On Friday, the Court of Appeal delivered its judgment in the Aerotel and Macrossan cases. The former required a ruling on the meaning of the ‘business method as such’ exception to patentability, while the latter also required a ruling on the ‘computer program as such’ exception to patentability.

The application in Aerotel was for a telephone system, claims 1 and 9 of which read:

"1. A method of making a telephone call from any available telephone, comprising: obtaining a special code by making a prepayment; inserting the prepayment in a memory in a special exchange and being allocated to the special code in the memory for use in verifying a calling party call; dialling the special exchange when a telephone call connection is desired; inputting the special code for verification; inputting the number of called party; verifying at the special exchange by checking the special code and comparing the prepayment less any deductions for previous calls in the memory with the minimum cost of a call to the called party station; connecting the called and calling parties' stations in response to said verification; monitoring the remaining prepayment less deductions for the running cost of the call; and disconnecting the call when the remaining prepayment has been spent by the running cost of the call.
9. A telephone system for facilitating a telephone call from any available telephone station, comprising:
means for coupling a calling party station to a special exchange;
memory means in the special exchange for storing customer special codes and prepayment information individual to each customer;
means for verifying the calling party responsive to a code transmitted from the calling party station to the special exchange so as to verify that the code matches the special customer code in the memory means and the calling party has unused credit; and
means for connecting said calling party station to a called station responsive to the verification."

The application in Macrossan (as summarised by Mann J) was 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 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'

Both were found to be caught by the exceptions by the High Court, and both resulted in an appeal to the Court of Appeal.

Their Lordships held that the correct approach to the exceptions is 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.

This was said to be a ‘reformulation’ of the Merrill Lynch and Fujitsu tests.

Applying this test, Aerotel’s appeal was successful. The system was new,and constituted a new physical combination of hardware (steps 1 and 2). It was clearly more than a mere business method (step 3) and it was technical (step 4).

However, Macrossan’s appeal was unsuccessful. The contribution (step 2) was an interactive system which will do the job which otherwise would have been done by a solicitor or company formation agent. Questions are asked, the answers incorporated in the draft, and depending on some particular answers, further questions are asked and the answers incorporated.
Contrary to Mann J’s ruling, a business method need not be abstract, nor need it result in the completion of a transaction. Macrossan’s claim was for the business of advising upon and creating appropriate company formation documents, which clearly was not technical (steps 3 and 40. Thus the claim failed as an application for a business method patent.
Likewise, in relation to the computer program exception, the Court of Appeal ran the test thus:
There is no difficulty over step 1. Step 2 – what is the contribution? – is again straightforward. It is to provide a computer program (in practice probably an interactive website) which can be used to carry out the method. The hardware used is standard and is not part of the contribution. Step 3 – is the contribution solely of excluded matter? – is again easy. The contribution is just the devised program up and running. Step 4 – is that contribution technical? – is again easy. No. So the exclusion applies.

The UK Patent Office has responded, saying that it will consider the Court of Appeal’s decision, and will issue a Practice Notice in the next few days.

The IPKat always favours clarity and so he welcomes the Court of Appeal’s nifty four-step test. He also notes the exception range of sources drawn on by the court: EPO Board of Appeal decisions, decisions of the ECJ, German decisions, US decisions, the book of Job and academic writings (this one makes the IPKat particularly happy).


  1. I missed Jacob LJ's use of Job - can you point me to a paragraph?

  2. Sensible input required!

    I've only read this judgement through the once, so far, on Friday evening at that, but the four step test seems far from nifty, to me. In particular, how do you work out what the contribution is? Is it the features that are novel and inventive (like the CFPH "advance")? Not according to Jacob who says that you should be able to work out whether something is patentable just by looking at it, not by considering the other requirements. But then why does he refer to the contribution in Aerotel as being a "new" system?

    Anyway, the important question I need answering is "Does the reasoning on the Aerotel patent open the way to patenting computer implemented business methods?"

    Here's an example. I develop a new and inventive (in that the prior art does not suggest it) business method. To implement the business method, I need to create a new computer system (even though that computer system is trivial once the business method is developed). That new system could be as simple as adding an additional server programmed to implement the business method to the Internet. I have contributed a new computer system to the art, which is clearly not a business method, and is clearly technical.

    I have an invention because of the new system aspect. That invention is new and inventive because of the business method aspect. Therefore, according to Jacob in para. 53, I can have a patent.

    What is wrong with this picture? Admittedly the Macrossan part of the reasoning (para. 63 and 73) implies this is not sufficient to get a patent, but why was it sufficient for Aerotel?

    To me, if Macrossan had chosen to argue his case by drawing a picture of the Internet and then adding a new server on to it, he would have persuaded Jacob he had contributed an invention!

  3. There is a discussion in para 28 about whether it would be correct to describe Art.52(2) EPC as 'the Lord giveth and the Lord taketh away'. This is a minor corruption of Job 1:20-21:

    Then Job arose, and rent his mantle, and shaved his head, and fell down upon the ground, and worshipped,
    And said, Naked came I out of my mother's womb, and naked shall I return thither: the Lord gave, and the Lord hath taken away; blessed be the name of the Lord.

  4. IPKat knows her Tanach :-)

    What I think the Patent Office was asking for, with their 4 step test was:

    1. What does the patent mean ?
    2. How does it differ from the prior art ?
    3. Are there non-excluded physical integers which differ from the prior art ?
    4. If not, does it contribute a new overall effect in a non-excluded area ?

    -- essentially the approach used by Patent Office to analysing questions in this area in Decisions, going back a long time.

    Unfortunately the Patent Office perhaps didn't clarify sufficiently clearly the distinction between 3 and 4 to the judge, who when he uses the word "contribution" doesn't always seem to distinguish between the two very clearly.

    Aerotel (unfortunately, IMO) managed to persuade the judge that they were claiming new physical *hardware* in their "special exchanges", and thus a new physical network structure by incorporating them. I think a competent barrister from Telco would have ripped that to ribbons in short order; but so it goes.

  5. James,

    I haven't been able to face going back to our parallel debate on Wikipedia since Friday, so it's strange to find you here!

    Anyway, I can't agree with your interpretation of the new test. The reason to have steps 3 and 4 distinct from one another is, IMO, to account for the fact that the list of exclusions is not exhaustive. There may be other non-inventions not covered by the list which you can only recognise as such by their lack of "technicality". The Patent Office have been quite clever in recognising that the list of exclusions is "the lodestone" but that the "technical" test is also useful for cases where you can't quite fit something into any of the excluded categories.

    Your suggestion that the Patent Office wanted something physical in step 3 also cannot be correct. That places too much weight on the need for there to be a new device, something which the Patent Office and the courts have largely avoided (since it is placing substance over form). In fact, it's the root of my query above since the Aerotel reasoning seems to rely entirely on the creation of a new system.

    However, I have now realised that, while Jacob's reasoning concerning Aerotel is a bit impenetrable, he does support in paras. 90 to 92 (as he is forced to!) the previous CofA judgements that merely having new hardware is not enough and that a non-excluded contribution may exist either within or exterior to the computer.

    Maybe this judgement makes sense after all. Even though neither of us appear to yet understand why Aerotel was actually found to be patentable, he at least hasn't opened the floodgates to business methods in the way I had originally feared.

  6. In my view, the Aerotel/Macrossan approach focuses on the 'novel' rather than 'inventive' aspects of a patent - see wording of the test and explanation in [40] and [43]. In the Aerotel appeal, the novel aspect of the patent was to use a seperate, new exchange dedicated to this kind of telephone system as opposed to merely constructing a new *method* for using the existing system. The new exchnage was not technically 'inventive' but that is not part of this exclusion test so the patent was upheld.

    In Macrossan's appeal, the novel aspect of the patent was simpy a computer program that asked questions - a new method of doing something already done by a lawyer/agent. Connectign to the internet would not be a new system. However, if Macrossan had used some new kind of connecion methodology, as Aerotel supposedly did, this might have satisfied. The technology to acheive this system could have been unimaginative but the system itself would have to be a contribution to human knowledge.

    Does that make sense or am I oversimplifying? My knowledge of patent law is somewhat rudimentary!

  7. There appears to be no basis in the law that justifies identifying a contribution when deciding on exceptions to patentability. The analysis of whether differing features fall solely within the excluded subject matter or whether the contribution is actually technical in nature to me is the requirement for an inventive step. It can only be present if a technical problem is solved in a non-obvious fashion. If the contribution causes effects in non-technal fields only then there cannot be a solution to a technical problem hence, no inventive activity.
    The exclusions may be an aid when deciding on technicality. They can be considered as a non-exhausitive list of non-technical areas.
    Deciding on technicality appears to be the most challenging issue. Unfortunately, their Lordships' made not contribution in that respect.

  8. There appears to be no basis in the law that justifies identifying a contribution when deciding on exceptions to patentability.

    That depends on whether you consider "the claims as a whole" as the invention, or rather follow the core theory (whereby it's the contribution that must cumulatively fulfill the conditions of patentable subject matter, novelty, non-obviousness and industrial applicability).

    The analysis of whether differing features fall solely within the excluded subject matter or whether the contribution is actually technical in nature to me is the requirement for an inventive step.

    That's indeed the EPO practice, and that leads to decisions like this one...

  9. I am also not happy with the outcome of the KONAMI decision but I do not conclude that therefore the approach of the board was wrong. I believe the problem lies in the interpretation of the claim during the search phase. The difficulty is always to determine the relevant, i.e. technical elements of the claimed invention. The search examiner probably was not aware of what he should have in his focus. According to the board, the non-obvious technical contribution lies in displaying an edge indicator toward an object which is being outside the screen as a solution to the problem of interactive display screens which no longer show an interesting detail of a large map because the user zoomed into a picture.
    If the search examiner would have been aware that this was the crucial feature he might have found much better prior art, that would have led to a different decision of the board. In my opinion the board should have recognized that relevant prior art must have been available and asked for an additional search.

  10. We disagree then, because I do think that the fact that such an indicator can constitute a "non-obvious technical contribution" if no prior art is available demonstrates that the approach used by the TBAs is horribly broken.


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