RELEVANT LEGAL PRINCIPLES - MANNER OF MANUFACTURE
53 Whether the claimed invention constitutes a manner of manufacture is the principal issue regarding the validity of the Patent that falls for determination in this proceeding. The invention that is the subject of the Patent has otherwise been found to be novel and inventive.
54 The basic requirements of patentability are set out in s 18 of the Act. Section 18(1A)(a) relevantly provides that an invention is patentable for the purposes of an innovation patent if the invention, so far as claimed in any claim, is a manner of manufacture within the meaning of s 6 of the Statute of Monopolies 1623 (Imp) ('Statute of Monopolies'). This is a threshold requirement for patentability, "capable of solution upon a study of the specification itself" (CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260 at 291 ('CCOM'), citing Compagnies Reunies des Glaces et Verres Speciaux du Nord de la France Application (1931) 48 RPC 185 at 188).
55 'Invention' is defined in the Dictionary contained in Schedule 1 to the Act as "any manner of new manufacture the subject of letters patent and grant of privilege within s 6 of the Statute of Monopolies, and includes an alleged invention".
56 Section 6 of the Statute of Monopolies provides that the declarations of invalidity contained in the preceding provisions of that Act:
shall not extend to any [letters patent] and Graunte of Privilege… hereafter to be made of the sole working or makinge of any manner of new Manufactures within this Realme, to the true and first Inventor and Inventors of such Manufactures, which others at the tyme of makinge such [letters patent] and Graunte shall not use, soe as alsoe they be not contrary to the Lawe nor mischievous to the State, by raising prices of Comodities at home, or hurt of Trade, or generallie inconvenient...
57 The Full Court of the Federal Court of Australia in CCOM chronicled the development of this ground of invalidity in patent law in a passage that merits repetition (at 290):
the phrase "any manner of new manufactures" [the phrase that appears in s 6 of the Statute of Monopolies] has been interpreted over time in such a way as to contain within it distinct principles or doctrines concerned with patentability: Advanced Building Systems Pty Ltd v Ramset Fasteners (Australia) Pty Ltd (1993) 26 IPR 171 at 188-190, per Hill J. They include the necessity for a manner of manufacture itself, for novelty, and for inventiveness. Objections such as lack of utility may have been derived from the prohibition upon manufactures which are "generally inconvenient". Others, such as obtaining by false suggestion, derived from the general law attending the writ of scire facias to recall Crown grants and the Chancery jurisdiction in respect of fraudulent grants: Prestige Group (Australia) Pty Ltd v Dart Industries Inc (1990) 26 FCR 197 at 213-219. The essential point is that the grounds of revocation were capable of development by the common law and did so develop: American Cyanamid Co (Dann's) Patent [1971] RPC 425 at 435-436 (Lord Reid), 448-449 (Lord Wilberforce).
Particular grounds of invalidity, derived from the case law, were added to the modern statutes. Lack of inventiveness, as distinguished from anticipation, obtained a distinct statutory recognition only in this century and, in Australia, in the 1952 Act: R D Werner & Co Inc v Bailey Aluminium Products Pty Ltd (1989) 25 FCR 565 at 573-584, 591-602. As this development continued, the phrase "manner of new manufactures" came to represent the residuum of the central concept with which NRDC was concerned, namely what the High Court called the relevant concept of invention. It should be noted that in NRDC (at 262) the High Court, which was dealing with the 1952 Act, spoke of the concept of patent law ultimately traceable to the use in 1623 of the words "manner of manufacture" and spoke of novelty and inventive step as distinct matters.
This distinction is now made clear by the use of the expression "manner of manufacture" in s 18 of the 1990 Act. The structure of s 18(1) emphasises that the grounds of novelty, inventive step, utility and secret use are each excised from any general body of case law which previously developed the phrase from 1623 "manner of new manufactures". The point is made particularly clear by the reference in par (a) of the subsection to "manner of manufacture" rather than to "manner of new manufactures".
58 Considerable jurisprudence has developed over time to identify the boundaries between inventions falling within the concept of manner of manufacture, and those falling outside it. This development of the law is ongoing, and is often prompted by developments in technology - for example, the advent of computers. However, courts have long determined that some subject matter is not capable of supporting an application for grant of a patent.
59 For example, Sir Robert Finlay AG in the case of Re Cooper's Application for a Patent (1901) 19 RPC 53 (cited with approval in Grant v Commissioner of Patents (2006) 154 FCR 62 at 66 ('Grant')) noted at 54 that a patent cannot be granted in respect of:
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. The subject with reference to which you must apply for a Patent must be one which results in a material product of some substantial character. The Specification must show how some such material product is to be realised or effected by the alleged invention.
60 Historically, mere working directions and methods also fell outside the concept of manner of manufacture. The same is true for directions as to how to operate a known article or machine or to carry out a known process so as to produce an old result, even though they may be a different and more efficient method of doing things (Welcome Real-Time SA v Catuity Inc (2001) 113 FCR 110 at 133 [106] ('Catuity')). Cases in which patents have been refused on this basis include Rolls-Royce Ltd's Application [1963] RPC 251 (a method of operating an aircraft engine in such a way as to reduce noise during take off), Re Brown (1899) 5 ALR 81 (an improved method of preventing the fraudulent re-use of sales book dockets), Commissioner of Patents v Lee (1913) 16 CLR 138 (improved methods for charcoal burning), Neilson v The Minister of Public Works for NSW (1914) 18 CLR 423 (improved methods for utilising an existing mechanism of septic tank purification), and Rogers v Commissioner of Patents (1910) 10 CLR 701 (method for felling trees using fire): see Catuity at 133 [106].
61 Also historically rejected were patents for "methods of calculation and theoretical schemes, plans and arrangements" (Catuity at 133 [107]), such as:
a stellar chart for ascertaining the position of an aircraft in flight (Re an Application for a Patent by Kelvin & Hughes Ltd (1954) 71 RPC 103);
a plan relating to the layout of contiguous houses in a row or terrace so as to address the disadvantages typically associated with building houses in such a manner, namely, that they "do not as a rule add to the adornment of a town", and "they offer but comparatively little privacy, the tenants "being exposed to the eyes of the neighbours on either side"" (Re an Application for a Patent by ESP (1944) 62 RPC 87);
an arrangement of buoys for navigational purposes (Re an Application for a Patent by W (1914) 31 RPC 141); and
a system of business (the implementation of which involved the use of a printed envelope with a particular arrangement of words: Re Johnson's Application for a Patent (1902) 19 RPC 56).
See Catuity at 133 [107]; and Grant at 67 [16].
62 The same can be said for processes of mathematical operations, and "printed sheets, cards, tickets or the like which are mere records of intelligence" (see CCOM at 292, citing the comments of Professor James Lahore in his article "Computers and the Law: The Protection of Intellectual Property" (1978) 9 Federal Law Review 15).
63 Against the background of these decisions and the reasons provided in them, the decision of the High Court in National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252 ('NRDC') provides the principles for determining what constitutes a manner of manufacture.
64 Justice Nicholas in Cancer Voices Australia v Myriad Genetics Inc (2013) 99 IPR 567 at 582-583 summarised the reception of NRDC as follows:
The case was described by Barwick CJ in Joos v Commissioner of Patents (1972) 126 CLR 611 at 616 ; [1972-73] ALR 831 at 833 ; 1A IPR 172 at 174 as a "watershed" in this area of law, and in Grain Pool of Western Australia v Commonwealth (2000) 202 CLR 479 ; 170 ALR 111 ; 46 IPR 515 ; [2000] HCA 14 at [45] (Grain Pool) Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ referred to it as a "celebrated judgment". As the Full Court (Spender, Gummow and Heerey JJ) explained in CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260 at 289; 122 ALR 417 at 444-5; 28 IPR 481 at 508-9:
In Australia, when the 1952 Act was replaced by the 1990 Act, the new British legislation was not followed. There was in s 18(2) an express exclusion from patentable inventions of human beings and biological processes for their generation. Beyond that the legislature left the matter, in terms of s 18(1)(a), to rest with the concept of manner of manufacture within the meaning of s 6 of the Statute of Monopolies, as developed by the courts, notably in the NRDC case. This was a matter of deliberate legislative choice.
65 Three claims were in issue in NRDC, all of which were method claims relating to eradication of weeds from crop areas containing leguminous fodder crops by application of a known herbicide (which had not previously been known to be effective to treat the particular weeds identified in the claims). In that case, the Commissioner rejected the patent sought, principally on the bases that (a) it merely claimed a new use of a known substance; and (b) there was no manner of manufacture because the use of the composition did not result in a "vendible product".
66 The High Court in NRDC articulated the "central question" in the manner of manufacture inquiry as being whether the process claimed falls within the category of inventions to which, by definition, the application of the Act is confined (at 268). The High Court noted the fact that 'invention' is legislatively defined by reference to the "established ambit of s 6" of the Statute of Monopolies, and stated that (at 269):
[t]he inquiry which the definition demands is an inquiry into the scope of the permissible subject matter of letters patent and grants of privilege protected by the section. It is an inquiry not into the meaning of a word so much as into the breadth of the concept which the law has developed by its consideration of the text and purpose of the Statute of Monopolies… The word "manufacture" finds a place in the present Act, not as a word intended to reduce a question of patentability to a question of verbal interpretation, but simply as the general title found in the Statute of Monopolies for the whole category under which all grants of patents which may be made in accordance with the developed principles of patent law are to be subsumed.
67 The High Court continued:
It is therefore a mistake, and a mistake likely to lead to an incorrect conclusion, to treat the question whether a given process or product is within the definition as if that question could be restated in the form: "Is this a manner (or kind) of manufacture?" It is a mistake which tends to limit one's thinking by reference to the idea of making tangible goods by hand or by machine, because "manufacture" as a word of everyday speech generally conveys the idea. The right question is: "Is this a proper subject of letters patent according to the principles which have been developed for the application of s 6 of the Statute of Monopolies?"
(Emphasis added)
68 This latter question was said to be very different to the former. The High Court noted that a widening conception of the notion of "manufacture" has been a characteristic of the growth of patent law, and it is clear that it encompasses both a process and a product (at 269-270). However, their Honours noted that one unresolved question was "whether it is enough that a process produces a useful result or whether it is necessary that some physical thing is either brought into existence or so affected as the better to serve man's purposes".
69 After reviewing a number of United Kingdom and Australian authorities, the High Court stated that (at 271):
[t]he truth is that any attempt to state the ambit of s 6 of the Statute of Monopolies by precisely defining "manufacture" is bound to fail. The purpose of s 6, it must be remembered, was to allow the use of the prerogative to encourage national development in a field which already, in 1623, was seen to be excitingly unpredictable. To attempt to place upon the idea the fetters of an exact verbal formula could never have been sound. It would be unsound to the point of folly to attempt to do so now, when science has made such advances that the concrete applications of the notion which were familiar in 1623 can be seen to provide only the more obvious, not to say the more primitive, illustrations of the broad sweep of the concept.
70 The High Court then cited with approval the case of Re an Application for a Patent by GEC (1943) 60 RPC 1. The High Court noted that in that case, Morton J (as his Honour then was) had simultaneously disclaimed any intention of laying down "any hard and fast rule applicable to all cases" and "put forward a proposition which, if literally applied, would have a narrowing effect on the law and indeed has already been found to stand as much in need as the statute itself of a generous interpretation" (NRDC at 271). Justice Morton's proposition was that a method or process will be a manner of manufacture if it:
(a) results in the production of some vendible product; or
(b) improves or restores to its former condition a vendible product; or
(c) has the effect of preserving from deterioration some vendible product to which it is applied.
71 The High Court then considered a number of United Kingdom authorities dealing with this test. In doing so, the Court referred to Re Virginia-Carolina Chemical Corporation's Application (1958) RPC 35 at 36, and noted that to fall within the limits of patentability prescribed by the Statute of Monopolies, a process must be one that offers some advantage which is material, in the sense that it belongs to a useful art as distinct from a fine art - namely, its value to the country must be in the field of economic endeavour (at 275).
72 In considering the meaning of the expression "vendible product" as used in the Morton J test, the High Court referred to Re an Application for a Patent by Henry Barnato Rantzen (1947) 64 RPC 63, and suggested that the expression lays "proper emphasis upon the trading or industrial character of the processes intended to be comprehended by the Acts - namely, their "industrial or commercial or trading character"" (at 275).
73 In considering that what is meant by a "product" in relation to a process is only "something in which the new and useful effect may be observed", the High Court in NRDC stated that (at 276):
[s]ufficient authority has been cited to show that the "something" need not be a "thing" in the sense of an article; it may be any physical phenomenon in which the effect, be it creation or merely alteration, may be observed: a building (for example), a tract or stratum of land, an explosion, an electrical oscillation. It is, we think, only by understanding the word "product" as covering every end produced, and treating the word "vendible" as pointing only to the requirement of utility in practical affairs, that the language of Morton J's "rule" may be accepted as wide enough to convey the broad idea which the long line of decisions on the subject has shown to be comprehended by the Statute.
74 The High Court concluded that (at 277):
the view which we think is correct in the present case is that the method the subject of the relevant claims has as its end result an artificial effect falling squarely within the true concept of what must be produced by a process if it is to be held patentable. This view is, we think, required by a sound understanding of the lines along which patent law has developed and necessarily must develop in a modern society. The effect produced by the appellant's method exhibits the two essential qualities upon which "product" and "vendible" seem designed to insist. It is a "product" because it consists in an artificially created state of affairs, discernible by observing over a period the growth of weeds and crops respectively on sown land on which the method has been put into practice. And the significance of the product is economic; for it provides a remarkable advantage, indeed to the lay mind a sensational advantage, for one of the most elemental activities by which man has served his material needs, the cultivation of the soil for the production of its fruits. Recognition that the relevance of the process is to this economic activity old as it is, need not be inhibited by any fear of inconsistency with the claim to novelty which the specification plainly makes. The method cannot be classed as a variant of ancient procedures. It is additional to the cultivation. It achieves a separate result, and the result possesses its own economic utility consisting in an important improvement in the conditions in which the crop is to grow, whereby it is afforded a better opportunity to flourish and yield a good harvest.
75 Finally, in rejecting the Commissioner's contention that agricultural or horticultural processes are, by reason of their nature, outside the limits of patentable inventions, the High Court commented (at 278):
It must often happen in a sphere of human endeavour as old as that of primary production that a newly-devised procedure amounts to nothing more than an analogous application of age-old techniques; and where that is the case, want of novelty is a fatal objection to a patent. It may be conceded, moreover, that if there were nothing that could properly be called a "product" of the process, even an ingenious new departure would be outside the limits of patentability.
76 These comments were remarkably prescient. In fact, since NRDC was decided, the advent of computer technology has prompted an elaboration of the concept of methods as patentable inventions (see Grant at 67 [17], citing Catuity at 135-136 [118]-[122]).
77 To this end, in 1991, Burchett J delivered judgment in International Business Machines Corporation v Commissioner of Patents (1991) 33 FCR 218 ('IBM (1991) 33 FCR 218'). The invention in that case was described as a method and apparatus for producing a curve image on computer graphics displays. It was objected that claim 1 (which provided for a method of producing a visual representation of a curve image from a set of control points which define the curve, and which are input for each dimension and a number of intervals to the curve to be computed, said method comprising a number of defined steps) did not define a manner of manufacture. Rather, the claim was said to recite a mathematical algorithm, which it then "wholly pre-empted".
78 In that case, Burchett J emphasised "useful effect" as being important to distinguish between the discovery of a principle of science and the making of an invention (at 224). His Honour applied NRDC, and in doing so, referred to the decision of the Patents Appeal Tribunal in Burroughs Corporation (Perkins') Application [1974] RPC 147 ('Burroughs'). Burroughs involved a method of transmitting data over a communication link between a central computer and "slave computers" connected to it. In that case, Graham J (delivering the decision of the Tribunal) referred to the proposition that "claims for a method of operating a computer could not be a manner of new manufacture within the Act since the end product of the method was 'merely intellectual information' which does not fall within the meaning of 'product' as defined by Morton J" (at 154).
79 Justice Burchett extracted Graham J's conclusion on this point, to the effect that (at 225 in IBM (1991) 33 FCR 218, citing Burroughs [1974] RPC 147 at 158 and 160-161):
it is not enough to take a narrow and confined look at the 'product' produced by a method. Of course, if a method is regarded purely as the conception of an idea, it can always be said that the product of such a method is merely intellectual information. If, however, in practice the method results in a new machine or process or an old machine giving a new and improved result, that fact should in our view be regarded as the 'product' or the result of using the method, and cannot be disregarded in considering whether the method is patentable or not.
…
[W]e consider the correct conclusion in the present case is as follows: If a claim, whatever words are used, namely, whether the claim is for example for 'a method of transmitting data .. .', 'a method of controlling a system of computers' or 'a method of operating or programming a computer .. .', is clearly directed to a method involving the use of apparatus modified or programmed to operate in a new way, as the present claims are, it should be accepted ... Claims in this form in truth meet Mr Aldous' argument that there must be an artificial end product or effect before a method can be patentable. Whether the argument is right or not, there is in fact such an effect in this case.
It is plain that the question of patentability must in every case be considered on the facts before a conclusion can be reached as to whether the claim covers a mere idea or method, or is more than that and results in fact in some improved or modified apparatus, or an old apparatus operating in a novel way, with consequent economic importance or advantages in the field of the useful as opposed to the fme arts.
…
It also follows from what we have said, though this is not strictly necessary for the purposes of our decision, that in our view computer programmes which have the effect of controlling computers to operate in a particular way, where such programmes are embodied in physical form, are proper subject matter for letters patent.
80 Justice Burchett noted that it was not suggested that there was anything new about the mathematics of the invention in the case before him - rather, what was new was the application of the selected mathematical methods to computers (and in particular, the production by computer of the desired curve). His Honour found that (at 226):
[t]his is said to involve steps which are foreign to the normal use of computers and, for that reason, to be inventive. The production of an improved curve image is a commercially useful effect in computer graphics.
81 His Honour considered that such a finding was not precluded by the United States authorities regarding the pre-emption of algorithms relied on in argument before him. His Honour emphasised that the patent was not sought over a mere mathematical formula - rather, the formula was applied to achieve an end, which was the production of the improved curve image. The method of producing such a result by computer was, his Honour held, entitled to patent law protection (at 226).
82 In 1994, the Full Court of the Federal Court of Australia delivered judgment in CCOM. The invention in that case concerned a character word processor for the storage and retrieval of Chinese language characters. It used a particular method of characterisation of character strokes, applied to an apparatus in such a way that the operation of a keyboard would enable the selection (through a computer) of the appropriate Chinese characters required for word processing in that language. The primary judge held that the invention was not a manner of manufacture.
83 In undertaking the manner of manufacture inquiry, the Full Court characterised their task as one requiring the application of concepts "which have evolved, and are still evolving, in accordance with the classic decision in the NRDC case" (at 289). In such an inquiry, a decision is required as to "what properly and currently falls within the scope of the patent system" (at 291). Insofar as "manufacture" suggests a "vendible product", the Full Court held that this is to be understood as "covering every end produced or artificially created state of affairs which is of utility in practical affairs and whose significance thus is economic" (at 291).
84 The Full Court in that case specifically addressed the challenges posed to the law of intellectual property by the advent and development of computer technology. They noted that one response to computer technology has been to make provision for it in copyright law - but this response has been subject to criticism on a number of bases, for example, on the basis that functionality is not a proper object of copyright protection (see further CCOM at 291-292).
85 The Full Court then reviewed a number of publications and United Kingdom authorities on point (about which more will be said in due course), and noted the trend in other jurisdictions (not replicated in Australia) to exclude computer programs from patent protection (at 292-293). For example, the Full Court discussed a number of English cases that were decided after NRDC, but before the enactment of the Patents Act 1977 (UK) (which, unlike the patent law legislation in Australia, expressly excluded business methods and computer programs from the ambit of patentability). The Full Court opined that "there is significant guidance to be obtained from the course of decisions in Britain before the new legislation with the application in this field of the principles expounded in the NRDC case" (at 293).
86 One of these cases was Burroughs [1974] RPC 147, which, as previously noted, was considered and approved by Burchett J in IBM (1991) 33 FCR 218. Another was International Business Machines Corporation's Application [1980] FSR 564 ('IBM [1980] FSR 564'), which concerned a computer program intended to automatically calculate the selling price of shares by comparing buying and selling orders. The Patents Appeal Tribunal acknowledged that a completely standard computer made and sold by IBM could be programmed to perform the invention (to this end, I note that IBM submitted in opposition to the validity of the patent in that case that "even on the assumption that the idea is new and not obvious it does not become a manner of manufacture if you do no more than call in the aid of an ordinary computer to do the work for you": at 568). But ultimately the Tribunal held that what was claimed by the patent was a manner of manufacture, in the sense that it was a method involving the operation or control of a computer such that it was programmed in a particular way to operate in accordance with the inventor's method. It was held that the invention involved more than mere intellectual information (in contrast to those cases where a patent was sought over an algorithm alone, as discussed in IBM [1980] FSR 564 at 572).
87 The Full Court in CCOM rejected the submission that all that had been done in respect of the invention in issue was to select "a desirable characteristic of a computer program, the ability to search, in the manner described, a data base of the type described, and "to claim all computers present and future possessing that characteristic"" (at 294). The Court concluded (at 294-295):
That submission should not be accepted. It may be that such a claim lacks novelty, is obvious, or lacks utility, or there is a failure to comply with one or other of the limbs of s 40 because, for example, the invention is not fully described or the claim is not clear and succinct. But if such hurdles all are surmounted, then in our opinion in a case such as the present there does not remain an independent ground of objection as to patentability, within the sense of s 18(1)(a) of the 1990 Act.
88 The invention in CCOM was held to be a manner of manufacture in the sense articulated by NRDC - namely, a mode or manner of achieving an end result which is an artificially created state of affairs of utility in the field of economic endeavour (at 295). The relevant field of economic endeavour in CCOM was held to be the use of word processing to assemble text in Chinese language characters. The end result achieved was held to be the retrieval of graphic representations of desired characters, for assembly of text. And finally, the mode or manner of achieving this (which was said to provide particular utility in achieving the end result) was held to be the storage of data as to Chinese characters analysed by stroke-type categories, for search including "flagging" (and "unflagging") and selection by reference thereto.
89 Subsequently, in 2001, Heerey J delivered judgment in Catuity. The invention in issue was a process and device for the operation of smart cards (being cards containing a microprocessor or chip with the capacity to store and receive information) in connection with traders' loyalty programs, which enable traders to promote goods or services by offering rewards to consumers based on prior transactions. The invention incorporated the ability to dynamically store each merchant's loyalty program in a separate record of a file called the "Behaviour file", which process occurs at a point of sale terminal the first time that a cardholder uses the card at that merchant's store. In contrast to the prior art, behaviour information and points for merchants never visited by the cardholder were not added to the card. It was said that this approach allowed chip cards with a small memory capacity to be used with thousands of merchants, each operating their own loyalty program.
90 The respondents in that case submitted that working directions and methods of doing things - of which the invention was said to be an example, using well-known integers including a chip card, the memory space of such a card, and various computer programs to operate familiar kinds of loyalty and incentive schemes for customers - fall outside the concept of manner of manufacture.
91 They sought to distinguish both IBM (1991) 33 FCR 218 and CCOM on the basis that in each of those cases, there was "a physically observable effect that met the manner of manufacture requirement: the screen curve in International Business Machines and the retrieval to graphical representations of desired characters for the assembly of text in CCOM" (at 133 [108]). The respondents also relied on the High Court's decision in Commissioner of Patents v Microcell Ltd (1959) 102 CLR 232, where it was said at 249 that:
[m]any valid patents are for new uses of old things. But it is not an inventive idea for which a monopoly can be claimed to take a substance which is known and used for the making of various articles, and make out of it an article for which its known properties make it suitable, although it has not in fact been used to make that article before.
92 In his reasons for judgment, Heerey J referred to Burroughs [1974] RPC 147 and IBM [1980] FSR 564 as being "of particular importance for present purposes" (at 135-136 [118]). His Honour also considered analogous United States case law; notably, the decision of the United States Court of Appeals for the Federal Circuit in State Street Bank & Trust Co v Signature Financial Group (1998) 149 F.3d 1368 ('State Street'). That case - to which I will return in due course - involved a patent for a data processing system for the implementation of an investment structure involving the pooling of assets of mutual funds in an investment portfolio organised as a partnership. In the course of considering State Street, Heerey J noted previous United States authorities (to which Burchett J also adverted in IBM (1991) 33 FCR 218) which held that mathematical algorithms are not patentable subject matter to the extent that they are merely abstract ideas. However, his Honour ultimately endorsed the conclusion reached by the Court of Appeals in State Street, that (at 137):
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 formula and calculation because it produced "a useful, concrete and tangible result" in the form of a final share price momentarily fixed for recording and reporting purposes.
93 As will be observed later, the test considered appropriate in State Street was later disavowed in the decision of Re Bilski 545 F.3d 943 (Fed. Cir. 2008)). However, I do not consider that this affects his Honour's decision.
94 In Catuity, his Honour concluded that the invention in question produced an artificially created state of affairs, in that "cards can be issued making available to consumers many different loyalty programs of different traders as well as different programs offered by the same trader", instantaneously and at each relevant retail outlet (at 137 [127]). Accordingly the invention involved more than just an abstract idea, or method of calculation, and such a result was held to be beneficial in a field of economic endeavour - namely, retail trading (at 137 [127]). It is convenient to set out his Honour's concluding words in full (at 137-138 [128]-[130]):
What is disclosed by the Patent is not a business method, in the sense of a particular method or scheme for carrying on a business - for example, a manufacturer appointing wholesalers to deal with particular categories of retailers rather than all retailers in particular geographical areas, or Henry Ford's idea of stipulating that suppliers deliver goods in packing cases with timbers of particular dimensions which could then be used for floorboards in the Model T. Rather, the Patent is for a method and a device, involving components such as smart cards and POS terminals, in a business; and not just one business but an infinite range of retail businesses. CCOM and the English decisions referred to therein are in my opinion indistinguishable. The respondents' argument for distinguishing CCOM - the supposed lack of "physically observable effect" - turns on an expression not found in CCOM itself. Nor does such a concept form part of the Full Court's reasoning. In any event, to the extent that "physically observable effect" is required (and I do not accept that this is necessarily so) it is to be found in the writing of new information to the Behaviour file and the printing of the coupon.
The State Street decision is persuasive. It may be true, as the respondents argue, that United States patent law has a different historical source owing little or nothing to the Statute of Monopolies. The Constitution of the United States, Art 1, s 8, cl 8 confers power on Congress "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries". But the social needs the law has to serve in that country are the same as in ours. In both countries, in similar commercial and technological environments, the law has to strike a balance between, on the one hand, the encouragement of true innovation by the grant of monopoly and, on the other, freedom of competition.
As to the Microcell point, it cannot amount to the mere new use of a known article in a manner for which the known properties of that article make it suitable to have devised a particular method of processing data using a chip card, the properties of which (particularly its limited memory space) presented difficulties which were overcome only after much time and effort.
(Emphasis in original)
95 In 2006, the Full Court of the Federal Court of Australia delivered their decision in Grant. In that case, the Deputy Commissioner of Patents had revoked an innovation patent claiming a method of asset protection consisting of actions of financial and legal consequence that utilised a trust, a gift, a loan and security. Claim 1 of the patent was as follows (at 64[3]):
1. an asset protection method for protecting an asset owned by an owner, the
method comprising the steps of:
(a) establishing a trust having a trustee,
(b) the owner making a gift of a sum of money to the trust,
(c) the trustee making a loan of said sum of money from the trust to the owner, and
(d) the trustee securing the loan by taking a charge for said sum of money over the asset.
96 The primary judge upheld the Deputy Commissioner's decision to revoke the patent. This decision was in turn upheld by the Full Court on appeal.
97 In doing so, the Full Court applied NRDC and the decisions following that case that have already been considered in these reasons for judgment (including the United Kingdom decisions of Burroughs [1974] RPC 147 and IBM [1980] FSR 564 considered by Burchett J in IBM (1991) 33 FCR 218 and the Full Court in CCOM). The Full Court summarised the United Kingdom decisions as follows (at 67 [18]):
In the United Kingdom, Graham and Whitford JJ considered claims for computer programs. In Burroughs Corp (Perkins) Application [1973] FSR 439 and International Business Machines Corporation's Application [1980] FSR 564 their Lordships distinguished claims to a business scheme or intellectual information as the product of the conception of an idea, which are not patentable, from claims to methods which in practice (and whatever words are used in the claim) result in a new machine or process or an old machine giving a new and improved result which, applying NRDC, are patentable. The distinction drawn was between mere intellectual information and a method that affected the operation of an apparatus in a physical form. When the method is practiced in a way that is embodied in a physical form it is a manner of manufacture. There must be more than "a mere method or mere idea or mere desideratum" (Burroughs Corp Application at 160). Their Lordships declined to decide whether it was necessary that there be an artificial end product or effect. If this does exist it is patentable because the method affects the operation of the apparatus.
98 The Full Court also referred to various United States authorities on point to which I will later return, noting that (at 68-69 [24]):
While the development of US patent law is derived from the Constitution of the United States rather than the Statute of Monopolies, as Heerey J observed at [129] [in Catuity], the policy behind the two provisions is the same. In both jurisdictions, the courts have confirmed that a broad approach to subject matter should be taken in order to adapt to new technologies and inventions but that does not mean that there are no restrictions on what is properly patentable.
99 The Full Court noted the High Court's emphasis in NRDC on the need for adaptability of patent law to cover technological developments, and stated (at 70 [29]):
In NRDC the High Court looked to the application of the claimed method. That is similar to the approach of courts in the United States. A product of a method is something in which a new and useful effect may be observed. For claimed computer programs, the courts looked to the application of the program to produce a practical and useful result, so that more than "intellectual information" was involved… The underlying principle, developed from the Statute of Monopolies, that business, commercial and financial schemes, which are "intellectual information" are not themselves properly the subject of letters patent, was maintained.
100 Ultimately the Full Court in Grant held that the method of the patent sought by Mr Grant did not produce any artificial state of affairs, "in the sense of a concrete, tangible, physical or observable effect" (at 70 [30]). On this basis, it was held to be different from the invention in Catuity, "which was a method involving components such as smart cards and point of sale terminals, and produced tangible results in the writing of new information to the Behaviour file and the printing of the coupon". The Full Court noted that although it did not produce a physically observable end result (in the sense of a tangible product), the invention in Catuity involved "an application of an inventive method where part of the invention was the application and operation of the method in a physical device", and accordingly, an artificial state of affairs in accordance with NRDC was produced.
101 By contrast, it was held that at best, Mr Grant's method resulted only in "an abstract, intangible situation". In concluding that for reasons "related to its operation and effect", Mr Grant's alleged invention did not involve a manner of manufacture, the Full Court stated (at 70-71 [32]):
A physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required. In NRDC, an artificial effect was physically created on the land. In Catuity and CCOM as in State Street and AT&T, there was a component that was physically affected or a change in state or information in a part of a machine. These can all be regarded as physical effects. By contrast, the alleged invention is a mere scheme, an abstract idea, mere intellectual information, which has never been held to be patentable, despite the existence of such schemes over many years of the development of the principles that apply to manner of manufacture. There is no physical consequence at all.
102 A further question in Grant was whether, notwithstanding this conclusion, the alleged invention lay in a "realm of human endeavour outside those in which patents may be granted" (at 71 [33]). The Full Court pointed to the fine arts as an example of such an area, and noted that (at 71 [34]):
The interpretation and application of the law would not be considered as having, in the words of NRDC, an industrial or commercial or trading character, although without doubt it is an area of economic importance (as are the fine arts). The practice of the law requires, amongst other things, ingenuity and imagination which may produce new kinds of transactions or litigation arguments which could well warrant the description of discoveries. But they are not inventions. Legal advices, schemes, arguments and the like are not a manner of manufacture.
103 But the Full Court did not accept that the realm of human endeavour in which patents may be granted can be defined positively as that of "science and technology", observing (at 71 [38]):
We are not sure that this is correct. One thing that stands out from NRDC is the emphasis that their Honours put on the unpredictability of the advances of human ingenuity. What is or is not to be described as science or technology may present difficult questions now, let alone in a future which is as excitingly unpredictable now as it was in 1623 or 1959, if not more so. We think 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.
104 In any event, the Full Court determined that the scheme proposed by Mr Grant represented a new use of known products (being a trust, a gift, a loan and security) with known properties, where these properties make the products suitable for that new use - something which is not the proper subject of letters patent (at 71-72 [39]).
105 Before proceeding further, it is useful to make some general observations on these authorities and the principles to be applied in the manner of manufacture inquiry.
106 It must always be remembered that any attempt to set forth any prescriptive requirements for what is a "manner of manufacture" would be impermissible on the approach taken by the High Court in NRDC. To deny patentability to any class of invention (whether tangible or intangible) which would otherwise come within the principles developed by the courts over centuries would be to fail to follow the core teaching of NRDC.
107 The NRDC approach is one of flexibility, to allow for "excitingly unpredictable" and emerging inventions to be patentable. Whilst historically patents related to engineering, industry and applied science, the scope of patentable subject matter has expanded beyond these traditional areas.
108 Whatever formulation is used by a court, it can only be a guide to answering the "right" question stated by the High Court. I do not think that in talking of an "artificially created state of affairs" for instance, the High Court was laying down an absolute definition of manner of manufacture to be applied in all circumstances. After all, an "exact verbal formula" is not to be used.
109 It must also be remembered that any court considering the application of NRDC is only dealing with the concept of manner of manufacture, which is a threshold consideration. Any validity inquiry remains to be determined quite separately, and on different criteria compared to the conceptual analysis dictated by the NRDC approach. It is unnecessary to introduce rigid criteria into this "manner of manufacture" inquiry, when the policy of the patents legislation can also be implemented through the application of the distinct grounds of invalidity set out therein.
110 Of course, this is not to say that the manner of manufacture consideration does not have its own important content - just that it does not have to do all the work in implementing the policy inherent in the patents legislation.