Federal Court Rules on patentability for software and business methods

The Federal Court of Australia has handed down its eagerly anticipated first instance decision in respect of Research Affiliates LLC v Commissioner of Patents [2013] FCA 71. This decision was hoped to bring clarity to a relatively controversial area of law, being the patentability of computer implemented methods. However, for applicants and patentees in this space, the decision tends to pose as many questions as it answers, and certainly creates additional hurdles that need to be satisfied.


The claims upon which the decision focuses relate to a computer implemented method for generating an index (for example an index of shares upon which an investment strategy may be devised or benchmarked). In general terms, the method involved gathering data relating to a plurality of assets, and processing that data in a particular manner to generate an index. The Australian Patent Office had rejected the application as failing to satisfy the requirement of being a “manner of manufacture”, that is of being the proper subject of letters patent under Australian law. The Federal Court arrived at the same conclusion, although for different reasons.

The Federal Court’s reasoning introduces apparently new concepts that might be considered when assessing the patentability of subject matter. In this regard, the Court suggests a requirement that computer implementation of a method should give rise to a practical application in the improved use of computers:

“There is no practical application in the method of the claimed invention for the improved use of computers. The effect of the implementation of the method is not to improve the operation of or effect of the use of the computer.”

The Court went on to further cast doubt as to whether information produced by the operation of a computer constitutes an “artificially created state of affairs” (being a significant requirement for patentability):

“The case propounded by Research Affiliates depends upon the proposition that information of economic significance, once entered into or produced by means of a computer, becomes an economically valuable artificially created state of affairs, and thus patentable. That proposition must be rejected.”

Unfortunately, the Court did not provide substantive guidance as to the positive requirements that should be satisfied for the output of a method to be considered as an artificially created state of affairs.

The decision also suggests that a method, however claimed, may not be patentable if it could have been performed manually:

“The Specification asserts a patentable invention, not in the use of a computer, but in the particular series of steps that give rise to the generation of the index. Those steps could have been carried out manually. The aspect of computer implementation is nothing more than the use of a computer for a purpose for which it is suitable. That does not confer patentability.

This suggests that positive claim elements can be disregarded for the purposes of assessing whether a claim defines a manner of manufacture, and may create substantial repercussions in other areas of technology.

There are a number of issues in respect of which the decision is generally silent, but which might have been of great interest to various parties. In particular, the decision does not discuss differences between “system claims” (i.e. claims directed to specifically-configured computer systems) and method claims, and implies that where a method claim fails, so do any corresponding system claims.

It is not clear at this stage whether the decision will be appealed. In the meantime, it would be wise for patentees and applicants to consider strategies for mitigating risks stemming from the decision. Given the nature of the decision, there may be challenges in devising such strategies for pending and issued cases.