Business Method patents and the whole issue of “patent eligibility” raises its controversial head yet again, with the UK courts recently endorsing a patent office refusal to grant Australian entrepreneur and solicitor Neal Macrossan a patent for “an automated method of acquiring the documents necessary to incorporate a company. It involves a user sitting at a computer and communicating with a remote server, answering questions”.

The court summarised the invention thus:

“The essence of the invention is that by means of posing questions to a user in a number of stages, enough information is gleaned from the user’s answers to produce the required documents. Questions posed in the second and subsequent stages are determined from previous answers provided and the user’s answers are stored in a database structure. This process is repeated until the user has provided enough information to allow the documents legally required to create the corporate entity to be generated. A number of document templates are also stored and the data processor is configured to merge at least one of these templates with the user’s answers to generate the required legal documents. The documents may then be sent in an electronic form to the user for the user to print out and submit, mailed to the user, or submitted to the appropriate registration authority on behalf of the user”.

The Court set out a four-step test that examiners should use when deciding whether inventions relating to business methods and software are patentable:

i) properly construe the claim
ii) identify the actual contribution;
iii) ask whether it falls solely within the excluded subject matter;
iv) check whether the actual or alleged contribution is actually technical in nature.

Applying this test, the court held that Macrosann’s “contribution” was nothing more than merely implementing (via computer) a job that is otherwise done by a solicitor or company formation agent. i.e. helping a client procure necessary forms and fill them out in order to incorporate a company. Thus the claim failed as an application for a business method patent. It appears that Australian lawyers (such as Neal Macrosann) are particularly creative when it comes to thinking up new legal-business methods. In Grant vs Commissioner, a lawyer filed an application claiming a method for securing assets by using a particular trust structure. The claim read:

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,(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 asset.

In effect, such a patent would help debtors avoid their debt by creating a trust. The Supreme Court endorsed the refusal of the grant by the patent office. Interestingly, a lower court based its decision on “public interest”, holding that such a patent would not add to the economic wealth of Australia. Lawyers helping clients avoid their legal obligations is one thing–but now claiming patents over it is something else altogether…

To appreciate this case better, one has to bear in mind the traditional ‘Patent eligibility’ vs patentability distinction. Patent eligibility broadly refers to the requirement that a subject matter for which a patent is sought be inherently suitable for patent protection, in the sense of falling within the scope of subject matter that patent law prima facie exists to protect. The term ‘patentability’, on the other hand, refer to those set of principles that inform the requirements that must be satisfied for a patent eligible subject matter (i.e., an invention) to be granted a valid patent. Principally they are the requirements of novelty, inventiveness (non-obviousness), utility (industrial applicability) and sufficient description.

As noted by Professor David Vaver Invention in Patent Law: A Review and a Modest Proposal 11 (3) Intl J Law and IT (2003) 287 (incidentally my PhD supervisor at Oxford):

Analytically, this proposition exemplifies the familiar Aristotelian dichotomy between essence/kind on the one hand, and attributes/quality on the other, also reflected in other intellectual property laws. Thus, in copyright law, what qualifies as an artistic work (its ‘essence’ or ‘kind’) is analytically distinct from the question whether the work is ‘original’ or not (its ‘attribute’ or ‘quality’).

However, he later cautions in a footnote that ‘the distinction between kind and quality cannot be pressed too far. For example, one might fairly argue that novelty and non-obviousness are part of an invention’s essence’.

In short, the term ‘patent eligibility’ or ‘inherent patentability’ denotes limitations in terms of the kind of ‘subject matter’ that would qualify for patent protection– this question is different from and often precedes the question of whether the said subject matter meets the ‘patentability’ criteria.

In most member countries, the principle of patent eligibility is embodied in the term ‘invention’ i.e. a poem, though new and useful, cannot be patented, since it is not an ‘invention’. Section 3(l) of Indian Patents Act which excludes ‘a literary, dramatic, musical or artistic work…’. See also Article 52 (2) (b) of the European Patent Convention (EPC) which similarly excludes all ‘aesthetic creations’. This is true with TRIPS as well, with Article 27.1 drawing a sharp distinction between patent eligibility and patentability, by its use of the term ‘invention’. It states, in pertinent part that, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.

The US Supreme Court, guided by its Chakraborty philosophy that ‘everything under the sun is patentable’ once again reflected its hesitation in laying down any specific ‘patent eligibility’ principle by ducking the issue in the metabolite case (Metabolite Laboratories Inc and Competitive Technologies Inc v Laboratory Corporation of America Holdings). The issue here was whether a patent covering the co-relation between high levels of homocystine and a Vitamin B12 or folic acid deficiency is invalid because it covers a ‘law of nature’ or ‘natural phenomena’. The relevant claim in the patent describes a 2 step method involving: a) assaying a sample for high levels of homocysteine: and b) co-relating a value higher than a certain number to a Vitamin B12 or a folic acid deficiency.

A recent article notes in this regard:

In the Metabolite case the Court passed on the opportunity to reverse the Federal Circuit and hold that a medical diagnosis of a vitamin deficiency based on the results of an unpatented blood test is the type of process that should not be patentable. Although it surprised some that the Metabolite patent was upheld as valid, this Article shows that the federal courts’ abandonment of any subject matter gate-keeping role has occurred as a gradual process over the last several decades. Metabolite is simply a far point on this continuum. This Article further demonstrates, through economic modeling and a case study of business method patents, that the courts’ abandonment of their gate-keeping role is bad for society, because it results in patents being granted in areas in which inventors do not need the incentive of monopoly grants. Accordingly, this Article suggests that the gatekeeper role be revived, possibly by way of Congress’s delegation of the role to an administrative agency.

Is the patent eligibility versus patentability test one that ought to be maintained? If we take the law of nature exception too far, wouldn’t all inventions be excluded as involving a principle of nature of some sort? At what point in time does a principle of nature convert to a patentable invention OR in other words, how much of a concrete embodiment ought we to have prior to granting a monopoly.

On another note, if the real problem with Metabolite is the fear of preventing doctors from carrying out their oath to cure in all circumstances, then, cannot this issue simply not be redressed by carving out a medical defense exception for doctors? Further, if the problem with the claim is that it prevents people from thinking about the co-relation between high levels of homocysteine and a vitamin deficiency, then what is the impact of this claim anyway? How will a patent owner enforce it, unless such mental method is actually applied in practice (e.g. by a doctor). A recent conference at the George Washington University Law School (GWU) (where I teach now) tackles these interesting issues. For more information on the symposium, please see . To see the webcast, see

Shamnad Basheer

Shamnad Basheer

Prof. (Dr.) Shamnad Basheer founded SpicyIP in 2005. He's also the Founder of IDIA, a project to train underprivileged students for admissions to the leading law schools. He served for two years as an expert on the IP global advisory council (GAC) of the World Economic Forum (WEF). In 2015, he received the Infosys Prize in Humanities in 2015 for his work on legal education and on democratising the discourse around intellectual property law and policy. The jury was headed by Nobel laureate, Prof. Amartya Sen. Professional History: After graduating from the NLS, Bangalore Prof. Basheer joined Anand and Anand, one of India’s leading IP firms. He went on to head their telecommunication and technology practice and was rated by the IFLR as a leading technology lawyer. He left for the University of Oxford to pursue post-graduate studies, completing the BCL, MPhil and DPhil as a Wellcome Trust scholar. His first academic appointment was at the George Washington University Law School, where he served as the Frank H Marks Visiting Associate Professor of IP Law. He then relocated to India in 2008 to take up the MHRD Chaired Professorship in IP Law at WB NUJS, a leading Indian law school. Later, he was the Honorary Research Chair of IP Law at Nirma University and also a visiting professor of law at the National Law School (NLS), Bangalore. Prof. Basheer has published widely and his articles have won awards, including those instituted by ATRIP, the Stanford Technology Law Review and CREATe. He was consulted widely by the government, industry, international organisations and civil society on a variety of IP issues. He also served on several government committees.


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