Patenting of computer-related inventions faces many challenges in the Indian patent office. Although the Computer-related Invention (CRI) guidelines have been in place since 2017, some grey shade of non-patentability looms large on all the applications relating to CR inventions under the unintended extended scope of Section 3(k). Without clarity on the coverage, the patent examiner, as a cautious approach, tends to place every invention involving computer programs or solving financial transactions issues in business transactions as falling within the category of non-patentable inventions under Section 3(k). A closer look at this section reveals that it covers only four types of inventions viz a mathematical method, a business method, a computer programme per se, and algorithms.
No further explanation is given in the act and rules, and as these terms are not defined, it leaves unbridled discretion with the Controller, leading to bringing subject matter related to software or computer programmes within the preview of the non-patentability category under section 3(k). We may pause here to see the word ‘per se’, which was added later to qualify the computer programme alone. This means the only question that the Controller may have to investigate while dealing with computer programme patentability issues is whether the applicant is claiming computer programme only. If the inventor is claiming something more than the computer programme, he may not deny the patent.
In computer-related patent applications involving a business method, he needs to consider whether the patent application addresses a business or administrative problem and provides a solution for the same. This means it requires only finding the eligibility criteria for the subject matter. Patent Act and Rules are silent on what should not be covered under the term business method.
Secure transaction Management System inventions
Electronic appliances such as computers and mobile are required to work in an environment that ensures that personal information is accessed and used only in authorised ways. Maintaining the integrity, availability, and/or confidentiality of the information in e-commerce financial transactions must operate in a secure and reliable environment. Many players actively develop inventions relating to computer and/or electronic security.
In India, patent applications for “Selectively concealing physical address information” (Priya Randolph Appln.) and “Methods and Devices for Authentication of an Electronic Payment Card using Electronic Token” (Comviva Appln.) were refused by the patent office on the ground that such subject matter falling under section 3(k). This raised a pertinent question of whether the definition of business method can be stretched to deny patents to secure transaction-related (STR) inventions as well. Simply stated, does such invention, in fact, fall under this category of exclusions under Section 3(k)? It clearly means that courts must step in to provide clarity in segregating what types of CR invention do not fall within the exclusions under section 3(k).
Definition of ‘Business method’
Intellectual Property Appellate Board made the first attempt to define ‘business method’ in the Yahoo case, where the patent applicant claimed it was “a method of operating a computer network search apparatus.” IPAB found that no clear definition was available in any jurisdiction at that time due to the difficulties in defining the business method. IPAB found the definition of the business system given by the Intellectual Property Research Institute of Australia (IPRIA), which states that “A business system is a method of operating any aspect of an economic enterprise.” IPAB also noted that the Manual of Patent Procedures 2008 relates to the business method (Para 34), which, in a way, tried to clearly define what should be considered a business method by the Controller.
“Business Methods” claimed in any form are not patentable subject matter. The term ‘Business Methods’ involves a whole gamut of activities in a commercial or industrial enterprise relating to transaction of goods or services. With the development of Internet Technologies, business activities have grown tremendously through e-commerce and related B2B and B2C business. The claims are at times drafted not directly as business method but apparently with hitherto available technical features such as internet, networks, satellites, tele-communications, etc. The exclusions are carved out for all business methods and, therefore, if in substance the claims relate to business methods, even with the help of technology, they are not considered to be patentable.”
In this case, IPAB ruled that
“[W]e must place ourselves in 1998, to decide the patentability and what appears so easy and familiar today was new then. Even if we go back in time to 1998 the nature of invention is still a method of doing business. That does not change. There are huge innovations in the computers themselves, but the invention claimed is not for the machine but for the method. From whichever point of time we look at it, it still looks to be a business method.” [Emphasis added]
In 2017, the CRI Guidelines redefined in clause 4.5.2 what is a business method, stating:
“4.5.2 Claims directed as “Business Method”: The term “Business Methods” involves whole gamut of activities in a commercial or industrial enterprise relating to transaction of goods or services. The claims drafted not directly as “business methods” but apparently with some unspecified means are held non-patentable. However, if the claimed subject matter specifies an apparatus and/or a technical process for carrying out the invention even partly, the claims shall be examined as a whole. When a claim is “business methods” in substance, it is not to be considered a patentable subject matter. However, mere presence of the words such as “enterprise”, “business”, “business rules”, “supply-chain”, “order”, “sales”, “transactions”, “commerce”, “payment” etc. in the claims may not lead to conclusion of an invention being just a “Business Method”, but if the subject matter is essentially about carrying out business/ trade/ financial activity/ transaction and/or a method of buying/selling goods through web (e.g. providing web service functionality), the same should be treated as business method and shall not be patentable.”
In this case, pre-grant opposition was filed, and the Controller refused the patent applicant on the ground that the subject matter was a business method. The applicant filed an appeal, and IPAB upheld the order of the Controller and ruled that the subject matter claimed for a method of doing business or improvement over it is not patentable under Section 3(k). This rule, to some extent, provides that “A business system is a method of operating any aspect of an economic enterprise.” However, this definition was not of any help to the inventor as it vaguely covers all activities of the economic enterprise.
However, in Opentv INC v. The Controller of Patents and Designs (May 2023), the Delhi High Court looked deeper into the patentability of ‘business methods’, its coverage and limitation under Section 3(k) of the Patents Act, where the patent application (2564/DELNP/2012) for ‘System and method to provide gift media’ was refused by the patent office. This application claimed 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. In fact, the Delhi High Court laid down the following guidelines for dealing with patent applications involving a business method under Para 73.
“73. Thus, the only question that the Court or the Patent Office while dealing with patent applications involving a business method, needs consider is whether the patent application addresses a business or administrative problem and provides a solution for the same.
The Court went on further to lay down what should be considered when arriving at the conclusion of whether the subject matter seeks to patent business methods or not.
“74. In order to judge as to whether a particular patent application seeks to patent business methods or not, at the outset, the following aspects, ought to be considered-
(i) whether the invention is primarily for enabling conduct or administration of a particular business i.e., sale or purchase of goods or services;
(ii) whether the purpose of the invention is for claiming exclusivity or monopoly over a manner of doing business;
(iii) whether the invention relates to a method of sale or purchase of goods or services or
(iv) is in fact a computer program producing a technical effect or exhibiting technical advancement.
If it is the latter, it would be patentable but not if it is the former.” [emphasis added]
This decision clearly differentiated between what is purely a method of doing business or primarily for enabling conduct or administration of a particular business, i.e., sale or purchase of goods or services from a method of sale or purchase of goods or services or, in fact, a computer program producing a technical effect or exhibiting technical advancement. Thus, the coverage of section 3(k) after this ruling is limited to inventions that do not show any technical advancement or technical effect.
Role of Technical Effect in Section 3(k) Assessment after Ferid Allani
The role of technical effect or technical advancement in assessing the coverage and limitation of section 3 (k) was first emphasised by Coordinate Bench Delhi High Court in Ferid Allani v. Union of India (December 2019), where a patent application for “method and device for accessing information sources and services on the web”. The claims in the patent consisted of both method claims and device claims. This application was refused by the patent office on the grounds that it is for a business method.
The Court, in this case, allowed the application to proceed for the grant, finding that the invention claimed clearly showed technical effect and technical advancement. This case laid down a clear mandate for the Controller to see whether the invention results in a technical effect or a technical advancement while assessing the patentability of ‘computer software per se’ under Section 3(k) of the Patents Act.
CRI inventions for purposes of data privacy and protection
The inventor of computer-related inventions kept on filing applications for business-related activities, but this time, the focus shifted to needed Security Transactions Related (STR) inventions such as payment gateways. Here, the inventor’s concern was preserving personal data secrecy and preventing misuse of payment through cards or mobile applications.
When an application (201641026786) for an invention titled “For selectively concealing physical address information.” was filled by Priya Randolph and others, it was refused by the patent office on the ground that the claimed invention relates to a business method under section 3(k). On appeal, the Madras High Court ruled that the claimed invention relates to e-commerce, which involves communication and interaction between the participants in e-commerce transactions. [Priya Randolph and Another v. Deputy Controller of Patents and Designs, 2023 [SCC OnLine Mad 7890]
In this case, the Court observed that if the claims are deploying hardware, software, and firmware for purposes of data privacy and protection, the monopoly claim is not in respect of a business method and ruled that when
“the claims are directed at concealing the physical address of the purchaser of goods in e-commerce transactions by deploying software, hardware, and firmware for such purpose. While it is possible that the conduct of e-commerce in this manner may be part of the business method of an enterprise if the claimed invention were to be put to use, the monopoly claim is not in respect of a business method but in respect of a claimed invention deploying hardware, software and firmware for purposes of data privacy and protection. Therefore, the conclusion that the claimed invention relates to a business method is untenable.” [Emphasis added]
In this case, the Madras High Court provided much-needed clarity in segregating what types of CR inventions do not fall within the exclusions under Section 3(k). The court ruled that where a claimed invention deploying hardware, software, and firmware for purposes of data privacy and protection, such claims should not be treated as business methods. In other words, the step of concealing the physical address of the purchaser of goods in e-commerce transactions by deploying software, hardware and firmware for such purpose is not a business transaction or method.
In Comviva Technologies Limited vs Assistant Controller of Patents & (12 November 2024), the Delhi High Court looked again into the CRI guideline 2017 and ruling in Priya Randolf and OpenTV Inc and endorsed these rulings on business methods coverage to conclude that:
“14. In Priya Randolf (supra), a similar view was taken by a Single bench of the High Court of Madras, holding that in e-commerce transactions, a claim would be construed as a “business method” only if, in substance, it is for a “business method”. In the said case, the invention involved was software, hardware, and firmware for the purposes of data privacy and protection. The Court came to the conclusion that this cannot be termed as a ‘business method’ and hence the impugned order of refusal passed by the Patent Office was set aside.”
If we look at the Comviva case, we will find that the patent for invention relates to “Methods and Devices for Authentication of an Electronic Payment Card using Electronic Token” [ Appl No.201611000234]. Prima facie, this invention may fall into the category of computer-related invention. The Controller observed that the actual contribution lies purely in the software part of performing electronic payment and, therefore, falls within the provisions of section 3 (k) of the Patents Act 1970 and, hence, is not patentable. The Court looked into the Complete Patent Specification along with the Claims and found that the subject application is not addressing a business problem but addressing the security of the transaction. The inventive step in the subject application does not lie in the business concept but rather lies in the technical process, as disclosed in the application. The authentication in the invention finishes before the actual financial transaction begins. Therefore, the aforesaid subject application would not relate to a financial transaction.
Security Transections Related (STR) Inventions Patentable after Comviva
Financial transaction security and personal data secrecy are primary problem areas of concern in e-commerce throughout the world. The inventors are doing research and finding innovative solutions in this field as well. It would not be wise to deny patents involving such transactions. We have seen in the Comviva case that the subject application does not address a business problem but rather addresses the security of the transaction. The inventive step in the subject application does not lie in the business concept but rather lies in the technical process, as disclosed in the application. The authentication in the invention finishes before the actual financial transaction begins.
The last step makes this invention fall short of what could have been possibly stated as a business transaction. This means the possibility of obtaining patents for Security Transactions Related (STR) inventions cannot be ruled out because the inventor is using terms like ‘payment,’ ‘transactions,’ and ‘financial transaction’ in the specification and claims. The Court has specifically observed in this case that the use of such terms in the specification and claims appears to have led the Controller to refuse this application as being a “business method”.
This case clearly highlights the drafting aspect of the patent specification and claims. A close look at claims by the Court reveals that the applicant is claiming the use of electronic tokens to ensure authentication of electronic payment through a card. The Controller, in this case, refused the patent on the ground that such transactions are “computer programmes per se” and methods of doing business fall under section 3(k). The Court ruled in this case that
“The impugned order fails to take into account that the subject application, even if based on computer programme and communication, would be patentable as it has resulted in a technical advancement in contactless payments, where the contactless payments were vulnerable to unauthorised transactions when a transaction card got stolen or compromised. Existing solutions, like one-time passwords (OTPs) or dynamic security codes, are susceptible to problems such as mobile phone cloning, visibility of security codes, etc. The appellant, through the subject application, has tried to overcome such limitations by providing a technical solution to a technical problem i.e., how to prevent unauthorised transactions using electronic payment cards. Therefore, in my view, it would not be a “computer program per se”.
Way Forward
In the Priya Radolf case, the Court clarified that if the claims are deploying hardware, software, and firmware for purposes of data privacy and protection, the monopoly claim is not with respect to a business method. In the Comviva case (November 2024), Judge Amit Bansal has observed that the appellant, through the subject application, has tried to overcome such limitations by providing a technical solution to a technical problem, i.e., how to prevent unauthorised transactions using electronic payment cards. Therefore, in my view, it would not be a “computer program per se”. The Court also observed that “the subject application, even if based on a computer programme and communication, would be patentable as it had resulted in a technical advancement in contactless payments, where the contactless payments were vulnerable to unauthorised transactions when a transaction card got stolen or compromised.”
It is interesting to note that patent offices across the world have tested patent applications in this field of innovation on the fulcrum of “technical effect” and “technical contribution”. If the invention demonstrates a “technical effect” or a “technical contribution”, it is patentable even though it may be based on a computer program. Even in CRI guidelines 2017, it is stated that the Controller is required to look into the aspect of ‘technical effect’ or ‘technical contribution’ or technical advancement before forming an opinion to refuse the patent under Section 3(k).
The court cases discussed above clearly point towards the possibility of obtaining patents for secure transaction management system inventions as well, notwithstanding the use of computer programmes. This possibility cannot be ruled out just because the inventor chooses to use terms like ‘payment,’ ‘transactions’, and ‘financial transaction in the specification and claims. However, expert advice can be useful when the applicant seeks to obtain patents on computer-related inventions, including secure transaction-related (STR) inventions.
Author: DPS Parmar
First Published by: Lexology here