Scintilla – a flash, a spark, an iota. Shorthand for creativity and an indicator of inventiveness under Australian law.

Thursday, June 27, 2013

A step backward for patentable subject matter?

By Senior Associate Tom Reid and Law Graduate Israel Cowen

In February we reported that a Federal Court of Australia decision holding that isolated nucleic acid encoding a gene was patentable represented 'a step forward for patentable subject matter'. Now, the US Supreme Court has ruled in a corresponding case that isolated genomic nucleic acid is not patentable, prompting the question: does this decision represent a step backward?

The US Supreme Court decision in Association for Molecular Pathology v Myriad Genetics Inc, which was handed down on 13 June 2013, involved claims in Myriad's US patents relating to the isolated BRCA genes that were at issue in Australia in February. To recap, mutations in these genes indicate a predisposition to breast and ovarian cancers.

The unanimous reasoning of the US Supreme Court was that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated. Under US law, natural phenomena, like laws of nature and abstract ideas, are unpatentable per se.

Wednesday, June 26, 2013

Changes may be on their way to the franchise industry

By Lawyer Nadia Guadagno

A comprehensive review of the Franchising Code of Conduct has recently been completed and publicly released. The Review of the Franchising Code of Conduct makes 18 recommendations covering a wide range of matters and which, if implemented, will result in significant changes to franchising parties' rights and obligations, as well as the Code's enforcement.  Three of the more significant recommendations are discussed below. 

On 17 June, the government released an Industry Consultation paper which discusses the recommendations, puts forward options in relation to each of them and seeks further information from stakeholders, franchisors and franchisees. The due date for responses is 9 July 2013.

Monday, June 17, 2013

Is software patentable? Go ask Alice

By Senior Associate and Patent Attorney Anthony Selleck

Courts in the United States and Australia continue to wrestle with the issue of whether software and business methods constitute patentable subject matter.

The most recent development is a closely watched decision of the United States Court of Appeal for the Federal Circuit in CLS Bank v Alice Corporation Pty Ltd. The US case comes hot on the heels of the decision of the Australian Federal Court in Research Affiliates v The Commissioner of Patents, which we reported on.

Alice Corporation is an Australian company which owns a number of US patents covering computerised trading platforms. The platforms are used to conduct financial transactions in which a third party settles obligations between the two contracting parties so as to eliminate certain types of risk associated with the transaction. One example is 'settlement risk', being the risk to each party in an exchange that only one of them will actually pay its obligation, leaving the paying party without its principal or the benefit of the counterparty’s performance. The patents in suit address that risk by relying on the trusted third party to ensure the exchange of either both parties’ obligations, or neither obligation.

In accordance with good drafting practice for software and business method patents, the patents in suit included multiple categories of claims, including 'methods', 'systems' and 'computer readable storage mediums containing computer programs'. At first instance, the court found all three categories of claims invalid for not being directed to patentable subject matter under section 101 of the US Patent Code. In particular, the court concluded that the claims were directed to the 'abstract idea' of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimise risk.

On appeal to the Court of Appeal for the Federal Circuit, seven of the 10 judges agreed with the trial judge that the method and computer-media claims were merely abstract ideas and thus not eligible for patent protection. However, the court was split evenly on the question of whether the system claims were patent eligible, such split resulting in the trial judge's decision being affirmed.

A number of slightly different tests for determining patent-eligibility were formulated in the various judgments, all of which appear to be aimed at preventing the grant of patents that monopolise abstract ideas or 'fundamental concepts'. For example, the test formulated by Chief Judge Rader focused on 'whether a claim includes meaningful limitations restricting it to an application, rather than merely an abstract idea'. The key to this inquiry for software and business method inventions is 'whether the claims tie the otherwise abstract idea to a specific way of doing something with a computer, or a specific computer for doing something'. Under this test, the system claims were patent eligible, but the method and media claims were not.

The patent-eligibility tests expressed in CLS Bank v Alice Corporation, have echoes in the Australian Research Affiliates decision. In particular, both courts recognise that purely 'abstract ideas' are not eligible for patent protection, whereas applications of such ideas may very well constitute patentable inventions. However, the split among the court in CLS Bank v Alice Corporation is a stark illustration of the uncertainties that arise when this seemingly simple test is applied to inventions that involve computer software and financial innovation.

The next statement from the Australian courts on the issue is likely to come from the Full Federal Court, in the event that leave to appeal in the Research Affiliates decision is granted. It will be very interesting to see if the Australian court can, in considering patent-eligibility in the context of the securities index construction methodology in issue in Research Affiliates, arrive at a more unanimous view than the US court did in CLS Bank v Alice Corporation.

In the meantime, we refer you to the view expressed in our earlier post, that applications of novel algorithms in many fields of computer science will fall comfortably on the right side of the line of patentability. We expect this will continue to be so, irrespective of the outcome of the Full Court's decision about the particular invention in issue in Research Affiliates.

Wednesday, June 12, 2013

Super powers defeat bad faith

By Lawyer Michelle Freeman

In a recent Federal Court appeal against a decision by a delegate of the Registrar of Trade Marks, Justice Bennett ordered that registration of the word mark 'superman workout' be refused on the ground of bad faith under the Trade Marks Act 1995 (Cth) (the TMA).

Cheqout Pty Limited sought to register the mark in Class 41 in relation to 'conducting exercise classes; fitness and exercise clinics, clubs and salons; health club services (exercise)'. The appellant, DC Comics, originator of the well-known 'Superman' character and associated media and merchandise, had never registered any iteration of its 'Superman' marks in relation to such services. Nonetheless, DC Comics sought relief under TMA sections 43, 60 and/or 62A. DC Comics succeeded on the s62A ground.

Deception and confusion

Sections 43 and 60 both concern deception and confusion, but differ in that s43 is a ground for rejection of an application and s60 is a ground for opposition to a registration. DC Comics conceded that a failure on the s60 ground would also constitute failure under s43, allowing Justice Bennett to make judgment on s60 alone.

Her Honour considered definitions of the word 'superman' (and 'superwoman', and also associated plural forms) and concluded that the terms are descriptive of 'values' associated with the DC Comics' character (without suggesting the character itself) or descriptive of German philosopher Nietzsche's conceptual 'super man' (or the Ubermensch). Without the associated 'get-up' of the DC Comics' character (such as the distinctive blue-and-red suit), Justice Bennett found that no 'real, tangible risk of confusion' for the consumer existed when the words 'superman' and 'workout' were used together. DC Comics' appeal on these grounds failed.

Bad faith

Section 62A provides that a trade mark registration may be opposed where the application was made in bad faith. DC Comics argued that use of the mark 'superman workout', in combination with a shield device containing the letters 'BG' on Cheqout's website and a DVD cover, demonstrated that the original application to register was made in bad faith. The court considered the shield device to 'closely resemble' the well-known 'S' shield device owned by DC Comics.

Justice Bennett considered the 2012 case of Fry Consulting Pty Ltd v Sports Warehouse Inc (No 2), in which Justice Dodds-Streeton clarified that the bad-faith intention of the registrant must exist at the time of registration, the onus of proving bad faith rests with the opponent to registration, and the standard of proof required is the balance of probabilities. Section 62A has only been in operation since 2006, and there has been little consideration of the provision by the courts. In Fry, Justice Dodds-Streeton cited UK authority in noting that dishonesty is not a prerequisite to a finding of bad faith, although it may indeed be present, and bad faith can be 'conduct falling short of the standards of acceptable commercial behaviours observed by reasonable and experienced persons'.

Justice Bennett considered that an inference could be drawn from the use of the 'BG' shield and the word mark together that Cheqout intended to 'strengthen the allusion to [DC Comics'] Superman' and thereby gain an advantage. Accordingly, this use was evidence that the application to register the word mark had been in bad faith.

Future guidance

'Bad faith' is not defined in the TMA, and judicial consideration of s62A has been scant. In combination with the principles extracted by Justice Dodds-Streeton in Fry, this decision provides helpful guidance as to when bad faith may be found to exist.

The decision also demonstrates that the question of whether or not the use of a mark causes deception or confusion is irrelevant to the consideration of whether an application was made in bad faith under s62A.