FEDERAL COURT OF AUSTRALIA

Grant v Commissioner of Patents [2006] FCAFC 120

PATENTS – patentable subject matter – business system or method – legal discoveries – manner of manufacture – claim for a method for structuring a financial transaction designed to protect an individual’s assets – new use of known products with known properties for which their known properties make them suitable – no physical effect or physical phenomenon – mere intellectual information – claimed subject matter not a proper subject of letters patent

Patents Act 1990 (Cth) s 18(1A)

Statute of Monopolies 1623 (Imp)

Federal Proceedings (Costs) Act 1981 (Cth)

Arrow Pharmaceuticals Ltd v Merck & Co Inc (2004) 213 ALR 182 cited

AT&T Corp v Excel Communications, Inc 172 F 3d 1352; 50 USPQ 2d 1447 (Fed Cir 1999) considered

Burroughs Corp (Perkins’) Application [1974] RPC 147 considered

CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260 followed

Commissioner of Patents v Lee (1913) 16 CLR 138 cited

Commissioner of Patents v Microcell Ltd (1959) 102 CLR 232 cited

Diamond v Diehr 450 US 175; 67 L Ed 2d 155 (1981) cited

Grant v Commissioner of Patents (2006) 67 IPR 1 affirmed on different grounds

In re Alappat 33 F 3d 1526; 31 USPQ 2d 1545 (Fed Cir 1994) cited

International Business Machines Corporation’s Application [1980] FSR 564 considered

International Business Machines Corporation v Commissioner of Patents (1991) 33 FCR 218 considered

Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91 cited

National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252 applied

Neilson v Minister of Public Works (NSW) (1914) 18 CLR 423 cited

N V Philips Gloeilampenfabrieken v Mirabella International Pty Ltd (1995) 183 CLR 655 cited

Re Brown (1899) 5 ALR 81 cited

Re Cooper’s Application for a Patent (1901) 19 RPC 53 cited

Re ESP’s Application (1944) 62 RPC 87 cited

Re Fishburn’s Application (1938) 57 RPC 245 cited

Re GEC’s Application (1942) 60 RPC 1 cited

Re Johnson’s Application for a Patent (1901) 19 RPC 56 cited

Re Lenard’s Application (1954) 71 RPC 190 cited

Re Peter Szabo and Associates Pty Ltd (2006) 66 IPR 370 considered

Re W’s Application (1914) 31 RPC 141 cited

Rogers v Commissioner of Patents (1910) 10 CLR 701 cited

Rolls Royce Ltd’s Application [1963] RPC 251 cited

State Street Bank & Trust Co v Signature Financial Group Inc 149 F 3d 1368; 47 USPQ 2d 1596 (Fed Cir 1998) considered

Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 224 ALR 280 cited

Welcome Real-Time SA v Catuity Inc (2001) 113 FCR 110 followed

Advisory Council on Intellectual Property, Report on a Review of the Patenting of Business Systems, September 2003

J Lahore, “Computers and the Law: The Protection of Intellectual Property” (1978) 9 Federal Law Review 15

STEVEN JOHN GRANT v THE COMMISSIONER OF PATENTS

NSD 1573 OF 2005

HEEREY, KIEFEL AND BENNETT JJ

18 JULY 2006

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1573 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	STEVEN JOHN GRANT APPELLANT
AND:	THE COMMISSIONER OF PATENTS RESPONDENT
JUDGES:	HEEREY, KIEFEL AND BENNETT JJ
DATE OF ORDER:	18 JULY 2006
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellant pay the respondent’s costs of the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1573 OF 2005

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

STEVEN JOHN GRANT

APPELLANT

AND:

THE COMMISSIONER OF PATENTS

RESPONDENT

JUDGES:	HEEREY, KIEFEL AND BENNETT JJ
DATE:	18 JULY 2006
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT

1 The Deputy Commissioner of Patents revoked Innovation Patent No. 2003100074 entitled “Asset Protection Method” on the basis that the invention claimed did not involve a manner of manufacture within the meaning of s 6 of the Statute of Monopolies 1623 (Imp) (‘a manner of manufacture’). The primary judge upheld that decision: Grant v Commissioner of Patents (2006) 67 IPR 1. The invention is a method for structuring a financial transaction to protect an individual’s assets, such as real property, from legal liability or, as stated in the specification, protecting assets ‘at financial risk’.

2 The issue is whether a method of asset protection consisting of actions of financial and legal consequence is properly the subject of letters patent.

3 Claim 1 of the patent, which formed the basis of the submissions, is:

‘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,

(d) the trustee securing the loan by taking a charge for said sum of money over the asset.’

4 The financial transaction to protect an individual’s assets therefore utilises a trust, a gift, a loan and a security. There is no suggestion of any novelty in those integers.

5 A requirement for a patentable invention for the purposes of an innovation patent (s 18(1A) of the Patents Act 1990 (Cth) (‘the Act’)) and for the purposes of a standard patent (s 18(1) of the Act) is that it be a manner of manufacture. That represents a threshold requirement for patentability(N V Philips Gloeilampenfabrieken v Mirabella International Pty Ltd (1995) 183 CLR 655 at 663; Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91 at [63]).

6 The Deputy Commissioner concluded that the invention does not involve any discovery of a law of nature nor involve the application of technology in some form or other to perform the process claimed; it does not result in an ‘artificially created state of affairs’ and is not a manner of manufacture. Accordingly, the Deputy Commissioner, after examination of the patent under s 101B of the Act, revoked the patent under s 101F on the ground in s 101B(2)(b).

Relevant principles

The NRDC case

7 The decision and reasoning of the High Court in National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252 provides the basis for a determination of what is patentable. The inquiry is into the scope of the permissible subject matter of letters patent protected by s 6 of the Statute of Monopolies. It is determined according to the breadth of the concept and principles which the law has developed for the application of s 6 (at 269). Those principles are applied flexibly, recognising that developments and inventions are ‘excitingly unpredictable’ (at 271).

8 The ability to adapt the notion of patentability to new scientific discoveries and technologies should not be fettered by contrived constraints. Just as there have been advances in technologies not envisaged when the Statute of Monopolies was formulated in 1623, the concept of patentability must be able to accommodate inventions not yet envisaged. This approach is not unique to Australia. As the United States Court of Appeals for the Federal Circuit said in AT&T Corp v Excel Communications, Inc 172 F 3d 1352 at 1356; 50 USPQ 2d 1447 at 1450 (Fed Cir 1999):

‘The sea-changes in both law and technology stand as a testament to the ability of law to adapt to new and innovative concepts, while remaining true to basic principles.’

9 The claims in NRDC were for a method for using certain chemicals to eradicate weeds from certain kinds of crops. The Deputy Commissioner had refused the claims on the grounds that they were not directed to a manner of manufacture because they were claims to the mere use of known substances – which use also did not result in a ‘vendible product’. This last-mentioned requirement comes from the decision of Morton J in Re GEC’s Application (1942) 60 RPC 1.

10 As put by Mr Aickin QC, for the appellant in NRDC at 255, vendible product is ‘neither an exclusive nor a conclusive test’. He submitted that the invention lay in observing the practical significance of the material, to take advantage of an initial discovery (in that case that certain weeds do and certain crops do not have an enzyme system which brings about a certain interaction). As recorded by the High Court at 268, Mr Aickin argued that there is a “manufacture” whenever a process produces, ‘either immediately or ultimately, a useful physical result in relation to a material or tangible entity’. The contrary submissions of Mr McInerney QC emphasised the word ‘manufacture’ and the need for the tangible nature of the object of the invention. He contended that ‘manufacture’ should be restricted to ‘vendible products and processes for their production’, and also exclude all agricultural and horticultural processes.

11 Relevantly for present purposes the High Court at 264 noted:

‘There may indeed be a discovery without invention – either because the discovery is of some piece of abstract information without any suggestion of a practical application of it to a useful end, or because its application lies outside the realm of “manufacture”’.

12 After discussing the specification in detail and concluding at 268 that the claims were not merely a new use of an old substance, their Honours turned to the ‘central question’ of the case, namely whether the process claimed was a manner of new manufacture within s 6 of the Statute of Monopolies. Their Honours’ reasoning for an affirmative conclusion can be summarised as follows:

· The concept was not limited to the idea of making tangible goods by hand or machine (the everyday meaning of ‘manufacture’); rather the question was ‘[i]s 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?’ (269).

· The 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’ (270).

· The ambit of s 6 cannot be stated by precisely defining ‘manufacture’ (271).

· A process, to fall within s 6, must belong to a ‘useful art as distinct from a fine art’ (275), it must have an ‘industrial or commercial or trading character’ (275 citing Re Lenard’s Application (1954) 71 RPC 190, at 192).

· A product, in relation to a process, is ‘only something in which the new and useful effect may be observed’;that‘“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’ (276).

· Morton J’s ‘rule’(the High Court’s inverted commas)may be accepted as long as ‘product’ is taken to cover ‘every end produced’ and ‘vendible’ as ‘pointing only to the requirement of utility in practical affairs’ (276).

· In the instant case, the method had as its end result an ‘artificial effect’ and thus was within the true concept of what must be produced by a process if it is to be held patentable (277).

· The effect of the method is a ‘product’ because it consists in‘an artificially created state of affairs’(explained in the context of the growth of weeds and crops on sown land on which a method had been put into practice) (277).

· If there is nothing that can properly be called a ‘product’ of the process ‘even an ingenious new departure would be outside the limits of patentability’ (278).

13 Their Honours continued at 277–279 to reject the separate argument of the Commissioner that agricultural and horticultural processes were outside the limits of patentable inventions.

Historical development of patentable invention

14 Business, commercial and financial schemes as such have never been considered patentable (J Lahore, “Computers and the Law: The Protection of Intellectual Property” (1978) 9 Federal Law Review 15 at 22–3, approved in CCOM Pty Ltd v Jiejing Pty Ltd (1994) 51 FCR 260 at 292) in the same way that the discovery of a law or principle of nature is not patentable. Sir Robert Finlay A-G observed in Re Cooper’s Application for a Patent (1901) 19 RPC 53 at 54, ‘[y]ou cannot have a Patent for 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’. A law of nature becomes patentable when applied to produce a particular practical and useful result (Welcome Real-Time SA v Catuity Inc (2001) 113 FCR 110 at [117]). While a mere scheme or plan is not the proper subject of a patent, an alleged invention which serves a mechanical purpose that has useful results does not become such an unpatentable scheme or plan merely because the purpose is in the carrying on of a branch of business (Re Fishburn’s Application (1938) 57 RPC 245 at 248).

15 Historically, working directions and methods of doing things fell outside s 6 of the Statute of Monopolies. As summarised by Heerey J in Catuity at [106], directions for the operation of a known article or machine or carrying out a known process so as to produce an old result were not patentable, even if they provided a different and more efficient method. Patents were refused for operating a jet engine in a way to reduce noise during takeoff (Rolls Royce Ltd’s Application [1963] RPC 251); improved methods for charcoal burning (Commissioner of Patents v Lee (1913) 16 CLR 138); improved methods for utilising an existing mechanism of septic tank purification (Neilson v Minister of Public Works (NSW) (1914) 18 CLR 423); and a method for felling trees by use of fire (Rogers v Commissioner of Patents (1910) 10 CLR 701).

16 Patents have also been refused for methods of calculation, theoretical schemes, including business schemes and abstract plans, such as:

· systems for arrangement of known things, such as a plan relating to the layout of houses in a row or terrace so as to prevent overlooking (Re ESP’s Application (1944) 62 RPC 87);

· an arrangement of buoys for navigational purposes (Re W’s Application (1914) 31 RPC 141);

· a system of business even though its implementation involved the use of a printed envelope with a particular arrangement of words (Re Johnson’s Application for a Patent (1901) 19 RPC 56 at 56); and

· a method of preventing the fraudulent re-use of sales book dockets and books used in that connection (Re Brown (1899) 5 ALR 81).

17 The advent of computers has resulted in an elaboration of the concept of methods as patentable inventions: see Catuity at [118]–[122].

18 In the United Kingdom, Graham and Whitford JJ considered claims for computer programs. In Burroughs Corp (Perkins’) Application [1974] RPC 147 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.

19 In International Business Machines Corporation v Commissioner of Patents (1991) 33 FCR 218 at 224 Burchett J, in considering the patentability of a method and apparatus for producing curves on computer graphics displays, emphasised “useful effect” in distinguishing between discovery of a principle and the making of an invention. His Honour applied NRDC and considered the use to which the claimed algorithm was applied, namely to the operation of steps by computers to achieve an end in the production of an improved curve image.

20 A physically observable effect was also present in the claims in CCOM, in the retrieval of graphical representations of desired characters for the assembly of text.

21 In State Street Bank & Trust Co v Signature Financial Group Inc 149 F 3d 1368; 47 USPQ 2d 1596 (Fed Cir 1998), the United States Court of Appeals for the Federal Circuit held that a business system, a data processing system utilising a mathematical algorithm for implementing an investment scheme, constituted a practical and concrete application. This involved the transformation of data by a machine through a series of mathematical calculations to provide a share price fixed for recording and reporting purposes. The Court was careful to emphasise that a mathematical algorithm, formula or calculation was not patentable but the transformation of data by a machine that produced a useful, concrete and tangible result was patentable.

22 The United States Court of Appeals revisited the subject of patentable subject matter in the context of the manipulation of numbers in the field of computer technology in AT&T. The basic proposition was repeated, that a mathematical formula alone, viewed in the abstract, is unpatentable subject matter. As had the United States Supreme Court in Diamond v Diehr 450 US 175; 67 L Ed 2d 155 (1981), the Court of Appeals reaffirmed the principle that laws of nature, natural phenomena and abstract ideas are excluded from patent protection. The Court cited its earlier decision In re Alappat 33 F 3d 1526; 31 USPQ 2d 1545 (Fed Cir 1994) in which it explained the ‘straightforward’ concept on which previous decisions, including State Street were based, ‘namely, that certain types of mathematical subject matter, standing alone, represent nothing more than abstract ideas until reduced to some type of practical application’ (emphasis in original) (172 F 3d 1352 at 1357; 50 USPQ 2d 1447 at 1451). The subject matter, standing alone, is not entitled to patent protection. The claim was examined to determine whether it was a claim to the principle or to a process that uses the principle in order to produce a ‘useful, concrete, and tangible result’ (172 F 3d 1352 at 1357; 50 USPQ 2d 1447 at 1451). An application is not limited to a physical transformation, which was said to be an example of a useful application but not an invariable requirement. Where the claimed process did nothing more than take several abstract ideas and manipulate them together, nothing was added that was patentable.

23 Despite the broad terms of the United States Code (35 U.S.C. § 101), the courts of that country have held that abstract ideas, laws of nature and natural phenomena are outside the categories of patentable invention until reduced to some type of practical application (Diehr, State Street, Alappat). The same tests apply for patents for business methods as for any other claimed invention. The distinction was between the employment of an abstract idea or law of nature and the idea or law itself.

24 In Catuity, Heerey J distinguished between an abstract idea, a method of calculation or a business method (in the sense of a particular method or scheme for carrying on business) which his Honour described as non-patentable and a claim to a method and device for use in business, that is a practical operation of an abstract idea. His Honour drew a distinction between a technological innovation which is patentable and a business innovation which is not. His Honour did not accept that a physically observable effect was necessarily required, although he held such an effect was present in Catuity. 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], 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.

consideration

Patentability of business systems

25 Mr Grant, who appears in person, contends that the invention is a business system, as discussed in the Advisory Council on Intellectual Property, Report on a Review of the Patenting of Business Systems, September 2003 (‘the ACIP Report’) at 6. The Government response to the ACIP Report was in favour of the patentability of business systems.

26 We do not consider that the question here is whether a business system, in the sense of a system for use in a business, is or is not patentable. Patent protection is afforded to an invention that complies with the requirements of the Act, including manner of manufacture. The fact that a method may be called a business method does not prevent it being properly the subject of letters patent; see Catuity at [125]–[126].

Manner of manufacture

27 Mr Grant’s contentions on manner of manufacture, based on NRDC, can be summarised as follows:

· The claimed invention has economic utility.

· The state of affairs created by the trust, the gift, the loan and the mortgage is an artificial state of affairs within the meaning of that expression in NRDC.

· The invention is the method by which an artificially created state of affairs is itself created.

· The artificial state of affairs is that financial rights and obligations have changed.

· If the result of the scheme is an artificial state of affairs with economic utility, the principles enunciated in NRDC and as developed for the application of s 6 of the Statute of Monopolies apply and the claimed invention is a proper subject of letters patent.

· The documents that create the scheme are not part of the claimed invention.

· It is conceded that there is no physical object or physical phenomenon as part of the invention but none is required.

· It is not suggested that there was a new combination or new working of the integers of the claim being the different arrangements that make up the scheme.

· The “useful, concrete and tangible result” of the invention is an alternative to accepted asset protection methods that enable people to trade.

· The invention is a new use of a known substance in which the substance comprises a trust, a gift to the trust and a loan of money secured by a mortgage in a new use or purpose.

· The Deputy Commissioner wrongly applied NRDC in a rigid and formulaic, rather than a flexible, manner.

28 Mr Grant submits that Catuity did not require “a device” or “the application of technology” and, if it did, such a test imports, to use the words of NRDC at 264, ‘vague and malleable terms infected with too much ambiguity and equivocation’. In any event, he points out, if the documents constituting the trust, making the gift, detailing the loan or recording the mortgage are produced by computer, that test would be satisfied, as would a requirement for a ‘physical phenomenon’.

29 NRDC emphasised the need for the adaptability of the law of patents to cover technological developments. 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. CCOM provides a useful analysis of the development of patent law in this context. 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. As Gyles J concluded in Arrow Pharmaceuticals Ltd v Merck & Co Inc (2004) 213 ALR 182 at [87], cited by the Full Court in Merck at [23], a method that is in the nature of directions for use does not constitute an invention or a manner of manufacture. Neither in Merck, nor here, has some previously unrecognised property of an aspect of the method been discovered.

30 Contrary to Mr Grant’s submission, the method of his patent does not produce any artificial state of affairs, in the sense of a concrete, tangible, physical, or observable effect. It is quite 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 (at [128]). While there was not a physically observable end result in the sense of a tangible product, the invention involved an application of an inventive method where part of the invention was the application and operation of the method in a physical device. Within the concept of NRDC an artificial state of affairs was produced, a state of affairs created by the application or effect of the method.

31 What Mr Grant’s method results in is at best an abstract, intangible situation, namely that a hypothetical unsecured creditor who recovered judgment against a user of the method could not levy against the user’s assets to the extent they were subject to the charge. (We say at best because the application of the Bankruptcy Act 1966 (Cth) preference provisions and the laws against fraudulentconveyances have not been considered in this litigation; see Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 224 ALR 280 at [21]–[24].)

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.

Are legal discoveries inventions?

33 We therefore conclude that, for reasons related to its operation and effect, Mr Grant’s alleged invention does not involve a manner of manufacture. There is a separate issue as to whether, quite apart from what might be called its lack of physicality, the alleged invention lies in a realm of human endeavour outside those in which patents may be granted. The fine arts are one such area. In NRDC the Commissioner unsuccessfully argued that agriculture and horticulture was another.

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.

Must a patentable process result in an application of science and technology?

35 There is also the question whether the realm of human endeavour in which patents may be granted can be defined positively as that of science and technology.

36 Article 27(1) of the World Trade Organisation Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) provides that patents shall be available in all fields of technology, provided that they are, inter alia, capable of industrial application. The latter expression is said to be synonymous with “useful”. The concept of invention is not, however, necessarily limited to traditional areas of science and engineering.

37 In Re Peter Szabo and Associates Pty Ltd (2006) 66 IPR 370 at [36] the Deputy Commissioner expressed the opinion that the concept of ‘an artificially created state of affairs’discussed by the High Court in NRDC required ‘the application of science or technology in some material manner’.

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.

The use of known products

39 In any event, it was not suggested that there was some specific interaction between the steps that effected a new working. Rather, the end result was effected by a mere taking of sequential steps, a collocation of integers rather than a new combination. Assuming novelty, the proposed scheme represents a new use of known products (a trust, a gift, a loan and a security) with known properties for which their known properties make them suitable (the creation of a structure of financial rights and obligations or even a change in the person’s legal circumstances). That is not the proper subject of letters patent (NRDC; Commissioner of Patents v Microcell Ltd (1959) 102 CLR 232).

Natural justice

40 Mr Grant contends that he was denied procedural fairness by the primary judge as the case was decided on a ground not put to him and expressly abandoned by the Commissioner. The primary judge said at [20] that the principle that seemed critical and which formed the basis for her Honour’s conclusion ‘is the principle that an invention should only enjoy the protection of a patent if the social cost of the resulting restrictions upon the use of the invention is counterbalanced by resulting social benefits’. Her Honour made further reference to the public interest in the context of the payments of debts and protection of assets. Neither before the primary judge, nor in this appeal, has the Commissioner relied upon any balancing of private and public interests.

41 Before the primary judge, Mr Grant submitted that the invention resulted in an artificially created state of affairs which has utility in the field of economic endeavour. The economic significance was the protection of an asset. The Deputy Commissioner accepted that the claimed invention had economic utility to those who would wish to avail themselves of the scheme.

42 The High Court in NRDC at 277 did discuss the economic significance of an invention and referred to economic utility. The primary judge looked to the words in NRDC at 275, which spoke of the method having ‘value to the country…in the field of economic endeavour’. Her Honour determined that the claimed invention had no utility of value to the country and would not add to the economic wealth of the country or benefit Australian society as a whole or advance the public interest; rather it was contrary to the public interest in individuals paying their debts as and when they fall due. Accordingly, her Honour held, the claimed invention was not a proper subject of letters patent.

43 The Commissioner did not support that aspect of the reasoning of the primary judge and we do not find it necessary to discuss the requisite economic benefits of the alleged invention. Further, immediate economic utility may not be able to be demonstrated by some inventions yet to be commercially developed but that is not to say that they are not patentable.

44 It is not relevant, in our view, that some may think that a method or product will not advance the public interest. Once a product or process has been patented, its use is subject to the laws of the land, such as (to take but a few examples) those concerned with environmental protection, pharmaceutical product approval and occupational health and safety.

45 Nor is the Court in a position to determine the balance between social cost and public benefit. Parliament has already made that judgment, as its predecessor did in 1623, by rewarding innovation with time-limited monopoly.

costs

46 Mr Grant submits that, in the event that the appeal is dismissed, he should be entitled to the costs of the hearing before the primary judge. There is no basis upon which the Commissioner should pay the costs of the hearing before her Honour. Mr Grant did refer in general terms to the Federal Proceedings (Costs) Act 1981 (Cth), but this legislation does not apply because the appeal has not succeeded: see ss 6 and 7.

conclusion

47 Mr Grant’s asset protection scheme is not unpatentable because it is a “business method”. Whether the method is properly the subject of letters patent is assessed by applying the principles that have been developed for determining whether a method is a manner of manufacture, irrespective of the area of activity in which the method is to be applied. It has long been accepted that “intellectual information”, a mathematical algorithm, mere working directions and a scheme without effect are not patentable. This claim is “intellectual information”, mere working directions and a scheme. It is necessary that there be some “useful product”, some physical phenomenon or effect resulting from the working of a method for it to be properly the subject of letters patent. That is missing in this case.

48 The appeal is dismissed. The appellant is to pay the respondent’s costs of the appeal.

I certify that the preceding forty eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Heerey, Kiefel and Bennett.

Associate:

Dated: 18 July 2006

The Appellant appeared in person.

Counsel for the Respondent:	D K Catterns QC

Solicitor for the Respondent:	Australian Government Solicitor

Date of Hearing:	28 February 2006

Date of Judgment:	18 July 2006

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