Business Method and Software Patent Eligibility: Australian and U.S. Standards

This is the first of a two-part series comparing Australian and U.S. law and will focus on software and computer-related inventions.

While U.S. patent owners, applicants, and the bar have been seeking clarification from the courts and U.S. Patent & Trademark Office (USPTO) regarding patent-eligible subject matter, other nations have been having similar struggles. Two recent decisions by the Federal Court of Australia concerning the patentability of computerized business methods and biotechnology provide an opportunity to compare the standards used in Australian and U.S. law, and help shed new light on the legal tests used in the U.S.

On December 11, 2015, the Federal Court of Australia held that a business-method patent application was not eligible for protection in Commissioner of Patents v. RPL Central Pty Ltd. While the Federal Court had previously held in 2014 that business-method patents are not automatically excluded from protection, RPL represents the second invalidation of a business- method patent in as many cases by the Federal Court.

The invention in question concerned a computer program that retrieved assessable criteria published for qualification and competencies in Australian Vocational Education and Training. The computer program then generated a set of questions based on the criteria to guide individuals through the information-gathering process, storing responses and related documentation in a database for future use by a training organization related to the identified vocation in the response.

In Australian law, one qualification is that the patent must be a “manner of manufacture,” as opposed to mere schemes or plans. The “manner of manufacture” qualification is similar to the U.S. requirement of utility: The invention must belong to the “useful arts,” provide a material advantage, and be economically valuable. As the Federal Court noted in RPL, abstract ideas do not qualify as a “manner of manufacture.” Again, this is similar to U.S. law with respect to the exclusion of abstract ideas, except that in U.S. law it is not cabined solely within the utility requirement. Rather, the “abstract idea” is considered an exception to the four statutory categories of invention: products, processes, apparatuses, and compositions of matter.

RPL held that “[i]t is not a patentable invention simply to ‘put’ a business method ‘into’ a computer to implement the business method using the computer for its well-known and understood functions.” Stated another way, the computer cannot be “a mere tool in which the invention is performed,” but rather “must involve the creation of an artificial state of affairs where the computer is integral to the invention . . . .” The inventive aspect (“ingenuity” as termed by the Australian court) must be “in the way in which the computer is utilised,” not in the scheme, plan, or process that is being implemented.

At first blush, this sounds similar to the guide posts present in the U.S. Supreme Court’s decision in Alice Corp. v. CLS Bank Int’l. The Supreme Court held that “a mere instruction to ‘implement’ an abstract idea ‘on a computer’ . . . cannot impart patent eligibility.” Instead, citing prior cases, Alice held that the invention may be patent eligible where it “improve[s] the functioning of the computer itself,” or “effect[s] an improvement in any other technology or technical field.”

However, the Australian Federal Court’s focus on what is the inventive aspect of (or the “ingenuity of the inventor in,” as the Australians would say) the use of the computer emphasizes a particular point in a manner distinct from U.S. law. Despite some statements in recent cases that indicate otherwise, it remains U.S. law that a patent claim may be inventive either as to an individual element or “as an ordered combination.” In contrast, Australian law focuses on what is new—that is, what is the “artificial state of affairs”—which results specifically from the use of the computer. Moreover, that ingenious aspect may result from a number of different guideposts, such as redefining “normal” use of the computer, improving the functioning of the computer itself, using a new or unusual technical effect, the implementation of the computer itself, where prior methods had failed in doing so, or a new use for the computer beyond its commonly understood search and processing functions.

In this sense, Australian law is both narrower and broader than the scope of the U.S. test for subject matter eligibility. It is narrower in that it focuses on the specifically inventive elements in the disclosed technology rather than giving consideration to the ordered combination of steps or structures as a whole. On the other hand, the potential uses of a computer that may be considered inventive appears to be broader than those expressly stated in Alice. It may be that US law eventually recognizes the use of an “unusual technical effect” or even the implementation of a computer where it previously seemed inapplicable, but such innovations are not currently recognized by US courts and the USPTO.

Lastly, the Australian test may provide a path forward with respect to broader theoretical concerns of how patent subject matter eligibility relates to other aspects of patent law, such as anticipation, obviousness, and adequate disclosure. Placing the consideration of abstract ideas and other exceptions to patent eligible subject matter within the framework of utility (or “manner of manufacture”) seems to better locate the broad questions of innovation and usefulness within the legal framework. Rather than asking whether a process is simply the writing out of an “abstract idea” in word form (as virtually every process is in some sense), placing these exceptions within the concept of utility re-frames the question: “Is this a useful application of an abstract idea, scientific theory, or law of nature, and does it in fact build upon these ineligible discoveries in some useful way?” Perhaps by recasting eligibility within the utility framework, U.S. patent law can find a way out of the legal paradoxes that seem to arise from the current framework of precedents concerning patentable subject matter.