Business Method Patent Rejected by Australian Federal Court

Saturday 2nd March 2013
Article written by: Ben HalbergWes Jones

Research Affiliates v Commissioner of Patents

On 13 February 2013 the Federal Court of Australia issued its long-awaited judgment in Research Affiliates LLC v Commissioner of Patents.[1]  The Court upheld IP Australia’s rejection of both Australian Patent Application No. 2005213293 and the divisional application No. 2010236045, signalling a narrowing of the bounds of patentability for business methods in Australia.

The patent applications at issue both related to methods for generating a passive investment management index weighted by an objective measure of scale other than the usual share price, market capitalisation, or equal weightings.  The weighting could be based on revenue, sales, or a number of employees, for example. 

The Full Court of the Australian Federal Court previously addressed the patentability of business methods in Grant v Commissioner of Patents.[2]  In that case, the Court upheld the revocation of an innovation patent for an asset protection method on the basis that “a physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required.”  

To meet this so-called “physical effect” requirement, the claimed methods in Research Affiliates v Commissioner of Patents recited a computer-implemented method and system for constructing data indicative of a non-capitalization weighted portfolio of assets, comprising the steps of gathering data about a plurality of assets, selecting a plurality of assets to create and index, and weighting the selected assets based on an objective measure of scale other than market capitalization weighting, equal weighting, share price weighting, or any combination thereof.

However, the Court disagreed that the mere use of a computer was sufficient for patentability, rejecting the claims on the basis that they were not for a “manner of new manufacture”:

“The case propounded by Research Affiliates depends upon the proposition that information of economic significance, once entered into or produced by means of a computer, becomes an economically valuable artificially created state of affairs, and thus patentable.   That proposition must be rejected.”

While there are several criticisms which can be levelled at the judgment, it largely vindicates IP Australia’s narrowed view on the patentability of business methods which seemed to come into effect, unannounced, in 2010.[3] Accordingly, patent applicants can expect IP Australia to continue objecting to computer-implemented method claims unless the claimed method “improve[s] the operation of or effect of the use of the computer”.[4]  However, the judgment provides little guidance as to precisely where the line will be drawn between patentable and unpatentable subject matter. 

Similar objections can also be expected in New Zealand, where the Intellectual Property Office increasingly cites Australian cases in support of “manner of new manufacture” objections to computer-implemented invention claims, despite those decisions having no legal effect in New Zealand.

Research Affiliates LLC have until 6 March 2013 to appeal the decision. 

[1]Research Affiliates LLC v Commissioner of Patents [2013] FCA 71
[2]Grant v Commissioner of Patents [2006] FCAFC 120.
[3]Invention Pathways Pty Ltd [2010] APO 10.
[4] Above n 1, at [70].

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