Patents

Software Patents Overview

John Lambert

Last updated 20 Sept 2005

Art 52 (1) (c) of the European Patent Convention ("EPC") excludes from the definition of "inventions" "schemes, rules and methods for performing mental acts, playing games and doing business, and programs for computers" However, that exclusion is qualified by paragraph (3) which adds that the provisions of paragraph (2) shall exclude patentability of the subject matter or activities referred to in that provision "only to the extent to which a European patent or European patent application relates to such subject matter or activities as such. S. 1 (2) of the UK Patents Act 1977 is in almost identical terms, The words "as such" have been at the root of considerable litigation in the European Patent Office ("EPO") and the English courts.

Early Case Law
The language of art. 52 (2) (c) seems to make it clear beyond peradventure that matter consisting of a computer program and nothing more falls outside the definition of "invention". Even if an invention did relate to something more than a program, there were other hurdles to clear such as the exclusion of methods for performing mental acts, doing business, presenting information or other excluded matter. For that reason, applications to the United Kingdom and European Patent Offices for software related patents tended to fail. Merrill Lunch's Application [1989] EPC 561, for instance, was rejected as a method of doing business and Wang Laboratories Inc.'s [1991] EPC 463 as a method for performing a mental act.

VIACOM

A case that is widely regarded as a watershed is the decision of the Technical Board of Appeal in T208/84 or Viacom [1987] 1 OLEO 14.that a claim for a technical process may be patentable even though one or more of its features falls into an excluded category provided that protection is not sought for the excluded matter as such. In the Board's words:

"Generally speaking, an invention which would be patentable in accordance with conventional patentability criteria should not be excluded from protection by the mere fact that, for its implementation, modern technical means in the form of a computer program are used. Decisive is what technical contribution the invention as defined in the claim when considered as a whole makes to the known art."

The Board allowed claims to a method of image processing that used an algorithm to process numbers representing the image on the ground that such method was a technical process. It related to the technical quality of the image. Even though the idea underlying the process was mathematical, a claim making use of the method was not a claim to protect that method as such.

Merrill Lynch and Gale

Fox LJ seized on the words "decisive is what technical contribution the invention as defined in the claim when considered as a whole makes to the known art" in Merrill Lunch's Application [1989] EPC 561. He opined that it cannot have been intended for a patent to be granted for an item excluded by art. 52 (2) EPC under the guise of an article that contains an excluded item, such as a conventional computer loaded with a program. Something more was required and that something was a technical advance on the prior art. The lack of "something more" was the basis upon which Gale's Application [1991] EPC 305, 315 was refused. The application was for a read only memory containing a computer program. Nicholls LJ accepted that a computer programmed with the applicant's software would be a better computer. but the software did not embody a technical process that existed outside the computer. Nor did that software solve a technical problem lying within the computer.

Summary

The position following Viacom was summarized aptly by Aldus J in Gale at page 305:

"I conclude that the first task of the court is to construe the claim, as that is where the invention is defined. If the claim properly construed is drafted so as to relate to any of the matters disqualified by section 1 (2) then the invention is not patentable. If however, the claim is drafted to a process or technique or product and the basis of such process or technique or product is a
disqualified matter, the court should go on to consider whether the claimed invention is in fact no more than a claim to an invention for a disqualified matter."

His lordship added that that was a question of fact to be decided in each case. In his view, it was always important, when deciding that question of fact, to consider whether the claimed invention is part of a process which is to be used in providing a technical result, in which case it could not be said to be an invention relating to no more than one of the disqualified matters. Similarly, where a claim is directed to a product, it is important to consider whether the product claimed is a new technical product or merely an ordinary product programmed in a different way in which case the claim is really to the program and therefore could not relate to a patentable invention. He concluded that if the claimed invention is more than a claim to an invention for a disqualified matter then it qualifies as a patentable invention.

Examination guidelines on substantially the same lines were drawn up on what appeared to be the Board's reasoning in Viacom. They restated that a computer program claimed by itself or as a record on a carrier was not patentable irrespective of its contents but that a computer as programmed that generated a technical effect might be.

The Early American Cases

Although the US Patent Act contains no express exceptions to patentability on the lines of art. 52 (2) EPC, it was once thought that patents could not be granted for computer programs. In Gottschalk v.Benson, 409 U.S. 63 (1972) the US Supreme Court upheld the rejection by the US Patent and Trade Marks Office ("USPTO") of an application for a patent for a method for converting binary-coded decimal (BCD) numerals into pure binary numerals. Delivering the judgment of the Court, Douglas J characterized that method, which was to be used in programming conventional general-purpose digital computers as merely a series of mathematical calculations or mental steps, and not a patentable "process" within the meaning of s. 100 (b) of the US Patent Act. The Supreme Court went even further in Parker v. Flook, 437 U.S. 584 (1978) in holding that a useful application of a mathematical process to be performed by computer was not patentable. In that case, the invention was a method of updating alarm limits for use in a catalytic converter. The only difference between conventional methods of and that described in the application lay in a mathematical algorithm or formula to calculate an updated alarm limit.

Diamond v Diehr

The above cases were distinguished in Diamond v Diehr 450 U.S. 175 (1981) on the ground that their subject matter constituted nothing more than claims to mathematical processes only without a practical application. The Supreme Court granted certiorari to determine whether a process for curing synthetic rubber that included the use of a mathematical formula and a programmed digital computer was patentable subject matter. Relying on Gottschalk v. Benson, the examiner had rejected the application on the ground that steps carried out by a computer under control of a stored program constituted non-statutory subject matter and that the remaining steps were known. The Board of Appeals agreed with the examiner, but the Court of Customs and Patent Appeals reversed him in Re Diehr, 602 F.2d 892 (1979) on the basis that a claim to otherwise statutory subject matter otherwise did not become non-statutory simply because a computer was involved. The claim was not to a mathematical algorithm or an improved method of calculation but rather to an improved process for moulding rubber articles through solving a practical problem that had arisen in the moulding of rubber products. The Supreme Court agreed: a physical and chemical process for moulding precision synthetic rubber products fell within s.101 of the Patent Act categories of possibly patentable subject matter. It could not be disputed that the application involved the transformation of an article, in this case raw, uncured synthetic rubber, into a different state or thing. They described in detail a step-by-step method for accomplishing such transformation, beginning with the loading of a mould with raw, uncured rubber and ending with the eventual opening of the press at the conclusion of the cure. Industrial processes as in any other patentable process. The fact that a mathematical equation and a programmed digital computer were used at various stages did not affect patentability. The Court concluded that "a claim drawn to subject matter otherwise statutory does not become non-statutory simply because it uses a mathematical formula, computer program, or digital computer."

A Revision

The Supreme Court's decision in Diamond v Diehr was followed and extended in the lower courts. Arguably one of the most significant decisions was Re Alappat 33 F3d 1526 (Fed. Cir) where the majority of the Court of Appeals for the Federal Circuit sitting en banc held in effect that a general purpose computer becomes a new machine once a computer program is loaded into its memory, and is therefore eligible for patent protection.

USPTO Guidelines

In response to those decisions, the USPTO published new examination guidelines for computer-related inventions which requires examiners to determine what an applicant had invented and how the claims relate to and define the invention rather than whether the invention contains non-statutory material. The guidelines concluded that a computer or other programmable apparatus whose actions are directed by a computer program could be construed as a "machine", computer-readable memory that can be used to direct a computer to function in a particular manner when used by the computer as an "article of manufacture" and a series of specific operational steps to be performed on or with the aid of a computer as a "process".

State Street

The Court of Appeals for the Federal Circuit regarded even that approach as unnecessarily restrictive. In State Street Bank & Trust Co. v Signature Financial Group Inc. 149 F 3d 1368 (Fed. Circ. 1998) the Court stressed that the question of whether a claim encompasses statutory subject matter should not focus on which of the four categories of subject matter to which the claim is directed to but rather on whether the essential characteristics of patentability are met. In the case before the Court, claim 1 was directed to a machine programmed with "Hub and Spoke" software which produced a "useful, concrete, and tangible result." It therefore constituted statutory subject matter even though the useful result was expressed in numbers, such as price, profit, percentage, cost, or loss.

The IBM Cases

To the extent that there are parallels between Europe and the USA, it might be said that Viacom was the European equivalent of Diamond v Diehr. Perhaps, the European cases that come closest to Alappat are the Technical Board's decision in International Business Machines Corporation's applications T1173/97 OJ EPO 589 and T935/97 The first of those cases was an appeal against the examining division's rejection of the following claims:

"A computer program product directly loadable into the internal memory of a digital computer, comprising software code portions for performing the steps of claim 1 when said product is run on a computer."

and

"A computer program product stored on a computer usable medium, comprising:

	computer readable program means for causing a computer to control an execution of an application (56 A);
	computer readable program means for causing the computer to implement a commit procedure, especially a two-phase commit procedure for said application (56 A);
	computer readable program means for causing the computer to notify said application (56 A) to continue to run in the event said commit procedure fails before completion, whereby said application (56 A) need not wait for said commit procedure to be completed; and computer readable program means for causing the computer to resynchronize said incomplete commit procedure asynchronously relative to said application (56 A)."

The reason for the rejection was that the subject matter of those claims was excluded from patentability by art.52 (2) and (3) EPC as interpreted by Chapter IV of the examination guidelines.

TRIPs

The applicant appealed against the decision contending inter alia that art. 52 (2) should be construed to give effect to art. 27 of the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPs") The Technical Board was persuaded of the significance of TRIPs but did not agree that it could be applied directly to the EPC. The European Patent Organization was not party to the agreement and not all EPC states were party to TRIPs. The Board took due note of US and Japanese developments which it regarded as "a useful indication of modern trends" that "may contribute to the highly desirable (world-wide) harmonization of patent law." In the Board's view, the only source of substantive law was the EPC.

Need for Technical Contribution

The Board was of opinion that software was excluded from patentability because computer programs "as such" are mere abstract creations without technical character. It followed that any program that actually had technical character would be a patentable invention. "Technical character" meant something more than merely actuating a computer but if such actuation produced a solution to a technical problem the program would fall outside the exclusion of art. 52 (2) EPC.

Pension Benefit Case

The need for "technical character" was challenged in T0931/35 - Pension Benefit Systems Partnership (Technical Board, 8 Sep. 2000), on the ground that there was no express requirement for an invention to have such character in the EPC. The Board held that such requirement was implicit from the frequent use of the term "technical" in the EPC and Implementing Regulations and that it had in any case been established by previous cases. The Board conceded, however, that it was not helpful to look for a contribution to a solution to a technical problem when determining whether an invention had "technical character".

In the Board's view, a computer program claimed by itself was not excluded from patentability if the program, when running on a computer or loaded into a computer, brings about, or is capable of bringing about, a technical effect which goes beyond the normal, physical interactions between hardware and software. Since the examination division had rejected the application without considering whether the program had technical effect, the Board set that decision aside and remitted the case "for examination of whether the wording of the present claims avoids exclusion from patentability under art. 52 (2) and (3) EPC, taking into account the fact that a computer program is not so excluded under all circumstances."

New Guidelines

Following the Board's decisions in IBM the European and UK Patent Offices revised their examination guidelines. Paragraph 2.1 of Part C, Chapter IV the EPO Guidelines now provides:

"The Convention does not define what is meant by 'invention', but Art. 52(2) contains a non-exhaustive list of things which shall not be regarded as inventions. It will be noted that the items on this list are all either abstract (e.g. discoveries, scientific theories, etc.) or non-technical (e.g. aesthetic creations or presentations of information). In contrast to this, an 'invention' within the meaning of Art. 52(1) must be of both a concrete and a technical character (see IV, 1.2(ii)). It may be in any field of technology."

Paragraph 2.2 adds that in considering whether the subject-matter of an application is an invention within the meaning of Art. 52(1), there are two general points the examiner must bear in mind:

(1)    any exclusion from patentability under Art. 52(2) applies only to the extent to which the application relates to the excluded subject-matter as such; and
(2)    the examiner should disregard the form or kind of claim and concentrate on its content in order to identify whether the claimed subject-matter, considered as a whole, has a technical      character.

"Technical character" means something more than the mere actuation of circuitry by running program. It may be found in the control of an industrial process, in processing data which represent physical entities or even in the internal functioning of the computer itself or its interfaces.

In a Practice Notice dated 19 April 1999 [1999] EPC 563 the Patent Office announced that it had taken the view that it is the substantive technical contribution of the subject matter of an invention that determines whether it is may be patented rather than whether it consists of, or is based on, a computer program. It had therefore decided to amend its examination practice in conformity with that of the EPO.

The Proposed Directive

Proposals to amend article 52 (2) EPC in respect of software inventions were discussed at the diplomatic conference to amend the EPC that took place in Munich between the 20 and 29 November 2000. These were shelved for further discussion. The Directorate General of the Internal Market issued a consultation document entitled "The Patentability of Computer-Implemented Inventions" on 19 October 2000 that suggested certain key elements for harmonization. Responses to this consultation have been analysed and a report published by PbT Consultants Ltd. The UK Patent Office has carried out a similar consultation exercise. These consultations resulted in a proposal for a draft directive on the patentability of computer implemented inventions. That proposal was amended several times by members of the European Parliament and the governments of the member states and it was not possible. A draft representing what was believed to be the common position of the member states and the European Parliament was presented for second reading and rejected on 6 July 2005. The text rejecting the common position instructed the president of the European Parliament to declare the legislative procedure closed.

Reconsideration of the New Guidelines

On 21 July 2005, Peter Prescott QC sitting as a deputy judge of the High Court and Pumfrey J delivered two judgments that threw the new Patent Office Guidelines into doubt. In the first of those cases, Re CFPH LLCs Applications [2005] EWHC 1589 (Pat), which was concerned with an appeal from Mr Jones's decision of 14 Dec 2005 rejecting applications for patents for  real-time interactive wagering systems, Mr Prescott reviewed the legislative history of art 52 and the subsequent EPO and English cases and concluded that the Patent Office Guidelines were inconsistent with EPO practice. In their place, the deputy judge suggested a two-step approach:

"(1) Identify what is the advance in the art that is said to be new and not obvious (and susceptible of industrial application).

(2) Determine whether it is both new and not obvious (and susceptible of industrial application) under the description of an "invention" in the sense of Article 52 of the European Patent Convention - which section 1(2) of the Act reflects."

(Quoted from paragraph 4 of "Patents Act 1977: Examining for Patentability, UK Patent Office Guidelines").

The case before Pumfrey J, Halliburton Energy Services, Inc. v Smith International (North Sea) Ltd and others [2005] EWHC 1623 (Pat) (21 July 2005) was an infringement action relating to drill bits for drilling for rocks but his lordship considered the European, English and American case law between paragraphs [207] and [215] of his judgment and concluded that the law was clear, albeit difficult to apply. In his view, "the contribution the inventor makes must lie in a technical effect, and not merely in excluded subject matter."

Following those decisions the Patent Office announced on 23 Aug 2005 changes to the examination guidelines for patentability of computer implemented inventions followed by FAQ on the topic on 13 Sept 2005.

Post CFPH Cases

Several cases have come before the Comptroller since CFPH and Halliburton of which the most interesting are NMR Holdings and Oracle Corp's. In the latter the hearing officer appears to have upheld an objection on the ground that the patent would foreclose computer programs to the public. If this is upheld it would represent quite a retreat from the law as it had until recently been understood.

EPO Website

The EPO has a useful micro-site on computer implemented inventions which covers existing practice and proposed legislation.

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