Software patents will not crash the patent system

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4 April 2014

In November last year, the Full Federal Court (comprised of Justices Kenny, Bennett and Nicholas) had an opportunity to consider whether software patents (more accurately described as “computer implemented inventions”) were patentable subject matter under the Patents Act 1990 (Cth) (the Act). The Court heard an appeal of a decision by Justice Emmett in Research Affiliates LLC v Commissioner of Patents[1] and this decision is imminent.

We are hopeful that the Court will reject the argument that for an invention to be patentable it must produce a “physical effect” that is qualitatively significant or substantial because:

  • established grounds of invalidity (novelty and inventive step) will ensure that patents for abstract ideas or mere schemes are not granted;
  • any qualitative test would be illogical and cause uncertainty; and
  • Parliament has not seen fit to introduce such a limitation and there is no foundation for it in existing case law.

First principles

In order to ascertain whether an invention claims patentable subject matter under the Act, it is necessary to ask whether it is a “manner of manufacture”, a phrase that has its origins in a 17th century statute from the United Kingdom that has been the subject of considerable exegesis.

The High Court considered the meaning of this phrase in NRDC v Commissioner of Patents[2] and found that an invention needed to result in both:

  • an artificially created state of affairs;
  • in a field of economic endeavour.

It is the first limb of this test that has been raised as a barrier to the patentability of computer-implemented inventions by the Patent Office in the past (discussed in further detail below).

On the last occasion that the Full Federal Court considered this issue, in Grant v Commissioner of Patents[3], it found that a method for structuring a financial transaction was not patentable. It held, “A physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required.” This decision is consistent with a long line of cases that hold that mere schemes, abstract ideas and information are not patentable subject matter.

Patent Office decisions

The Patent Office’s antipathy towards computer-implemented inventions crystallized in its 2010 decision, Invention Pathways Pty Ltd[4]. The Commissioner of Patents held that the “physical effect” (referred to in Grant) “…must be one that is significant both in that it is central to the purpose or operation of the claimed process or otherwise arises from the combination of steps of the method in a substantial way”.

The Office, clearly concerned about the consequences of extending patent protection to “business methods” which involve the use of a computer, essentially sought to bolster the test in Grant. Since that time, the Office has relied on this decision in upholding oppositions to numerous patent applications for computer-implemented methods.

Research Affiliates appeal

Research Affiliates sought a patent for a computer-implemented method for creating an index to be used for weighting an investment portfolio. At first instance, Justice Emmett found that the invention was not patentable subject matter. He held:

While it is true that the index may be stored in the computer’s RAM, or on a memory device, or can be transmitted, that can be said of any data generated by a computer. If that were sufficient to satisfy the requirement of any artificially created state of affairs, any computer implemented scheme would be patentable, merely by reason of the fact that it happens to be implemented by a computer.

It seems clear that Justice Emmett was endorsing the Commissioner’s view in Invention Pathways. His Honour found that there needed to be a “specific effect being generated by a computer” and that the mere physical effects produced by a computer’s ordinary use were not sufficient.

A different view

In August[5], Justice Middleton delivered his decision in RPL Central Pty Ltd v Commissioner of Patents[6]. The case was an appeal from a decision of the Commissioner holding that a computer-implemented method for assessing the competency of qualifications of individuals with respect to recognised standards (for example, to assist tertiary institutions to recognize prior learning) was not patentable subject matter.

Justice Middleton recognised that the Office’s manipulation of the Grant test had no foundation in law:

…I do not accept that the Australian decisions that are binding upon me in respect of this issue – NRDC, CCOM and Grant – expressly import any such requirement of substantiality or centrality of physical effect.

However, his Honour found that RPL Central’s invention would have satisfied any substantiality requirement (which Justice Middleton did not accept existed).

Unlike the Patent Office and Justice Emmett, Justice Middleton was prepared to consider the possibility that an invention may be brought within the ambit of patentable subject matter simply by the inclusion of computer-implemented features.

There is nothing to fear

Justice Emmett and the Office were clearly concerned that granting patents for computer-implemented methods would lead to patentees obtaining and seeking to enforce monopoly rights over abstract ideas, rather than the application of those ideas in the form of tangible and useful products and processes.

However, it seems that Justice Middleton astutely appreciated that:

  1. any attempt to impose a “qualitative” test on the method of application of an idea would result in uncertainty;
  2. such a test would be contrary to the established authorities; and
  3. the robust requirements of novelty and inventive step can be relied upon to weed out patent applications for abstract ideas.

If the Full Court decided to adopt Justice Middleton’s approach it may find further comfort in the High Court’s recent decision in Apotex v Sanofi-Aventis[7], in which methods of medical treatment were held to be patentable. The High Court found that Parliament had ample opportunity to amend the Patents Act to exclude methods of treatment but had not done so.

Equally, with respect to computer-implemented inventions, as Parliament has not seen fit to exclude them from the scope of patentability, the Full Court should be reluctant to introduce an exclusion by imposing a “qualitative test”[8]. This view is reinforced by the uncertainty that would be created, the absence of authority and the reliance that can be placed on established grounds of invalidity.


  [1][2013] FCA 71.

  [2] (1959) 102 CLR 252.

  [3]Grant v Commissioner of Patents (2006) 154 FCR 62.

  [4][2010] APO 10.

  [5] Before the Full Court heard the Research Affiliates appeal.

  [6][2013] FCA 871.

  [7][2013] HCA 50.

  [8] As per the Commissioner’s decision in Invention Pathways and Justice Emmett’s decision in Research Affiliates.


The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.


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David Fixler

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+61 3 9672 3173

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