01 October 2006
Applying for a patent for computer software or business methods can create problems for IP owners and examiners alike. Ignacio S Sapalo and Neptali L Bulilan of Sapalo Velez Bundang & Bulilan compare the rules in the US, Europe and the Philippines
The patentability, or otherwise, of computer software and business methods is one of the hottest topics in IP. Courts and legislators in the US and Europe have taken different positions on where the limits of patentability lie, denying patent applicants the harmonization they long for. In deciding its own position on the matter, the Philippines now has a number of competing models to choose from. This article seeks to explain the position it is taking.
INTERPRETING THE RULES
The US Federal Circuit Court considered USC 101 in State Street Bank & Trust Company v Signature Financial Group Inc, 149 F3d 1368, July 23 1998. The Court abandoned the subject matter argument by stating that “the question of whether a claim encompasses a statutory subject matter should not focus on which of the four categories of subject matter a claim is directed to…but rather on the essential characteristics of the subject matter, in particular, its practical utility”.
The Court also laid to rest the judicially created, ill-conceived business method exception. It cited to support this step the ruling of the Court in re Schreder that “patentability does not turn on whether the claimed method does ‘business’ instead of something else but on whether the method, viewed as a whole, meets the requirements of patentability.”
It thereby sets the main standard for patentability under 35 USC §101 – that the invention must have practical utility; this basically means that the claim should produce a useful, concrete, and tangible result.
But the Court in State Street failed to define fully the bounds of what is a “useful, concrete, and tangible result”. It did, however, give examples of results that would fit into this category:
In Alappat, we held that data, transformed by a machine through a series of mathematical calculations to produce a smooth waveform display on a rasterizer monitor, constituted a practical application of an abstract idea (a mathematical algorithm, formula, or calculation), because it produced ‘a useful, concrete and tangible result’ – the smooth waveform.
Similarly, in Arrythmia Research Technology Inc v Corazonix Corp (citation omitted) we held that the transformation of electrocardiograph signals from a patient’s heartbeat by a machine through a series of mathematical calculations constituted a practical application of an abstract idea (a mathematical algorithm, formula, or calculation), because it corresponded to a useful, concrete or tangible thing – the condition of a patient’s heart.
Today, we hold that the transformation of data representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because it produces ‘a useful, concrete and tangible result’ – a final share price momentarily fixed for recording and reporting purposes and even accepted and relied upon by regulatory authorities and in subsequent trades.”
Thus, it can be said that a useful result may encompass any result that can be applied in a practical manner.
It is clear that pure abstract quantities such as money or mere mathematical relationships between numbers, such as percentages, are sufficiently useful under State Street to qualify as patentable subject matter.
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RULES ON PATENTABLE SUBJECT MATTER IN THE US, EUROPE AND THE PHILIPPINES |
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US 35 USC 101 Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title. |
EUROPE Article 52, European Patent Convention 1. European patents shall be granted for any inventions which are susceptible of industrial application, which are new and which involve an inventive step. 2. The following in particular shall not be regarded as inventions within the meaning of paragraph 1: a. discoveries, scientific theories and mathematical methods; b. aesthetic creations; 3. The provisions of paragraph 2 shall exclude patentability of the subject-matter or activities referred to in that provision only to the extent to which a European patent application or European patent relates to such subject-matter or activities as such. |
THE PHILIPPINES Sections 21 and 22, Intellectual Property Code S.21. Patentable Inventions: Any technical solution of a problem in any field of human activity which is new, involves an inventive step and is industrially applicable shall be patentable. It may be, or may relate to, a product, or process, or an improvement of any of the foregoing. S.22. Non-patentable inventions: The following shall be excluded from patent protection: 22(1). Discoveries, scientific theories and mathematical methods; 22(2). Schemes, rules and methods of performing mental acts, playing games or doing business, and programs for computers. |
COMPARING LAWS
The industrial application requirement in article 52 of the European Patent Convention (EPC) differs significantly from the broad utility requirement in the US, and may serve as a substantial limitation on the patentability of business methods if the EPO narrowly construes the standard. Article 57 of the EPC provides that “an invention shall be considered as susceptible of industrial application if it can be made or used in any kind of industry, including agriculture”. While this provision suggests a broad interpretation of the requirement, industrial applications may in fact be limited by the need for patentable inventions to produce a technical effect.
Evidence exists that the EPO’s understanding of technical character has changed with the times, such that software inventions that would have been denied patentability when Article 52 was new would be granted patentability (assuming they were novel and inventive) if processed today. Historically, software by itself could not possess the required technical character because software and its development were not considered to be of a technical nature. The software-related patents that did issue had to have claimed some technical effect apart from the software itself.
The technical effect criterion would also take away a computer implemented business method inventions from the exceptions in Article 52(2). This is shown in the controversial decision Sohei. The lengthy claims at issue before the EPO Board of Appeals defined computer hardware, data storage files and a plurality of processing means for controlling the hardware and for storing, updating, reading and outputting the data. The patent application described a system as useful for financial and inventory management, and in particular construction management. Thus, the system might, for example, track the work to be done on a particular site within the construction industry.
According to the Board, the claimed invention involved technical considerations because it involved a novel use of different files to cause the computer to perform different tasks. Moreover, the Board noted that managing construction sites was comparable to managing traditional manufacturing process. The claimed invention could therefore not be considered a method of doing business excluded from patentability by the European Patent Convention. The reasoning of the Board in Sohei offers ample possibilities for artful claims drafters to overcome the restrictions upon patentable subject matter within the EPC.
As can be seen in the foregoing discussion, the EPO view of software patentability has inched closer to the view in State Street. The EPO requires that computer programs and methods of doing business should have a “technical effect” to be patentable while the Federal Circuit in State Street requires that a computer program and method of doing business should have a “useful, concrete, and tangible result”.
THE POSITION IN THE PHILIPPINES
The Bureau of Patents, in its Manual of Patent Examination Procedure (MPEP), states that an invention should have a technical character otherwise
there is no invention within the meaning of Section 21. Thus, for example… a computer program is claimed in the form of a physical record, e.g. on a conventional tape or disc, the contribution to the art is still no more than a computer program… and is, therefore, not allowable. If, on the other hand, a computer program, in combination with a computer, causes the computer to operate in a different way from a technical point of view, the combination might be patentable.
The MPEP states further that “where the claimed subject matter is concerned only with the program-controlled internal working of a known computer, the subject matter should be patentable if it provides a technical effect”. An example the MPEP gives is the case of a data processing system with a small fast working memory and a larger but slower memory. If the two memories are organized under program control, in such a way that a process, which needs more address space than the capacity of the fast working memory, can be executed at substantially the same speed if the process data were loaded entirely in that fast memory. The effect of the program in extending the working memory is of a technical character.
EVOLVING INTERPRETATIONS
The formulation of the foregoing MPEP rules indicates that the Bureau of Patents interprets Section 21 of the Intellectual Property Code in the standard and traditional way.
In the context of the immense impact of information technology on our world today the challenge that confronts the Bureau of Patents is whether it should review its bias in favor of the traditional interpretation of what should be considered patentable or open itself to new ideas so it can stay in step with rapid developments in science and technology.
The easy solution to the problems posed by computer-related inventions and business methods applications would be to interpret and apply Section 21 in a manner following that adopted by the European Patent Office.
On the other hand, there is a possibility that Section 21 can admit an interpretation that will accommodate US jurisprudence the Court’s conclusions in State Street.
Section 21 states that patentable subject matter consists of “any technical solution of a problem in any field of human activity…”. But does the manipulation of data by a computer through the use of a computer program to solve a problem not constitute a technical solution? In fact there exists jurisprudence in Europe which states that “if some practical (i.e. technical) effect is achieved by a computer or machine operating according to the instructions continued in a computer program, and such effect is novel and inventive, a claim directed to that practical effect will be patentable (NGBOI/88 Merrill Lynch)”. Based on this citation, any practical solution may be considered a technical solution. Consequently, Section 21 can be interpreted to accept a patent application similar to that which is the subject of the State Street case.
This view is not inconsistent with the requirement that an invention, to be patentable, should be industrially applicable. Section 116 of the WIPO Model Law for Developing Countries on Inventions provides that industry shall be understood in its broadest sense to include “handicraft, agriculture, fishery and services”. This reflects Article 1(3) of the Paris Convention which provides that “industrial property shall be understood in the broadest sense and shall apply not only to industry and commerce proper, but likewise to agricultural and extractive industries…”.
Following this liberal interpretation of Section 21, the “useful, concrete and tangible result” standard set in State Street can meet the requirement of “industrial applicability” as used in the said section.
Would this not benefit the burgeoning information technology sector in the Philippines? The Bureau of Patents will serve the country’s interests well if it takes this course of action.
IGNACIO S SAPALO
Ignacio S Sapalo is the managing partner of Sapalo Velez Bundang and Bulilan. He obtained a BSc degree, major in engineering, in 1963 and his Bachelor of Laws in 1967 from Ateneo de Manila. He was the director of the Bureau of Patents, Trademarks and Technology Transfer of the Philippine government from 1987 to 1996, during which time he led the group which drafted the 1998 IP Code of the Philippines. He is the author of Background Reading Material on the Intellectual Property System of the Philippines (WIPO, 1994) and has been professor of intellectual property at the Ateneo School of Law since 1991. He has also lectured at WIPO seminars and acts as a consultant on IP matters for the Department of Trade and Industry of the Philippines. He worked for the ASEAN Secretariat in 1998 and acted as WIPO Consultant to Cambodia in 1999. He is the founder and president of the Intellectual Property Foundation, President of Iprobe, Inc. (an intellectual property investigation and consulting firm), a member of the executive board of the International Chamber of Commerce of the Philippines and of the board of trustees of the Philippine Dispute Resolution Center. He is also a member of the Integrated Bar of the Philippines, the Philippine Bar Association, Association Internationale Pour la Protection De La Propriete Industrielle, Asian Patent Attorneys Association, and the Intellectual Property Association of the Philippines.
NEPTALI L BULILAN
Neptali “Nep” L Bulilan is a partner of Sapalo Velez Bundang and Bulilan law offices and heads its IP department. He is a licensed mechanical engineer and a lawyer with many years of experience as patent examiner and hearing officer of the Bureau of Patents, Trademarks and Technology Transfer. He is a director and one of the founding members of the Philippine Association of Certified Patent Agents (PACPA). He is also a member of the American Intellectual Property Law Association (AIPLA) and the president of the Rotary Club of Marikina North, District 3800.
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