Iowa Lottery misses the jackpot

In Iowa Lottery [2010] APO 25 (21 October 2010) we see an unsuccessful attempt to secure patent protection in Australia for aspects of a lottery game.  We also see further use of the new “substantial effect” test for method claims that use a computer or other physical device.

The patent application

Iowa Lottery (the applicant) filed patent application 2007240153 as a divisional application on 6 December 2007.  The application related to lottery games and more particularly lotto type games.

There were three independent claims in the claim set under consideration.  These were claim 1 directed to a prize pool, claim 3 directed to a method of paying prizes and claim 12 to a method of managing a prize pool.

Putting the handbrake on NRDC

The Delegate started off sensibly enough, referring to National Research and Development Corporation v Commissioner of Patents [1959] HCA 67; [1959] 102 CLR 252.  The Court summarised the requirement for patentability as “a mode or manner of achieving an end result which is an artificially created state of affairs of utility in the fields of economic endeavour”, as noted in CCOM Pty Ltd v Jiejing [1994] FCA 1168 at [128].

He observed that the Court in NRDC was itself dealing with a rather narrow approach that had been applied on the basis of what had become known as Morton's rules (G.E.C.'s Application (1943) 60 RPC 1).  Applicants have forgotten this apparently.

All the Court was saying, according to the Delegate, was that the “manner of manufacture” requirement should not be constrained, for example, by existing notions of science and technology.  However, there was no justification to expand the scope of patentable subject matter to fields that have never been patentable according to long standing principles.  The exclusion of designs, schemes and plans, said the Delegate, are examples of those principles.

Intellectual information

The Delegate referred to the decision of the Full Federal Court in Grant v Commissioner of Patents [2006] FCAFC 120.  In Grant the Court concluded:

“Whether the method is properly the subject of letters patent is assessed by applying the principles that have been developed for determining whether a method is a manner of manufacture, irrespective of the area of activity in which the method is to be applied. It has long been accepted that "intellectual information", a mathematical algorithm, mere working directions and a scheme without effect are not patentable. This claim is "intellectual information", mere working directions and a scheme. It is necessary that there be some "useful product", some physical phenomenon or effect resulting from the working of a method for it to be properly the subject of letters patent. That is missing in this case.”

He observed that the prize pool of claim 1 was 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, he said, 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.

The applicant argued that claim 1 was directed to a product rather than a method.  However, the Delegate didn’t think that claiming a product produced by a scheme fundamentally alters the question of patentability of the scheme itself.

Financial transaction

The second group of claims, represented by claim 3, concerned a method of paying prizes.  The applicant argued that the requirement stated in Grant for a “concrete, tangible, physical or observable effect” was met by the payment of prizes.

On this point the Delegate observed that a financial transaction, or legal transfer of an asset, is not the sort of physical or observable effect that the Court in Grant was referring to.

Substantial effect

The last set of claims, represented by claim 12, was directed to a method of managing a prize pool.  Claim 12 included a computing device to allocate fees and prizes.  The applicant argued that the use of the computing device resulted in “a change in state or information in a part of a machine” and therefore reflected a “concrete transformation”.

The Delegate did not consider that the physical effect identified is one that is substantial or central to the operation of the claimed method.  This is a requirement of patentability because the Delegate in an earlier case said it was.

He referred to his own decision in Invention Pathways Pty Ltd [2010] APO 10.  He observed that he does 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 [patentable subject matter] …  The subject matter of the present application is essentially a lottery game.  It does not in my view become patentable because it is operated in whole or part using a computer system in the normal or an unspecified way.  Rather some substantial effect or transformation must be present in the use of the computer or other physical device”.

Further steps

The Delegate rejected all claims, finding that none of them were directed to patentable subject matter.

Photo courtesy of author Lisa Brewster under Creative Commons licence.