1. Business Methods, Computers & Electronics A review of patent eligible subject matter at the EPO and in the UK 27 October 2015

2. Overview –Terminology (patent eligible subject matter, “the exclusions”, “excluded subject matter”) –The legal provisions – EPC, UK Patents Act –EPO approach in detail –Break –UK approach in detail –US approach, briefly 2

3. Legal Provisions

4. Article 52 EPC Patentable inventions (1) European patents shall be granted for any inventions, in all fields of technology, provided that they are new, involve an inventive step and are susceptible of industrial application. (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; (c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers; (d) presentations of information. (3) Paragraph 2 shall exclude the patentability of the subject-matter or activities referred to therein only to the extent to which a European patent application or European patent relates to such subject matter or activities as such.

5. Section 1(2) of the UK Patents Act It is hereby declared that the following (among other things) are not inventions for the purposes of this Act, that is to say, anything which consists of - (a) a discovery, scientific theory or mathematical method; (b) a literary, dramatic, musical or artistic work or any other aesthetic creation whatsoever; (c) a scheme, rule or method for performing a mental act, playing a game or doing business, or a program for a computer; (d) the presentation of information; but the foregoing provision shall prevent anything from being treated as an invention for the purposes of this Act only to the extent that a patent or application for a patent relates to that thing as such.

6. Section 130(7) of the UK Patents Act (7) Whereas by a resolution made on the signature of the Community Patent Convention the governments of the member states of the European Economic Community resolved to adjust their laws relating to patents so as (among other things) to bring those laws into conformity with the corresponding provisions of the European Patent Convention, the Community Patent Convention and the Patent Co-operation Treaty, it is hereby declared that the following provisions of this Act, that is to say, sections 1(1) to (4), 2 to 6, 14(3), (5) and (6), 37(5), 54, 60, 69, 72(1) and (2), 74(4), 82, 83, 100 and 125, are so framed as to have, as nearly as practicable, the same effects in the United Kingdom as the corresponding provisions of the European Patent Convention, the Community Patent Convention and the Patent Co-operation Treaty have in the territories to which those Conventions apply. But …

7. UK Novelty and inventive step considerations are imported into the patent eligibility test Two hurdles: Patent eligibility: High Inventive Step: Low Key difference between the approach of the EPO and UK IPO (and courts) EPO Patent eligibility considerations are imported into the inventive step analysis Two hurdles: Patent eligibility: Low Inventive Step: High

8. Inventive step at the EPO Inventive step at the EPO – “the problem-solution approach” (1)What is the closest prior art? (2)What is the difference between the claim and the closest prior art? (3)What is the technical effect caused by this difference? (4)What, therefore, is the technical problem underlying the claimed invention? (5)Would the skilled person solve this problem in the matter indicated on the basis of the totality of the prior art, without inventive skill?

9. The UK Aerotel/Macrossan test for patent eligible subject matter (1) Properly construe the claim; (2) identify the actual contribution; (3) ask whether it falls solely within the excluded subject matter; (4) check whether the actual or alleged contribution is actually technical in nature.

10. The EPO’s approach 10

11. Article 52 EPC Patentable inventions (1) European patents shall be granted for any inventions, in all fields of technology, provided that they are new, involve an inventive step and are susceptible of industrial application. (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; (c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers; (d) presentations of information. (3) Paragraph 2 shall exclude the patentability of the subject-matter or activities referred to therein only to the extent to which a European patent application or European patent relates to such subject matter or activities as such.

12. Inventive step at the EPO Key point: in all but the most extreme cases the EPO considers excluded subject matter when assessing inventive step Inventive step at the EPO – “the problem-solution approach” (1)What is the closest prior art? (2)What is the difference between the claim and the closest prior art? (3)What is the technical effect caused by this difference? (4)What, therefore, is the technical problem underlying the claimed invention? (5)Would the skilled person solve this problem in the matter indicated on the basis of the totality of the prior art, without inventive skill?

13. “Where the claim refers to an aim to be achieved in a non-technical field, however, this aim may legitimately appear in the formulation of the problem as part of the framework of the technical problem to be solved, in particular as a constraint that has to be met”. (Guidelines, Part G, VII, 5.2). EPO Guidelines The Guidelines for Examination in the European Patent Office gives guidance to examiners and practitioners to the EPO’s approach to examination of patent applications.

14. Golden Rule The EPO grants patents when a non- obvious technical solution to a technical problem can be identified How did we get here? Let’s look at the case law.

15. 5 Landmark Decisions 1986: T208/84 (Computer-related invention/VICOM) 1998: T1173/97 (Computer program product/IBM) 2000: T931/95 (Pension Benefit Systems Partnership) 2002: T641/00 (Two identities/COMVIK) 2004: T258/03 (Hitachi/Auction method)

16. 1986: T208/84 (Computer-related invention/VICOM) Concerned the computer-based digital processing of images using a particular underlying mathematical technique Confirmed the patentability of computer-implemented inventions Let’s look at the claim

17. VICOM – the claim Version 1 of the claim 1.A method of digitally filtering a two-dimensional data array having elements arranged in rows and columns in which an operator matrix of a size substantially smaller than the size of the data array is convolved with the data array, including sequentially scanning the elements of the data array with the operator matrix, characterised in that the method includes repeated cycles of sequentially scanning the entire data array with a small generating kernel operator matrix to generate a convolved array and then replacing the data array as a new data array… etc Excluded?

18. VICOM – the claim Version 2 of the claim 1.A method of filtering digitally processing images in the form of a two- dimensional data array having elements arranged in rows and columns in which an operator matrix of a size substantially smaller than the size of the data array is convolved with the data array, including sequentially scanning the elements of the data array with the operator matrix, characterised in that the method includes repeated cycles of sequentially scanning the entire data array with a small generating kernel operator matrix to generate a convolved array and then replacing the data array as a new data array… etc Any difference?

19. VICOM Version 1 – not allowable, a mathematical method as such Version 2 - allowable

20. “the invention furthermore confers a technical benefit, namely a substantial increase in processing speed compared with the prior art” VICOM – from the decision “Even if the idea underlying an invention may be considered to reside in a mathematical method a claim directed to a technical process in which the method is used does not seek protection for the mathematical method as such” “A claim directed to a technical process which process is carried out under the control of a program (whether by means of hardware or software), cannot be regarded as relating to a computer program as such”

21. T1173/97 (Computer program product/IBM) The allowability of claims to computer program products This appeal only concerned the allowability of claims to computer programs, the equivalent method and apparatus claims having been found allowable at first instance by the examining division.

22. IBM - the claims 1. A method for resource recovery in a computer system running an application which requests a work operation involving a resource, said method comprising the steps of: implementing a commit procedure for said work request; in case the said commit procedure is not completed due to a failure, notifying said application after some time that it can continue to run, whereby said application need not wait for resynchronization; and while said application continues to run, resynchronizing said incomplete commit procedure for said resource asynchronously relative to said application. 20. A computer program product directly loadable into the internal memory of a digital computer, comprising software code portions for performing the steps of claim 1 when said product is run on a computer. A computer program as such?

23. “the Board is of the opinion that with regard to the exclusions under Article 52(2) and (3) EPC, it does not make any difference whether a computer program is claimed by itself or as a record on a carrier” IBM – from the decision (allowing computer program claims) “a computer program product is not excluded from patentability under Article 52(2) and (3) EPC if, when it is run on a computer, it produces a further technical effect which goes beyond the "normal" physical interactions between program (software) and computer (hardware)”

24. T931/95 (Pension Benefit Systems Partnership) The exclusion of methods only involving economic concepts and practices Concerned the allowability of a technique for controlling a pension benefits program by administering subscriber employer accounts in a particular way. There were method and system claims. Let’s look at them.

25. 1. A method of controlling a pension benefits program by administering at least one subscriber employer account on behalf of each subscriber employer's enrolled employees each of whom is to receive periodic benefits payments, said method comprising: providing to a data processing means information from each said subscriber employer defining the number, earnings and ages of all enrolled employees of the said subscriber employer; determining the average age of all enrolled employees by average age computing means; determining the periodic cost of life insurance for all enrolled employees of said subscriber employer by life insurance cost computing means; and estimating all administrative, legal, trustee, and government premium yearly expenses for said subscriber employer by administrative cost computing means; the method producing, in use, information defining each subscriber employer's periodic monetary contribution to a master trust, the face amount of a life insurance policy on each enrolled employee's life to be purchased from a life insurer and assigned to the master trust and to be maintained in full force and effect until the death of the said employee, and periodic benefits to be received by each enrolled employee upon death, disability or retirement.

26. 5. An apparatus for controlling a pension benefits system comprising: a data processing means which is arranged to receive information into a memory from each subscriber employer defining the number, earnings and ages of all enrolled employees, said data processing means including a processor which includes: A. average age computing means for determining the average age of all enrolled employees; B. life insurance cost computing means for determining the periodic cost of said life insurance for all enrolled employees of said subscriber employer; C. administrative cost computing means for estimating all administrative, legal, trustee, and government premium yearly expenses for said subscriber employer; the apparatus being arranged to produce, in use, information defining each subscriber employer's monetary contribution to a master trust; the face amount of each life insurance policy to be issued and made payable to said master trust by a life insurer on the life of each enrolled employee and to be maintained in full force and effect until the death of the said employee; and periodic benefits payable by said master trust to each enrolled employee upon death, disability, or retirement.

27. PBS What do you think? A business method as such? Any difference between the two claims?

28. An often-referenced part of PBS is that the method claim was found to be excluded whereas the apparatus was found to be patent-eligible in principle because it was an apparatus (as opposed to a method). A red herring. Treatment of apparatus claim more interesting as it was found to lack an inventive step. T931/95 (Pension Benefit Systems Partnership) The exclusion of methods only involving economic concepts and practices

29. PBS – from the decision “the improvement envisaged by the invention according to the application is an essentially economic one, i.e. lies in the field of economy, which, therefore, cannot contribute to inventive step. The regime of patentable subject-matter is only entered with programming of a computer system for carrying out the invention. The assessment of inventive step has thus to be carried out from the point of view of a software developer or application programmer, as the appropriate person skilled in the art, having the knowledge of the concept and structure of the improved pension benefits system and of the underlying schemes of information processing as set out for example in the present method claims.” Another way of stating this is: when running the problem-solution analysis, the non-technical innovation (i.e. the pension scheme) can be given to the skilled person (the programmer) as part of the technical problem that he needs to solve. A computer directed to that particularised scheme is an obvious answer to this question.

30. The claim had the following novel features: (i)the subscriber identity module was allocated at least two identities, (ii)these identities were selectively usable, and (iii)the selective activation was used for distributing the costs for service and private calls or among different users. T641/00 (Two identities/COMVIK) Including “non-technical” parts of the solution in the technical problem Concerned a digital mobile telephone system and the use of a single-user multi-identity IC card.

31. Features (ii) and (iii) were deemed non-technical (“the claimed concept of selectively distributing the costs for service and private calls or among different users does as such not make a contribution to the technical character of the invention”) These features were put into the technical problem, and the remaining feature was deemed obvious base on the cited art. COMVIK – from the decision “Although the technical problem to be solved should not be formulated to contain pointers to the solution or partially anticipate it, merely because some feature appears in the claim does not automatically exclude it from appearing in the formulation of the problem. In particular where the claim refers to an aim to be achieved in a non-technical field, this aim may legitimately appear in the formulation of the problem as part of the framework of the technical problem that is to be solved, in particular as a constraint that has to be met.”

32. Problem: in an internet-based implementation delays between bids could occur and change the result. Invention involved asking each participant to provide a "desired price" and a "maximum price" at the outset, so that the auction process was performed automatically. T258/03 (Hitachi/Auction method) Methods to be examined like apparatus Concerned an automatic auction method executed in a server computer. The invention was claimed in both method and apparatus terms. “Dutch auction” - the price sinks with time and the first bidder to bid is successful.

33. However (correctly in my view) the decision distinguished itself from PBS and found that “a method involving technical means is an invention within the meaning that method claims” Both method and apparatus claims refused for same reason as lacking an inventive step. HITACHI – from the decision However, the Board followed the Comvik approach and found that “the technical part of the invention is thus essentially limited to instructing the server computer to apply the given conditions and perform any necessary calculations”.

34. Note: outright non-inventions will be objected to if there are no technical features in the claim. Summary of these decisions These five pieces of case law explain how European practice has developed. When considering inventive step any “non-technical” features are ignored by importing them into the technical problem to be solved.

35. Based on the questions referred at least, the Enlarged Board has indicated that practice is settled in this area. 2010 (G 3/08) The Enlarged Board of Appeal doesn’t consider questions concerning the patentability of computer programs In October 2008 the President of the EPO referred four questions concerning the patentability of computer programs to the Enlarged Board of Appeal. However, in its opinion which issued on 12 May 2010, the Enlarged Board of Appeal considered the referral to be inadmissible because no divergent decisions had been identified in the referral.

36. Break

37. The UK approach 37

38. Overview for the UK Wording of Act similar to EPC Section 130 Practice is different from that of the EPO Stand alone test for excluded matter (applied before and separately from the novelty and inventive step assessment, though by considering the “contribution” aspects of novelty and inventive step are actually imported into the test)

39. Section 1(2) of the UK Patents Act It is hereby declared that the following (among other things) are not inventions for the purposes of this Act, that is to say, anything which consists of - (a) a discovery, scientific theory or mathematical method; (b) a literary, dramatic, musical or artistic work or any other aesthetic creation whatsoever; (c) a scheme, rule or method for performing a mental act, playing a game or doing business, or a program for a computer; (d) the presentation of information; but the foregoing provision shall prevent anything from being treated as an invention for the purposes of this Act only to the extent that a patent or application for a patent relates to that thing as such.

40. The UK Aerotel/Macrossan test for patent eligible subject matter Key point: the UK considers excluded subject matter as a stand alone test Aerotel/Macrossan test: (1) Properly construe the claim; (2) identify the actual contribution; (3) ask whether it falls solely within the excluded subject matter; (4) check whether the actual or alleged contribution is actually technical in nature.

41. UK in detail 6 Court of Appeal judgments UK IPO’s practice notes “Signposts” for the allowability of computer programs

42. 6 Court of Appeal Judgments Merrill Lynch’s Application (1989) [1989] RPC 561 (Merrill Lynch) Gale’s Application [1991] RPC 305 (Gale) Fujitsu Limited’s Application [1997] EWCA Civ 1174 (Fujitsu) Aerotel Ltd v Telco Holdings Ltd & Ors Rev 1 [2007] RPC 7 (Aerotel/Macrossan) HTC Europe Co Ltd v Apple Inc [2013] EWCA Civ 451 Lantana’s application (2014) [2014] EWCA Civ 1463 (Lantana)

43. Merrill Lynch (1989) A computerized trading system found to be a business method Concerned a computerized trading system accommodating random real-time order flow Case appealed to Court of Appeal Appeal unsuccessful: found to be a business method as such

44. Merrill Lynch - from the judgment “It seems to me to be clear… that it cannot be permissible to patent an item excluded by s.1(2) under the guise of an article which contains that item – that is to say, in the case of a computer program, the patenting of a conventional computer containing that program. Something further is necessary. The nature of that addition is, I think, to be found in the Vicom case where it is stated: “Decisive is what technical contribution the invention makes to the known art”. There must, I think, be some technical advance on the prior art in the form of a new result (e.g., a substantial increase in processing speed as in Vicom).” “Now let it be supposed that claim 1 can be regarded as producing a new result in the form of a technical contribution to the prior art. That result, whatever the technical advance may be, is simply the production of a trading system. It is a data-processing system for doing a specific business, that is to say, making a trading market in securities. The end result, therefore, is simply “a method of doing business”, and is excluded by s.1(2). …A data processing system operating to produce a novel technical result would normally be patentable. But it cannot, it seems to me, be patentable if the result itself is a prohibited item under s.1(2). In the present case it is such a prohibited item.”

45. Gale (1991) CD ROM found to be a computer program Concerned an improved method of calculating square roots Private applicant Claim directed to CD ROM programmed to undertake the method Not a mathematical method but rejected by Court of Appeal as being a program for a computer

46. Gale – from the judgment “In the present case Mr. Gale claims to have discovered an algorithm. Clearly that, as such, is not patentable. It is an intellectual discovery which, for good measure, falls squarely within one of the items, mathematical method, listed in s1(2). But the nature of this discovery is such that it has a practicable application, in that it enables instruction to be written for conventional computers in a way which will, so it is claimed, expedite one of the calculations frequently made with the aid of a computer. In my view the application of Mr. Gale’s mathematical formulae for the purpose of writing computer instructions is sufficient to dispose of the contention that he is claiming a mathematical method as such.” “That still leaves the difficulty that those instructions when written, and without more, are not patentable, because they constitute a computer program. Is there something more? In the end I have come to the conclusion that there is not. …Mr Gale …has found an improved means of carrying out an everyday function of computers. His program makes a more efficient use of a computer’s resources. …But the instructions do not embody a technical process which exists outside the computer. Nor, as I understand the case as presented to us, do the instructions solve a “technical” problem lying within the computer.” Nichols LJ

47. Fujitsu (1997) Computer-based modelling of crystal structures is a computer program Computer-based modelling of a crystal structure for use in designing inorganic materials in the fields of chemistry and physics. Computer converts data representing the physical layouts of two crystal structures into data representing the physical layout of the crystal structure that would be obtained by combining the original two structures in such a way that the two selected structures are superposed. Resulting data is then displayed to give a picture of the combined structure. Claimed as a method and as a computer apparatus.

48. Fujitsu – from the judgment “Mr Birss is right that a computer set up according to the teaching in the patent application provides a new "tool" for modelling crystal structure combinations which avoids labour and error. But those are just the sort of advantages that are obtained by the use of a computer program. Thus the fact that the patent application provides a new tool does not solve the question of whether the application consists of a program for a computer as such or whether it is a program for a computer with a technical contribution. I believe that the application is for a computer program as such…. The only advance is the computer program which enables the combined structure to be portrayed quicker. I conclude that the application does not relate to a patentable invention as it is excluded by Section 1(2)(C) as being a program for a computer as such.”

49. Aerotel/Macrossan (2006) New four step test introduced Aerotel concerned a telephone charging system and was an appeal from High Court summary judgement. Macrossan concerned an automated method of acquiring the documents necessary to incorporate a company and was an appeal from a UK IPO refusal. Aerotel was found to relate to a patentable invention in principle because the system as a whole was new in itself. Macrossan was rejected for not being an invention since it was found to relate to a computer program as such and to a method of doing business as such.

50. Aerotel/Macrossan Aerotel/Macrossan held that the requirements for patentability set out in section 1(1) should be considered using a “four step approach”, set out in paragraph 40 of the judgment as follows: (1) Properly construe the claim; (2) identify the actual contribution; (3) ask whether it falls solely within the excluded subject matter; (4) check whether the actual or alleged contribution is actually technical in nature. The Court held that this “four step approach” was consistent with previous approaches

51. HTC v Apple (2013) 2 Apple patents ‘948 patent: relates to a “touch event model” for computer devices with touch sensitive screens which are capable of responding to more than one touch at a time. High Court: computer program as such Court of Appeal: not excluded ‘022 patent: slide to unlock High Court: lack of novelty/obvious Court of Appeal: agreed Note: ‘022 = patent eligible subject matter

52. Lantana (2014) From CoA judgment Lantana's application relates to a method of extracting and transferring data between two computers…The method operates when both computers are linked up to the internet and one makes a request to the other for a file. The local computer will have a list of the documents on the other computer. The user of the local computer sends an email message to the other which automatically responds by sending a message to the local computer with the file attached. So, if, for example, the user were a solicitor who had gone to, say, South America, and wished to use a precedent for a joint venture agreement which he had on his desk computer in his London office, he could use this software to get the file for use where he was located abroad. Lantana claims that this method saves the need for continuous connection to the desk computer in London and the risks of being hacked while so connected or losing the connection. I will call this problem "the problem of vulnerable connectivity".

53. Lantana From CoA judgment Lantana's application relates to a method of extracting and transferring data between two computers…The method operates when both computers are linked up to the internet and one makes a request to the other for a file. The local computer will have a list of the documents on the other computer. The user of the local computer sends an email message to the other which automatically responds by sending a message to the local computer with the file attached. So, if, for example, the user were a solicitor who had gone to, say, South America, and wished to use a precedent for a joint venture agreement which he had on his desk computer in his London office, he could use this software to get the file for use where he was located abroad. Lantana claims that this method saves the need for continuous connection to the desk computer in London and the risks of being hacked while so connected or losing the connection. I will call this problem "the problem of vulnerable connectivity".

54. Lantana What do you think?

55. Lantana Patent Office: computer program as such High Court: agreed Court of Appeal: agreed What would the EPO have said?

56. Aerotel/Macrossan four step test used by UK IPO There are a handful of UK IPO practice notes in this area. Most important one: Patents Act 1977: Patentable subject matter 2 November 2006. Four step test adopted by UK IPO.

57. “Substance over form” From the UK IPO’s Manual of Patent Practice: “In Aerotel/Macrossan, Jacob LJ elaborated on step two, saying ‘What has the inventor really added to human knowledge perhaps best sums up the exercise. The formulation involves looking at substance not form - which is surely what the legislator intended’.”

58. “Signposts” for the allowability of computer programs Guidance given by High Court in AT&T Knowledge Ventures’ Application and CVON Innovations Ltd’s Application [2009] FSR 19 (“AT&T”) of “signposts” which indicate when a computer program makes a relevant technical contribution that would overcome an excluded matter objection. Modified by HTC v Apple. The five signposts are:- i) whether the claimed technical effect has a technical effect on a process which is carried on outside the computer; ii) whether the claimed technical effect operates at the level of the architecture of the computer; that is to say whether the effect is produced irrespective of the data being processed or the applications being run; iii) whether the claimed technical effect results in the computer being made to operate in a new way; iv) whether the program makes the computer a better computer in the sense of running more efficiently and effectively as a computer; v) whether the perceived problem is overcome by the claimed invention as opposed to merely being circumvented.

59. Different results: Symbian Concerned how a library of functions (a "Dynamic Link Library"), useable by multiple application programs running on a computer, is accessed. EPO: granted UKIPO: refused UK Appeal x2: patentable (i.e. UK IPO refusal overturned) EPO vs. UK Aerotel/Macrossan Judge considered EPO approach ‘intellectually dishonest’ Duns Licensing (EPO T-decision) The ‘technical effect approach’ in Aerotel was ‘not consistent with a goodfaith interpretation of the European Patent Convention’ and it is ‘irreconcilable’ with it ‘for the further reason that it presupposes that “novel and inventive purely excluded matter does not count as a ‘technical contribution’.

60. UK Imports the questions of novelty/inventive step when considering inherent patentability. Uses the four step test. Summary of how software inventions are examined in the EPO and UK IPO EPO Imports the question of inherent patentability into inventive step analysis. Looks for a non-obvious technical solution to a technical problem.

61. The US approach 61

62. US –No exclusions in the statute –Case law derived exclusions –2010: Bilski, US Supreme Court (a method of “risk hedging” in commodities trading) –2014: Alice, US Supreme Court (exchanging obligations using “intermediated settlement”) –Claims not patentable as business methods –Affirmed traditional exclusions of “laws of nature, natural phenomena, and abstract ideas” –US PTO practice, having been more lenient than the UK and EPO, is toughening following Alice 62

63. Thank you 63 Gareth Fennell Partner gfennell@kilburnstrode.com Kilburn & Strode LLP 20 Red Lion Street London WC1R 4PJ T +44 (0) 20 7539 4200 F +44 (0) 20 7539 4299 www.kilburnstrode.com Patent and Trade Mark Attorneys