Marianna Papadakis Reporter

Marianna writes for The Australian Financial Review and Business Review Weekly from the Sydney newsroom. She has an interest in legal affairs, technology and business.

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No credit: Bid to patent banking index software fails

Published 21 February 2013 12:09, Updated 15 April 2013 11:24

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No credit: Bid to patent banking index software fails

Patent refusal for banking software Photo: Erin Jonasson

The Federal Court has refused an appeal by a United States financial research company to patent a computer program that produces indexes used by Australian banks.

The decision could affect numerous patent applications for business methods that use computer applications to carry out the method currently before IP Australia.

Business methods, such as new financial products, analytical tools and investment structures, will be difficult to patent under Australian law following the court’s decision.

But what does and does not satisfy the elusive criteria has been controversial and just because a new method of doing business uses a computer application, that does not make it patentable.

Financial research company Research Affiliates claimed that its computer application, which selects and weighs securities based on company size, sales, cash flow, book value and dividends to produce an index, was a patentable invention.

It argued the information generated was “an economically valuable artificially created state of affairs” and was patentable.

But the Commissioner of Patents rejected the application and the court has deemed that a computer-implemented method for generating this type of index is not patentable.

The index is used by financial institutions, such as Colonial First State, to create and manage investment funds for a “significant licence fee”.

The court ruled that just because the index was created by a computer application, this did not make it patentable.

Significantly, it raised the bar for patent applications, with Justice Arthur Emmett saying an application must “improve the operation of or effect of the use of the computer. The index generated is nothing more than a set of data. The index is simply information: it is a set of numbers.”

But the court did not elaborate on what criteria such an application would have to satisfy to be granted a patent.

Research Affiliates’ chief operating officer, Katrina Sherrerd, said it was disappointed with the judgment and was exploring its options.

A partner at Minter Ellison’s intellectual property division, John Fairbairn, said the decision meant it would be very difficult to obtain patents for business methods.

He said the case made clear the extent to which companies would have to focus on the inventiveness of the software or hardware rather than the underlying business method in order to be granted a patent.

Companies could turn to confidentiality agreements or copyright, but this was likely to be insufficient in many cases.

“In some circumstances, keeping something confidential may be preferable, but if you want to offer a product to the public, such protection will be lost,” Fairbairn says. “Copyright may protect the code but it does not protect someone from independently creating a program with similar functionality. The protection in this context would be too narrow. Patents provide the strongest form of protection.”

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