The new law of patents


According to a Deputy Commissioner, you can't get a patent in Australia for computer software; but you can - the Full Federal Court said so in CCOM v Jeijing at ¶128.

According to another Deputy Commissioner, you can't get a patent in Australia for a business method, but you can - Welcome-Real Time v Catutity ¶¶110 - 130 (admittedly the endorsement of State Street is obiter).

According to the Deputy Commissioner, you cannot patent a financial scheme in Australia, but you cannot ....

Kim Weatherall alerts us to Grant v Commissioner [2005] FCA 1100.

Claim 1 claimed:

1. an asset protection method for protecting an asset owned by an owner, the method comprising the steps of:

(a) establishing a trust having a trustee,

(b) the owner making a gift of a sum of money to the trust,

(c) the trustee making a loan of said sum of money from the trust to the owner, and

(d) the trustee securing the loan by taking a charge for said sum of money over the asset.’

As Branson J summarised it: a method of structuring a financial transaction to protect an individual's assets (presumably against the lawful claims of the creditors). Branson J upheld (on different grounds) the Deputy Commissioner's refusal of the patent on grounds that it was not a manner of manufacture.

Now, it seems pretty obvious that one shouldn't be able to get a patent - even a junk innovation patent - for this way of using a trust. There must be thousands, if not millions of trusts out there, that answer the description claimed (if not necessarily the further gloss on forestalling creditors). And the purported combination could not be innovative, surely - as Branson J recognised. But, therein lies the rub, conclusions of that sort require experience or evidence and I guess the Commissioner's operatives do not take their treatises on the law of trusts or financial planning home with them each night.

First, Branson J was tempted to accept the Commissioner's view that, to be patentable, the alleged invention must relate to a scientific or technological invention. Her Honour, with respect, chose to avoid that path in view of the potential dangers in trying to identify the boundaries of science or technology.

Perhaps, rather more directly to the point, as the Full Court in CCOM pointed out (at ¶105), the Australian Parliament carefully (and mercifully) failed to import that suspicious European requirement into our law.

In its watershed ruling, the NRDC ruling, the High Court declared:

a process, to fall within the limits of patentability which the context of the Statute of Monopolies has supplied, must be one that offers some advantage which is material, in the sense that the process belongs to a useful art as distinct from a fine art -- that its value to the country is in the field of economic endeavour.

The Deputy Commissioner could not fault Grant's application on this basis. Branson J, however, ruled that Grant's application failed this test:
21 The Deputy Commissioner did not think that there could be any argument about the invention the subject of the Patent being of economic utility because of the number of financial advisers in society charged with looking after their client’s assets. This was, in my view, to adopt the wrong approach to the question of whether the method has ‘value to the country in the field of economic endeavour’ within the meaning of the above excerpt from NRDC. The economic utility identified by the Deputy Commissioner is not a utility of value to the country; it is a utility of value only to those whose assets are ultimately protected – and possibly to their professional advisers. The performance of the invention will not add to the economic wealth of Australia or otherwise benefit Australian society as a whole.
This seems, with respect, misdirected. As her Honour correctly indicated earlier in her reasons, the "field of economic endeavour" component was another way for the High Court to express its distinction between something of practical application in the useful arts versus something in the fine arts. That is the claimed invention has application in the economic or commercial life of the country and matters relating to financial affairs could hardly be more practical or commercial.

Branson J derived her Honour's interpretation of "economic endeavour" from the principle which her Honour distilled for the application of the definition of "manner of manufacture":
the principle that an invention should only enjoy the protection of a patent if the social cost of the resulting restrictions upon the use of the invention is counterbalanced by resulting social benefits. This principle is derived from the theoretical justification for the grant of a patent; that is, the assumed value of inventive ingenuity to the economy of the country. The monopoly granted by a patent to an inventor is assumed to serve the public interest both by rewarding, and thus encouraging, inventive ingenuity and by ensuring the disclosure to the public of a new article or process.
The general principle must surely be right but, with respect, its application in the "manner of manufacture" test would appear to be misplaced. The Patents Act itself is the means by which the social costs and social benefits are balanced. The Act specifies what requirements must be satisfied, and how they must be satisfied, to warrant a patent. The costs versus benefits balance is effected by ensuring that each of the requirements - manner of manufacture, novelty, inventive (or in this case innovative) step, fair basing etc. are satisfied. If they are satisfied, the costs/benefits analysis is satisfied. The "manner of manufacture" requirement operates to ensure that the subject matter has practical application, rather than being 'mere' knowledge and is not in the field of fine arts which is the purview of copyright. No more, nor any less.

Finally, Branson J considered an alternative ground for rejecting Grant's application was that a method that shielded its user from laws intended to advance the public interest, such as bankruptcy laws, was not a proper subject matter for a patent. This raises at least 3 interesting aspects.

First, the Commissioner may refuse, or in the case of an innovation patent, revoke a patent if its use would be contrary to law: Patents Act 1990 (Cth) ss 50 and 101B(2)(d).

But, secondly, would the use of the method be contrary to law and, if so, would not its use be subject to attack as a sham or some kind fraudulent or voidable preference - and, if not, why would its use be contrary to law?

Thirdly, the Act defines an "invention" as any manner of new manufacture the subject of letters patent and grant of privilege within s 6 of the Statute of Monopolies .... As Branson J noted, s 6 was an exception to the general prohibition on monopolies. Its terms included an exception to the exception, the so-called "proviso", prohibiting patents which were contrary to the law or mischievous to the state by raising of prices of commodities or hurt of trade or generally inconvenient. We don't know if that proviso still has any operation.

At least part of the proviso - contrary to law - finds expression in the terms of the Act as already mentioned. And, as Heerey J observed in Catuity, all patents tend to raise prices and restrict trade. That is the whole point of them! Thus, the Full Federal Court in CCOM appears to have concluded that the proviso does not have continuing effect, what is operative is the 'core residuum" of s 6. On the other hand, at least Finkelstein J in a differently constituted Full Court considered that the proviso continues to have effect; Black CJ and Sundberg J did not finally decide the point.

The Deputy Commissioner's decision is here.

Posted: Wednesday - 17 August, 2005 at 04:35 PM         |

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