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The Australian start-up Rokt Pte Ltd (Rokt), now a global marketing technology force, has succeeded in its Federal Court appeal against IP Australia. The triumph offers much-needed clarity around the patentability of computer-implemented inventions, and is a promising result for innovators in the software space.

In this IP Communique, Moulis Legal patent attorney Warren Wong discusses the mess that has been made of computer-implemented patents, and why it needs cleaning up.

Who will guard the guards?

The Patent Office of IP Australia acts as Australia’s patent gatekeeper and decides which patent applications should proceed to grant.

In recent years, the Patent Office’s assessment of computer-implemented inventions has deviated from its assessment of other types of inventions. In particular, there has been a marked increase in the number of computer-implemented technologies being denied patent protection because the Patent Office has deemed them not to be “patent-eligible”. The Patent Office’s reasoning for whether a computer-implemented technology is patent-eligible has been nothing short of inconsistent.

In one disturbing example, a Patent Office hearing officer stated that prior art can be considered when determining patent-eligibility, despite earlier Full Federal Court decisions embracing the complete opposite position.

Unsurprisingly, the Patent Office’s approach to computer-implemented inventions has come under increasing scrutiny and criticism, prompting the following comment from the Institute of Patent and Trade Mark Attorneys of Australia (IPTA):

IPTA is particularly concerned by the current approach being adopted by IP Australia, and lower courts, in relation to the assessment of patentability of inventions based on software. Many inventions which satisfy novelty and inventive step requirements are being rejected outright by IP Australia, even when such inventions are considered patentable in Europe.

This is why Federal Court appeals against Patent Office decisions — like Rokt’s — are important for clarifying Australia’s patent laws concerning software inventions.

The Rokt decision

In 2013, Rokt filed a patent application directed to a digital advertising system and method. This computer-implemented invention combined various elements to provide “a dynamic, context-based advertising system”.

The Patent Office examined Rokt’s patent application and accepted it, but then decided, of its own accord, to re-examine the application. The Commissioner of Patents ultimately refused the patent application on the ground that Rokt’s computer-implemented invention was not patent-eligible. Rokt appealed and the Federal Court decided against the Commissioner.

In deeming Rokt’s invention patent-ineligible, the Commissioner argued that each element of Rokt’s invention was already known when Rokt filed its patent application. Such an argument is not typically raised against non-computer technologies, but has seemingly become standard practice at IP Australia for rejecting computer-implemented inventions.

The Court warned against considering the discrete elements of an invention without considering the invention as a whole:

A focus on elements … in isolation tends to lose sight of the combination of techniques or components in an innovative and previously unknown way.

The Court also affirmed that combining known elements in a new way can indeed be patentable, stating of Rokt’s invention that:

Known components had been integrated into a single system in an innovative and previously unknown way.

The Commissioner also argued that Rokt’s invention is patent-ineligible because it solves a business problem rather than a technical problem. The Court rejected this argument, stating that the business problem of attracting the attention of a user was translated into a technical problem of how to utilise computer technology to address the business problem.

Rokt’s patent application is now proceeding to grant, and IP Australia was ordered to pay Rokt’s costs as agreed or taxed.

The uncomfortable state of uncertainty

Patents can be crucial tools for technology companies to attract funding. Investors often want peace of mind that the technology they are investing in is at least capable of patent protection so that their investments won’t be eroded by copycats. Patents are also treated as business assets and can be monetised, even if the technology company fails.

The current uncertainty about the patentability of computer-implemented inventions undermines the confidence with which investors can prospect.

If patent protection is available for a technology, this is obviously good news for an investor. If patent protection is clearly not available, at least the investor can rest assured that the technology being invested in won’t infringe any third party patent rights. Where there is uncertainty however, the investor cannot ascertain whether the technology is defensible against copycats, or whether the technology might infringe potential patent rights of competitors. (What an attractive investment opportunity!)

Australia has a growing software industry with new software innovators regularly making headlines. Certainty regarding the patentability of computer-implemented inventions is needed so the Australian software industry can seek reliable protection mechanisms and the support of investors.

Indeed, Rokt’s decision to appeal was in part to support smaller start-ups which cannot afford such a fight with IP Australia. Rokt’s chief executive, Bruce Buchanan, shared the following with The Australian Financial Review after the Federal Court ruling:

Thinking about the future of [Australia] and what industries are going to support that, software will be critical. For IP Australia to walk away from that is not only foolish, but it lets down future businesses.

The future for computer-implemented inventions

The Rokt decision is a welcome departure from most recent cases in which computer-implemented inventions were deemed patent-ineligible. However, it is too early to tell whether the decision will substantially alter the practices of IP Australia, not least because the Commissioner may file an appeal.

More important however is a pending appeal from Encompass Corporation Pty Ltd v InfoTrack Pty Ltd which also concerns patent-eligibility issues. Unlike the Rokt decision, which was made by only a single Federal Court Judge, the Encompass appeal has been heard by a Full bench of five judges and a decision is expected in the first half of 2019. We eagerly await the outcome of the Encompass appeal and hope the Rokt decision is a precursor of things to come.

This memo presents an overview and commentary of the subject matter. It is not provided in the context of a solicitor-client relationship and no duty of care is assumed or accepted. It does not constitute legal advice.

© Moulis Legal 2018