November 2010

Business method patents before the Commissioner

Patent Baristas has a guest post from Bill Bennett at Pizzeys considering the Deputy Commissioner’s recent rejection of the “Iowa Lottery” patent application.

1. A prize pool for a lottery game played among a plurality of member lotteries, at least two of which are from diverse jurisdictions, the prize pool comprising:

a system of prize levels including a jackpot prize and at least first and second subordinate prizes;

a super pool of accumulated funds that is used to pay the jackpot prize and inflate the second subordinate prize; and

wherein, in a drawing having a jackpot prize winner in at least one jurisdiction, a member lottery in a jurisdiction without a jackpot prize winner pays out of its own funds the first subordinate prizes and contributes money to the jackpot winner and second subordinate prize winners in each jurisdiction having a jackpot winner, and

wherein one or more of the jurisdictions sets a jackpot prize limit such that money in the super pool in excess of the jackpot prize limit is awarded as second subordinate prizes.”

The third independent claim, claim 12 for a method added in (at least) using a computing device to calculate the allocations to the different prize pools.

In a world where Tattslotto and Powerball have existed for donkey years, apparently, the “exciting” element in this claimed invention was the ability of lottery operators in different states to combine.

The Deputy Commissioner appears to have considered that the claim was just to a mere scheme:

  1. I consider that the same can also be said in relation to all the subject matter of the present application. What is claimed, in whatever guise, is a scheme and not an artificially created state of affairs within the principles articulated in the NRDC decision. In considering the applicant’s submissions I note that in relation to claims 1-2 and 17 it is argued that Grant is distinguished because what is claimed is not a method and more significantly that the claimed prize pool is an artificially created state of affairs whose significance is economic. While clearly of economic significance and a creation of human activity, I however consider the prize pool to be merely information (ie the size of a potential future payment) generated in or reflective of the operation of the scheme defined in the claims. Information even if represented in a physical way has never been considered sufficient for patentability save for some material advantage or mechanical effect in the arrangement of the information. See for example Re Cooper’s Application for a Patent (1901) 19 RPC 53 and Re Virginia-Carolina Chemical Corporation’s Application (1958) RPC 35).
  2. I further do not consider the claiming of a product characterised by the features of a scheme by which it is produced or is affected, even if a real, physical thing, fundamentally alters the question of patentability over the claiming of the scheme as a method. Clearly Mr Grant would have had no better success had he claimed a house characterised by his asset protection scheme. As observed in the Virginia-Carolina decision care should be taken not to allow the form of words use to claim an alleged invention to cloud the real issues of manner of manufacture and it should not be the case that:

“claiming clauses ostensibly directed towards a manner of manufacture cloak the real nature of the applicant’s disclosure”

The Deputy Commissioner went on to reject another set of claims on the grounds that:

15 Obviously a financial transaction, or otherwise, the legal transfer of an asset, is not the sort of physical or observable effect that the Court [in Grant’s case] was referring to, and this is apparent from its reference to the situation in Welcome Real-Time v Catuity Inc [2002] FCA 445 finding at [30] that Mr Grant’s method [was not patentable]

The Deputy Commissioner did not think that reciting in a computer to do all the calculations helped. The change in state or information in the computer was not sufficiently substantial to secure a patent. In this connection, at Patent Baristas, Mr Bennett is concerned by the Deputy Commissioner’s statement in [17] that:

…. As I indicated in my decision in Invention Pathways Pty Ltd [2010] APO 10 I do not believe there is any authority in Australian law for the proposition that the mere identification of a physical effect is sufficient for patentability. It must in my view be an effect “…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” ”.

Iowa Lottery [2010] APO 25

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A case of (un) parallel imports

BTB holds a licence to make and sell “Greg Norman” branded clothing in India from Greg Norman Collection Inc (GNC). GNC is the “head licensor” of the “Greg Norman” trade marks registered in, amongst other places, India and Australia.

By clause 2.4 of the licence agreement, BTB agreed not to sell the branded clothing it made outside India without GNC’s consent:

LICENSEE acknowledges that this License is limited to the TERRITORY defined herein, and agrees not to sell LICENSED PRODUCTS to anyone other than its regular retail customers in the TERRITORY in the normal course of trading, and further agrees that it will not sell LICENSED PRODUCTS destined directly or indirectly for sale outside the TERRITORY without the prior written approval of GNC.

Sunsport operates mainly in Pakistan, but also has a representative in Singapore, Mr Wadhwani. Mr Wadhwani also operates a business, PT International which, amongst other things, supplies product to the second respondent in Australia.

Sunsport told Mr Wadhwani that it could source genuine Greg Norman branded merchandise from BTB. Mr Wadhwani told the principal of the second respondent, Mr Dwyer, this. Mr Dwyer checked out GNC’s website and established that BTB was an authorised licensee of GNC and placed an order with Mr Wadhwani from BTB’s catalogue.

Sunsport placed an order with BTB for a shipment of clothing, apparently to be delivered to Pakistan via Singapore. When the shipment reached Singapore, however, PT International on sold the goods to Mr Dwyer’s company, which imported them into Australia.

Nicholas J has found that in doing so Mr Dwyer’s company infringed the “Greg Norman” trade marks.

One particularly interesting issue is why Mr Dwyer’s company was unable to rely on s 123 of the Trade Marks Act 1995: while BTB was in fact a licensee of the relevant trade marks, Nicholas J still found that the trade marks had not been applied to the particular goods with the trade mark owner’s consent. The main reason for this conclusion was that BTB’s licence was limited to India. Although BTB made and marked the goods in India where it did have a licence, it had no licence to sell “Greg Norman” merchandise outside India. At [78] his Honour said:

Where a registered owner consents to another person applying the registered mark to goods on condition that the goods must not to be supplied outside a designated territory, the registered owner would not usually be regarded as having consented to the application of the mark to goods which the other person knows at the time he or she applies the mark are to be supplied by him or her outside the territory.

However, there may be more to it than that. It would appear that BTB made a special batch of the merchandise to fill the order from Sunsport. Also, the evidence showed that BTB did not include the sale in its royalty reports to GNC. While strictly obiter, his Honour went on to note at [89]:

I would not be prepared to infer that products manufactured by BTB in respect of which GNC had received royalty payments were products to which the second applicant’s marks had been applied without the second applicant’s consent in the absence of convincing evidence to that effect. Of course, as I have previously found, royalties were not paid on the products shipped to Sunsports. ….

and went on to reject an argument that the goods imported were of an inferior quality.

If nothing else, this decision shows just how high the hurdle may be for someone who want to engage in parallel importing. On the other hand, if the receipt of royalties has the significance identified at [89], trade mark owners will need to scrutinise statements from their licensees very carefully to ensure that they are not “implicitly” licensing a parallel importer. The implicit licence, or licence by acquiescence, however,  might seem very hard in cases where royalty reports don’t come in for several months (or longer) unless, perhaps, there be a pattern of acquiescing.

A second interesting point lies in his Honour’s comments on the Champagne Hiedsieck case. In that case, Clauson J had held that there is no use of a trade mark as a trade mark by someone when the goods in question are goods to which the trade mark owner had actually applied the mark. That ruling has been upheld and applied many times.

I had thought the High Court’s references to Champagne Hiedsieck in its Gallo ruling showed its continuing relevance.

Nicholas J points out, however, that the High Court stated that s 123 embodies the principle in Champagne Hiedsieck. As a consequence, applying conventional principles of statutory interpretation, his Honour concluded that the enactment of s 123 has operated as a kind of statutory repeal or displacement of Champagne Hiedsieck. His Honour explained:

[98] The question whether a person who sells goods to which a trade mark has been applied with the consent of the owner of the mark uses the mark as a trade mark was recently left open by the High Court: E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2010] HCA 15; (2010) 265 ALR 645 at [53].

[99] The respondents’ argument before me was that, independently of the question of trade mark use by them (which was, as I have said, conceded by them to have occurred), the applicants were also required to establish that the respondents had engaged in “infringing use” and, for that purpose, had to establish that the marks on the relevant goods had not been applied by or with the licence of their owner. I do not think this is correct. There is no justification for implying any such additional requirement. If the circumstances referred to in s 123 are shown to exist then the respondents will not have infringed the registered trade marks, not because of any additional requirement of the kind now postulated but by operation of s 123 itself. The High Court observed in E & J Gallo Winery at [34] that s 123 reflects the principle established by Champagne Heidsieck.
[100] As a matter of statutory construction, s 123 of the Act, in form and substance, creates an exception to infringement which, in accordance with the relevant principles of statutory construction, leads to the conclusion that it is the person who invokes the section who carries the onus of proof: Avel Pty Ltd v Multicoin Amusements Pty Ltd [1990] HCA 58; (1990) 171 CLR 88 at 119; Vines v Djordjevitch [1955] HCA 19; (1955) 91 CLR 512 at 519.

(Nicholas J did go on to note how lightly the burden on a respondent might shift.)

Arguably, the point was not strictly before his Honour as Mr Dwyer’s company conceded it was using the Greg Norman trade marks “as trade marks”. If right, however, there would appear to have been a significant narrowing of defendants’ “wriggle room”.

Sporte Leisure Pty Ltd v Paul’s International Pty Ltd (No 3) [2010] FCA 1162

A case of (un) parallel imports Read More »