29 May, 2008

US and UK Courts Consider Business Method Patents in May

US and UK Courts Consider Business Method Patents in May

May 2008 is shaping up to be a big month for the patenting of business methods in the United States and the United Kingdom. Contemporaneously, courts in both countries have considered the patentability of business methods, with potentially important consequences for patent owners in both countries. Unlike the position in the United Kingdom and under the European Patent Convention where methods of doing business as such are excluded from patentability, U.S. and Australian patent laws do not have any statutory prohibition against the patenting of business methods per se. In the U.S. and Australia, the same patentability criteria for other types of inventions are applied to business method inventions.

In a closely watched case in the United States, the Court of Appeals for the Federal Circuit sitting en banc (12 judges) heard arguments on 12 May 2008 in In re Bilski, an appeal from the USPTO’s rejection of Bilski’s patent application for a method of hedging weather-related risks for a commodity sold at a fixed price. Earlier decisions of U.S. courts had established tests for the patenting of processes, including business methods, which required that the method produce a “useful, concrete and tangible result”. During the hearing, the panel of judges asked probing questions about the meaning of “concrete”, “tangible”, and “abstract” with a view as to what is the proper test for patentable subject matter. The Court could decide whether or not some of its earlier decisions dealing with the patenting of business methods should be reconsidered. News of the U.S. court’s forthcoming decision is keenly awaited.

Also in May, the High Court in the United Kingdom revoked a UK patent in Aerotel v Wavecrest because it only involved a business method. Aerotel Ltd owned the UK patent at issue covering a telephone system that allowed a customer to use a pre-paid telephone calling card to make telephone calls from any telephone anywhere and charge the costs of the call to the card. Aerotel brought infringement proceedings against Wavecrest, an international communications service provider that offers a range of pre-paid telephone card products. The High Court found based on the evidence that the patent covered subject matter (a method of doing business) excluded under the European Patent Convention and was also invalid for obviousness in light of the prior art at the priority date of the patent. Unless overturned, this decision of the High Court in Aerotel v Wavecrest could have a significant impact on UK patents involving business methods, as well as pending UK patent applications for such methods currently undergoing examination.

For a number of years, the patenting of business methods in Australia has been more closely aligned with the position in the United States than that of the United Kingdom. In Australia, a patent may be granted for a business method involving an artificially created state of affairs producing a physical effect, but a mere scheme or plan would be unpatentable. The requisite physical effect must involve a useful product, or a physical, concrete, tangible or observable effect, phenomenon, manifestation or transformation resulting from the method or process. Examples of a relevant physical effect include a change in state or information in a part of a machine, a transformation of data, and execution of a method in a physical device. The decisions of the US and UK courts will be important to Australian patent applicants for business methods in those jurisdictions, as well as Australia, and will be followed closely for developments.

Author: Scott Berggren, Principal

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