25 July 2006

Full Court Finds Asset Protection Method not Patentable Subject Matter

Introduction

In my post of 14 August 2005, I reported that Justice Branson had upheld a decision of the Commissioner of Patents to grant a patent for "An Asset Protection Method". The relevant claim can be seen in that post.

On 18 July 2006, the Full Bench of the Federal Court handed down Grant v Commissioner of Patents [2006] FCAFC, which was an appeal from the case reported in my post. Perhaps to avoid the high costs of litigation, Grant himself appeared in what seemed to be a desperate and vain attempt to challenge settled law in Australia.

In this post, I will have a look at some of the important aspects raised by the Full Bench. However, this matter does not raise any new law, possibly evidenced by the fact that the judgment is only 14 pages long, a refreshing change from some of the turgid documents generated by this court in the past.

Brief Background

In the initial hearing before the Commissioner of Patents, the Deputy Commissioner concluded that the invention did not involve any discovery of a law of nature nor involve the application of technology in some form or other to perform the process claimed. He held that it does not result in an "artificially created state of affairs" and is not a manner of manufacture.

In the Federal Court, Branson J., for some reason, held that the value of the invention was only to those whose assets are ultimately protected - and possibly to their professional advisers. She held that the performance of the invention will not add to the economic wealth of Australia or otherwise benefit Australian society as a whole. For that reason, in her view, the invention was not proper subject matter for a patent. Her honour went on further to state that the claimed invention is a method by which the owner may be insulated from the operation of laws intended to serve the public interest. She held that a court of law must assume that the performance of the invention will not advance the public interest but merely advance private interests. Finally, her honour held that the social cost of conferring on the invention the protection of a patent would not be counterbalanced by any resultant benefit to the public.

This was rather strange reasoning given the wealth of precedent behind her and may in fact have provoked Grant's folly in pursuing an appeal.

Relevant Principles Discussed by the Court

It is not really necessary to get too involved here. Most of these principles are set out in my previous post of 29 May 2006. Some things are worth pointing out, though.

The court set out an interesting review of the historical development of patentable subject matter, which should be read. Their honours point out that business, commercial and financial schemes as such have never been considered patentable in the same way that the discovery of a law or principle of nature is not patentable. For example, in Re Cooper's Application for a Patent (1901) 19 RPC 53, it was held that "you cannot have a Patent for a mere scheme or plan - a plan for becoming rich; a plan for the better government of a State; a plan for the efficient conduct of business."

Business Systems

Mr. Grant contended that the invention is a "business system" as discussed in a report by the Advisory Council on Intellectual Property. The Government was in favour of the patentability of business systems. However, their honours held that the question was not whether a system for use in business was or was not patentable. Rather, they held that an invention must comply with the requirements of the Patents Act and the fact that it may be called a business method does not prevent it being proper subject matter for a patent.

Manner of Manufacture

Mr. Granted argued, for various reasons, that the invention was a "manner of manufacture". As discussed in my post of 29 May 2006, in order for the claimed method or process to be a "manner of manufacture", the method or process must result in an "artificially created state of affairs".

Their honours pointed out that the method of Mr. Grant's invention does not produce an artificial state of affairs, "in the sense of a concrete, tangible, physical or observable effect". They stated further that it was quite different from the invention in Welcome Real-Time SA v Catuity Inc [2001] FCA 445 (17 May 2001), discussed in an article linked in my post of 17 July 2006. The method disputed in that case involved components such as smart cards and point of sale terminals, and produced tangible results. According to their honours, Mr Grant's method resulted in "at best an abstract, intangible situation, namely that a hypothetical, unsecured creditor who recovered judgment against a user of the method could not levy against the user's assets to the extent they were subject to the charge."

Their honours emphasized that a physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required. By contrast, Mr Grant's alleged invention resulted in no physical consequence at all.

Must the Result be an Application of Science and Technology?

This question arose because in Re Peter Szabo and Associates Pty Ltd (2006) 66 IPR 370, reported in my post of 1 July 2005, the Commissioner had expressed the opinion that "an artificially created state of affairs...required the application of science or technology in some material manner."

Their honours stated that they were "not sure that this is correct". They supported this by stating that to erect a requirement that an alleged invention be within the area of science and technology would be "to risk the very kind of rigidity which the High Court warned against" in the NRDC case, which forms the basis of the "artificially created state of affairs" requirement and is discussed in my post of 29 May 2006.

Justice Branson's Diversion

As mentioned above, Justice Branson had set out some other "interesting" reasons why the patent should not be granted. These included her conclusion that "an invention should only enjoy the protection of a patent if the social cost of the resulting restrictions upon the use of the invention is counterbalanced by resulting social benefits."

According to their honours, however, it was not relevant whether or not the public interest is advanced. Also, they held, the Court is not in a position to determine the balance between social cost and public benefit. Their honours rubbed it in a little by stating that the court's predecessor had already determined the balance in 1623, by rewarding innovation with time-limited monopoly.

Conclusion

Mr Grant's asset protection scheme is not unpatentable because it is a "business method". The proper assessment is carried out by applying the principles that have been developed, irrespective of the area of activity. Their honours repeated the requirement 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 a patent.

17 July 2006

Articles from Presentation

For those of you who may be interested, an article on software and business methods can be accessed here and an article on Australian patent practice can be accessed here. These articles are based on presentations that I delivered at the American Bar Association's IPL Summer Conference and to various firms and corporations in Silicon Valley. Your comments on these articles would be particularly appreciated.

13 July 2006

Some Thoughts on Software Patent Specifications

Introduction

I have recently returned from a trip to the United States, where I delivered a presentation at the American Bar Association's summer conference covering Australian patent practice. I also spoke at a number of firms and corporations in Silicon Valley. During the trip, I had a number of interesting discussions with practitioners and attended a very useful lecture on drafting software patent specifications.

The purpose of this post is to give you some of my thoughts on preparing software patent specifications in the United States and Australia. Recent developments in the United States has made the need for searching and proactive patent preparation clear.

Changes at the United States Patent and Trademark Office (USPTO)

The United States Commissioner of Patents and Trade Marks, John Doll, was a guest speaker at one of the conference lunches. He spoke of an accelerated examination procedure that was about to be implemented by the USPTO. More information concerning the accelerated procedure can be found
here.

In short, the USPTO is prepared to guarantee that a first office action (patent examination report) will issue within 12 months from filing the application provided a number of conditions are met. The most important condition is that the Applicant must carry out a search. The results of the search must be provided in a statement at the time of filing and the Applicant must explain how the invention is distinguished from the results of the search. The specification can also include no more than twenty claims, and only three of those claims can be independent. The conditions are a lot more extensive and amount almost to the Applicant carrying out its own examination (surprisingly, the USPTO will not be reducing its fees if this procedure is selected).

I have mixed feelings about this new procedure, but I understand the problem faced by the USPTO. It is simply caving in under the massive influx of patent applications particularly in the software / business method category. Those practitioners that have been involved in the preparation of specifications covering software products will appreciate the difficulties involved with identifying the invention and then describing it. It would follow that examining such patent applications would also be extremely difficult and time-consuming. As a result, applicants in the software / business method categories have been told recently that it may take up to five years or more for a first office action to issue. Given the fast pace of software development, this is simply an untenable position.

Making it Easier

During the conference, one of the speakers gave some tips on how to speed up the prosecution of a United States software patent application.

First of all, a search is strongly recommended. The search results should be described in a background section so that the Examiner can understand the field of the invention. A good background also helps to provide a point of reference when defining the invention. It is usual practice for the background section to describe the disadvantages associated with the known technology. If the background section contains the search results, such a description can be made all the more meaningful. Practitioners need to be careful here, of course. An in-depth description of prior art is useful but can also provide material for a revocation action.

Secondly, the specification should point out why the invention is patentable in light of the search results. Clearly, this should help the Examiner to understand the relevance of the elements or integers of the claims and make his or her job easier. Some practitioners may disagree, pointing out that this may provide a road map for a revocation action against the patent. That may be so, but I believe that the advantage of having an decent and relatively speedy examination outweighs any prejudice against the applicant resulting from this approach.

Thirdly, the specification should employ simple and clear language. Words that are unique to the field of the invention should be defined in a "Definitions" section of the patent specification. The purpose of this is to avoid the need for the Examiner to waste time looking up meanings of words. Practitioners need to make sure that all words used are free of any ambiguity. If there is a possibility of ambiguity, either a definition should be provided or a different word used.

Fourthly, and controversially, the speaker mentioned that practitioners should limit the number of claims. The scope of the search and examination carried out by the Examiner is determined by the claims, particularly the number of independent claims. By limiting these, the scope of the search can be determined more quickly by the Examiner.

Fifthly and finally, as many drawings as possible should be filed together with the patent application. In fact, if possible, it should be possible to comprehend a working example of the invention just by looking at the drawings. In the case of software patent applications, the drawings should include system diagrams, flowcharts and block diagrams that illustrate preferred embodiment/s of the invention to the reader. This will make life a lot easier for the Examiner.

Tricks up our Sleeves?

In Australia, we have the option of requesting, at no extra cost, expedited examination. This will speed up examination. If we follow the guidelines for making it easier described above, examination should proceed quite rapidly.

Our innovation patent system provides a neat mechanism for obtaining early enforcement of patent rights. I have discussed our innovation patent system in my post of
4 May 2005. While that post points out the dangers of the system, an innovation patent can be very useful when used in concert with a standard patent application.

It is possible to file a divisional patent application for an innovation patent from a standard patent application. This is useful if the Applicant wishes to enforce patent rights before the standard patent is granted, due to the relatively quick prosecution of the innovation patent application. Provided the alleged infringement can be described in the specification of the parent application, the claims of the innovation patent can be crafted to capture the infringement. This is an extremely effective tool and we have used it on a number of occasions to enforce clients’ patent rights during prosecution.

Concluding

The filing of software patent applications has become a key strategy of most R&D firms in Silicon Valley. At the moment there is a quest among many of these firms to develop a way in which patents can be granted quicker while still being subject to a decent examination and thus a stronger presumption of validity. Instead of simply complaining about the problems of backlog and poor examination, practitioners can and should find ways to engage the problem in a constructive manner.

03 July 2006

Shedding Some Light on Business Methods

Introduction

In my post of 29 May 2006, I discussed how Australia has become comfortable with software patents. This post builds on that by setting out how we deal with "Business Methods" in Australia and has particular implication for patents covering e-commerce products.

In that post, I discussed how our law developed to deal with the term "manner of manufacture". In this post, I have a look at one of our most significant cases in connection with e-commerce. I then carry out our tests on a patent claim considered in the well-known United States case of Ex Parte Lundgren, that was heard by the United States Board of Patent Appeals and Interferences on 20 April 2004. I also consider a granted claim and explain why it was granted.

A Significant Case

In Welcome Real-Time SA v Catuity Inc [2001] FCA 445, Heerey, J. had the opportunity to consider a process for generating a reward system or buyer's loyalty scheme. This case is worth reading, especially the section dealing with "Manner of Manufacture" which has a discussion of the NRDC case mentioned in my previous post.

The relevant claim reads as follows:

1. Method of processing coded information during a purchase or payment operation by a customer, holder of a card with a chip, at a trader's, in which the contents of the memory of the chip card are read and a coupon is or is not printed on the basis of the information arising from the contents of said memory, characterized in that, with the memory of the chip card including a first identification file, termed the Member file, identifying the card-holding customer, a second accounting file, termed the Points file, and a third file, termed the Behaviour file, relating to the behaviour of the card holder towards the user trader or traders,

a specified algorithmic processing is performed dependent, on the one hand, on the date of the operation and, on the other hand, on the information contained in said files, including the Behaviour file, the algorithmic processing including a step of incrementing or decrementing the Point [sic] file by a predetermined number of points depending on the frequency and/or the nature of first, second or xth visit by the card holder over a time period of specified duration, the coupon is printed only if the number of points contained in the Points file is greater than a specified value then data is written to the Points file, new information is written to the Behaviour file, and said coupon is or is not printed on the basis of the result of said algorithmic processing.

Justice Heerey found the United States matter, State Street Bank & Trust Co v Signature Financial Group 149 F 3d 1368 (1998) persuasive. Those familiar with this matter will recall that it concerned a patent for a data processing system for implementing an investment structure. Mutual funds ("Spokes") pooled their assets in an investment portfolio ("Hub") organised as a partnership. This system allowed for consolidation of costs of administering the funds combined with the tax advantages of a partnership.

Previous decisions of the United States Supreme Court had held that mathematical algorithms are not patentable subject matter because they are merely abstract ideas. However, in State Street, it was held that the transformation of data representing discrete dollar amounts by a machine through a series of mathematical calculations into a final share price constituted a practical application of a mathematical algorithm because it produced "a useful, concrete and tangible result" in the form of a final share price momentarily fixed for recording and reporting purposes.

His honour held that the reward system was not a “business method” in the strict sense. Rather, he held that it produced an artificial state of affairs in that cards could be issued for different loyalty programs of different traders as well as different programs offered by the same trader. All this could be done instantaneously at each retail outlet. The result was beneficial in a field of economic endeavour - namely retail trading - because it enabled many traders (including small traders) to use loyalty programs and thereby compete more effectively for business. Such competition was beneficial to consumers, both in the general sense and in the sense that they could obtain benefits in the form of discounts and free goods and services.

His honour gave an interesting example of what would not be patentable. That crackpot genius, Henry Ford, had the bright idea of stipulating that suppliers of components for the Model T Ford supply the components in crates fabricated with planks of suitable dimensions for use as floorboard planks for the Model T. According to his honour that business practice would not constitute patentable subject matter as it did not result in an artificially created state of affairs.

A Granted Claim

Set out below is a claim from Australian patent no. 732272 for "An Advertising System" that was granted on 12 April 2001:

A method of attracting traffic to a network site, including:
publishing a network site for a plurality of radio advertisers, the site having an index to the advertisers; and
advertising the address of the site on radio cooperatively with respective advertisements of the advertisers.

Clearly, by carrying out the steps of that method, we end up with "an artificially created state of affairs" in the network site with an index.

The Ex Parte Lundgren Claim

In the United States, the Board of Patent Appeals and Interferences dealt with a claim that had the following steps (I have removed large portions for the sake of clarity):

1. A method of compensating a manager.

2. Choosing an absolute performance standard from a set of absolute performance standards.

3. Measuring an absolute performance of each firm.

4. Determining a performance comparison base.

5. Comparing said measurement.

6. Determining a relative performance measure.

7. Determining the managerial compensation amount.

8. Transferring compensation to said manager.

If we apply the NRDC test to the above steps, all we end up with is a well-compensated manager. I don't think that could be regarded as an "artificially created state of affairs".

A Last Word

In order to assess a claim for patentable subject matter, one has to consider the result of the claim. I am tempted to refer to some form of “transformation” of hardware. However, it is important to stick to the terminology of the courts. There has to be a change in the state of affairs and that change has to be artificially created. It follows that if the specification makes no reference to hardware of any sort, there cannot be an “artificially” created state of affairs and the relevant claim would not be suitable for Australia.

29 May 2006

Why is Software Patentable in Australia?

In this post I will explain that the boundary between patentable and unpatentable subject matter is clearly demarcated. On the way there, I will explain how we arrived at a patent system comfortable with software inventions.

THE STATUTES

Section 18(1)(a) of the Australian Patents Act forms the basis of the patentability question in Australia. To quote: "a patentable invention is an invention that, so far as claimed in any claim is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies."

So, unlike Europe, we have no statute that specifically prohibits the granting of patents for software products. It follows that we do not have to perform various semantic gymnastics if we need to protect software, as is the case in Europe.

The 1623 Statute of Monopolies

The Statute of Monopolies was established in England in 1623 and is the original source of Anglo-American law. I am proud that we have maintained our connection to this Statute. In my opinion, section 18(1)(a) is an excellent provision since it allows our judiciary to continue to define and re-define the meaning of "manner of manufacture".

The history of patentable subject matter in Australia actually begins and is still deeply rooted in England. In fact it goes as far back as 1623. The reason for this lies in section 18(1)(a) of our Patents Act. According to that section an invention will be patentable provided it is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies.

Back in the late 1500's, Queen Elizabeth I granted monopolies to various courtiers and favourites for all manner of products which were already in existence in an attempt to raise revenue. Because of the uproar this caused, the Queen revoked the most objectionable and allowed the common law courts to determine the validity of the remaining monopolies. In Darcy v Allin, (1602), Darcy sued Allin for infringement of his sole rights of importing and making playing cards. The court held that the patent was bad and thus set a precedent which could be used in further matters.

However, after Elizabeth, King James I continued to grant objectionable monopolies. As a result, the Statute of Monopolies was passed. The Statute banned all present and future monopolies except for inventions, which were preserved by section 6 of that Statute.

Section 6 reads as follows: "Provided also, and be it declared and enacted that any declaration beforementioned shall not extend to any Letters Patent, and grants of privilege for the term of 14 years or under hereafter to be made of the sole working or making of any manner of new manufactures (emphasis added) within this realm to the true and first inventor and inventors of such manufactures which others at the time of making such Letters Patent and grants shall not use so as also they be not contrary to the law nor mischievous to the state by raising prices of commodities at home or hurt of trade or generally inconvenient (emphasis added), the said 14 years to be accounted from the date of first Letters Patent or grant of such privileges hereof to be made, but that the same shall be of such force as they should if this Act had never been made, and of none other."

There are two phrases that have been the source of much judicial precedent. These are: "manner of new manufactures" and "generally inconvenient". For the purpose of this post, I will just consider "manner of new manufactures".

Manner of New Manufactures

In a series of cases, the courts in England attempted to define this phrase, leading eventually to the watershed case of National Research Development Corporation v Commissioner of Patents (1959) 102 CLR (The "NRDC" Case).

In that case, NRDC attempted to obtain a patent for a method of applying a herbicide to a field. The High Court pointed out that we should not be attempting to reduce the question of patentability to a question of verbal interpretation, but rather as a general title for a whole category of subject matter for which patents may be granted. The court proposed a broad approach towards the meaning of invention, while still attempting to provide some guidance. In the Court of the Commissioner, reference had been made to the English case of GEC's Application in 1942.

In that matter, Justice Morton put forward what have become known as Morton's Rules. In terms of those rules, a method or process is a manner of manufacture if it (a) results in the production of some vendible product; or (b) improves or restores to it's former condition a vendible product; or (c) has the effect of preserving from deterioration some vendible product to which it is applied.

This was too much of a limitation for the High Court in NRDC and it held that it would only accept those rules if "product" could be interpreted as covering any artificially created state of affairs, which was "vendible" if it had economic significance. Furthermore, the method or process must have application in the industrial as opposed to the fine arts. That said, the High Court compared a field full of weeds with a weed-free field and concluded that there was indeed an artificially created state of affairs evident in the weed-free field. The weed free field was clearly of economic significance and thus it concluded that NRDC indeed had a patentable invention.

It follows that we can distill three rules for patentability from the NRDC case. In order to qualify as patentable subject matter, a method or process must:

(a) Result in an artificially created state of affairs, and

(b) Be of economic significance, and

(c) Be applied to the industrial arts as opposed to the fine art.

Applying NRDC to Software

In the 1991 case of IBM v Commissioner of Patents, the Delegate of the Commissioner of Patents rejected an application by IBM for "A Method and Apparatus for Producing a Curved Image". The method in question was objected to by the Delegate as not being a "manner of manufacture". The Delegate stated that the claim was bad since it defined a mathematical algorithm. A mathematical algorithm is not patentable since it is a method of solving a mathematical problem and so does not result in "an artificially created state of affairs".

The relevant claim included a number of computing steps and a displaying step. The claim itself did not disclose any apparatus or physical mechanism for computing and displaying the curve. Thus, citing a number of US cases, the Delegate rejected the claim. The court, however, correctly construed the claim in the light of the specification and held that there was clearly a computer involved in the generation of the curve. Furthermore, the court held that there was no difference conceptually between the use of the compounds involved in the NRDC case and the use of the computer to generate the curve. Just as those compounds were previously known, so here, it was not suggested there is anything new about the mathematics of the invention. What was new was the application of the selected mathematical methods to computers, and, in particular, to the production of the desired curve by computer. The production of an improved curve image was held to be a commercially useful effect in computer graphics. Thus, the method claim described an "artificially created state of affairs" that was of "economic significance".

The Australian Patent Examiners Manual

The Patent Examiner's manual has endorsed NRDC and IBM, by stating that the following will almost always be patentable:

1. Source code for patentable computer software.

2. Executable code for patentable computer software, which is in a machine readable form.

3. A computer, when programmed to achieve any result which has utility in the field of economic endeavour.

Proper Claiming

In view of NRDC, IBM and the Examiner's manual, when putting together a set of claims for software it is advisable to have independent claims including

1. A method claim covering the steps carried out by the software product

2. A claim directed to a computer configured or programmed to carry out the steps.

3. A claim directed to the software product per se.

Conclusion

It is clear that there is no reason to treat software any differently from any other field of technology when it comes to patents. In my opinion, much of the contention has been driven by a feeling that patents are somehow not suited to software. Furthermore, I think that the patent examination process is not particularly suited to software at the moment, leading to patents being granted for subject matter that is often neither novel nor inventive.

However, before we throw out the baby with the bathwater, there are things that we can do to address this issue and to deal with software patents which could unreasonably hinder development. I will deal with that in a further post.

09 May 2006

Federal Court Constructs Refuse Bag



Clorox Australia Pty Ltd v International Consolidated Business Pty Ltd [2006] FCA 261

TOPICS: Construction of claims - determination of essential features of claimed refuse bag; infringement - all essential features must be taken - no infringement, even though "principle feature" taken.

Introduction

The applicant (Clorox) sued the respondent (ICB) for infringement of its Australian patent no. 611639 for the invention entitled "Bag with Tie Parts at Open End".

ICB was engaged in importing, offering for sale, supply and sale in Australia of a refuse bag referred to as the "Hercules WingTop" (the Hercules bag).

The Patent

Clorox contended that ICB infringed, inter alia, claims 1, 2, 4, 5, and 6.

Claim 6 depends on claims 4 or 5. Also, claims 1, 2, 4 and 5 are similar and were broken down conveniently by the court. In short, the relevant integers of the claims can be commonly recited as:

(a) a refuse bag...

(b) front and rear panels joined along three straight sides; and

(c) the fourth side formed so as to have valleys and projections which result, in effect, in four tie parts of sufficient length to be tied together by hand to close the fourth side.

The Issue

The case turned on whether or not the having the front and rear panels joined along three straight sides was an essential feature of the invention and whether or not the Hercules bag had three straight sides as claimed in the patent. It was not in issue that the Hercules bag had the fourth side with valleys and projections.

As set out in my post: "Full Court Rules on Claim Construction", it is necessary for an alleged infringer to take all the essential integers to infringe. Accordingly, the question of whether the "three straight sides" is an essential feature or not is an important consideration.

Principles of Claim Construction

Justice Stone briefly set out a useful overview of the principles of claim construction. Some of the principles are worth repeating.

Her honour started off by stating that it is appropriate to consider the principles applicable to construction of a patent specification before considering infringement. She emphasized that it is important to ensure that the consideration of the allegedly infringing product does not influence the determination of the proper construction of the claims.

Her honour cited the well-known Minnesota Mining & Manufacturing Co. v Beiersdorf (Australia) Ltd (1980) 144 CLR 253 ("Minnnesota Mining"). In that case it was held that when construing the claims it is necessary to consider the context in which the claims are made. The specification must be considered as a whole even if there is no ambiguity in the claims. However, she cited Welch Perrin & Co. Pty Ltd v Worrel (1961) 106 CLR 588 ("Welch Perrin") where it was held that where the claims are clear and unambiguous, they are not to be varied, qualified or made obscure by statements found in other parts of the specification.

A number of other principles were also given and are worthy of study. However, for this post, it is worth mentioning that her honour cited Sartas No. 1 Pty Ltd v Koukourou & Partners Pty Ltd (1994) 30 IPR 479 ("Sartas"), where the court held that evidence can be given by experts on the meaning which those skilled in the art would give to technical or scientific terms and phrases and on unusual or special meanings given by such persons to words that might otherwise bear their ordinary meaning. Also, citing Allsop Inc. v Bintang Ltd(1989) 15 IPR 686, insofar as a view expressed by an expert depends on a reading of the patent, it "cannot carry the day unless the court reads the patent the same way."

Are the "three straight sides" essential?

Her honour cited Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183, in which it was held the a feature is considered essential if the hypothetical reader would have understood from the language used in the claim, in the context of the specification as a whole, that the patentee intended that strict compliance was an essential feature of the claim.

Clorox attempted to develop a theory that the "three straight sides" was an intermediate feature and that there was therefore some inherent flexibility in the interpretation of this feature. Her honour disagreed. She held that either the feature is "necessary for an article to infringe the Patent or it is not". Her honour simply held that the "three straight sides" are an essential feature. She held that the patentee has chosen by the language of the claims to make the requirement that the front and rear panels be joined along straight sides an essential feature.

Laid-flat Form

Some questions arose concerning the shape of the bag forming the subject matter of the patent. In short, her honour noted that such bags are usually formed in a tubular manner. Thus, it would seem to be incongruous to refer to the bags having "front and rear panels joined along three straight sides". However, she held that the specification imported into the claims that the bag be "laid down flat". Her honour therefore held that it was appropriate to consider the bag as claimed in a "laid-flat form". In that form, the bag could be regarded as having the "front and rear panels joined along three straight sides".

Clorox submitted that the laid flat form could involve laying a bag flat and then tensioning the edges or sides to demonstrate that the sides were straight. The Hercules bag had a gusseted base and this tensioning would be necessary to achieve straight sides. Her honour held that this was not permissible. She agreed with counsel for ICB who said that it was necessary for there to be a constant way in which to assess allegedly infringing products. She held that this does not allow the bag to be manipulated in any way once in the laid-flat form.

Unfortunately for Clorox, when the Hercules bag was laid down flat without manipulation the "sides" showed a clear curvature and "do not fall within any possible meaning of straight as used in the Patent specification".

Conclusion

Since Hercules did not take all the essential features, Clorox were unable to show infringement.

It appears that it may have been necessary for Clorox to limit their protection in that manner. However, it remains a lesson to practitioners that even though one feature may confer novelty, it is necessary for all the features to be taken to show infringement. Thus, the adage "less is more" certainly applies to effective claiming.




12 April 2006

Damages and Springboarding in New Bill

On 30 March 2006, the Intellectual Property Laws Amendment Bill was read into parliament. The purpose of the bill is to address certain issues in Australian trade marks and patents practice. In particular, the changes help us to comply with our free trade agreement with the United States.

Since this is a patents blog, I will consider some of the more important proposed changes to our Patents Act.

1. DAMAGES

1.1. The Current Situation

Section 122 simply allows a court to grant an injunction and, at the option of the plaintiff, either damages or an account of profits. It is unusual for a court to grant damages, and the financial penalty paid by the loser is generally restricted to the legal costs.

1.2. The Proposal

Proposed section 122(1A) sets out that a court has discretion to increase an assessment of damages based on a number of factors. These include the flagrancy of the infringement and the need to deter others from infringing. Other factors are the conduct of the infringer after the act of infringement or after that party was informed that it had allegedly infringed the patent and any benefit shown to have accrued to the infringer as a result of the infringement.

2. INFRINGEMENT EXEMPTIONS

2.1. The Current Situation

Section 119 in its present form allows a person to continue to “make the product, or use the process, (or continue to do so)” without infringing a patent claiming such a product or process if that person was already doing so or had taken definite steps to do so immediately before the priority date of the patent. The section makes no mention of whether or not that right is transferable.

2.2. The Proposal

Proposed section 119 sets out that a person may “do an act that exploits a product, method or process and would infringe the patent”, without infringing the patent. The necessary proviso is that the person: (a) was exploiting the product, method or process…; or (b) had taken definite steps to exploit the product, method or process, immediately before the priority date of the relevant claim.

The proposed section introduces a definition of “exploit”, which is substantially more extensive than just “make” or “use”. In particular, “exploit” in relation to a product is to be understood to cover making, hiring, selling, “otherwise disposing of”, offering to do these, using, importing and keeping the product for the purpose of doing the preceding acts. In relation to a method, “exploit” is to be understood to cover using the method or process and doing the acts mentioned above in relation to a product resulting from the use of the method or process.

The proposed section also allows that right to exploit to be successively transferred to other persons.

3. SPRINGBOARDING

3.1. Proposed new section 119A(1)(a) provides an exemption from infringement of a pharmaceutical patent if exploitation of the invention claimed in the patent is solely for obtaining registration of goods that are intended for therapeutic use and that are not devices as defined in the Therapeutic Goods Act 1989. Section 119A(1)(b) applies the exemption if the purpose is connected with obtaining similar approval under a law of a foreign country.

3.2. Proposed new section 119(A)(2) excludes 119(A)(1)(b) for export from Australia of goods unless the term of the patent has been extended and the goods comply with certain characteristics. In particular, the goods need to be a pharmaceutical substance per se, as disclosed in the complete specification and in substance falling within the scope of the claims. Alternatively, the goods need to be a pharmaceutical substance when produced by a process that involves the use of recombinant DNA technology.

4. THE EFFECTS OF THE BILL

Any provision that allows an Australian court greater discretion to increase damages is welcome. A patent is property, albeit intangible. Theft of such property should be dissuaded as far as possible.

The new infringement exemptions are a substantial departure. Applicants need to be particularly wary of the fact that the exploitation rights arising from prior use are fully transferable.

As far as the springboarding provision is concerned, it is clear that the major pharmaceutical patent holders will not be happy. More litigation perhaps?




06 April 2006

Nokia Claims Found Deficient


Opposition to Patent Application No. 732973 in the name of NOKIA CORPORATION by QUALCOMM INC.


TOPICS: Section 40 issues, clarity of claims. Claims found to lack fair basis.

Background

Nokia Mobile Phones Limited filed patent application 732973 on 17 June 1997 entitled "Control of Transmission Power in Wireless Packet Data Transfer". The application was accepted on 3 May 2001. On 3 August 2001, Qualcomm Inc filed a Notice of Opposition. The serving of evidence finally completed on 12 November 2004.

The Patent Application

According to the specification, the invention concerns a method for controlling the transmission power taking the special features of packet-switched links into account. The specification exemplifies the invention with the GSM (Global System for Mobile Communications) system. In such a system, the data transfer capacity to be reserved for one link is one traffic channel formed by one Time Division Multiple Access (TDMA) time slot being cyclically repeated in the transmission frequency and on the receiving frequency.

In circuit switched data transfer, one problem is the sufficiency of radio frequencies. Data transfer in packet form has been developed as a solution. However, data transfer in such a form causes problems relating to the control of the transmission power.

Claim 1 read as follows: "A method for controlling transmission power in a terminal device of a cellular radio system, the radio connection of which with a certain base station comprises an alternative first state (10) and second state (11), in the first state of which the terminal device receives (30) signals transmitted regularly by the base station and in the second state of which the terminal device additionally transmits (34) data as packets to the base station, characterized in that in said first state the control of the default value of the transmission power in said terminal device is based on measuring (31, 32) of the signals transmitted regularly by the base station, and in said second state the control of the transmission power in said terminal device is based both on the feedback transmitted by the base station on the quality of the data transfer link (35, 36, 37, 39) and on measuring of other signals transmitted regularly by the base station."

The other independent claim, claim 13, read as follows: "A method for controlling the transmission power in a base station of a cellular radio system, the radio connection of which at least with one terminal device comprises an alternative first state (10) and second state (11), in the first state of which the base station transmits regularly control signals and in the second state of which the base station additionally transmits data as packets to a certain terminal device, characterized in that in said first state the default value of the transmission power in said base station is the same as the maximum transmission power of the base station and in said second state the control of the transmission power in said base station is based as well on the feedback of the quality of the data transfer link (35, 36, 37, 39) said feedback being transmitted by the terminal device, as on the time passed from the reception of the previous acknowledgment message by the base station from said terminal device."

The Grounds of Opposition

Qualcomm held that the claimed invention is not a manner of manufacture, is not novel, and does not involve an inventive step. Further, Qualcomm held that the specification did not describe the invention fully and the claims were not clear or fairly based on the matter described in the specification.

For the purposes of this post, I will look at the clarity and fair basis issues.

Interpretation of the Claims

Much of the discussion at the hearing was related to whether the claims related to packet-switched or circuit-switched systems.

Nokia asserted that the claims should be read in the context of the specification and of the published knowledge existing at the time of the application. Thus, they asserted that the common sense approach was that the claims referred to packet-switched connections. In response to this the Delegate of the Commissioner, citing D├ęcor Corporation Pty Ltd v Dart Industries Inc, 13 IPR 385, commented that it seems impermissible to confine the claims to elements of the description if such elements are not expressly or by proper inference found in the claims themselves.

The Delegate had a problem with the claims since they did not define the radio connection between the terminal devices. He set out that the claims were wholly silent in respect to whether the radio connection is packet-switched, circuit-switched or an overlay of one over the other. He again referred to the Decor case and stated that it was not legitimate to confine the scope of the claims by reference to packet-switched limitations that may be found in the specification.

Evidence adduced by Nokia initially made much of the special features associated with packet-switched systems and that the specification inherently described such features. One of the witnesses set out that it was absurd to say that a circuit-switched radio connection can exist in alternative first and second states. The reason for this is that a circuit-switched radio connection is a continuous circuit which either exists or does not and so cannot exist in more than one state at a time. The converse is true of a packet-switched system.

The Delegate held that there was nothing in the claims that clearly defines the operation of the two states. Due to the absence of this operational link, the Delegate held that it may even be interpreted that one or other state is optional since the word "alternative" does not mean the states alternate.

The Delegate noted that the above independent claims were "notably silent" regarding any switching alternately between states. Thus, the Delegate regarded claims 1 and 13 as unclear.

Fair Basis

In considering the evidence of Nokia that the invention applied to packet-switched systems, the Delegate held that claims 1 and 13 were not fairly based on the specification since these features were absent from the claims.

Lessons

The Delegate raised a number of other issues, including a rather "startling submission" by the patent attorney for Nokia that an Applicant would not knowingly claim beyond the descriptive part of the specification or claim the prior art.

In any event, this matter emphasizes the need for patent attorneys to ensure that the claims are both easy to understand and that the scope of the claims can readily be ascertained. The claims should be reviewed to ensure that the essential features of the claims correspond with features in the specification.

It is clear that a thorough review of Nokia's specification by their Australian agents would have saved them a lot of trouble. This is a good lesson for us Australian practitioners.



11 March 2006

Federal Court Gives Lesson in Ownership

Conor Medsystems, Inc. v the University of British Colombia et al [2006] FCA 32

TOPICS: Entitlement to grant of a patent; joint patentees; one patentee not claiming through the inventor.

COURT: Federal Court

JUDGE: Finkelstein J

DATE OF ORDER: 3 February 2006

Introduction

The patents in this matter were granted jointly to Angiotech Pharmaceuticals, Inc. and the University of British Columbia, the respondents. Each patentee claimed title to the inventions by assignment from the US inventors.

In the case of the University of British Columbia, title was claimed from persons that the applicant claimed were not inventors. Thus, the applicant argued that the patent must be revoked.

The Law

Section 138(3) of the Patents Act 1990 allows a patent to be revoked if it was granted to a person not entitled to the patent. It is useful to set out section 15 (1) here:

Subject to this Act, a patent for an invention may only be granted to a
person who:
(a) is the inventor; or
(b) would, on the grant of a patent for the invention, be entitled to have the patent assigned to the person; or
(c) derives title to the invention from the inventor or a person mentioned in paragraph (b); or
(d) is the legal representative of a deceased person mentioned in paragraph (a), (b) or (c).

The Issue

The question was: "If a patent is granted to several persons, must each of them be or claim through, an inventor?"

The respondents argued that in section 138(3)(a), which provides for revocation where the patentee is not entitled to the invention, the words "the patentee is" must, in the case of a joint grant be read as "the patentees are". Therefore, they reasoned, a patent can only be revoked under that paragraph if all "the patentees [are] not entitled to the patent."

British History

His honour stepped back into the 1600's when "monopolies" were granted both for inventions originating in Britain and for imported inventions. He quoted Institutes by Sir Edward Coke: "The reason wherefore such a privilege is good in law is because the inventor bringeth to and for the common wealth a new manufacture by his invention, costs and charges, and therefore it is reason, that he should have a privilege for his reward (and the encouragement of others in the like) for a convenient time".

The first statute which regulated patents was the Statute of Monopolies of 1640. A patent could be granted to the "first and true inventor". The inventor was the person in whose mind the idea originated. Interestingly, however, in 1831, the inventor was also the person who first introduced the invention into the "realm".

The Patents, Designs and Trade Marks Act 1883 provided that any person could make an application for a patent or two or more persons could make joint application for a patent. At that time, a patent granted to several persons was valid even if only one of them was the "true and first inventor". Thus, "a capitalist" could advance money to a needy inventor and obtain an interest in a patent from the start.

Australian History

Some of the Australian colonies diverged from this. For example the Patents Act 1889 (Victoria) provided that the only person that could apply for a patent was the actual inventor, or his assigns or legal representatives or a person to whom the invention "had been communicated" by the "actual inventor" or his representatives or assigns.

The first Commonwealth statute was the Patents Act 1903 (Cth). This Act contained provisions modeled on the Victorian Act. This Act specifically stated that the actual inventor or his assignee, legal representative or any person to whom the invention has been communicated may make an application for a patent.

The explanation was given for this in 1903, when the Postmaster-General said that the monopoly should be granted to the inventor and the inventor only, since the world had "grown so much smaller". At the same time, during a debate concerning the words "actual inventor" Justice Higgins said that it means "the person whose brains have performed the work."

United States History

His honour then turned to the historical position in the United States. In 1888, Justice Gray of the Supreme Court delivered the opinion that: "The patent law makes it essential to the validity of a patent, that it shall be granted on the application, supported by the oath, of the original and first inventor.

Having regard to the US history, his honour presented some rules: (i) a valid patent can only be granted to the real inventor and if there be more than one inventor it must be granted to all; (ii) in the case of a joint invention, a patent issued to only one of the inventors is void; (iii) a patent issued in the names of joint patentees will also be void unless all of them are the inventors.

Concluding

Moving back to Australia, his honour held that the 1903 Act (supra) intended that a patent would be granted only to the "actual" inventor or a person claiming under him. Furthermore, a patent was not granted to the "actual" inventor if it was granted jointly to two or more persons, one of whom was not the inventor. His honour held that the position must be the same under the 1990 Act for there is no material difference in language.

His honour did not agree with the reasoning of the respondents (supra). His honour held that if one of the patentees is not entitled to the patent, then it is still correct to say that "the patentees are not entitled to the patent".

This case is useful in that it re-affirms the need for clear ownership of the invention by the applicant/s to avoid being vulnerable to an entitlement-based attack. In the event that the "actual" inventors are not the applicants, practitioners need to ensure that there is always a clear, documented transfer of ownership to the applicant/s.

22 February 2006

When a Blade is not a Knife



------------INVENTION ------------------------------------ ALLEGED INFRINGEMENT


On 23 December 2005, the Federal Court of Australia handed down
Breville Pty Ltd v The Warehouse Group (Australia) Pty Ltd [2005] FCA 1893 .

Introduction

The applicant (Breville) sued the respondent (Warehouse) for infringement of its Australian patent no. 684615 for the invention entitled "Fruit and Vegetable Juicer".

The Patent

Breville contended that Warehouse infringed, inter alia, claim 1:

A fruit and vegetable juicer of the kind comprising a horizontal grating disc rotatable about a vertical axis and integral with and surrounded by a substantially frusto-conical filter sieve the sides of which project upwardly and outwardly from the grating disk, a feed tube arranged above the disc and a food pusher insertable into the tube to press food down on to the grating disc for grating, pulp and juice thereby produced flying upwardly and outwardly, the juice passing through the filter and the pulp passing over the filter for subsequent collection characterised in that the feed tube has an internal diameter substantially the same as that of the grating disc, there being provided in the tube a knife or knives having an upwardly directed cutting edge, the knife or knives being attached to and supported by the tube, the food pusher being bifurcated or otherwise shaped to pass downwardly past the knife or knives, downward movement thereof causing an article of food to be cut by the cutting edge or edges of the knife or knives and pressed onto the grating disc, the food being held against rotation by the knife or knives.

The Issue

The case turned on the proper construction of two aspects of claim 1, emphasized above.

According to the specification, " the pusher pushes ... on to the edge 18 which cuts it into two halves, which move downwardly on either side of the knife 17 and are then prevented from rotating and are pressed onto the grating disc 13 by downward pressure ..."

The Decision

Lindgren J. referred to the questions posed to two witnesses in connection with the allegedly infringing device, known as a "Cascade Juicer". Lindgren J. held that the evidence did not establish that there was a technical meaning of any of the expressions in claim 1 and that they were to be given their ordinary meanings. Citing Allsop Inc v Bintang Ltd (1989) 15 IPR 686, his honour held that the construction of the specification is for the court.

Lindgren J. made reference to a number of dictionary definitions before deducing that "relevantly, in ordinary parlance, a knife necessarily has a blade with a sharpened edge designed for cutting."

His honour identified "the tension" that exists in cases of construction. First, there is the idea that a person should not be able to take the "pith and marrow" or "substance" of the patented invention and avoid infringement by avoiding the language of the claims. Secondly, there is the idea that the language of the patent claims has been chosen by the patentee, sets the boundary of the patentee's monopoly, and should not be extended by the court to catch that which the patentee has left open to be done by others.

The principle of construction has been referred to in my post entitled "Full Court Rules on Claim Construction". His honour was grateful for those references, but stated simply that the "blade" of the Cascade juicer was not "on any reckoning, "a knife ... having an upwardly directed cutting edge"". He reinforced this by setting out that the blade is not a "knife" as it does not have a sharpened edge designed to "cut". In fact, in this case, as his honour pointed out, the blade of the Cascade juicer had its "least sharp" edge facing upwards. Furthermore, his honour set out that if the blade were separated from the juicer, no one would contemplate using its upper edge for the purpose of cutting.

In view of this construction, Lindgren J. held that the Cascade juicer fell outside of claim 1 and therefore did not infringe the patent.

Lessons

It is not clear why the claim was drafted so narrowly. However, this case is a reminder of the need for practitioners to think carefully about other embodiments which could achieve similar results. Perhaps a more favourable result would have been achieved if the relevant practitioner had referred to a "parting" or "splitting" member with suitable description in the specification explaining that an actual "cutting" edge could be replaced with a simple blade or vane.

In any event, this case emphasizes the importance of word selection and the ability to apply lateral thought when drafting patent documents.



03 February 2006

Federal Court Crimps Appellant

SYNTHETIC BOWLING GREEN

Synthetic Turf Development Pty Ltd v Sports Technology International Pty Limited [2005] FCAFC 270


Introduction

The appellant, Synthetic Turf, was the patentee of Australian Standard Patent No. 664427 for an invention entitled "Synthetic Bowling Green". Synthetic Turf instituted a proceeding against the respondent for infringement of the patent. The respondent, Sports Technology, denied infringement and cross-claimed for declarations of invalidity in respect of nine of the claims.

The primary judge dismissed the application made by Synthetic Turf and made an order revoking the nine claims on the grounds that they were not novel and did not involve an inventive step. Synthetic Turf appealed, giving rise to this case.

The Patent

The problem sought to be overcome by the invention was to overcome "leading bias resistance" in artificial turf playing surfaces. This is partly due to the directional pile of the fibres which has resulted in such surfaces being unsuitable as playing surfaces.

Claim 1 read as follows: "A playing surface comprising an artificial turf having a plurality of fibres extending generally upwardly from a backing material, said turf having particulate matter between the fibres such that each of the fibres has a buried stem and a free end protruding from the particulate matter and wherein at least 10% of the free ends are crimped at an angle to the stem so that they lie in different compass directions such that noticeable bias in any one direction is avoided." (emphasis added)

The phrase "at least 10% of the free ends are crimped" became significant.

The appellant contended that the 10% refers to the fibres that are themselves crimped, with the result that their free ends which protrude from the particulate matter are necessarily crimped. The respondent contended that the phrase extends only to fibres the free ends only of which are crimped. In other words, the buried stems are not crimped.

In supporting the respondents, the court held that claims are to be read in the context of the specification, not merely when ambiguity exists in the claim.

It is instructive to note that the court referred to the Macquarie Dictionary (An Australian Standard) to assist in determining the meaning of "crimped" and thus its meaning in the context of the above claim.

Infringement

The appellant alleged that the primary judge erred in finding that claim 1 of the patent was not infringed by a "Promaster" synthetic playing surface.

The respondent admitted that Promaster has "a plurality of fibres extending generally upwardly from a backing material. It also admitted that those fibres are crimped. However, it made no admission that "free ends...crimped at an angle to the stem".

In rejecting the appellant's allegation, the court held that there is no infringement if the wording of the claim makes it clear that the relevant area has been deliberately left outside the claim. The court held that none of the claims defines a product made from fibres that are crimped over their entire length rather than at the fibres' free ends.

Fair Basis

The appellant alleged that the primary judge erred in finding that, if claim 1 of the patent was to be given a construction which included a product crimped during the manufacturing process than claim 1 would not be fairly based on the matter disclosed in the specification.

Section 40(3) of the Patents Act 1990 provides that the claims must be "fairly based" on the matter described in the specification. The court cited some well-known cases and re-iterated the rules that the claim to a product must not travel beyond the matter disclosed in the specification. Furthermore, fair basis requires a real and reasonably clear disclosure of what is claimed. The specification must also be read as a whole.

The specification included such phrases as: "Any conventional artificial turf having a plurality of fibres tufted or woven to a backing material and extending generally upwardly therefrom is suitable...". And: "Ideally, the artificial turf used in the practice of the invention is manufactured so that each fibre stands substantially vertical." The only method of crimping referred to in the specification is by rolling the playing surface after particulate matter has been placed between the fibres leaving free ends protruding above the particulate matter.

Based on that, the court held that if claim 1 is construed in an appropriate manner it does not travel beyond the matter disclosed in the specification. However, if it were to be construed to include a playing surface comprising an artificial turf manufactured from pre-crimped fibres, it would travel beyond the matter described in the specification.

Novelty (Oral Evidence)

The Appellant contended that the primary judge ought to have rejected certain oral evidence which led him to a finding that the claims lacked novelty.

The court cited Fox v Percy (2003) 214 CLR 118 where the High Court gave no support to the notion that an appellate court should feel free readily to interfere with the findings of a trial judge based on his or her assessment of the respective credibility of witnesses. In fact, their honours in that matter spoke of a trial finding being "glaringly improbable" or "contrary to compelling inferences" before appellate interference was justified.

Inventive Step

The Appellant complained of the primary judge's finding that the invention did not involve an inventive step.

Inventive step has been discussed in previous posts. See for example "Jupiters Misses the Jackpot (Again)".

The court emphasised that the onus of establishing the absence of an inventive step rests on the party challenging validity. Also, that the type of "person skilled in the art" was a non-inventive skilled artificial turf installer.

While Mr Heylen, the inventor, was not an independent witness, the court accepted that the primary judge could take his evidence as to the common general knowledge as it existed at the priority date of the patent. Also, the court held, the primary judge correctly held that any inventiveness would lie in the solution to the problem of leading bias resistance in synthetic turf and not in the identification of the problem.

Considering the evidence, the court supported the primary judge's finding that the idea of rolling in multiple directions synthetic turf to which sand has been added was known to each of the witnesses before the priority date. Thus, it held that the primary judge was correct in holding that invention did not involve an inventive step.

Conclusion

This is a good illustrative matter. The technical field is not complicated and the full court has canvassed a number of "pillars" of Australian patent practice. The "Fair Basis" section is particularly interesting and indicates that practitioners ought to make sure that all possible embodiments are at least broadly covered. Perhaps the most important lesson provided is the critical nature of the language used by patent practitioners. Clarity is very important and should be demanded.