Patent & Trade Mark

Software and business method patents: Not a problem!

Date: 01 November 2008


Software and business method patents have now been recognised as patentable subject matter in many patent jurisdictions. But, as with many things in life, there is a catch.

Despite the WTO's Agreement on Trade Related Intellectual Property Rights (TRIPS) requiring that patents be granted in "all fields of technology", patentability requirements in regards to software and business methods are not consistent among WTO member states. Consequently, this creates a level of uncertainty as to the scope of monopoly that may be acquired in each jurisdiction for these types of invention.

This article explains the different requirements in major patent jurisdictions, and how the requirements may be satisfied to ensure the best possible outcome for patent applicants.

The World As It Currently Stands

Patentability requirements in regards to software and business methods can be categorised into the following:
  • Economic utility requirement in Australia, New Zealand and Canada;
  • Machine-or-transformation requirement in the United States;
  • Hardware requirement in Japan and Korea; and
  • Technical effect requirement in Europe, China and India.

Economic Utility Requirement

Australia, New Zealand and Canada are considered to be most favourable towards software and business method patents, simply requiring an invention to provide an end result with economic significance.

In Australia and New Zealand, software and business methods that produce a "commercially useful effect" are entitled to patent protection. Canada also has a similar "economic significance" requirement, but business method claims must include hardware implementation.

As almost all inventions are designed to provide an economic benefit, the requirements of these jurisdictions can almost always be satisfied.

Machine-or-Transformation Requirement

In the United States, a recent en banc Federal Circuit decision in In re Bilski held that software and business methods are patentable as long as they:
  1. are tied to a particular machine or apparatus, or
  2. transform an article into a different state or thing.
The Bilski court emphasised that the basis for this machine-or-transformation requirement is to prevent pre-emption of fundamental principles. In this regards, it was held that the "concrete, useful and tangible result" test formulated in State Street Bank was "inadequate" in determining whether a claim is drawn to a fundamental principle, or an application of it.

To satisfy the transformation requirement (2), the "article" must be a physical object or substance, or data representing thereof. Therefore, a method which merely transforms data representing abstract constructs such as business risks and legal obligations is not patentable. However, the question remains whether tying such a process to a general purpose computer or processor is sufficient to satisfy the machine requirement (1).

Hardware Requirement

Japan and Korea are also favourable towards software and business method patents, but require that an invention is realised using "concrete means". Similar to the machine requirement (1) in the United States, a claimed method must include hardware resources, such as a processor, input and output devices and computer memory. A data structure and computer program have to be claimed along with a computer-readable medium.
Japan goes one step further. Not only does a claimed method have to specify cooperative interrelationship between software and hardware resources, it must also involve some information processing or, in other words, data transformation. However, unlike the transformation requirement (2) above, the data does not have to represent a physical object or substance.

Technical Effect Requirement

The most difficult hurdle of all is the "technical effect" requirement in Europe, China and India. In these jurisdictions, software and business methods are patentable subject matter if they have a "technical character" and are directed to solving a technical problem. Usually, the fields of commerce, finance, actuarial science and management are not considered to be technical.

Further, even if an invention has a technical character and solves a technical problem, only its technical, non-business features will be considered in determining inventive step. In other words, if a computer programmer is simply asked to develop a computer program for a new business system using known techniques, the program would not likely to be patentable.

Therefore, to satisfy this technical effect requirement, it is vital to present a business-related invention as a technical solution to a technical problem as determined by a skilled person in the relevant technical field. For example, a patent application for a method of creating documents by asking a user a series of questions is considered to be patentable in Europe as it presents a technical solution using interpretative logical argument methods (granted patent EP0988609).


With a good understanding of the patentability requirements in different jurisdictions, it is possible to customise a patent specification to better satisfy the relevant requirements in each jurisdiction.

Accordingly, before a patent application is filed, it is useful for patent applicants to discuss their commercial plans with their patent attorney to ensure the best possible outcome in each jurisdiction of interest.

For more information on the patentability requirements in the jurisdictions discussed, please refer to the accompanying appendices and contact us if you have any questions.
Tags:  Software, business methods
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