Introduction

The patent system is based on the utilitarian conception of fostering innovation by incentivizing innovators by giving them exclusive, time-limited proprietary rights over the innovation. This reward is in the form of a patent. Since the main focus of patent law is to promote invention the question arises as to what qualifies as an ‘invention’. The main prerequisites for granting a patent in India are novelty, non-obviousness, and industrial application. While these three criteria have been highlighted as the prerequisites of granting a patent, it has been argued they are not adequate to meet the needs of contemporary inventions. Traditionally, patent law has focused on protecting “hardware” inventions. This traditionalist conception of ‘invention’ has excluded many categories like software programs, algorithms, business methods, etc., from patentability. Section 3(k) of the Indian Patent Act specifically bars grants of patents to ‘inventions’ falling below the above-mentioned categories.

This paper firstly summarizes the rationale of the court in the OpenTV case and then goes on to comment on how business method patents foster monopolistic practices and how the recent cases have followed a similar stance. It concludes by stating how this stance is beneficial for smaller businesses.

The case is an appeal filed by the appellant (OpenTV) seeking an order to set aside an order issued by the Respondent (The controller of patents and designs) on 31st May 2021. The impugned order had rejected the grant of a patent for application no 2564/DELNP/2012, titled ‘System and Method to provide gift media’. The patent was requested for a ‘network architecture and a method implemented on the same to enable the exchange of interactive media content distribution of any type of digital or tangible media’.

The First Examination Report (FER) issued on April 20, 2018, included objections related to lack of novelty, inventive steps, and non-patentability. The Appellant responded on August 2, 2018, by amending the claims and claimed that these amendments referred to a novel system and method to retrieve and gift a media item from an interface.

Appellant’s arguments

To prevent exclusion under Section 3(k) and avoid classification as a business method, the appellant asserted that their patent application involved a technical selection and distribution of media items. They supported this claim by pointing to amended claims related to a user interface presenting media items to be gifted along with a list of a plurality of different versions of the said media item. The appellant argued that when the subject matter demonstrates technical contribution and produces a technical effect, it should be eligible for patent protection, citing relevant court decisions. She also contends that the network architecture shows novelty and that there is clear technical advancement in the claims and the mere use of the word “method” shouldn’t deprive the appellant of his right to patent.

She secondly counters the reasoning given by the respondent for rejection i.e. because there are financial gains by sharing the media between the users, it is in effect a business method. She argues that merely because there are financial gains that can be achieved through a particular patented invention would not lead to an automatic conclusion that the same is a business method claim.

Respondent’s arguments

The respondent argues that the claims show that the subject patent is a user interface facilitating the giving of media items as gifts. The network architecture used is irrelevant as the appellant is seeking a patent ‘for the process of gifting’. The entire purpose of this invention is to facilitate gift-giving and can be done by existing methods, therefore has no novelty. The invention’s purpose is to enable sale or purchase which classifies it as a business method and brings it under the purview of section 3(k) of the Patents Act.

The main issue of this case is whether the subject invention is non-patentable under Section 3(k) of the Act and does it meet the criteria for novelty, inventive step, industrial application, and eligibility for patent protection?"

Held

A perusal of the claims in the FER would show that the purpose of the subject invention is to enable the giving of media as gifts. The question as to whether a particular invention or a business method or not, is dependent on the wording of the claims and the subject matter of the invention. The grant of monopoly on a method for giving media as a gift would in effect mean that any system architecture which enabled such giving would fall foul of the invention and in effect therefore, the monopoly relates to a method of giving a gift and hence a business method which is unpatentable according to the provisions of section 3(k) of the Indian Patents Act, 1970. An examination of the wording of the provision would show that the exclusion of business methods is an absolute one and not “per se”.

In the present case the appellant is seeking a patent not for the computer program but for the method of gift-giving of media items. To judge whether a patent is sought for a business method or not the following criteria need to be satisfied:

i) Does the invention serve primarily to facilitate business conduct, such as the sale or purchase of goods or services?

(ii) Is the purpose of the invention to assert exclusivity or a monopoly over a business method?

(iii) Does the invention involve a method of buying or selling goods or services, or is it a computer program that produces a technical effect or demonstrates technical advancement?

The court concluded that the patent, being for a gift-giving method, falls under the category of a business method and is thus ineligible for protection under Section 3(k). It urged legislative amendments to Section 3(k) to accommodate newer inventions (AI-based), citing the 161st Report on Intellectual Property Rights in India , which highlights inadequacies hindering AI ownership and inventions. The court emphasized the necessity of reviewing exclusions in Section 3(k) to support innovations in emerging technologies, particularly by SMEs, start-ups, and educational institutions, stressing the urgency of keeping patent law aligned with digital advancements to prevent it from becoming obsolete.

Analysis of the Business Method Patents

The court has clearly emphasized in the OpenTV case that the exclusion of business methods from patentability is absolute. This is in line with the stance set in cases like Yahoo v Controller of Patents & Rediffcom India Limited. There have been instances where the court has deviated from the provisions of Section 3(k) of the Indian Patent Act, of 1970 by allowing concessions such as re-amendment of terms or allowing them because of their technical nature. In the aforementioned case, the court analyzed whether patents should be granted for business methods. It looked into how business methods are a result of competition rather than innovation and how business methods are merely processes of making business more efficient, and there is no innovation involved. It also emphasized that granting business method patents is counter-productive and promotes monopoly.

[Image Sources: Shutterstock]

This has been the leading argument against granting business method patents i.e. patenting business methods does not incentivize businesses. Business methods involve all the activities employed in a commercial enterprise for facilitating the transaction of goods and services. Business methods are a result of creative acumen and are a result of competition. This is proved by the fact that business methods have existed before the creation of the patent regime. The ‘first mover’ advantage and promise of efficiency act as adequate incentives for these businesses and motivate them to develop new business methods.

The Indian Courts have strictly emphasized that the exclusion in Section 3(k) for business patents is absolute. The exclusion applies even if the subject-matter business method involves a computer program. In Yahoo v. Controller of Patents , the court ruled that even if the business method claims to have a technical effect not existing in previous art, it is merely an improvement/ method of efficiency in doing business transactions. Section 3(k) bars business methods from being patentable even if they are technically smarter because they are only providing a solution to a business or administrative issue. The form and substance of the claims should be able to portray the technical nature of the subject-patent.

The court has followed the rationale established in Yahoo in Oneempower Pte Ltd. v. Controller of Patents and Designs . In the aforementioned case, the court ruled that if the invention only provides a solution for conducting business transactions rather than providing a technical solution for a technical problem then they would come under the category of business methods. In doing so they referred to the Guidelines for Examining Computer-Related Inventions, 2017 [“CRI Guidelines”], as well as the Manual of Patent Office Practice and Procedure, 2019, which state that if the subject matter refers to business transactions they would be unpatentable. The court then went further to say that merely disguising a business method as a computer program would not be enough to claim the “per se” exception given to computer programs. This strict exception will apply even if a hardware element is involved. Merely automating day-to-day business transactions will not grant it a technical nature and they still will be classified as business methods.

While the court has taken an absolute stance in saying that the provisions of section 3(k) must be mandatorily followed, it also has taken care to ensure that ‘good’ patents will not be excluded. It has allowed patents in instances where the claims in the patent application were amended and the amended claims showed a technical nature. The inclusion of words like “business”, “sales”, “transactions”, “commerce” etc., in the claims will not directly designate them as business methods and the whole claim should be considered as a whole. If the claim is with regards to carrying out e-commerce business, then they still will be unpatentable. However, if the claim is with regard to the software or hardware involved for data collection the subject matter will be patentable.

The court has taken appropriate care to ensure that innovators will not be unjusticed by arbitrary denial of patent grants. The court has emphasized that the Controller of Patents must give appropriate reasoning as to the denial of the patent. Not doing so would imply that a subjective arbitrary, cut-paste decision–making standard has been applied. The courts have regularly emphasized that rejection and approval of patents is a time-consuming and grave matter and that authorities should take time and care to give detailed decisions showing the application of mind.

The stance taken by the court in OpenTV is strict and gives utmost importance to the statutory provisions about patenting business methods. As emphasized by the court it needs to pass the review of the legislature. In contrast to the approaches taken by other countries, India adopts a more conservative position to safeguard the interests of smaller and newer firms venturing into the market. The rationale behind this caution is the concern that granting patents for business methods may impose significant entry costs on new entrants. This, in turn, could potentially result in the establishment of monopolies, not only in the creation of these methods but also in all other routine business transactions, leading to the unwarranted exercise of market power.

Author : Neha Shanbhag, in case of any query, contact us at Global Patent Filing or write back us via email at support@globalpatentfiling.com.