Hitachi Auction Method, T 258/03

This article concerns a recent decision of the boards of appeal of the European Patent Office which has significant implications for the patentability of computer software inventions. In particular, the decision clarifies the borderline between what types of computer-related innovation are potentially patentable inventions and what types of computer-related innovation are explicitly excluded from patentability by the European Patent Convention.

The decision (T 258/03) related to a European patent application by Hitachi, Ltd. for a particular auction method carried out over a computer network. This article introduces the Hitachi patent application, before setting out background law concerning the patentability of computer software in Europe and then focusing on the aspects of the Hitachi decision which agree and disagree with earlier case law.

The Hitachi Patent Application

The Hitachi European Patent Application, No. 97306722.6 concerned an automatic auction method which is of general application, but was designed particularly for wholesale auctions for the sale of fresh foods. The auction method begins with data exchange between a central server and client computers in order to receive bids from the participants in the auction. The bids include both a desired price to pay for the goods and a maximum price. The auction then proceeds automatically without any requirement for the bidders to monitor the proceedings on-line. The server carries out a calculation, in which an auction price is set and then successively lowered (in a manner equivalent to a Dutch auction) until the auction price reaches the desired price specified by one or more bidders. If the same price is specified by more than one bidder, then the price is raised again until it exceeds the maximum price specified by all but one bidder. When only one bidder remains, the price is set and the sale can proceed.

The Hitachi European Patent Application has several different categories of claim. (Claims are the part of a patent specification which sets out the scope of protection which is sought). Claim 1 of the main request considered in this decision was for a method executed on a server computer embodying the invention; claim 3 was for corresponding “computer auction apparatus”; and claim 4 was for a corresponding computer program.

The computer software patentability exception

The first hurdle to be overcome by a patent application in the field of computer software is the test set out in Article 52 of the European Patent Convention.

Article 52(1) states that “European patents shall be granted for any inventions which are susceptible of industrial application, which are new and which involve an inventive step.”

Article 52(2) then qualifies this statement with the well-known computer software patentability exception: “The following in particular shall not be regarded as inventions within the meaning of paragraph 1: …. (c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers;…”

This is further qualified by Article 52(3) which states: “the provisions of paragraph 2 shall exclude patentability of the subject matter or activities referred to in that provision only to the extent to which a European patent application or European patent relates to such subject matter or activities as such.” This means that it is “programs for computers as such” which are excluded from patentability, not “anything involving a program for a computer”. As we will explain, the legal test applied by the European Patent Office to determine whether a claim relating to a program for a computer is patentable has moved some way from the apparent literal meaning of Article 52.

The prohibition against the patenting of “schemes, rules and methods for performing mental acts, playing games or doing business” as such, is also important when assessing the patentability of many e-commerce ideas which relate to new business practices or the automation of steps which are usually carried out by the human mind.

Because Article 52(1) states that European patents shall be granted for any inventions which fulfil certain criteria, and because article 52(2) defines certain types of subject matter that are not considered to be inventions, the first legal requirement to be assessed when determining the patentability of computer software is whether the claimed subject matter is an ‘invention’ within the meaning of Article 52. The board of appeal of the European Patent Office believe that this should be assessed before going on to determine whether the ‘invention’ is new and involves an inventive step.

What is an ‘invention’ within the context of Article 52?

The boards of appeal of the European Patent Office have previously determined that, in order to be an ‘invention’, the claimed subject matter must have technical character, for example if a technical effect is achieved by the invention or if technical considerations are required to carry out the invention. Technical character has never been satisfactorily defined, but might be found in the control of an industrial process or in processing data which represents physical entities or in the internal functioning of the computer itself or its interfaces under the influence of a computer program, perhaps affecting the efficiency or security of a process, the management of computer resources required, or the rate of data transfer in a communications link. (EPO Examination Guidelines C-IV, 2.3.6). On the other hand, methods which only involve economic concepts and practices of business would generally be held to lack technical character.

This requirement for ‘technical character’ is not anywhere explicitly mentioned in the European Patent Convention. However, it has become a clear legal requirement for an ‘invention’ to have technical character if a valid European patent is to be obtained.

This requirement for ‘technical character’ is of more practical consequence than the exclusion of “programs for computers as such”. Indeed, before 1999, the exclusion of “programs for computers as such” was taken to mean that claims to computer software per se were unpatentable, but that claims to methods carried out by a computer or computer apparatus might be acceptable provided that they had the necessary technical character. This will be why the Hitachi patent application, like many others, claimed a method executed on a server computer and computer auction apparatus as well as a computer program. However, since two important decisions in 1999 concerning IBM computer program products, it has been possible to obtain grant of claims for computer program products, provided that they have technical character. Any computer program with technical character is not considered to be an excluded ‘computer program as such.’

Several years ago it was unclear as to what part of a claim had to have technical character for the claim to be considered as an ‘invention’ within the meaning of Article 52. In the early 1990s, the European Patent Office would typically employ the so-called ‘contribution approach’. They would assess the contribution that the invention made to the art and determine whether this contribution had technical character. In general, the contribution was considered to be the difference between the closest prior art and the claimed invention. This meant that it was necessary to determine the closest prior art and the contribution made by the invention in order to determine patentability. If the different between the closest prior art and the claimed invention was purely non-technical, then the claimed invention was considered not to be ‘an invention’ and so was held to not be patentable.

In recent years, however, the contribution approach has been discredited. Instead, the current position is that it should be possible to determine whether claimed subject matter does or does not have technical character without reference to the prior art or the contribution it makes. Technical character is an inherent absolute property of a claimed invention; it does not depend on the differences between what is claimed and what is already known; technical character does not appear or disappear depending on what is considered to be the closest prior art.

This was summed up as follows in appeal T0931/95 (Controlling pension benefits/Pension Benefit Systems Partnership) published in 2000. “There is no basis in the European Patent Convention for distinguishing between ‘new features’ of an invention and features of that invention which are known from the prior art when examining whether the invention concerned may be considered to be an invention within the meaning of Article 52(1) EPC. Thus there is no basis for applying this so-called contribution approach for this purpose’.

Although the Pension Benefit Systems case was perhaps the final nail in the coffin for the contribution approach, it left open a significant question, which was considered in the Hitachi appeal.

Claims comprising both technical and non-technical subject matter

The claims of the Hitachi auction method patent application, like many e-commerce software inventions, include some subject matter with technical character, such as a server and client computers, and a network. Their claims also include some subject matter which does not have technical character, such as auction rules. How is the patentability of a claim which includes technical and non-technical features to be judged? In particular, does a claim to a use of technical means for a non-technical purpose have technical character, or not?

In the Pension Benefit Systems case, the board of appeal concluded that this was not necessarily the case. In their words, “a feature of a method which concerns the use of technical means for a non-technical purpose and/or for processing purely non-technical information does not necessarily confer a technical character to such a method.”

The board of appeal in the Hitachi case held the view that the Pensions Benefit Systems approach included remnants of the now discredited contribution approach. Their view was that, in general, a method involving technical means is an invention within the meaning of Article 52(1) EPC. In essence, they propose that a claim including any technical means (e.g. a server, network etc.) has technical character and is not excluded from patentability. For an activity to be a non-invention within the meaning of Article 52(1) EPC it would have to represent purely abstract concepts devoid of any technical implications.

Applying this reasoning, the board of appeal decided that the claimed auction method was an invention within the meaning of Article 52(1) EPC because it contained technical features such as client computers, a server computer and a network. This was the case even though the overall aim of the claimed method, to identify the successful bidder for a product offered for sale at an auction, was not regarded as having technical character.

The board appreciated that this definition of what constitutes an ‘invention’ within the meaning of Article 52(1) EPC is so broad that it includes, e.g. writing using a pen and paper. However, they did not consider this breadth to be problematic. This is because the requirement for the claims of a patent application to relate to an ‘invention’ having technical character is just one test which must be passed to be obtain grant of a valid patent. The invention must also be new, represent a non-obvious technical solution to a technical problem and be susceptible of industrial application.

Inventive Step

The board of appeal then moved on to considering whether the claimed invention met the requirements of being novel and having an inventive step. Novelty was not an issue and so the board went on to consider inventive step.

The European Patent Office consider an invention as involving an inventive step if, having regard to the state of the art, it is not obvious to a person skilled in the art. Thus, the board of appeal began by considering documents setting out the state of the art.

One close prior art document discussed an auctioneer’s operator station connected with operation stations for bidders. The procedure described in this first prior art document was a Dutch type auction in which the auction price, as monitored by an auction “clock”, decreases with time. Bidders follow the auction at their operator stations. A bidder may stop the clock remotely using a pushbutton on their desk. The first bidder to stop the clock is successful. It is very important to determine accurately who stopped the clock first and so time information is transmitted from the bidders’ operation stations in order to determine the order of stop commands.

Another close prior art document discusses a similar auction in which a software phase-locked loop is used to synchronise the clocks at each bidders terminal, solving the problem of ensuring that that the system accurately determines the order in which stop commands were issued by bidders.

The European Patent Office look to determine the objective technical problem to be solved by the invention and consider whether or not the claimed invention, starting from the closest prior art and the objective technical problem, would have been obvious to the skilled person. In line with earlier case law, the board of appeal considered inventive step by taking account only of those features which contribute to a technical character.

Hitachi argued that the invention overcame the technical problem in the prior art of delays in propagation of information between the bidders and the server. They argued that if the auction was performed online, as proposed in the prior art documents mentioned above, these delays in propagation would influence the outcome of the auction. The problem was solved by adapting the rules of the known Dutch auction methods so that the auction method could be carried out automatically. In this way, any data transmission delays become irrelevant.

Hitachi’s arguments were however rejected. The board of appeal took the view that this solution did not contribute to a technical character and so could not be taken into account for assessing inventive step, since it concerned the rules of the auction, not a technical solution, solved by technical means, to the delay problem described in the prior art. The board stated that: “method steps consisting of modifications to a business scheme and aimed at circumventing a technical problem rather than solving it by technical means cannot contribute to the technical character of the subject-matter claimed.”

This is quite an interesting statement. The board of appeal were clearly not minded to allow a patent application which does not solve a technical problem, by technical means. However, the wording they used leaves a gap. On the one hand they disapprove of modifications to a business scheme which circumvent a technical problem. On the other hand, they would generally allow a non-obvious solution to a technical problem by technical means. What about a modification to a business scheme which actually solved, rather than merely circumvented a technical problem by non-technical means?

The decision went on to comment that “if a step of a method has been designed in such a way as to be particularly suited for being performed on a computer, it arguably has a technical character. Suggesting such a step might require technical considerations namely of the working principles of a computer.” Perhaps this board of appeal would look favourably on a patent for a business scheme which was clearly designed in such a way as to make it particularly suited for performance on a computer, or which clearly solved a technical problem?

However, the board of appeal did not consider that the patent application before them had the required characteristics and so Hitachi ’s appeal was dismissed.

Conclusions

The boards of appeal of the European Patent Office are not bound by earlier decisions, although they must give their reasons when they deviate from an earlier decision of a board. For this reason, the broad definition of what constitutes an ‘invention’ within the meaning of Article 52 that was set out in the Hitachi decision should not be considered as set in stone.

Nevertheless, this is another decision which shows that the contribution approach to determining whether claimed subject matter was an ‘invention’ is discredited. If this precedent is followed, it will become easier to argue that any claim of a European patent application including any technical means meets the requirements Article 52. It is becoming less important for applicants for European patents to structure their claims specifically to meet the demands of the contribution approach.

The prime difficulty which will be faced in Europe by patent applications for inventions which relate to computerised business and financial methods, or other aspects of computer software at the borderline of patentability, will be arguing that there is an inventive step. There must be a technical problem solved by the features of the claim which contribute to technical character. Accordingly, patent applications which may face objections of lack of technical character should be structured to support arguments that the claimed subject matter solves a technical problem, and that this solution is provided by feature of the claim which contribute to technical character.

As discussed above, the Hitachi decision does leave open some possibility that a computer-implemented business method designed in a fashion particularly suited for being performed on a computer, and solving a technical problem, would be found to be patentable.

Although the Hitachi patent application is an example of a patent application that has been disallowed, it should be borne in mind that the majority of patent applications for computer software related inventions which are filed with the European Patent Office are granted in some form. Computer software remains an important subject for patenting in Europe .

Indeed, we will finish with an example of a claim from a Patent, EP 927,945, recently granted to Amazon.Com, Inc. (albeit the subject of Opposition proceedings at the date of writing of this article) which illustrates what may be granted by the European Patent Office.

1. A method in a computer system for ordering a gift for delivery from a gift giver to a recipient, the method comprising:

• receiving from a gift giver an indication that the gift is to be delivered to the recipient and an electronic mail address of the recipient;
• sending to a gift delivery computer system an indication of the gift and the received electronic mail address;
• wherein the gift delivery computer system coordinates delivery of the gift by:
• sending an electronic mail message addressed to the electronic mail address of the recipient, the electronic mail address requesting that the recipient provide delivery information including a postal address for the gift; and
• upon receiving the delivery information, electronically initiating delivery of the gift in accordance with the received delivery information.