Encompass is still too abstract to be patentable subject matter

A Full Bench[1] of the Federal Court’s appeal jusrisdiction has dismissed Encompass’ appeal against Perram J’s ruling that its computer-implemented method was not a patentable invention because it was not a manner of manufacture.

Encompass had two innovation patents covering its concept. It sued Infotrack for infringing them. Infotrack admitted its conduct would infringe, but contended the patents were invalid on the grounds that they did not claim a manner of manufacture and did not involve “an innovative step”.[2]

At first instance, amongst other things, Perram J found the claims did involve an innovative step, but were not patentable because they were not for a manner of manufacture.

Infotrack was joined in resisting the appeal by the Commissioner of Patents (appearing as of right pursuant to r 34.23. The Institute of Patent Attorneys also sought and obtained (on a limited basis) leave to intervene.[3]

The claimed invention

Encompass’ (innovation) patent claimed a computerised method and apparatus for displaying business intelligence about “entitites”. The idea seems to have been to facilitate searching of multiple third party electronic databases[4] to ascertain and present aggregated data about the “entity” of interest. Claim 1 provided:

A method of displaying information relating to one or more entities, the method including, in an electronic processing device:

a) generating a network representation by querying remote data sources, the representation including:

i) a number of nodes, each node being indicative of a corresponding entity; and,

ii) a number of connections between nodes, the connections being indicative of relationships between the entities; and,

b) causing the network representation to be displayed to a user;

c) in response to user input commands, determining at least one user selected node corresponding to a user selected entity;

d) determining at least one search to be performed in respective of the corresponding entity associated with the at least one user selected node by:

i) determining an entity type of the at least one user selected entity;

ii) displaying a list of available searches in accordance with the entity type; and,

iii) determining selection of at least one of the available searches in accordance with user input commands;

e) performing the at least one search to thereby determine additional information regarding the entity from at least one of a number of remote data sources by generating a search query, the search query being applied to one of the number of remote databases to thereby determine additional information regarding the entity; and,

f) causing any additional information to be presented to the user.

Crucially for the outcome of the appeal, the Court noted at [30] that neither claim 1 nor any of the other claims “characterised” the electronic process device which performed the method – “any suitable process system” may be used.

Encompass’ challenge

Basing itself on NRDC and CCOM, Encompass argued that the concept of manner of manufacture required the claim to give rise to an artificially created state of affairs which had economic significance. These requirements were satisfied, Encompass argued, because the claimed invention involved:

(a) the interrogation of remote data sources;

(b) the generation and display of the network representation;

(c) the interaction with the network node to initiate a further search;

(d) the determination that the results thereby produced relate to the same entity as the one produced from the first search (the contention that this is a step of the claimed method is an issue in this appeal); and

(e) the display of the results of that search.

Encompass argued that Perram J had erred by considering whether the claimed invention “improved the functionality of the machine”. This was said to be an erroneous incorporation of the “machine or transformation” test from US law.

The appeal

Despite what it described as the “oblique attacks” made by Encompass and IPTA on Research Affiliates and RPL Centrol, the Court considered at [77] the appeal did not raise any significant question of principle. Their Honours considered that, having regard to the submissions made by Encompass and IPTA, the correctness of the two earlier decisions was not seriously in doubt. Rather, the issue was whether Perram J had applied the principles from those cases correctly.

The Court started by noting that the High Court in Myriad had agreed with NRDC that the issue is whether the claimed invention is a proper subject for the grant of a patent.

At [80], therefore, the Court noted that to determine whether a claimed invention involves a manner of manufacture requires a characterisation of the claim.

At [81], the Court reiterated that this characterisation is to be undertaken as a matter of substance rather than merely as a matter of form.

At [83], the Court noted the Myriad majority had held the NRDC court had not been attempting an exhaustive definition of “manner of manufacture” when it referred to ‘an “artificially created state of affairs of economic significance”’. Further, the satisfaction of that formulation did not necessarily lead to a finding of “inherent patentability”.

Encompass’ reliance on the reasoning in CCOM was misplaced. The Full Court in CCOM had explained why the computer program in that case was a manner of manufacture in the following terms:

The NRDC case at 275–277 requires a mode or manner of achieving an end result which is an artificially created state of affairs of utility in the field of economic endeavour. In the present case, a relevant field of economic endeavour is the use of word processing to assemble text in Chinese language characters. The end result achieved is the retrieval of graphic representations of desired characters, for assembly of text. The mode or manner of obtaining this, which provides particular utility in achieving the end result, is the storage of data as to Chinese characters analysed by stroke-type categories, for search including “flagging” (and “unflagging”) and selection by reference thereto.

First, however and as the High Court in Myriad had confirmed, this reaoning was a guide only and not a rigid formula.

Secondly, the Court rejected Encompass’ argument that the proposition in Grant that a manner of manufacture required a “physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation” was inconsistent with CCOM and Catuity. Rather, both CCOM and Catuity involved methods where a component was physically affected or a change in state or information in a machine.

The Court then confirmed that the presence of a physical effect in the broad sense envisaged in Grant was also not conclusive. (There being such a transformation in the electronic processing device’s state by performing Encompass’ method.) The question was whether the claimed invention as a matter of substance transcended an abstract idea or mere information.

Encompass’ claimed invention did not provide sufficient specificity to transcend the abstract idea. At [99], the Court explained:

99 the method claims in suit are, in truth, no more than an instruction to apply an abstract idea (the steps of the method) using generic computer technology. The appellants endeavoured to explain why the claimed method falls within the notion of an artificially created state of affairs by attributing computer functionality to the method: the computer (or, in the language of the claims, the electronic processing device) searches remote data sources; the computer generates a network representation; and the computer responds to a user’s selection to conduct a further search. The appellants also attributed computer functionality to the method by the computer determining additional information relating to the same entity. As we have previously noted, this involves the contentious question of “entity matching”—a step which the primary judge found was not a step in the claimed method. We discuss this below when dealing with the grounds relating to innovative step. But even if for present purposes “entity matching” is taken to be a step in the claimed method, neither it nor the other steps, individually or collectively, amount to anything more than a method in which an uncharacterised electronic processing device (for example, a computer) is employed as an intermediary to carry out the method steps—where the method itself is claimed in terms which amount to no more than an abstract idea or scheme. (emphasis supplied)

The Court accepted that Encompass’ method could not be implemented using “generic software”. This did not save the claims as they did not specify as an essential feature of the invention any particular software or programming. It was left to a user of the method to devise and implement their own suitable computer program. According to the Court, this was merely an idea for a computer program. As in Research Affiliates and RPL Central, at [101] the Court characterised Encompass’ claims as merely a “method … in an electronic processing device”, which itself is not characterised.”

Finally, the Court at [105] – [110] rejected Encompass’ criticism that Perram J had improperly required the claimed method to result in “an improvement in the computer” by reference to the Research Affiliates court’s discussion at [104] – [105] to Alice Corporation in the USA. The Court considered that Perram J’s reference to these matters, properly understood, was just “an inquiry into and search for possibly patentable subject matter by reference to a touchstone of such subject matter.”

So, there you have it; all cleared up!

Next up, the Commissioner’s appeal (NSD66 of 2019) against the finding that Rokt did claim a manner of manufacture.

IPTA’s intervention

The Court summarised IPTA’s intervention as seeking to contest the Commissioner’s approach to computer related inventions. The Court outlined how it understood IPTA’s proposed intervention:

72 IPTA’s submissions took issue with the Commissioner’s statement that, in considering the patentability of computer-implemented methods, a key consideration is determining where the alleged ingenuity lies. IPTA submitted that this statement is “misconceived” because it intrudes questions of novelty and inventive step into the question whether the invention is a manner of manufacture; it suggests that the way in which the method is implemented in the computer is decisive and directs attention away from the method as claimed; and it suggests that a method characterised as a business method or a scheme is unpatentable, whereas it is only methods or schemes that are no more than a method of doing business or an abstract idea (with no practical application or effect) that are not patentable.

73 IPTA submitted that the Commissioner’s “misconceptions” had become established practice when examining patent applications. IPTA said that this was of “central concern to IPTA and its members’ clients seeking patent protection for their inventions”. IPTA said, further, that these “misconceptions” are reflected in the Australian Patent Office Manual of Practice and Procedure (the Manual) on which the Commissioner’s delegates rely for authoritative guidance in the examination of patent applications. IPTA argued that this has “led … to a confused state of affairs in the examination of computer-implemented inventions, and will cause examination of many such applications to miscarry”.

The Court, however, refused to buy into this fight on the grounds that the correctness or otherwise of the Commissioner’s earlier decisions was not a controversy before the court. The Court also refused to engage with what it described as “IPTA’s editorial comments” on the Manual of Practice and Procedure.

Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161 (Allsop CJ, Kenny, Besanko, Nicholas and Yates JJ)


  1. A sitting of the Full Court constituted by 5 judges, rather than the more usual 3 judges. A bench of 5 judges appears to be appointed where there appear to be inconsistent rulings of differently constutited (3 Judge) full courts or there may be some compelling reason to doubt the correctness of an earlier decision.  ?
  2. Patents Act 1990 s 18(1A).  ?
  3. IPTA’s intervention sought to challenge the Commissioner’s approach to computer related inventions  ?
  4. For example, land registries, ASIC company records, police records “or the like”.  ?

A new approach to business method patents Down Under?

Patent Baristas has a guest post from Bill Bennett at Pizzeys on the Deputy Commissioner’s rejection of a patent application for (as described by the Deputy Commissioner):

“a method for commercialising inventions that includes the step of applying for patent protection. The specification indicates that the method is intended to facilitate the uptake of commercialisation of inventions taking into account the restricted timeframe to file for intellectual property rights and the effect of automatic patent publication. The latter is a reference to the practice in most jurisdictions of publishing patent applications 18 months after their earliest priority date.”

Claim 1 reproduced in the Deputy Commissioner’s decision reads:

1. An invention specific commercialization system to facilitate success of inventions, the system including the steps of:
a) applying for patent protection for the invention in a country which is party to the Paris Convention,
b) conducting a review of specific commercialization process required by the invention,
c) preparing a research and development plan, testing the business dynamics of the invention,
d) conducting prototype testing, developing a prototype cost/benefit analysis,
e) determining product positioning and packaging,
f) conducting a manufacturing checklist,
g) entry of the information collected in steps a) to f) into an electronically fillable checklist having a prescribed time limit for each step to form a commercial entry strategy (CES) with a number of sub-steps, the CES prepared on the basis that each of the sub-steps in the CES are to be completed by a corresponding deadline, all deadlines falling within 30 months from the earliest priority date of the patent application, the checklist being computer-implemented and stored in computer or human readable format in data storage means and associated with processing means to allow updating of the checklist; and
h) policing compliance with the deadlines for the completion of the sub-steps through the production of reminders based on the prescribed time limits in the checklist to ensure that all sub-steps are completed within the deadlines.

At the risk of seeming glib and/or flip, one might think this was a checklist for the commercialisation of “an invention”, where one of the items on the checklist includes applying for patent protection, and using a calendaring system to generate reminders so you don’t miss a deadline.

Wonder what business managers and patent managers have been using Excel, Outlook and any number of computerised database for until now?

Any how, Mr Bennett’s blog, focusing on the “electronically fillable” and “computer-implemented” wording in the claim, contends that the Deputy Commissioner has reinterpreted Grant (you remember: the asset protection method (formerly known as a trust) in light of the US Supreme Court’s ruling in Bilski so that the production of a physical effect will lead to a “manner of manufacture” only where the effect is:

of such substance or quality that the method considered as a whole is “proper subject of letters patent according to the principles which have been developed for the application of s. 6 of the Statute of Monopolies”.

(Do read Mr Bennett’s more detailed consideration.)
However, this seems to confer on the Commissioner a rather wide discretion. Was it really necessary?

Invention Pathways Pty Ltd [2010] APO 10

In re Bilski

Patently-O has extracts from and links to transcripts of the oral argument before the US Supreme Court and some informed reportage.

Also, make sure you read Prof. John Duffy’s rebuttal of the charge that the Federal Circuit’s decision in State Street “opening the floodgates” to business method patents is a case of judicial activisim gone wild.

Then ask yourself, would the world really be a better place if we all adopted the European practice of banning the patenting of  business methods and computer programs “as such“?

Selected microblog posts for week ending 21/8/09


In re Bilski

Bilski et al. have filed their written brief in their appeal to the US Supreme Court over the Federal Circuit’s disallowance of their “business method patent” – a method for managing risk when buying or selling energy commodities.

Patently-O has a guest blog analysing the submission and quite a range of comments.

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Bilski v Doll

The US Supreme Court granted certiorari overnight. So, we’ll eventually get to find out about the patentability of business methods in the US.

Patently-O reports the questions are:

Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

Scotusblog has links to the docket and the rounds of briefs here.

The comments on Patently-O anticipate the end of State Street and business methods in the USA.