Patenting information technologies, computer software and business methods

Computer technology plays an increasingly important role in society today. As a result of the increasing economic importance of technology, as well as developments in patent law, the number of computer software and business method patents filed and granted has increased significantly in recent years, both in Australia and around the world.

Watermark has conducted an analysis of patenting trends in Australia in the information technology (IT) sector, particularly looking at the computer software and business methods fields.

Australian filing trends
Figure 1 shows the number of patent applications filed each year from 1990 to 2006 in Australia in the IT sector. The accelerated growth in the field over recent years is clear. The IT sector is in the top 10 technology sectors for which patent applications are filed in Australia, and has been one of the top five growth technologies over both the past five years and the past 10 years. Between 2001 and 2006 Australian applicants filed approximately 20 per cent of the IT patents in Australia.

While trends among Australian and foreign applicants are similar, it is apparent that foreign entities are major users of the Australian patent system in this technology sector.

Watermark’s analysis of data extracted from the Delphion and Australian Patent Office (IP Australia) databases indicates that only one of the top 10 holders of granted patents classified within the computer software and business method-related search classes is Australian - Silverbrook Research Pty Ltd. Other top patent proprietors in Australia include Canon, Ericsson, NEC, Sony and Samsung.

Figure 1 

International filing trends
Figure 2 shows the number of Patent Cooperation Treaty (PCT) applications filed per year in the ‘computer software’ and ‘business methods’ fields, defined as subject matter classified in the International Patent Classification classes G06F, G06N and
G06Q.

Figure 2 



There was slow but steady growth in the number of patents filed under the PCT in the computer software and business method fields before 1999. It can also be seen that there was a significant increase in the number of patent filings in 2000 and 2001. However, there was almost the same decline in the number of patent filings in 2002. Filings continued to decline in 2003 before another upward trend began in 2004. That upward trend has continued to date.

A number of factors may have contributed to the sudden growth in patent filings in 
1999. Notably, the US State Street decision was handed down in July 1998, which strengthened the case for business-related patents in general by changing the legal test in the United States for patentable software from “causing a physical transformation” to producing “a useful, concrete and tangible result” - a broader and more lenient standard.

Another catalyst which may have helped to increase the number of applications filed in this period was the dot-com technology boom and bust, fuelled by the low interest rates in 1998 to 1999, which helped to increase the start-up capital amounts for technology-related businesses. The boom commenced in 1999 and the bust happened from 2001 to 2003. This may be directly related to the sharp increase in applications filed in 2000 and the sudden drop in patent filings in 2002 and 2003.

Legal developments in Australia
Australian patent filing trends have closely followed the PCT filing trends. This may reflect the relatively enlightened approach to patentability adopted by the Australian courts, which provides an incentive to file applications relating to information technologies.

In Welcome Real-Time SA v Catuity Inc ([2001] FCA 445), which related to a computer-implemented customer loyalty system, the Federal Court of Australia expressly approved the approach taken in the State Street Case. As a result, it is now well established that in principle, computer software and computer-implemented business methods are patentable in Australia. A more recent decision has helped to clarify the law around patentability of these types of subject matter.

In Grant v Commissioner of Patents ([2006] FCAFC 120) the Australian Full Federal Court considered the patentability of business methods. The court held that:

“it is necessary that there be some ‘useful product’, some physical phenomenon or effect resulting from the working of a method for it to be properly the subject of letters patent.”

Accordingly, applicants seeking business method patents should ensure that the claims of an Australian patent specification include features or steps that enable such a physical effect to be created, and that the specification provides adequate support for such claims.

In relation to software-based inventions, in Grant the court stated that a physical effect will exist where a component was physically affected or a change in state of information in a part of a machine resulted. The court also observed that the physical effect need not always be a physically observable end result in the sense of a tangible product. These observations are especially pertinent to software-based inventions, which typically involve a set of computer program instructions that are executable by a computer processor to achieve a desired function. The execution of the program instructions will typically result in a change of state of information in a computer memory - an effect that is generally not physically observable.

Summary
The Australian position on patenting of software and business methods is similar to that of the United States. This position is more liberal than that in jurisdictions such as the member states of the European Union, where the patentability of software is more limited and business methods are generally excluded from patentability.