Issue 06/14 | March 7, 2006
Another Piece to the Puzzle of Business Method Patents in Australia

Patent laws throughout the world have often faced the problem of defining what constitutes suitable subject matter for patents. These largely static laws must grapple with the ever changing and growing nature of technology as, inevitably, whole new fields of endeavour come about which could not possibly have been envisaged at the time the laws were created.

Australian patent law fortunately provides a well stated and adaptable definition of what constitutes patentable subject matter. For nearly half a century this law has proved to be sufficiently agile to encompass appropriate new patentable fields such as biotechnology and information technology, while suitably constraining the extent of patentable subject matter. Indeed, recent legislative reviews have stressed the benefits Australia has enjoyed under this versatile and inclusive approach, in contrast to the ongoing difficulties in attempting to apply somewhat artificial statutory exclusions such as those in Europe.

Business practices are an area in which innovation is taking place, with such innovation in recent times often being enabled by information technology. Given that a primary motivation of all patent systems is to reward and thus encourage innovation, the age-old problem takes a new form in this context: are innovative 'business methods' suitable subject matter for patents?

The flexibility of Australian patent law to accommodate this new field of subject matter was demonstrated in the 2001 decision of Welcome Real-Time SA v Catuity Inc. (2001 FCA 445) by the Federal Court of Australia. That decision makes clear that Australian law makes no explicit exclusion of business methods from patentability and that business methods should be subject to the same legal requirements for patentability as any other process or method. That is, business methods are patentable in Australia provided they: comprise "a mode or manner of achieving an end result which is an artificially created state of affairs of utility in the field of economic endeavour"; are new and involve ingenuity.

Naturally, there are limits to what constitutes a patentable business method in Australia. Such bounds to patentability are currently only partially defined and can be expected to be at issue for some time into the future. Nevertheless, some recent decisions provide pieces to this puzzle.

Peter Szabo and Associates Pty Ltd [2005] APO 24 was a decision issued by a Delegate of the Australian Commissioner of Patents on 5 May 2005. The patent application at issue related to a "reverse mortgage", with the novel refinement that a rebate is provided by the financier in the event of early death of the aged mortgagor, in order to compensate for the excessive profit that the financier would otherwise reap. The rebate calculations follow particular mathematical algorithms which were admitted to be arbitrary rather than relating to any real world effect. The application was rejected. Therefore it is to be expected that, where a novel development is an essentially arbitrary algorithm refining a pre-existing type of financial relationship, it will be difficult to secure an Australian patent for such a development.

A more recent decision by the Federal Court of Australia, Grant v Commissioner of Patents 2005 FCA 1100, issued on 12 August 2005, provides further guidance on where the limits to patentable subject matter lie in the field of business methods. In that decision, the invention related to an asset protection method in which an owner of the asset makes a gift to a trust. The trust makes a secured loan of the money back to the original owner. This method for asset protection was rejected on the basis that such a financial arrangement was not proper subject matter for patentability, as the invention was merely for insulating the owner from the operation of Australian laws. Accordingly, it is to be expected that patent protection will be unlikely in Australia for asset protection schemes and the like.

Pieces to the puzzle of patentability of business methods will undoubtedly continue to be revealed for some time to come. In the meantime these recent Australian cases assist in guiding innovators to an informed decision as to whether their particular improvement to business practices might be suitable subject matter for a patent in Australia.

For further or more specific information on business method patents Australia, please contact Will Monks (will.monks@fbrice.com.au), Chris Owens (cowens@fbrice.com.au) or any of the other practitioners of F B Rice & Co via our website at www.fbrice.com.au.

The information contained in this email is provided for informational purposes only and does not represent legal advice. Neither the APLF nor the author intends to create an attorney client relationship by providing this information to you through this message.

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