In Australia, software is a 'patentable invention' for the purposes of section 18 of the Patents Act 1990 (Cth), provided that it is:
- a manner of manufacture;
- novel and involves an inventive step when compared with the prior art base as it existed before the priority date of the claim;
- useful; and
- not the subject of 'secret use'.
However, impending changes to patent legislation in New Zealand, as well as uncertainties raised by recent US Federal Court judgments regarding how to approach the patentability of software, may have future implications for software patents in Australia.
Legislative developments in New Zealand
New Zealand is in the process of updating its patent regime by replacing the Patents Act 1953 (NZ) (NZ Patents Act) with new patent legislation (Patents Bill).
Under the current NZ Patents Act, computer programs are patentable. A Report of the Commerce Select Committee in 2010 advised the Government to remove the ability for computer programs to be protected by patent law. There has been uncertainty in New Zealand regarding whether the Government would accept this recommendation. This uncertainty was seemingly addressed on 9 May 2013, when the Commerce Minister, Craig Foss, released a supplementary order paper clarifying this issue, following intense pressure from the IT industry.
The supplementary order paper inserts clause 10A into the NZ Patents Act, which provides that 'a computer program is not an invention and not a manner of manufacture for the purposes of this Act'. An invention will be a 'computer program' where 'the actual contribution made by the alleged invention lies solely in it being a computer program'.
A range of factors will be considered by the courts in identifying the 'actual contribution' of the invention. These factors include: the substance of the claim and the actual contribution it makes, what problem the invention solves or addresses and how it does so, the advantages of solving or addressing the problem in that manner, and any other matters the Commissioner or the court thinks relevant (clause 10A(4), Patents Bill).
The essence of this change relates to whether a computer program is capable of implementing a tangible effect, beyond its primary function as a computer program. The supplementary order paper compares two examples to illustrate this point: one is a computer program which contains a method for improving the performance of a washing machine. In this circumstance, the actual contribution of the computer program is the new and improved way of operating the washing machine, and thus it is eligible for patent protection. By contrast, a process for automatically completing legal documents, using conventional hardware (the novel aspect of the claim being the computer program itself) would be ineligible for patent protection. In this instance, the actual contribution of the claim would lie solely in being a computer program, and the mere execution of a method within a computer does not allow the method to be patented.
It seems, then, that what constitutes an eligible patent claim under these changes will be dependent on whether the actual contribution of the patent lies outside of the computer or, if it affects the operation of the computer, that the contribution is not dependent on the type of data being processed or the particular application being used. There appears be a requirement for an external or tangible effect of the computer program in order to qualify for patent protection, to which clause 10A(4) of the Patents Bill specifically refers the Commissioner and the courts in determining whether an invention will be considered a computer program.
Judicial uncertainty in the US
In CLS Services Ltd v Alice Corporation Pty Ltd, the Federal Court of Appeals (District of Columbia) was expected to provide a clear determination on the circumstances in which computer software would be patentable in the United States. However, the Court in this case did the opposite: the 10 judges of the Court authored five different judgments, all coming to different conclusions on the circumstances in which software will be eligible for patent protection.
In the US, eligibility for patent protection is based on whether the claimed invention is a new and useful process, machine, manufacture or composition of matter, or an improvement of an existing invention. The court must be satisfied that the invention does not make a claim to a law of nature, a natural phenomenon or an abstract idea. In this case, Alice Corporation had developed a computerised trading platform used for conducting financial transactions in which a third party settles obligations between the contracting parties to reduce settlement risk. Alice Corporation sought patent protection over the software's systems and methods.
The Court delivered a divided opinion on a range of different issues. In particular, the Court was conflicted regarding whether the computer software was more than an 'abstract idea' and eligible for patent protection. One judgment (the Lourie judgment) found that the software was ineligible for patent protection as the claim did not more than articulate an abstract idea into computer language. That the software did no more than enable a process to be carried out more efficiently, or by a machine rather than a human, was not enough to make the claim eligible for patent protection. Without doing more than stating a method or a process, and adding nothing of practical significance to the underlying idea, the software was found ineligible for patent protection.
In a judgment that accepted parts of the Lourie judgment but dissented in parts, the Rader judgment found the system claims eligible for patent protection and the method claims ineligible. The main distinction between the Rader judgment and the Lourie judgment appears to be in the way the interaction between the computer and the computer program is analysed. The Rader judgment found that the combination of the computer program and the computer itself had the effect of creating a new machine or outcome. The abstract idea of avoiding financial risk was found to be integrated into a system utilising machines by the operation of the computer program, creating a new and practical effect.
Although there were various other bases for disagreement between members of the Court, this distinction between the two main judgments regarding the way computer programs interact with computers, and how to categorise this interaction, illustrates a fundamental issue in the application of patent law to software. The inability of the Court to come to agreement regarding the way that computer programs should be categorised, whether as an abstract idea or as having the effect of creating a new machine or outcome, creates uncertainty in the IT industry regarding what software will be eligible for patent protection.
Potential ramifications for Australia
In Australia, software is currently eligible for patent protection. In IBM v Commissioner of Patents (1991) 33 FCR 218, the Federal Court found that a method and apparatus for producing a curve image was patentable. This finding was based on the production of the curve being a new application of mathematical methods to computers.
This reasoning was applied in Research Affiliates LLC v Commissioner of Patents, where using a computer to create a weighted index of assets was found to be ineligible for patent protection. The facts in this case were distinguished from the IBM case on the grounds that the steps of the patent could have been done manually, and that the role of the computer in the process of creating the weighted index was no more than the use of a computer for a standard purpose. To be eligible for patent protection, it appears then the court will need evidence of a practical application or effect which improves the use of the computer, rather than a computer being used to more efficiently fulfil a task that could have been undertaken by a human.
How the role of computers in producing the 'practical effect' of the patent is categorised will be critical to a finding of patent protection in Australia.
The New Zealand legislature has tried to address the confusion that may arise in making this determination by trying to specify the circumstances in which patent protection will (and won't) be available for computer programs. Conversely, the US decision of CLS v Alice Corp exemplifies the uncertainty that can arise when a court is unable to clearly determine and articulate the role that computers play in implementing particular computer software.
These US and New Zealand developments highlight an area of potential confusion and uncertainty in Australian law, which software developers should watch with caution.
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