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”.  ?

Productivity Commission implementation part 2

IP Australia has released draft legislation for the proposed Intellectual Property Laws Amendment Bill (Productivity Commission Response Part 2 and Other Measures) Bill 2018.

Schedule 1 of the proposed bill includes measures to:

  • amend inventive step requirements for Australian patents (to bring them into line with the imagined approach of the EPO;
  • introduce an objects clause into the Patents Act 1990
  • phase out the abomination innovation patent system.

Well, 1 out of 3 is not so bad.

Schedules 2 – 4 propose the mooted amendments to the Crown use provisions (both patents and designs) and the compulsory licensing provisions.

There are also streamlining measures and “technical improvements” in schedules 5 to 7.

Download the draft bill, the draft EM and consultation questions from here.

Written submissions are due by 31 August 2018.

Government response to Productivity Commission IP report

The Government has published its response to the Productivity Commission’s Intellectual Property Arrangements – Final Report.

Further comment will have to await. In the meantime, the media release notes:

A key priority will be to align Australian inventive step law with international best practice to ensure that the necessary protections are available to deserving inventions. The Government has also accepted the Productivity Commission’s recommendation to phase out the Innovation Patent System.

and, in not accepting the proposal to adopt a general “fair use” defence to copyright:

It is important copyright reform is considered in a holistic context rather than focused on individual issues. We will continue to work closely with stakeholders over the next 12 months to develop effective options for copyright reform.

The Australia Copyright Council is very pleased.

There will also be a new IP Policy Group (within government) to, er, monitor IP policy!

According to the Government’s Media Release, the Government is still considering the merits of a number of other proposals and “will work on these further”.

Australian Government Response to the Productivity Commission Inquiry into Intellectual Property Arrangements (pdf)

Media release 25 August 2017

Another Infringed Innovation Patent And A Delivery Up Question

Product Management Group (PMG) has lost its appeal from Middleton J’s finding that it infringed Blue Gentian’s innovation patents for a self extending/collapsing garden hose.

The appeal seems like a fairly straightforward application of construction principles and demonstrates, yet again, how slender an innovation need be to secure a monopoly for eight years.

There may, however, be a question for the future whether or not the “substantial contribution” to the working of the “invention” required by s 7(4) must be a positive contribution to the working of the invention.[1]

An interesting point is the Order Middleton J made for delivery up. His Honour did not just require delivery up of PMG’s unsold stock and componentry. In addition, by paragraph 3(c), his Honour ordered that PMG should contact the customers to which it hold sold the infringing products, offer them a refund and request that they return the products to PMG.

Nicholas J considered this travelled well beyond the purpose of an order for delivery up. His Honour considered that purpose was to relieve the infringer from the “temptation” of further infringing and so, in that sense, was in aid of the injunction. Nicholas J considered that an order requiring a party to try and retrieve property to which it no longer had any legal title could not fairly be described as in aid of delivery up and so would have set aside that part of the Order.

In circumstances where the Court had not been favoured with any oral submissions and only brief mention in written submissions, however, Kenny and Beach JJ were not persuaded that his Honour’s discretion miscarried and their Honours would let it stand in this case. However, they warned:

But our rejection of this ground should not be taken as any endorsement of this form of order for the future. We doubt that such an order would ordinarily be appropriate. We do not need to comment further.

This may pose an interesting dilemma for “convicted” infringers: object to such an order or, as the purchasers’ use of an infringing product would itself be an infringement, risk having the successful plaintiff require discovery and then suing the individual customers for infringement too.[2]

Product Management Group Pty Ltd v Blue Gentian LLC [2015] FCAFC 179


  1. Compare Kenny and Beach JJ at [178] to Nicholas J at [284].  ?
  2. On the approach taken vy Yates J in Winnebago (No 4). Of course, the plaintiff might not be willing to pursue individual purchasers of garden hoses, but what about Bunnings and the other hardware chains?  ?

Innovation patent consultation on the consultation

IP Australia has issued a consultation paper seeking the public’s view on (the now departed) ACIP’s recommendations for the innovation patent. Specifically:

IP Australia is seeking feedback from interested stakeholders on:

  • the ACIP recommendation that the government should consider abolishing the innovation patent system
  • any alternative suggestions to encourage innovation amongst SMEs.

Get your comments in by 25 September 2015

IP Australia’s consultation paper here (pdf or word). The ACIP report being “consultated” upon, via here and updated here.

ACIP on innovation patents

ACIP’s final report into Innovation Patents has been published.

Key points / recommendations:

  • ACIP can’t find evidence to support conclusion that innovation patents promote innovation

 

  • ACIP recommends that, if the innovation patent system be retained:

 

    • there be a new “innovation” threshold:

amending the Patents Act 1990 (Cth) to raise the level of innovation to a level above the current innovative step level, but below the inventive step level that applies to standard patents. A suitable level of innovative step would be provided by the test of inventiveness described by the High Court of Australia in Minnesota Mining & Manufacturing Co v Beiersdorf (Australia) Ltd [1980] HCA 9: (1980) 144 CLR 253; (1980) 29 ALR 29 with a modification to that test to include the current definition of what is relevant CGK. In order to be innovative an invention would need to be non-obvious by reference to CGK either within or outside the patent area but not by reference to prior art information that is not part of CGK at the priority date of the relevant claims of the innovation patent. This would be a lower threshold than is applied to standard patents, where the invention must be non-obvious by reference to the CGK and any piece of prior art.

I suppose that would at least be a test that requires some advance over the prior art and is (at least in theory) something which those of us who started growing up under the 1952 Act should be familiar with.

    • a request for examination must be filed within 3 years
    • the term “patent” be reserved for certified “patents” only;
    • exclude from innovation patents “all methods, all processes and all systems “.

The Government has indicated it will respond in due course.

ACIP’s Innovation Patent Inquiry page.

Link to the Final Report (pdf).

Innovation patents – further chance to protest

IP Australia is seeking comments on how the innovation patent system is working.

Since 2001, Australia grants 2 types of patent: the standard patent with a normal term of 20 years and an innovation patent with a term up to 8 years.

Ann innovation patent need show only an innovative step over the prior art to be valid. According to the Full Court in Delnorth, this requires a difference that the person skilled in the art would understand makes a substantialmaterial contribution to how the product / method works. As the Full Court acknowledged, this is nothing like the inventive step requirement for a standard patent.  See also the SNF case.

According to IP Australia’s website:

Since the Delnorth (2009) decision in the Federal Court, relatively obvious minor improvements to inventions have been patentable.  There has been an unusual growth of innovation patent applications for certain technologies. There is some evidence that larger companies might be using the innovation patent system to extend the life of their patents and deliberately targeting competitors.

ACIP is already undertaking a review into the innovation patent system as a whole. The consultation paper for this (IP Australia’s) review explains:

The Advisory Council on Intellectual Property is presently conducting a review of the Innovation Patent system as a whole. In the mid term, this will provide valuable insights and recommendations for improvements.

In the short term, however, there is a pressing need to address emerging risks of the Innovation Patent system being used in ways which would lead to undue costs to consumers and to businesses that compete with owners of Innovation Patents. For example, there is a need to ensure that Innovation Patents do not inappropriately extend the life of pharmaceutical patents and delay the introduction of less expensive generic medicines, leading to increased costs to consumers and an increase in government expenditure through the Pharmaceutical Benefits Scheme.

As a result, the Government proposes to amend the Patents Act 1990 to raise the threshold for inventiveness to the same level as for Standard Patents (Attachment A refers). This approach is consistent with the second tier patent systems operating in countries such as Germany and Japan.

Comments are requested by 25 October 2012.

You can download the consultation paper, Innovation Patents – Raising the Step (sic), via this page.

ACIP reviews innovation patents

On 28 February, the Minister directed ACIP to report on the innovation patent system.

On 17 August, ACIP published an issues paper (pdf) and now seeks your comments by 14 October 2011.

According to the announcement of the issue paper’s release:

In recent years a variety of concerns have been raised about the innovation patent system and whether it is meeting its original objectives. A key concern is that an innovation patent is overly difficult to invalidate and the remedies for infringement are overly generous. Another concern is that innovation patents are being used to obtain a form of quick protection for higher level inventions while a standard patent is being pursued. Also, the innovation patent system has never been reviewed to assess whether it remains effective and appropriate for Australia now and in the future.

Innovation patents (which are not for business schemes) are difficult to invalidate after Dura-Post? The Full Court confirmed that the test of ‘innovative step’ does not involve a sort of obviousness penumbra over common general knowledge. Rather, the patent is innovative unless it can be shown that the difference between the patent and the prior art do not make a substantial contribution to the working of the ‘invention’. This was apparently derived from Griffin v Isaacs. As the trial judge explained with the apparent approval of Kenny and Stone JJ at [70] and [79]:

Be that as it may, the feature of what Dixon J said was the disjunctive nature of the concepts – one was ‘make no substantial contribution to the working of the thing’; the other was ‘involve no ingenuity or inventive step’. The first alternative has been taken by Parliament virtually verbatim from the judgment. The focus is upon working of the invention (as claimed) not to the degree or kind of variation from the kinds of information set out in s 7(5). In other words, the variation from the kinds of information might be slight but, if a substantial contribution is made to the working of the invention, then there is an innovative step. … In my view the provenance of the phrase ‘make no substantial contribution to the working of the invention’ indicates that ‘substantial’ in this context means ‘real’ or ‘of substance’ as contrasted with distinctions without a real difference.

Rather than a modified inventive step test, it is a modified novelty test.

The Issues Paper runs to some 28 pages.

Interestingly, just over 11,000 innovation patents have been granted and 1,790 certified.Over 80% are to Australian inventors and around half are to Australian individuals as opposed to corporations (the proportion of certifications falls to 41%). The proportion of Australian grantees vs foreign appears to be falling over time.

1,011 of the grants are divisionals from applications for standard patents. For the first few years, that was about 5% of all divisional applications, but it has been at least 10% since 2006 with a couple of years getting closer to 14%. This leads to concerns that innovation patents are being used to get ‘quick’ rights.

There are also concerns that the pharmaceutical industry is using the system to ‘evergreen’ its patent portfolios.

The questions (although ACIP would like to take this opportunity to provoke discussion generally):

  1. Effectiveness in stimulating innovation
  2. Does Australia need a utility model?
  3. Does it cost too much?
  4. Is the cost of certification dissuading people from seeking certification?
  5. How do (people in) other jurisdictions jurisdictions perceive the innovation patent?
  6. Are there concerns about the uncertainty arising from the delays in getting certification?
  7. Are the current remedies appropriate?
  8. If the available remedies are reduced (e.g. you couldn’t get an injunction) would costs of (getting) an innovation patent be justified?
  9. How do you think the use of divisionals is working (and why did you do it)?

ACIP announcement

Issues paper (pdf)

Scope of disclosure in an innovation patent

Patentology has a nice summary of the innovation patentee’s successful appeal in Seafood Innovations Pty Ltd v Richard Bass Pty Ltd [2011] FCAFC 83.

One point: it seems like the disclosure in the body of the specification supporting the broadest claim was at a level of generality similar to that upheld by the High Court in the first round of Lockwood. Wonder how that will hold up for future application under the (proposed) Raising the Bar legislation?

Secondly, the (now) infringer’s best line of defence (apart from invalidity) seems to have turned on trying to argue (now unsuccessfully) that incorporating additional integers in the accused gutting machine to those specified in the claim. Bennett J gave it short shrift.

What’s the priority date for a divisional patent?

Mont has an innovation patent for a travel pack.

It sued Phoenix for infringing the innovation patent; Phoenix  counter-claimed for invalidity on the grounds of Mont’s own use commencing in October 2004.

Patents Act 1990 s 24 (read with Reg. 2.2(1A)) provides a patentee with a grace period: protecting the patentee against attacks on grounds of lack of novelty or inventive step/innovative step by reason of the patentee’s own authorised use or disclosure within the 12 months prior to “the filing date of the complete specification”.

The background was as follows:

In October 2004, it had started offering travel packs made according to the invention for sale.

In May 2005, it filed a complete application (with a complete specification) for a standard patent.

In November 2006, however, it filed a complete application (and of course a complete specification) for an innovation patent as a divisional application from the earlier standard application and this application matured into the innovation patent.

The trial judge had found that the “grace period” had to be calculated from the date of filing the complete specification for the divisional application, not the parent.

The Full Court has now allowed an appeal ruling that “the complete specification” referred to in reg. 2.2(1A) in the case of a divisional application is the complete specification for the parent.

Jagot J (with whom Emmett J agreed) explained the rationale:

76 By the provisions relating to divisional applications, the Act and Regulations establish a scheme in which an applicant may ensure that a claim for an invention that the applicant has previously disclosed in a complete specification as filed and which is within the scope of the claims of the complete specification as accepted takes a priority date as if the claim had been included in that earlier complete specification. The scheme thus ensures that the requirements of novelty and inventive step or innovative step for the claims within the divisional application (which are essential determinants of the validity of the patent application) are assessed by reference to a priority date established by the date of the earlier (or parent or original), rather than the later (or divisional) specification.
77 All features of this statutory scheme for divisional applications are consistent. Hence, the claims in any patent granted on a divisional application take the priority date of the claims in the earlier (or parent or original) application. Publications or uses of the claimed invention, after that priority date, cannot affect the validity of any patent granted. The term of any patent granted on a divisional application is also taken to have started on the same date as the date of the earlier (or parent or original) application.

76 By the provisions relating to divisional applications, the Act and Regulations establish a scheme in which an applicant may ensure that a claim for an invention that the applicant has previously disclosed in a complete specification as filed and which is within the scope of the claims of the complete specification as accepted takes a priority date as if the claim had been included in that earlier complete specification. The scheme thus ensures that the requirements of novelty and inventive step or innovative step for the claims within the divisional application (which are essential determinants of the validity of the patent application) are assessed by reference to a priority date established by the date of the earlier (or parent or original), rather than the later (or divisional) specification.

77 All features of this statutory scheme for divisional applications are consistent. Hence, the claims in any patent granted on a divisional application take the priority date of the claims in the earlier (or parent or original) application. Publications or uses of the claimed invention, after that priority date, cannot affect the validity of any patent granted. The term of any patent granted on a divisional application is also taken to have started on the same date as the date of the earlier (or parent or original) application.

Similarly Bennett J said [49]:

49 The scheme of the Act provides that, where the invention of the divisional was disclosed in the parent, the publication or use of the invention within 12 months before the filing date of the parent must be disregarded for the purposes of assessing the novelty and inventive/innovative step of each of the parent and the divisional, provided that a patent application for the invention is filed within the prescribed period. This applies where the divisional is of a parent standard patent or a parent innovation patent. Where the invention of the divisional was disclosed in the parent, the words “the complete application” in reg 2.2(1A) refer to the parent application and not to the divisional application.

Jagot J also provided a detailed rebuttal of Phoenix’ contentions.

Mont Adventure Equipment Pty Ltd v Phoenix Leisure Group Pty Ltd [2009] FCAFC 84

ps: IPTA was granted leave to intervene (and while advocating the view that the Full Court adopted, was ordered to pay any additional costs incurred by the parties as a result of the intervention).

pps:a patentee who needs to rely on a grace period to preserve the validity of the patent in Australia may well still lose the patent outside Australia where the grace period does not apply