented that the requirement had been assumed to be necessary in the recent decisions in cases T 1173/97 Computer Program Product/IBM and T 0935/97 Computer program product II/IBM, see also the recent decision of the German federal Court of Justice in case XZB 15/98 Sprachanalyseeinrichtung. The various method steps in claim 1 were of a purely administrative, actuarial or financial character, and the use of technical means for carrying out these steps did not impart technical character to them. In the Vicom case the claimed method produced the technical result of improving and sharpening an image, in Sohei the steps of the claimed method were closely related to the functional features of the computer system, and Petterson related to a three-dimensional apparatus which was clearly of a technical character. The subject matter claimed in each of the above three cases was of a technical character whereas that claimed in claim 1 of the application in issue was not.

Significantly, the Appeal Board held that the subject matter of claim 5 was NOT excluded by the prohibition on patenting business methods In the Board's view a computer system suitably programmed for use in a particular field, even if that was the field of business and economy, had the character of a physical entity, man-made for a utilitarian purpose and was therefore an invention within the meaning of Article 52(1) EPC. This distinction with regard to patentability between a method for doing business and an apparatus suited to perform such a method was justified in the light of the wording of Article 52(2)(c) EPC, according to which "schemes, rules and methods" are non-patentable categories in the field of economy and business, but the category of "apparatus" in the sense of "physical entity" or "product" was not mentioned in Article 52(2) EPC. If a claim was directed to such an entity, the formal category of such a claim did in fact imply physical features of the claimed subject-matter which could qualify as technical features of the invention concerned and thus be relevant for its patentability.

The applicant's problems were by no means over: the Board went on to decide that the subject matter of claim 5 involved no inventive step. They concluded that the assessment had to be carried out from the standpoint of a skilled person who knew of the structure and concept of the improved pension benefits system and the underlying schemes for information processing. Use of computers in the economic sector had become widespread in the economic field at the priority date, and there was no technical contribution provided by the claimed subject matter to the prior art Accordingly the EPO appeal board rejected the appeal and the application was refused..

In Fujitsu"s UK Application 9604003.5, the main embodiment was a reservation management system in which the relative importance of conflicting requests was assessed based on such factors as the reason for a meeting, the importance of the person making the booking, the number and seniority of attendees, how long it was until the meeting, for how long a meeting had already been booked, and the number of times a reservation had been rescheduled. An algorithm assessed the degree of importance using these criteria and priority was given to the more important reservation. Existing reservations could be rescheduled. Apparatus and method claims were presented, the apparatus claim in the form that it was examined during the hearing reading as follows:

"A reservation management apparatus in an information processing system for receiving reservation requirements and determining automatically whether to accept the reservation requirements, comprising:

• entry means for entering requirements of a first reservation;
• storage means for storing information of a second reservation that was previously registered and storing predetermined standards for determining degrees of importance;
• detection means for determining whether there is a duplication between the first reservation and the second reservation, according to the information of the second reservation stored in said storage means and the requirements of the first reservation, when the requirements of the first reservation are entered;
• importance degree determination means for automatically calculating an importance degree of the first reservation according to the requirements of the first reservation, and an importance degree of the second reservation according to the information of the second reservation by referring to the predetermined standards for determining degrees of importance stored in the storage means; and
• arrangement means for determining whether to accept the requirements of the first reservation, based on a comparison between the importance degree of the first reservation and the importance degree of the second reservation, which are calculated by said importance degree determination means, wherein the first reservation is automatically accepted when the importance degree of the first reservation is greater than the importance degree of the second reservation, and a time and date of the first reservation is automatically changed when the importance degree of the first reservation is lower than the importance degree of the second reservation."

Fujitsu argued that the problem being addressed by the invention was a technical one in that conflicting requests for entry to a database had to be handled efficiently and consistently according to criteria set up in advance. They added that the technical nature of the invention was demonstrated by the fact that the system permitted a plurality of input sources from multiple users over a network and highlighted the possible use of different input devices such as keyboard, mouse, telephone, microphone, fax and reading characters from a request form, which they said distinguished the present system from the traditional manual method of resolving conflicts. They pointed to the complex criteria for assessing priority which they said contributed to the technical character, and argued that the performance of the calculation to assess priority, the resultant changes to the database, and the rescheduling of other items were technical matters, as was the output of notification to the users. Examples of output notification given in the specification were e-mail, fax, electronic bulletin board, automatic calls using voice synthesis, mailing and circulating a printed notice. They concluded that while the operation of the invention might be underpinned by a business method, that should not of itself exclude the invention from patentability, and that that the claims were not directed to a business method as such.

The Patent Office (Mr Peter Marchant, Deputy Director) rejected the above argument and held that the claimed subject matter fell within either the mental act or the business method objection to patentability, and that any claim that could be put forward based on the disclosed subject matter would fall within one or other of these exclusions since it would involve merely the automation of a manual method of prioritizing human actions.

If there was an objection based on the mental act prohibition, then following the Merril Lynch decision [1989 RPC 561 the presence or absence of a technical effect was irrelevant to patentability. If this approach was wrong, however, the claimed apparatus and method did not in fact produce any technical effect. Mr Marchant summarized the conclusions of the Patent Office as follows:

Accordingly the application was refused; Fujitsu can lodge an appeal to the Patent Court.

Despite a difference of opinion as to the eligibility of claim to apparatus for carrying out a business method, the two decisions show considerable similarity in their reasoning. In both cases they are looking for an identifiable technical effect which goes beyond mere automation of an existing system which in the UK has been the subject of a long-standing prohibition on the ground of lack of inventive step, see British United Shoe v Collier (Simon) (1909) 26 RPC 21 and (1910) 27 RPC 567. When an application is drafted, it is advisable to mention any feature that could contribute to a technical effect so as to maximize the chances of allowable subject matter being identified during prosecution.

Although the prohibition on patenting computer software is proposed to be removed in the present revision to the EPC, the latest proposals for revision of the EPC (13 October 2000; available at www.european-patent-office.org) provide for the retention of prohibitions on schemes, rules and methods for performing mental acts, playing games or doing business. Although there is a climate of opinion in favor of patents for computer-related inventions, and many cases relating to dot.com inventions can be prosecuted successfully, the approach in Europe is at present not as favorable for pure business-method inventions as it is in the USA and it is unlikely to shift significantly in the immediate future. However, the field is fast developing, and the present approach will not deter applicants in the US and other countries who may prudently take the view that the commercial importance of their inventions justifies attempting to obtain grant, especially since the approach established by case law may have evolved significantly by the time that their application comes up for examination.