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(PRWeb December 14, 2021)

Read the full story at https://www.prweb.com/releases/2021/12/prweb18388920.htm

Originally written by Oliver Woolley on Growth Business

The first thing you need to decide, says Oliver Woolley, is what kind of business you are building – a ‘lifestyle’ business or a ‘growth’ business?

In a unanimous decision – Commissioner of Patents v Aristocrat Technologies Australia Pty Ltd [2021] FCAFC 202 – a Full Bench of three judges (Middleton, Perram and Nicholas JJ) of the Federal Court of Australia (‘Full Court’) has reversed last year’s ruling by Justice Burley that claims directed to a so-called ‘feature game’ implemented on an electronic gaming machine (EGM) constituted a patent-eligible ‘manner of manufacture’ under Australia law.  (A ‘feature game’ is a secondary, or bonus, game triggered by the occurrence of a defined event in the ‘base’ game of spinning reels.)  As I explained at the time, Justice Burley applied a two step test, asking firstly whether ‘the claimed invention is for a mere scheme or business method of the type that is not the proper subject matter of a grant of letters patent’ and then – if this question is answered in the affirmative – ‘whether the computer-implemented method is one where invention lay in the computerisation of the method’ as opposed to ‘merely plugging an unpatentable scheme into a computer’.  He found the claims to be patentable at the first step, because they were directed to ‘a mechanism of a particular construction’, i.e. a gaming machine.

The Full Court has rejected Justice Burley’s test, with the majority (Middleton and Perram JJ) proposing an alternative two step test (at [26]) which asks firstly whether the claimed invention is ‘a computer-implemented invention’ and then – if so – ‘can the invention claimed broadly be described as an advance in computer technology’.  The majority determined that Aristocrat’s EGM, despite being claimed in terms of a combination of hardware and software components, was in substance a computer-implemented invention, and that the asserted contribution of the claimed invention ‘pertains only to the use of a computer’ and not to ‘the development or advance of computer technology’ (at [63]-[64]).  As such, they concluded that the claims were not directed to patent-eligible subject matter.

The third judge of the Full Court, Nicholas J, arrived at the same ultimate conclusion, by different reasoning.  He agreed with the majority that Justice Burley’s two step test was not the correct approach, because it failed to ‘engage with the Commissioner’s submission that the invention as described and claimed was in substance a mere scheme or set of rules for playing a game implemented using generic computer technology for its well-known and well-understood functions’ (at [135]).  However, rather than embarking upon an inquiry as to whether Aristocrat’s claims were directed to a ‘computer-implemented invention’ he simply observed that ‘the substance of the invention, as described and claimed, resides in the game program code which embodies a computer implemented scheme or set of rules for the playing of a game’ (at [138]).  He further reasoned (at [140]-[142]) that the game code does not solve any ‘technological problem’, nor does it exhibit any ‘unusual technical effect due to the way in which the computer is utilised’, and therefore that there is nothing ‘about the way in which the game code causes the EGM to operate which can be regarded as having transformed what might otherwise be regarded as purely abstract information encoded in memory into something possessing the required artificial effect.’

While the Full Court found the representative claim at issue to be unpatentable, it did not entirely foreclose the possibility that there may be patent-eligible aspects to the inventions disclosed in Aristocrat’s four innovation patents.  The case has been remitted back to Justice Burley to determine any residual issues in light of the Full Court’s judgment.

There are positive and negative aspects to this decision.  On the plus side, the approach taken by the majority brings some clarity to the approach to be taken in construing and assessing claims to computer-implemented inventions, which often comprise a physical apparatus defined in terms of (possibly conventional) hardware, configured via software for particular functionality.  On the down side, however, the majority also relied upon the existence of ‘an advance in computer technology’ to confer patent-eligibility upon a computer-implemented invention, without providing clear guidance on what, exactly, is covered by this terminology.  The decision also perpetuates an uncertainty that exists around the exact role to be played by prior art information in applying the ‘manner of manufacture’ test to assess patent-eligibility.

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As I recently (tentatively) predicted, on Friday 30 July 2021 Justice Beach in the Federal Court of Australia handed down a judgment giving Australia the dubious honour of becoming the first country in the world to legally recognise a non-human as a valid inventor on a patent application: Thaler v Commissioner of Patents [2021] FCA 879.  I would suggest that the remarkable speed with which this unnecessarily lengthy (228 paragraphs) decision was rendered, after being heard on 2 July 2021, may reflect the judge’s enthusiasm for issuing such a ground-breaking ruling.  Unfortunately, I do not share that enthusiasm, and I am confident that there are many others who are equally uncomfortable with the outcome.  My hope is that this includes officials within IP Australia and the Department of Industry, Science, Energy and Resources, and that the decision will be duly appealed to a Full Bench of the court.  It is, in my view, deeply regrettable that the Commissioner of Patents did not put on a stronger defence in the first instance because, even though an appeal was probably inevitable either way, the worldwide publicity that this decision is now generating is not necessarily beneficial for Australia.

The judge summarised his reasoning (at [10]) that:

…in my view an artificial intelligence system can be an inventor for the purposes of the Act. First, an inventor is an agent noun; an agent can be a person or thing that invents. Second, so to hold reflects the reality in terms of many otherwise patentable inventions where it cannot sensibly be said that a human is the inventor. Third, nothing in the Act dictates the contrary conclusion.

The patent system faces many challenges, but right now a need to grant more patents in a wider range of circumstances in not one of them.  We are in the grip of a global pandemic, and very serious questions are being asked about whether patents deliver a net benefit to the people of the world by incentivising the development of new vaccines and treatments, or whether they have the detrimental effect of denying affordable access to vital care and protection in poor and developing nations.  While I am firmly in the former camp, it only becomes harder to defend the patent system when opponents see the law expanding access to allow inventions generated by machines – potentially including those owned and controlled by giant corporations.

The standing and reputation of Australia and our patent laws are also at risk.  The country is already the target of criticism – rightly or wrongly – for declining to support calls for a waiver of IP provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS).  The Federal Court’s decision in Thaler is receiving global attention, and not all of it is positive.  One tweet (in Spanish) compares Australia’s patent-friendly approach unfavourably with the infamous incident of an early innovation patent being granted for a ‘circular transportation facilitation device’, a.k.a. the wheel.

Just because patents are (or, at least, can be) good, it does not follow that more patents, generated in more ways, by more entities, must be better.  Australia should not think that we will necessarily come across as a socially and technologically progressive nation by ‘leading the way’ on allowing patents to be granted for inventions generated by non-humans.  On the contrary, we risk being left out on our own and looking like chumps.  The United States will not follow our lead – there are Constitutional, statutory and procedural barriers to permitting US patent applications naming non-human inventors.  The European Patent Office will not follow in the foreseeable future – it has already established its position via an academic study and discussions with member states of the European Patent Convention.  The UK has so far rejected any expansion of inventorship to non-humans.  And, contrary to recent reports (and the claims of the Artificial Inventor Project’s Ryan Abbott), the recent grant of a patent in South Africa naming DABUS as inventor indicates nothing about that country’s law or position on the issue.  As South African patent attorney Pieter Visagie has explained, the application effectively avoided any scrutiny of the legitimacy of the inventor by virtue of being filed via the international (PCT) system.

So what does Australia gain by being the first – and possibly only – country in the world to legally recognise non-human inventors?  Nothing, as far as I can see, other than a whole lot of unneeded publicity and global scrutiny of our patent laws.  If we are lucky, we will not receive many serious patent applications for inventions generated by machine inventors, and little practical harm will be done.  At worst, however, we could become the only country in the world to grant patents on such inventions, mostly filed by foreign applicants, creating exclusive rights that are enforceable only in Australia to the relative detriment of Australian innovators and consumers.

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One of the objectives of the Raising the Bar IP law reforms – most of which commenced on 15 April 2013 – was to reduce delays in the resolution of patent (and trade mark) applications.  The perceived problem with such delays was not that applicants were unhappy with the speed of processing of their applications (in fact, most choose to defer examination and acceptance of their patent applications), but rather that delays create uncertainty about whether a patent will be granted, and what scope the granted claims might have.  As noted in the Explanatory Memorandum to the Raising the Bar Bill, ‘[d]elay may suit the party, but it is not in the interests of the public, or the party’s competitors.’

There were four main features of the reforms that were expected to reduce delays and uncertainty:

1. reduction, from six months to two months, of the period within which an applicant is required to request examination, once directed to do so by the patent office;
2. reduction of the maximum period available for an applicant to obtain acceptance of a patent application, following issue of an initial examination report, from 21 months down to 12 months;
3. ‘tightening’ of the rules around when divisional applications can be validly filed, to reduce opportunities for what the Explanatory Memorandum describes as ‘abusive uses’; and
4. refinement of opposition proceedings, mostly in the form of more stringent criteria for obtaining extensions of time.

The reforms to opposition proceedings had an almost immediate impact, since they applied to all new oppositions filed on or after 15 April 2013, as well as (to a more limited degree) oppositions that were already in progress.  However, since over 99.5% of all accepted applications are not opposed, the reduction in opposition duration is irrelevant to the overwhelming majority of cases. 

It has taken longer to reach the point at which there is sufficient data to evaluate the effect of the change to the examination period, since this only applied to applications for which a request for examination was filed on or after 15 April 2013.  Many of these applications remained in the system for years.  Indeed, the last patent to be granted under the pre-Raising the Bar regime – without being additionally delayed by opposition proceedings – was no. 2010311063, which was derived from a PCT application that entered the national phase in Australia on 17 May 2012.  Examination was requested on 9 April 2013, and a first report issued on 7 August 2018 (after the application inadvertently lapsed and was restored).  The application was eventually accepted on 17 February 2020, and the patent granted on 18 June 2020.

I have now analysed nearly two decades worth of Australian patent examination data, spanning the period before and after commencement of the Raising the Bar reforms.  Further details and charts are below, but in summary I have found that:

1. reduction of the maximum examination period by nine months (from 21 to 12 months) has resulted in a drop of only a little over three months in the median period between initial examination and acceptance of successful applications;
2. the reforms have not, however, resulted in any lasting improvement in the pendency of the most ‘stubborn’ applications, which are only accepted following one or more divisional applications being filed for the purposes of continuing examination (for want of any better term, I call these ‘continuation divisionals’);
3. as a result, the ‘top’ 2% of cases are still pending for 900 days or more between an initial examination report being issued and an application finally being accepted;
4. perversely, following an initial temporary drop in the number of continuation divisionals, the reforms actually seem to have resulted in an increase in the proportion of divisional applications that are filed for the primary purpose of continuing examination;
5. on the other hand, however, the major use (i.e. over 60%) of divisional applications remains their primary purpose of pursuing alternative claims following acceptance of claims in a parent application.

Overall, reducing the examination period has had a relatively minimal effect on total pendency of patent applications – a reduction in the time prior to examination, i.e. between filing and a first examination report being issued, has been much more significant.  However, it appears to have had the unintended consequence of increasing the use of divisional applications to continue examination.

In 18 June 2021, a Full bench of the Federal Court of Australia (Middleton, Nicholas, and Burley JJ) unanimously upheld a decision of a single judge of the court (Beach J), finding that a method of detecting cell-free foetal DNA (cffDNA) in maternal blood serum comprises patent-eligible subject matter (i.e. a ‘manner of manufacture’) under Australian law: Ariosa Diagnostics, Inc v Sequenom, Inc [2021] FCAFC 101.  The patent at issue is Australian patent no. 727,919, covering an invention originally developed by Oxford University researchers, and subsequently transferred to Sequenom Inc.  The patent expired in March 2018, however a live dispute remains because Ariosa Diagnostics licensed its ‘Harmony Test’ – which Sequenom says (and the Full Court has agreed) infringes the patent – for use in Australia since at least September 2015.

To my mind, the result in this case is neither particularly surprising nor contentious.  The patent claims are directed to a method of detecting cffDNA.  While the method is underpinned by the naturally occurring fact – not known until its discovery by the inventors prior to March 1997 – that cffDNA is present in maternal blood serum, a useful method of detecting a previously unknown natural phenomenon, having a practical application, has long been considered patentable.  Ariosa’s arguments that Sequenom’s claims were in substance directed to the ‘mere’ discovery itself, resulted only in the production of ‘information’, and therefore unpatentable, were unsuccessful.  And while the broad scope of the main claim in this case might raise other issues, such as obviousness or sufficiency of description, these matters have also been addressed at first instance and/or on appeal, and are separate from the question of subject matter eligibility. 

Nonetheless, this case will generate some interest, if only because the result in Australia is opposed to the outcome of equivalent litigation between Sequenom and Ariosa involving a corresponding patent in the United States.  In that case, a narrower claim than in Australia was found to be directed to an unpatentable natural phenomenon.  The result was controversial, not least because a number of judges on the US Court of Appeals for the Federal Circuit (CAFC) – including Judge Linn on the original panel (Ariosa Diagnostics, Inc.v. Sequenom, Inc. (Fed. Cir. 2015)) and Judges Lourie and Dyk in a decision refusing en banc rehearing – indicated that they felt bound by the Supreme Court precedents, but did not agree with the outcome.  There was therefore great disappointment when the US Supreme Court declined to hear an appeal.

The outcome of the Australian appeal is not all bad news for Ariosa, however, with the finding of the primary judge on infringement being partially reversed.  In particular, there were periods during which the Harmony Test was not carried out in Australia, but instead samples were sent to the US for testing by Ariosa, which the primary judge found also to be infringing actions.  The Full Court has disagreed, finding that ‘importing’ the information resulting from the tests into Australia did not comprise a relevant ‘exploitation’ of the claimed method, as it might have done were the product of the method a physical article.

I previously reported on the Australian government’s budget announcement that it will be introducing a so-called ‘patent box’ tax incentive for medical and biotech (and, possibly, clean energy) innovations.  Implementation details of the scheme are yet to be worked out, and the government is promising to consult closely with industry on the design of the patent box.  However, while the final form of the scheme – which will not come into effect until 1 July 2022 – may not be known for many months, there is already at least one critical issue that prospective users of the system may need to consider.

The government’s fact sheet on ‘tax incentives to support the recovery’ states that ‘…granted patents, which were applied for after the Budget announcement, will be eligible’.  There is, as yet, no clear indication of what the government means by ‘applied for’, however in its ‘What’s New’ email (to which you can subscribe here), sent on 14 May 2021, IP Australia states that ‘[t]o be eligible, the patent must have a priority date after 11 May 2021…’.  Being unable to find this detail in the budget papers, I sent out a tweet asking whether anybody else had seen it, and tagging @IPAustralia, which responded:

Hi Mark, thanks for your comment. This is our understanding of the announcement. Further details on the patent box will be released in the coming weeks by Treasury as part of the public consultation.

— IP Australia (@IPAustralia) May 14, 2021

There is a big difference between ‘priority date’ and ‘filing date’, which hopefully will be open for discussion during the public consultation.  If the critical date is the priority date, then this means that Australian medical and biotech innovators who have already filed a priority application (e.g. a provisional application) prior to the budget announcement would not be eligible for the patent box tax incentive if they subsequently file a complete application claiming the benefit of the provisional filing date.  On the other hand, if they were now to file the same complete application in Australia without a priority claim, then they would be eligible for the scheme upon grant of any resulting patent.

The risk of dropping a valid claim to priority, of course, is there there may be intervening prior art that could invalidate or limit the scope of the claims, which has been made public after the priority date, but before the subsequent complete filing date.  To minimise this risk, the complete application should be filed as soon as possible. 

Fortunately, the Australian grace period protects an applicant against their own disclosures during the 12 months prior to the complete filing date.  Furthermore, the discovery of intervening prior art would not be fatal, at least up until grant of the patent (see regulation 10.2B(7) of the Patents Regulations 1991), since the patent request could be amended to include the priority claim, with the consequence that the patent box incentive would then be unavailable.

The choice to file in Australia without claiming priority would not affect the applicant’s right to claim priority in other jurisdiction, either through direct applications or via the Patent Cooperation Treaty (PCT).

But, frankly, this seems perverse.  To my mind, the logical choice for the critical date is the filing date of the complete patent application, which commences the patent term of up to 20 years during which the patent box tax incentive could be claimed.  Basing eligibility on the priority date will simply encourage strategies, such as I have outlined above, to engineer eligibility.  This does not serve anybody’s interests.  The government will not make significant savings on the operation of the patent box scheme, while applicants will feel compelled to adapt their patent filing strategies simply to comply with an arbitrary choice of eligibility criteria.

Hopefully, through the consultation process, common sense will prevail.  In the meantime, however, medical and biotech innovators with pending priority applications should probably seek advice from their patent attorneys.

As we edge closer and closer to Election Day on November 3, folks across the country are heading out to the polls to cast their votes and let their voices be heard. And although there are many things about this election that make it different from those of years past, one thing remains the same: … Continue reading 5 ideas to get involved in local elections and boost civic engagement →

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