15 December 2006
Key Points:
the fact that an invention may be a business method is not an obstacle to patentability to be patentable, an invention must have a physical effect or consequence new legal findings are not patentable an invention need not be within the area of science and technology to be patentable nor add to the economic wealth of Australia or otherwise benefit Australian society as a whole
The Full Court of the Federal Court recently delivered its judgment in Grant v Commissioner of Patents [2006] FCAFC 120. While an application for special leave to appeal to the High Court is pending, the Full Court's decision provides useful guidance on applying a key statutory requirement for patentability.
The Patent Act 1990 (Cth)
For an invention to be patentable in Australia, whether as a standard patent (section 18(1)) or an innovation patent (section 18(1A)), the invention must, among other requirements, be "a manner of manufacture within the meaning of section 6 of the Statute of Monopolies". In its seminal decision of National Research Development Corp v Commissioner of Patents (1959) 102 CLR 252 ("NRDC"), the High Court held that it is a mistake to ask whether a given process or product is a manner (or kind) of manufacture. Instead, the right question is whether the invention is a proper subject of letters patent according to the principles which have been developed for the application of section 6 of the Statute of Monopolies.
The invention that Mr Grant sought to patent
In 2003, Stephen John Grant applied to IP Australia for an innovation patent in relation to an asset protection method that he developed. Claim 1 described the method as comprising the following steps:
After several adverse examination reports, Mr Grant asked to be heard. A Deputy Commissioner of Patents decided to revoke the innovation patent. Mr Grant appealed to the Federal Court, who dismissed the appeal. You can read our earlier article on the Court's judgment here.
Appeal judgment
Mr Grant again appealed, this time to the Full Court, which delivered a single judgment.
In considering Mr Grant's invention, the Full Court made six key findings.
First, the Full Court made clear that it was not deciding whether or not a business method is patentable. It observed that an invention that complies with the requirements of the Patents Act is patentable - the fact that an invention may be a business method is not an obstacle to patentability.
Second, the Full Court held that, to be a manner of manufacture within the meaning of section 6 of the Statute of Monopolies, the invention must result in a physical effect:
"What Mr Grant’s method results in is at best an abstract, intangible situation, namely that a hypothetical unsecured creditor who recovered judgment against a user of the method could not levy against the user’s assets to the extent they were subject to the charge. … A physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required. ... 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."
Third, the Full Court noted that the interpretation and application of the law is an endeavour that lies outside the realm in which patents may be granted. It considered that new legal findings are discoveries, but not inventions, and are not a manner of manufacture.
Fourth, the Full Court questioned the opinion of a Deputy Commissioner of Patents, expressed in the recent decision of Re Peter Szabo and Associates Pty Ltd (2005) 66 IPR 370, that the concept of "an artificially created state of affairs" discussed by the High Court in NRDC required "the application of science or technology in some material manner". It pointed out that to erect a requirement that an alleged invention be within the area of science and technology would be to risk the very kind of rigidity which the High Court warned against.
Fifth, it is settled law that an invention involving multiple elements will not be patentable if it is a mere collocation of known parts, each performing its own function to produce an aggregate result. Instead, there must be a new combination, being a new mutual relation in the operation of the integers. In this case, the Full Court held that the end result of Mr Grant's invention was effected by a mere collocation of integers rather than a new combination.
Sixth, the Full Court specifically rejected the reasoning of the primary judge, stating that it is not relevant that some may think that a method or product will not advance the public interest and, further, the court is not in a position to determine the balance between social cost and public benefit.
Having set out the above reasoning, the Full Court reached the following conclusion:
"Mr Grant’s asset protection scheme is not unpatentable because it is a "business method". Whether the method is properly the subject of letters patent is assessed by applying the principles that have been developed for determining whether a method is a manner of manufacture, irrespective of the area of activity in which the method is to be applied. 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 "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 properly the subject of letters patent. That is missing in this case."
Accordingly, the Full Court dismissed the appeal.
Application for special leave to appeal to the High Court
Mr Grant has applied to the High Court for special leave to appeal from the judgment of the Full Court of the Federal Court. A hearing date for the special leave application has not yet been listed.
Implications
The Full Court decision is both helpful and unhelpful in creating certainty for inventors and business.
There are several aspects of the judgment that are positive. The Full Court has refocused attention on the NRDC decision as the basis for determining whether an invention is a proper subject of letters patent. It is not appropriate to apply substitute tests, for example, asking whether the invention is a "mere scheme or plan" or "business system". The Full Court has recognised that establishing a requirement that an invention be within the area of "science and technology" would, if only from a definitional perspective, be highly problematic. Further, and perhaps most importantly, the Full Court has rejected the approach taken by the primary judge which introduced a cost/benefit analysis test for patentability. For these reasons, the decision should be embraced.
However, there are other aspects of the judgment that are problematic. Most obvious is the requirement that a patent have a physical effect or consequence. The Full Court has provided little guidance on what is meant by a "physical effect" which, while sensible in the circumstances, nevertheless creates a questionable division between the physical and non-physical. For example, the claims in Mr Grant's specification could have specified that the integers of the invention - namely, trust, gift, loan and charge - be created by physical documentation. It is certainly arguable that there is a "useful effect" of the invention, albeit hypothetical, which could be observed when the subject assets were at financial risk. The Full Court's physicality requirement is thus likely to be as difficult to apply as the now rejected requirement that an invention be within the area of "science and technology".
For inventors and business, it is a now a matter of "watch this space" to see whether the High Court will grant special leave to appeal.
