Business method patents — Australian Full Court clarifies patentability

To be
patentable in Australia:

A business method must produce a
‘useful product’ – a
physical phenomenon or effect resulting from the working of the method. It must be more than mere
‘intellectual information’.

An alleged invention need not be an
application of science or technology.
However schemes relating to the operation of the law are not suitable
subject matter for patent protection.

Grant v Commissioner of Patents
[2006] FCAFC 120
(18 July 2006).


drafting practice

Due to
international jurisprudence, it has always been good practice to ensure that business
method patent specifications include at least some physical manifestation or
technical element. The simplest way to
effect this is of course to include embodiments which utilize a computer or
computerized network in order to work the invention. This practice has now been fully validated
in Australia.

While Mr
Grant may choose to appeal to the High Court, it is unlikely that leave would
be granted. Consequently, this is
likely to be the last word on patentability of business methods from the Australian
appellate courts for some time to come.

What is a
‘physical effect’?

definition of a ‘physical effect’ is obviously critical as it
defines the boundary of patentability.
The Full Court
did not provide a detailed definition of this term, perhaps leaving this to
the interpretation of future judges in the context of each case as it arises
— and rightly so.

the Full Court
provided guidance by stating amongst other things that:

  • the required physical effect
    must be a concrete effect or phenomenon or manifestation or
  • 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

In relation
to Mr Grant’s asset protection method, the Full Court stated:

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.’


History of
the proceedings

decision is the second appeal from a decision of the Deputy Commissioner of
Patents: Stephen John Grant [2004] APO 11 (26 May 2004).

In the
original decision, the Deputy Commissioner revoked Innovation Patent No. 2003100074 entitled ‘Asset Protection Method’
on the basis that the invention claimed did not involve a manner of
manufacture. The second instance
appeal (to the Federal Court) affirmed revocation of the patent: Grant v Commissioner
of Patents [2005] FCA 1100
(12 August 2005)

(The patent
in issue was an Innovation Patent, but this has no bearing on the question of
patentability as the same test for patentability applies.)

The claimed

Claim 1 of
AU 2003100074 read:

An asset protection method for protecting an asset owned by an owner, the
method comprising the steps of:

establishing a trust having a trustee,

(b) the owner
making a gift of a sum of money to the trust,

(c) the
trustee making a loan of said sum of money from the trust to the owner, and

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

non-patentable methods

The Full Court gave
the following examples of non-patentable methods:

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
(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).

the Full Court
referred to similar cases in the UK
and USA
to support its view:

Corp (Perkins’) Application
[1974] RPC

Business Machines Corporation’s Application
[1980] FSR

Street Bank & Trust Co v Signature Financial Group Inc

149 F 3d 1368; 47 USPQ 2d 1596 (Fed Cir 1998)

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