Aristocrat

Aristocrat lives to fight another day

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O’Bryan J has granted Aristocrat leave to appeal Burley J’s decision ruling that the remitted claims were not patentable subject matter.

Recap

O’Bryan J sets out a convenient summary of how the case came to be before him and IPwars has had a few goes including here and here but in case the meaning of “manner of manufacture” for the purposes of the Patents Act 1990 is not tattooed over you heart, a brief recap:

  1. The Commissioner rejected Aristocrat’s innovation patents over an electronic gaming machine (EGM) with a new software-implemented feature game and trigger.
  2. Burley J allowed Aristocrat’s appeal, pointing out it was accepted on all sides that the claims would have been patentable if implemented in the traditional mechanical way rather than software implementation.
  3. The Full Federal Court allowed the Commissioner’s appeal restoring the rejection of the claims. Although agreed in the result, the reasoning was divided. Middleton and Perram JJ held at [26] that it was first necessary to decide if the claimed invention was for a computer or computer-implemented. If so, it was then necessary for the claim to result in an advance in computer technology. In the result (and subject to any appeal to the High Court), after setting aside Burley J’s orders, the Full Federal Court ordered: The proceedings are remitted to the primary judge for determination of any residual issues in light of the Full Court’s reasons including any issues which concern the position of claims other than claim 1 of Innovation Patent No. 2016101967 (referred to at [8] of the reasons of the primary judge dated 5 June 2020) and the costs of the hearings before the primary judge.
  4. The High Court memorably failed to reach a decision, with three judges dismissing the appeal while the other three judges would have allowed Aristocrat’s appeal (a seventh judge was unable to sit). Consequently, under Judiciary Act 1903 s 23(2)(a), the decision of the Full Federal Court was affirmed.
  5. On remitter, Burley J considered he was bound by the Full Federal Court’s decision and ruled that the dependent claims of Aristocrat’s patents were also invalid.

Leave to appeal

As Burley J was hearing and determining an appeal from a decision of the Commissioner, Aristocrat needed leave to appeal to the Full Court under s 158(2).

Often where leave is being sought by the patentee or applicant for the patent rather than an opponent, one might expect leave would be granted as otherwise the patent is dead. As O’Bryan J explained at [50]:

The guidance that emerges from the above cases may be summarised as follows. Section 158(2) evinces a legislative policy against the bringing of appeals against a judgment or order of a single judge of the Federal Court in the exercise of its jurisdiction to hear and determine appeals from decisions or directions of the Commissioner except where the court, acting judicially, finds reason to grant leave. The discretionary power to grant leave is not constrained by express legislative criteria and the Court should not lay down rigid rules that would restrict the exercise of the discretion given the diversity of cases to which s 158(2) will potentially apply. In determining whether to grant leave, it is relevant to consider: whether the decision is attended with sufficient doubt to warrant it being reconsidered on appeal; whether the issues proposed to be raised by the appeal are of general application; and the consequences of a refusal to grant leave – particularly whether the refusal will finally determine the matter. None of those considerations is determinative in and of itself and the considerations are interrelated. The cases make clear that the degree of doubt with respect to the decision that would warrant a grant of leave is affected by the consequences of a refusal to grant leave. In a pre-grant opposition proceeding, where there have been two hearings with the opposition dismissed, and where the opponent of the patent will still be able to institute revocation proceedings, leave to appeal will often be granted only where the opponent has demonstrated a clear prima facie case of error in the decision appealed from. In contrast, where an opponent has been successful such that the decision will be final with respect to the grant of the patent, leave to appeal would ordinarily be granted where the grounds are arguable.

O’Bryan J appears to have had some reservation in granting leave this time around. His Honour described the application as “finely balanced”.

The two main areas that seem to have been particularly troubling were that, as the Commissioner characterised it, the parties had agreed that Burley J’s determination of claim 1 in the first hearing would guide the determination of the other claims. Secondly, the innovation patents in question had expired and Aristocrat still had applications for standard patents covering the same subject matter pending.

Ultimately, his Honour found in favour of granting leave in the “unusual circumstances” of this case.

The factor that appears to have tipped his Honour in favour of granting leave was not just that the High Court had divided 3:3 in its previous decision. O’Bryan J was sceptical that this was just Aristocrat trying to have a “second go”. Rather, the additional factor is how s 23 of the Judiciary Act should apply in circumstances where all six judges of the High Court appear to have rejected the majority view in the Full Federal Court.

At [65], O’Bryan J explained:

Having taken all of the foregoing factors into account, I have determined on balance that leave to appeal should be granted. Ultimately, two factors weigh marginally in favour of the grant of leave: that the effect of the primary judgment is to determine finally that the innovation patents in suit will not be granted, and that the grounds of appeal sought to be raised by Aristocrat are arguable (raising novel questions about the operations of s 23(2)(a) in the unusual circumstances of this case). If Aristocrat is able to persuade an appellate court that the primary judge’s application of s 23(2)(a) of the Judiciary Act in this case was erroneous, Aristocrat should be entitled to have the residual claims adjudicated in accordance with the legal principles that the appellate court determines are applicable.

What happens next

Having been granted leave to appeal, Aristocrat has foreshadowed an application under Judiciary Act s 40 requesting the High Court to hear and determine the appeal without the need for a further hearing in the Full Federal Court. This is of course a very unusual step. In this case, however, the foundational question can really be answered only by the High Court: how does s 23(2)(a) operate when the decision under appeal is affirmed but all the High Court judges sitting on the appeal appear to have rejected the reasoning of the “affirmed” decision?

Who know, we might even get something approaching a settled test for “manner of manufacture” (again).

Aristocrat Technologies Australia Pty Limited v Commissioner of Patents [2024] FCA 987

Aristocrat lives to fight another day Read More »

Aristocrat’s electronic gaming machine is patentable

1 Comment / Patents / / / , , , , , , , , ,

Burley J – one of the judges in the Full Court’s Rokt ruling – has upheld Aristocrat’s appeal and ruled that four of its innovation patents[1] for electronic gaming machines (EGMs) were manners of manufacture and not mere schemes or rules for a game.

[2]

The parties charaterised claim 1 of the 2016101967 patent as having 12 integers:

A gaming machine comprising:

(1.1) a display;

(1.2) a credit input mechanism operable to establish credits on the gaming machine, the credit input mechanism including at least one of a coin input chute, a bill collector, a card reader and a ticket reader;

(1.3) meters configured for monitoring credits established via the credit input mechanism and changes to the established credits due to play of the gaming machine, the meters including a credit meter to which credit input via the credit input mechanism is added and a win meter;

(1.4) a random number generator;

(1.5) a game play mechanism including a plurality of buttons configured for operation by a player to input a wager from the established credits and to initiate a play of a game; and

(1.6) a game controller comprising a processor and memory storing (i) game program code, and (ii) symbol data defining reels, and wherein the game controller is operable to assign prize values to configurable symbols as required during play of the game,

(1.7) the game controller executing the game program code stored in the memory and responsive to initiation of the play of the game with the game play mechanism to:

(1.8) select a plurality of symbols from a first set of reels defined by the symbol data using the random number generator;

(1.9) control the display to display the selected symbols in a plurality of columns of display positions during play of a base game;

(1.10) monitor play of the base game and trigger a feature game comprising free games in response to a trigger event occurring in play of the base game,

(1.11) conduct the free games on the display by, for each free game, (a) retaining configurable symbols on the display, (b) replacing non-configurable symbols by selecting, using the random number generator, symbols from a second set of reels defined by the symbol data for symbol positions not occupied by configurable symbols, and (c) controlling the display to display the symbols selected from the second set of reels, each of the second reels comprising a plurality of non-configurable symbols and a plurality of configurable symbols, and

(1.12) when the free games end, make an award of credits to the win meter or the credit meter based on a total of prize values assigned to collected configurable symbols.

No doubt oversimplifying, it seems the “clever” aspect of the patent was the use of a combination of configurable symbols and non-configurable symbols in which the display of a pre-determined number of configurable symbols on a base reel triggered free or bonus games. The configurable symbols were retained in the “free” game, while the non-configurable symbols were replaced with symbols from a second set of “reels”.

On the appeal, the Commissioner’s primary argument was that the claims were just claims to “a generic computer implementation”, leaving the hardware and software uncharacterised where the only features that distinguished the claimed invention from previous EGMs were the scheme or rules of the game. Thus, at [80] Burley J summarised the Commissioner’s submission:

integers 1.1 to 1.6 reflect the components of an EGM, including hardware (for example a display) and software (for example a random number generator) and some that are a combination of both (for example a game controller comprising a processor and memory). These were all standard components of EGMs.

Integers 1.7 to 1.12 deal with the conduct of the game and amount to a scheme or set of rules for doing so.

Amongst other things, the claim does not define any hardware features of the “game controller comprising a process or a memory” or any technical means by which the necessary processing functions are performed to implement the game. No software application or program code for carrying out the steps is defined by the claims. There is no suggestion of ingenuity in their implementation, which is left entirely to the skilled person reading the claim.

Consideration

In a point which bears emphasising (as it appears so often overlooked or misunderstood), Burley J began by reiterating that the ground of manner of manufacture is a separate and discrete requirement of validity, independent of other grounds like novelty, innovative step, utility and secret use. So, as his Honour pointed out at [84]:

whilst a claim for a ball point pen would fail for anticipation and inventive step, it would still be a claim for a manner of manufacture.

After referencing the “scheme” line of cases,[3] Burley J considered at [91] they mandated a two stage inquiry:

  1. The initial inquiry was whether or not the claim was for a mere scheme or business method of the type that was not the proper subject matter for a grant of a patent.
  2. If so, a second inquiry arose: whether or not the claim involved the creation of an artificial state of affairs where the computer was integral to the invention, rather than a mere tool in which it was performed. That is, was there invention in the computerisation of the claimed method?

Each step was to be undertaken as a matter of substance rather than mere form.

According to his Honour, it was at the second stage that it became necessary to identify whether or not the “contribution” was “technical in nature” or solved a “technical” problem or merely required a “generic” computer implementation.

The present case was different to the “mere scheme” line of cases because what was claimed was a mechanism of a particular construction where the integers interacted to produce a particular product. At [95], his Honour summarised:

the invention described and claimed, when understood as a matter of substance, is to a mere scheme or plan. It is to a mechanism of a particular construction, the operation of which involves a combination of physical parts and software to produce a particular outcome in the form of an EGM that functions in a particular way.[4]

Accordingly, it was unnecessary to embark on the second inquiry required for “mere scheme” cases.

As there was a physical product, therefore, it appears that the instant claims were conceptually different to those in Emcompass and Rokt. Burley J considered the instant claims were conceptually more like those upheld by Nicholas J in Konami and Dowsett J in LTH Consulting where, for example, Nicholas J had explained:

the inventions in suit claimed are not “mere ideas” but “new and useful gaming machines and new and useful methods of operation producing new and improved results”.

In opposing this claim, the Commissioner was labouring under the difficulty of the many, many patents already granted for EGMs and gaming machines generally. Moreover, the Commissioner necessarily conceded (consistently with his Honour’s ball point pen example) that the claim would have been a manner of manufacture if it had been implemented “the old-fashioned way, without using software but instead using cogs, physical reels and motors to create the gameplay”.

Thank goodness for that blow in favour of modernity and technological developement! One might question whether, when putting the elements into a box qualifies as a manner of manufacture, offering exactly the same functionality online accessible through a browser would also qualify as a manner of manufacture. Indeed, the specification refers to the invention being implemented alternatively by a “thick client” architecture or a “thin client” architecture.[5] And, if it did, how would one reconcile that with Rokt?

Aristocrat Technologies Australia Pty Limited v Commissioner of Patents [2020] FCA 778

  1. All four were divisionals from the same parent: AU 2015210489.  ?
  2. In this image from the decision, the vertical, numbered lines represent a portion of 5 “reels” (showing 3 symbols per reel) and the horizontal, lettered lines are rows.  ?
  3. Grant v Commissioner of Patents [2006] FCAFC 120; 154 FCR 62; Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150; 227 FCR 378; Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177; 238 FCR 27; Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161; 372 ALR 646; Watson v The Commissioner of Patents [2020] FCAFC 56 and Commissioner of Patents v Rokt [2020] FCAFC 86.  ?
  4. At [96], Burley J expanded on the physical components claimed and how they interacted through the software to produce an outcome and, at [97], his Honour referred to the tight regulatory supervision imposed on EGMs.  ?
  5. P. 4: “For example, a ”thick client“ architecture may be used wherein part of the game is executed on a player operable gaming machine and part of the game is executed remotely, such as by a gaming server; or a ”thin client“ architecture may be used wherein most of the game is executed remotely such as by a gaming server and a player operable gaming machine is used only to display audible and/or visible gaming information to the player and receive gaming inputs from the player.”  ?

Aristocrat’s electronic gaming machine is patentable Read More »

Turns out, damages were payable after all

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The Full Court has upheld Insight SRC’s appeal that it was entitled to compensatory damages under s 115(2) of the Copyright Act.

When ACER committed the infringements by reproducing the SOHQ, Dr Hart, the owner of the copyright, exploited it through his Insight company as an informal licensee or licensee at will.[1] As is probably not uncommon with “family” companies, the terms of the licence were so unclear Besanko J could not ascertain them. In these circumstances, Besanko J had ruled at [118]:

it is necessary to consider what action Dr Hart could have taken immediately prior to the execution of the Deed on 12 May 2011 by way of a damages claim for infringement of the copyright in the SOHQ. The possibilities are general damages under subs 115(2) and additional damages pursuant to subs 115(4) of the Act. As to the former, the difficulty for the applicants is that Dr Hart was not personally conducting a business involving the use of the SOHQ between the beginning of 2006 and 1 October 2009 and it has been no part of their case before me that Dr Hart personally would have exploited any commercial opportunities with ISV. Furthermore, Dr Hart did not claim that he could recover any such loss as the major shareholder of Insight SRC and that the Court could lift the corporate veil. On the other hand, what Dr Hart did have as the copyright owner was a right to nominal damages for infringement of copyright and a right to claim additional damages under subs 115(4). ….

ACER had used the copyright infringements to obtain contracts with ISV. It appears to have been accepted by both sides on the appeal that ISV would have had to award the contracts to Insight to be permitted to use the copyright. Bearing in mind that damages under s 115(2) are compensatory, the Full Court considered Dr Hart had suffered loss in the form of being prevented from procuring for his company the contracts ACER obtained by its copyright infringements. At [23]:

it is safe to infer that Dr Hart’s damage was the value of the loss of his ability to cause Insight to enter into a contract with ISV that would have generated the profit of $130,000 for Insight as found by the primary judge. Neither party at the trial asked his Honour to assess, as an alternative, the value of the loss of a chance to make such a contract.

From here, things get tricky. The Full Court went on to say at [24] that Dr Hart’s loss was not the royalty he would have received through the licence arrangement or the dividend he might have been paid from Insight’s profits:

An important component of this identification of what Insight’s damage would have been, is that Dr Hart wanted Insight to benefit by receipt of the profit. That is different to the characterisation urged by ACER that his damage was what might be received by him after Insight, Insight Holdings and the interposed trusts had received and made sequential distributions. Dr Hart used his efforts in exploiting the copyright to benefit Insight.

The reasoning seems to have been influenced by the proposition that a donor of a gift is entitled to recover the replacement value of the gift if it is wrongfully destroyed by another before receipt by the intended donee. (Perhaps, the real problem was that the licence arrangement was so amorphous[2] that it was not really possible to identify what fee was payable for the use of the copyright.)

In an attempt to kill off the case once and for all, the Full Court then went on to say that Dr Hart was entitled to at least $130,000 and, if the parties didn’t accept that, maybe more.

The $130,000 figure is interesting. It is the amount of profit Besanko J found ACER made on the ISV contracts it obtained by infringing the copyright. Presumably, that is the damages that Besanko J would have awarded on the basis that Insight would also have made that much profit.[3] I’m not sure why that follows but, perhaps, the Full Court had in mind that, possibly, Insight’s profit may have been higher than ACER’s as it may have had lower overheads?

Wouldn’t things have been easier if the majority in Aristocrataristocrat had agreed with Rares J’s view (and that of the English courts) that a reasonable royalty could be awarded as compensatory damages?

Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd [2013] FCAFC 62

  1. Insight did not become a formal, exclusive licensee until ACER’s infringements ceased. Bit more on the ownership, assignment and additional damages questions here.  ?
  2. The Full Court described it as “the informal, oral or bare licence that he granted it, or treated it as having had before the formal, exclusive licence [was] granted”. (emphasis supplied)  ?
  3. Damages under s 115(2) being an alternative to an account of profits must be the loss the copyright owner suffered, not the profits the infringer made which is the remedy obtained through an account. See e.g. Aristocrat and Rifai.  ?

Turns out, damages were payable after all Read More »

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