High Court has a bet each way on electronic gaming machine patent

Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents [2022] HCA 29

17 June 2022

High Court of Australia

Kiefel CJ, Gageler, Keane, Gordon, Edelman and Steward JJ

Background

Aside from the requirement to meet the more well-known criteria for patentability such as novelty and inventive step, many patent applications involving methods or procedures implemented by computer technology are tripped up over the threshold question of whether they are patent-eligible at all.   The Australian Patent Office regularly refuses patent applications to computer-implemented |inventions because they do not claim patent eligible subject matter.  These applications cover a range of fields, such as logistics, fintech, marketing and data analysis.

In 2018, the Patent Office revoked four innovation patents filed by Aristocrat Technologies Australia Pty Ltd (Aristocrat).  The patents were directed to a feature game available on an electronic gaming machine (EGM), and specifically related to the use and configuration of symbols representing prizes of various values.  The Office concluded that the relevant subject matter was no more than a scheme or abstract idea and therefore not patentable.  Aristocrat appealed to the Federal Court, resulting in Justice Burley overturning the original decision, finding the invention patentable on the basis that the combination of the rules of the feature game together with the physical functionality of the EGM produced a particular outcome.

The Commissioner successfully appealed to the Full Federal Court.  The Full Court found that while an abstract idea could be transformed into a patentable invention by means of computer implementation, that would only be the case if that implementation comprised some technical innovation in the field of computing.   It propounded a two step test – first, is the invention a computer-implemented invention; second, if so, can it broadly be described as an advance in computer technology.  Aristocrat’s EGM as claimed was a conventional machine, despite being customised for the game and therefore not patentable.

Legal background – the Federal Court ‘computer innovation’ test

In 2006 the Full Federal Court considered the patentability of a method for structuring a financial transaction to protect an individual’s assets in Grant v Commissioner of Patents [2006] FCAFC 120.  The method was found to be a mere scheme or intellectual information of which there was no physical consequence, a physical consequence being required for patentability in line with the longstanding High Court authority of NRDC.  The Full Court expressly contrasted this with previous cases in which ‘business methods’ had been implemented in a computer, noting that in those cases there was a component that was physically affected or a change in state or information in a part of a machine, and that those changes could be regarded as physical effects meeting the NRDC requirements.

The Grant test was consistently applied in the Patent Office such that business methods were generally considered patentable in Australia provided that they were implemented on a computer, creating the requisite physical effect.

However in 2010/2011 the Patent Office rejected two patent applications in the name of Research Affiliates LLC relating to a computer implemented method of constructing and using portfolios and indexes for securities trading. It is noteworthy that the first of these decisions came 6 months after the US Supreme Court’s opinion in Bilski v Kappos which was largely considered to cast doubt on the patentability of similar business methods in the United States.

The Patent Office’s decision was widely considered difficult to reconcile with the principles set out in Grant.   However on appeal to the Federal Court it was affirmed, including in 2014 by the Full Court, which set out a test which effectively demanded a link between the ingenuity or newness of the invention and the computer implementation.  In other words, an improvement in computer technology was required if the computer implementation of a business method was relied upon to produce patentable subject matter.  As was explained further by the Full Court in the later case of Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161, in Research Affiliates the Court sought to elaborate on the distinction drawn in Grant between, on the one hand a manner of manufacture, and on the other a “mere scheme, an abstract idea, mere intellectual information.  In particular, the legal character of an unpatentable method that was a mere scheme did not change “merely because the method [was] implemented by the instrumentality of a computer”.

Further, in determining whether the ingenuity of the invention lay in the computer implementation, the “substance” of the invention was to be considered, a concept which seems to have been interpreted as extending beyond a consideration of each claim, to matters in the specification generally.  Notably, in its judgment the Court canvassed the position on computer implemented inventions internationally, including the decision of the US Supreme Court delivered earlier that year in Alice Corp. v. CLS Bank International 573 U.S. 208, which also limited the scope of protection for such inventions in the United States.

A number of subsequent Federal Court decisions followed and applied this principle: Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161; Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177; Commissioner of Patents v Rokt Pte Ltd [2020] FCAFC 86; Repipe Pty Ltd v Commissioner of Patents [2021] FCAFC 223.  Interestingly, the High Court refused leave to appeal in both RPL Central and Rokt noting in RPL Central that the Full Court was “plainly correct”.

Coming to Aristocrat, the deviation between Burley J and the Full Court can be seen in the context of the Research Affiliates rubric – Justice Burley considered that the substance of the invention in this case was not a mere scheme, but rather was a mechanism of a particular construction, the operation of which involved a combination of physical parts and software to produce a particular outcome in the form of an EGM that functioned in a particular way.  On that basis, the question of whether the computer implementation was new did not arise because that test was only applicable in the case of a mere scheme. The Full Court on the other hand viewed the invention as the “rules of the game”, excluding the physical features of the EGM, which was a mere scheme which could only become patentable subject matter if it was implemented in new computer technology.

Implications

Interestingly neither of the High Court’s judgments endorsed the tests applied by either the trial judge or the Full Court.  Instead the judges who found the invention unpatentable indicated that the issue was whether the implementation of an otherwise unpatentable idea, plan or game involved some adaptation or alteration of, or addition to, technology otherwise well known in the common general knowledge, whereas the judges finding the invention patentable reverted to the NRDC question of whether an artificial state of affairs had been created, with the rider that the implementation of a scheme or idea on a computer must do more than merely manipulate an abstract idea.

Two other points of principle are worth noting.

First, Aristocrat submitted that an approach which focussed only on the new aspects of an invention conflated the issue of manner of manufacture with issues of novelty and inventive/innovative step.  In response, the Keifel CJ plurality drew on the High Court decision in N V Philips Gloeilampenfabrieken v Mirabella International Pty Ltd (1995) 183 CLR 655, in which the Court upheld the conclusion of the Full Federal Court that there is a threshold requirement that will remain unsatisfied if, on the face of the specification, it is apparent that the claimed invention does not have the necessary quality of inventiveness.  In other words, it considered that the High Court had already accepted that some evaluation of inventiveness is appropriate outside of specific novelty and inventive/innovative step considerations.   The Gordon J plurality expressed some doubt about such threshold test, but in any event noted that throughout the course of this litigation the Commissioner had not suggested that the claimed invention did not have the necessary threshold quality of inventiveness, treating this as a separate issue to manner of manufacture.

Secondly, central to the analysis of the judges in favour of finding patentability was Aristocrat’s submission that the legal position should not be different depending on whether an abstract idea was implemented through a mechanical device or through a computer, leading them back to the NRDC analysis.  It seems that the other judgment took the view that Mirabella provided an answer to this too, on the basis that a mechanical device which was not new would not meet the threshold inventiveness requirement regardless of the novelty of a game which could be played on it.

What is the effect of a 3-3 High Court decision?

For a judgment to be overturned in the High Court a majority decision is required.  As the High Court was evenly split the decision of the Full Federal Court is affirmed, so that the patents will remain revoked.

Furthermore, in the absence of a majority judgment, no binding precedent results from the High Court decision, either for future High Court benches or for the Federal Court.  So is the Federal Court bound by the earlier Full Federal Court decisions in cases such as Research Affiliates and Rokt? Or is it required to follow the two-step test favoured by the majority of the Full Federal Court in Aristocrat?  Given that neither of the High Court judgments supported the Full Court ‘two step’ approach, it may be that this is not taken up in the future, in favour of the overall approach which appeared to be taken by in both High Court judgments, of simply properly characterising the invention.  However the key difference between the judgments on this issue – whether or not only inventive aspects of the invention are to be taken into account, will remain the core question for future judges.   With two directly opposed views from the High Court on this issue, the lack of certainty in this area is likely to continue for some time.

Where to from here for Aristocrat?

The Aristocrat case itself has now been remitted back to Justice Burley to consider the position in relation to other claims of the patents (the High Court and Full Federal Court’s decisions relating only to claim 1 of one of the patents in issue), with a hearing listed for June 2023.

Round up of computer–implemented invention applications before the Patent Office 

In 2022 the Australian Patent Office issued 26 decisions addressing the ground of manner of manufacture for computer-implemented inventions.  The vast majority of these decisions upheld a rejection on this ground.   These hearings related to applications covering a diverse range of subject matter: a modified cash ledger basis for an accounting system, methods for improved prediction of commercial outcomes from marketing communications, the use of blockchain to track variable such as insurance claim value or telecommunications usage or process financial transactions on existing payment networks, life of mine planning and cost control, use of tokens to facilitate point-of-sale transactions using electronic devices, location-based collection of recyclables, systems for modifying accommodation bookings in response to travel schedule changes, and methods for enhancing cognition as a result of ageing using gaming operations.

Accenture Global Solutions Limited was the most prolific applicant, being a party to seven decisions on manner of manufacture, and in each case its application was refused by the Delegate.  Apple Inc. was a party to only three cases but had more success – two applications were remitted to examination for the opportunity to amend, and one application was allowed – the only such decision to this effect in 2022.

Accenture Global Solutions Limited [2022] APO 8 – series of questions asked by the Delegate

This decision on 10 February 2022 provides a template for the Patent Office’s approach for the year.  The application related to a system of artificial and machine learning-based incident management by dynamically identifying the affected organisational operations and associated KPIs, and prioritising the incidents accordingly.  At the hearing, manner of manufacture was the only outstanding objection, the examiner having found the claims novel and inventive.  In reviewing the authorities, the Delegate stated that the invention, i.e. the source of ingenuity, must lie in the computerisation.  “If it lies in the business method, the invention will not be patentable despite the computer implementation.”

The Delegate then asked a series of questions directed to identifying the locus of the ingenuity and the manner of implementation of the invention, the answers to which must be balanced in the overall consideration:

• Does the invention solve a technical problem with the computer or outside the computer?
• Does the invention result in improvement in the functioning of the computer, irrespective of the data being processed? Can the invention be broadly described as an improvement in computer technology?
• Does the invention use generic computer technology?
• Are there any steps foreign to the normal use of computers? Is there ingenuity in the way in which the computer is utilised?  Is the invention technological or business innovation?
• Is the computer merely an intermediary or tool for performing the method while adding nothing of substance to the idea?
• Does the application of the method produce a practical and useful result? Does the invention produce technical effect?
• Does the invention lie in the generation, presentation or arrangement of intellectual information?

Ultimately, the Delegate in this Accenture case did not identify a technical problem addressed by the invention, even though the combination of tasks performed was described as “technically” challenging.  The Delegate found the challenge lay in the complexity of the tasks, not the technical aspect of them, and the claimed functions provided no technical solution, involved no improvement as to how a computer operates, using a standard computer performing routine technical functions.

Subsequent decisions followed the same approach with generally identical outcomes.

In almost all subsequent decisions the application was refused by the Delegate.  In only three cases did the Delegate find that the objection for lack of manner of manufacture could potentially be rectified, in which case the application was remitted back to examination for the opportunity to amend.  By way of example, the application in Apple Inc. [2022] APO 15 relates to the use of visual features such as blurring to automatically adjust the appearance of translucent virtual controls (such as keyboards or sliding controls) overlaying other content on the display of electronic devices, to make them less distracting to the user.  While acknowledging the claims were not just to a business innovation, the Delegate also found that the result of the claimed feature was an artistic or aesthetic effect, the description evidencing ‘unusual technical effect via an unusual interaction with the hardware features of the devices’.  This was the case even where multiple controls were ‘stacked’ on the screen, such that only the front-most control was visible, however the Delegate found that such an embodiment could give rise to a material advantage, and therefore potentially a patentable technical effect.  While this conclusion was speculative, the Delegate granted Apple the opportunity to amend.  Notably, in this instance, the novelty and inventive step of the application had not yet been evaluated.

Apple Inc. [2022] APO 83 – sole application found allowable on manner of manufacture by a Delegate

In this decision the Delegate found some claims in an application directed to biometric authentication (such as via fingerprint sensor) for revealing redacted content on a screen to an authorised user to satisfy the ground of manner of manufacture.  The Delegate held that the redaction of content on a screen and the use of biometric data to reveal it were known, and did not accept the applicant’s submissions that its method of streamlining the biometric authentication solved a technical problem or comprised a technical solution, instead finding that while it may provide practical benefits to the user they were business rather then technical improvements.  However the Delegate found two claims to satisfy the ground of manner of manufacture – those with the additional limitation that unredacted information is displayed only while the biometric sensor continues to detect the biometric input.  The Delegate found that the working relationship between authorisation and display provided a technical means for the user to choose how long they wished to view the unredacted information, and improved the security – both being technical effects.

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