Manner of manufacture and software-based inventions: What does it mean for an invention to involve “an improvement in the computer”?

Whether inventions relating to the use of a computer are patentable according to the ‘manner of manufacture’ test has for many years been unclear in Australia.  This uncertainty, together with inconsistencies in how the law has been applied by the courts and the Australian Patent Office (APO), were just some of the contentious issues recently considered by a full bench of five judges from the Federal Court in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd (NSD 734/2018). Such was the significance of this hearing that the Commissioner of Patents and the Institute of Patent and Trademark Attorneys of Australia (IPTA) both applied to intervene and sought leave to be represented and make submissions at the hearing.

Decision at first instance

Central to the dispute between the parties are Encompass’ two innovation patents, both entitled “Information displaying method and apparatus” (Patents). The Patents relate to methods for an electronic processing device to access information from different databases (such as Land Titles Office, ASIC and a motor vehicle registry) in a seamless manner. Users are required to pay for reports obtained from the searches conducted of the various databases.  Encompass claimed that InfoTrack infringed the Patents by making available a computer platform entitled ‘Reveal’.

InfoTrack admitted infringement of the Patents, but asserted that the Patents were invalid on a number of grounds, including that the invention claimed in each of the Patents was not a manner of manufacture.

At first instance, Justice Perram found that the invention claimed in each of the Patents was novel and involved an innovative step, but was not a manner of manufacture. With respect to the ‘manner of manufacture’ requirement, Justice Perram adopted the two-limb test established by the High Court in National Research Development Corporation v Commissioner of Patents [1959] HCA 67; (1959) 102 CLR 252 (NRDC), which involves asking whether the invention consists of an artificially created state of affairs and whether it could be said to have economic significance.  The inventions according to the Patents were said by Justice Perram to pass both limbs of the NRDC test.

Nonetheless, Justice Perram noted that the two-limb test is not sufficient to establish a manner of manufacture, as emphasised in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150; (2014) 227 FCR 378 (Research Affiliates).  It was found by the court in Research Affiliates that the invention must result in “an improvement in the computer” for it to be a manner of manufacture. Justice Perram also referred to Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177; (2015) 238 FCR 27, in determining that a computer implemented method would not be for a manner of manufacture if it “merely requires generic computer implementation”.

Justice Perram therefore concluded that the inventions of the Patents did not involve any improvement in the functionality of the computer nor the computer itself.  As a result, the inventions were not for a manner of manufacture.  Justice Perram acknowledged that the Patents described a method that resulted in the computer being used to do something it had not been used to do before – by using a network representation and querying remote data sources – and that requiring the users to purchase the search results provided an innovative step.  These also enhanced the experience for the user of the computer.  However, these matters did not improve the functionality of the computer because, after the consideration of the prior art, the methods, individually, were not new and were well-known.

Full Court Appeal

Encompass sought to appeal against Justice Perram’s decision, and the appeal was heard by a full 5 member bench of the Full Federal Court on 8 – 9 November 2018.  It is likely that the outcome of that hearing will be known by mid-2019.

One of the key questions for determination by the Full Court is whether the approach taken by Justice Perram sets an unreasonably high threshold for computer-implemented inventions, by requiring the inventions to make improvements to the computer for the inventions to be patentable.

Australian Patent Office decisions

Since 2016, there has been an increase in hearings before the APO resulting from objections raised during examination against applications for computer or software-related inventions that were deemed not to be directed to patent-eligible subject matter.  Over the course of 2018, there were 17 such hearings. 16 of these matters resulted in the patent applications being rejected on the basis that the invention claimed was not for a manner of manufacture.  Notably, as with the inventions of the Encompass Patents, many of those inventions were found to be novel and involved an inventive step. However, the inventions involved the combined use of well-known computing mechanisms, and therefore were said to be not patentable.

Which inventions passed the ‘manner of manufacture’ test in 2018?

Case Invention claimed Manner of manufacture?
1                    Patent Investment & Licensing Company [2018] APO 1 (3 January 2018) Networked gaming machines – an apparatus and method for communicating information about networked gaming machines to players and prospective players.  The information provided to the player is based on data collected from the networked gaming machine. No.
2                    Google LLC [2018] APO 13 (21 February 2018) A method for discounting costs for conversions to advertisement purchasers based on a level at which the advertisement purchasers would have received the same advertising distribution results associated with the conversions. No.
3                    Eris Innovations, LLC [2018] APO 17 (8 March 2018) Financial instruments and the electronic clearing and settling of financial instruments – a computer-based system designed to offer tools to trade futures electronically. No.
4                    Bio-Rad Laboratories, Inc. [2018] APO 24 (28 March 2018) System and method for optimising a testing regime for testing of diagnostic devices for immediate release results. Yes.
5                    BGC Partners, Inc [2018] APO 27 (23 April 2018) A system for automatically distributing a trading order over a range of prices.  The method allows a trader (such as a market maker or other trader) to efficiently populate a trading system with bids and offers in a risk efficient manner. No.
6                    AirService Digital Pty Ltd [2018] APO 39 (19 June 2018) An ordering system and method for a retail establishment such as those which sell food and drink. No.
7                    Mine RP Holdings (Pty) Limited [2018] APO 41 (27 June 2018) A method of translating depletable natural resources and reserves, such as mineral deposits, into inventory and stock items. These items, once translated are then manageable within an inventory management system. No.
8                    Repipe Pty Ltd [2018] APO 42 (28 June 2018) A method and systems for providing and receiving information for risk management from field workers. No.
9                    Google LLC [2018] APO 44 (4 July 2018) A system for managing contactless transactions. No.
10                 Aristocrat Technologies Australia Pty Limited [2018] APO 45 (5 July 2018) A system and method for providing a “feature game”. No.
11                 Academisch Ziekenhuis Leiden and Biomarin Technologies B.V. [2018] APO 49 (31 July 2018) Method for efficient exon skipping in Duchenne Muscular Dystrophy and associated means. Yes.
12        Limited [2018] APO 53 (20 August 2018) System and method for trading options (Credit Filters and Two Stage Updating). No.
13                 Apple Inc. [2018] APO 54 (20 August 2018) Computer user interfaces, and more specifically to context specific user interfaces for indicating time that allow users of portable multifunction devices to access information through a single user interface and allowing the user to customise the user interface and the types of information provided through the user interface. No.
14                 Amplero, Inc. [2018] APO 5 (5 September 2018) Automated marketing offer decisioning – method allows decisions to be made as to when marketing messages are offered to customers. No.
15                 Lempco Industries, Inc. [2018] APO 61 (12 September 2018) Computer implemented method and apparatus for establishing and executing a dynamic equity instrument. No.
16                 HRB Innovations, Inc. [2018] APO 63 (14 September 2018) System for simplified tax interview – accurately predicting the information that is necessary and relevant for the purpose of determining the relevant questions for a tax interview. No.
17                 Joy Global Surface Mining Inc [2018] APO 68 (5 October 2018) Methods and systems for training operators of industrial machines – computer-based training simulators. No.

This article was prepared by Veg Tran and Esme Wong.