A Relook at Business Methods in light of Madras High Court’s Decision in Priya Randolph v. Deputy Controller 

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In Priya Randolph v. Deputy Controller, Madras High court rejected the contention that the subject invention was excluded for being business method. The findings of this short judgement have possible significant implications on the jurisprudence regarding 3(k) and business methods in the Patent Act. The judgement comes on the heels of  OpenTV v. The Controller of Patents and Designs in July which had rejected a patent application for being primarily a claim to business method. In this post, I will contrast the two decisions in the light of the CRI guidelines to understand their reasons for variance in conclusion. Further, I will place the MHC judgement in the context of observations made by DHC regarding desirability of amendment to 3(k). This post, rather than commenting on the merit of patentability for business methods discusses its current scope and how MHC judgement, possibly, narrows it. 

Judgement: Analysis and Findings 

In the instant case, the question to be determined was whether the patent application was a ‘business method’ under sec. 3(k) of the Patent Act and thereby excluded. The invention titled ‘For selectively concealing physical address information’ ensured that the physical address of the user was concealed at various stages of an online transaction of purchase of product. The Controller held that the invention “relates to completion of the transaction i.e. from the stage of purchase of the product to the delivery of the product through the channel of e-commerce platform, logistic company and delivery executive which is purely a business activity.” In the impugned order, the Controller acknowledges that although the invention relates to protection of privacy of user, it is a business method since it also relates to a ‘purely business activity’.(extracted in Para 5 of judgement) .  

Madras HC, examining CRI guidelines, observed that “a claim would be construed as a business method if the claim is, in substance, for a business method.” Here, the court deviates from the Controller in a subtle but substantial manner. Whereas the Controller excludes the patentability on a mere finding that the invention related to a business activity, court qualifies the finding by providing that such relation to business activity must be ‘substantial’ in nature. In fact, in Para 8 the court notes that the present invention “may be part of the business method of an enterprise” if put to use, however, the present invention is mainly “in respect of a claimed invention deploying hardware, software and firmware for purposes of data privacy and protection.” Accordingly, it decided that the present invention did not relate to business method. 

Here, it is important to note that there is no fix jurisprudence on how to determine which invention is ‘substantially’ business methods. In this case, the court does not give weightage to the argument that, in effect, the invention facilitates the competition of an e-commerce transaction which is in fact a business activity. Rather, it focuses on the manner of implementation of the invention, mainly, utilising hardware, software and firmware to protect the privacy of the user of the e-commerce platform besides completion of transaction.

Accordingly, for the court, this, in substance, does not relate to business method despite being part of the business method of an enterprise

Business Method Under 3(k): CRI Guidelines and the DHC decision in the Open TV case

According to Guidelines for Examination of Computer related invention, ‘Business method’ as is “essentially about carrying out business/ trade/ financial activity/ transaction and/or a method of buying/selling goods through web”. It requires the claim to be examined as a whole, if the subject matter “specifies an apparatus and/or a technical process for carrying out the invention, even partly”. Therefore, the claim, in substance, must be a ‘business method’ to be excluded. If in substance, the claim, taken as whole, does not fall in any of the excluded categories, the patent should not be denied. 

DHC SB, in OpenTV v. The Controller of Patents and Designs,  observed that “exclusion in respect of business methods is an absolute one”. It contrasted Sec. 3(k) of Patent Act with Art. 52 of European Patent Convention as regards patentability of business method. The court interpreted the above guidelines broadly to exclude invention which relate to business method. As I will show, the court in this case eventually decides against the applicant on the basis that, in effect, the invention is a business method despite the system architecture employed by applicant to implement the invention. 

It observed that the bar in India to grant of business method is an “absolute bar without analysing issues relating to technical effect, implementation, technical advancement or technical contribution.” It is immaterial whether a computer program is used in the implementation of the invention. In Para 73, the court says, that to determine whether an invention is a business method or nor, it must consider whether the patent application addresses a business or administrative problem and provides a solution for the same. In other words, whether the invention is primarily for enabling conduct or administration of a particular business i.e. sale or purchase of goods & services and purpose of the invention is for claiming exclusivity or monopoly over a manner of doing business. (para 74)

In Europe, on the other hand, the bar is qualified by per se and not absolute. EPO creates a difference between patentable business method and a method of doing something that does not have a “technical effect”.(Ch.7, Perspectives on Patentable Subject Matter by Bronwyn H. Hall, p. 250, see here) EPO does not reject the patent claim merely because it is a business method. In case the invention is implemented using computer program, EPO adopts ‘problem and solution approach’ wherein it first considers whether the invention has technical features. Then, applicant will have to prove that the invention provided a non-obvious technical solution to a technical problem through technical means proving inventive step.(see here for the paywalled book The Cambridge Handbook of Artificial Intelligence by Nicholas Fox at p. 225) 

In the case before DHC, the petitioner had argued that the focus in determining patentability must not only be on effect of the invention. (Para 31-32) Rather, if such invention is implemented in an innovative and novel manner, it must be patentable. (Para 32). Relying on European authorities, it also argued that if subject matter relates to business method and is a result of technical implementation and contribution to technical character, it cannot be excluded from patentability. (Para 35) On the other hand, respondent argued that since the purpose of the invention was to “merely enable sale or purchase”, which is essentially business method, it must be excluded. (Para 38) 

Clearly, petitioner was focusing on the ‘manner’ in which such invention was implemented whereas the respondent adopted a ‘effects’ approach to argue for exclusion of patentability. DHC, agreeing with latter, focused on the effect of the invention, noting that “purpose of the invention is primarily to enable giving of a media in tangible or intangible format to the recipient”. Importantly, it disregarded the arguments about the technical and novel manner in which the invention was implemented, noting- “such a giving of a media irrespective of whether is(sic) worded as a method or as a system would be nothing but a method for doing a particular business i.e., for giving of a media as a gift.”

Reconciling MHC AND DHC: Relook at 3(k)?

In the MHC case, the claimed invention, as Controller notes in its order, related to “completion of the transaction i.e. from the stage of purchase of the product to the delivery of the product through the channel of e-commerce platform, logistic company and delivery executive”. Although, the invention was implemented in a technical manner using hardware, software and firmware for protecting date privacy, it is immaterial since effectively facilitating completion of transaction is purely a business activity. Even MHC concedes to the extent that if the claimed invention were put to use, it would be “conduct of e-commerce in this manner may be part of the business method”.

However, MHC, differing from DHC, relies on the ‘technical manner’ in which the invention is implemented (hardware, software and firmware) to provide a ‘technical solution’  to the ‘technical problem’ of data privacy concern of e-commerce customer. Although MHC does not use the exact terms, the parallels are visibly apparent on a close reading. How? In para 8, it notes that the invention was implemented by “deploying software, hardware and firmware”(technical means). It also notes that the invention is “directed at concealing the physical address of the purchaser of goods in e-commerce transactions”(Technical problem). It is clear that in most online e-commerce transactions, there are very high privacy and data protection issues. The claimed invention provided a ‘system for selectively concealing information relating to physical address’ in addition to conducting e-commerce business.(technical solution). Here, the court shifts focus from the in effect result of the invention to the manner of invention.

MHC does not narrowly focus on the end result of the invention in arriving at a conclusion. 

On a broad level, MHC and DHC give differing conclusions on similar matter relying on CRI guidelines which provide that patent application, in substance, must relate to business method. The interpretation of the term substance is unclear at this point. The uncertainty is heightened in the present context where DHC reads it as an ‘absolute bar’ whereas MHC narrowly interprets the term. 

DHC raised pertinent concerns in Para 85 that present language of 3(k) potentially excludes a large number of inventions. It rightly notes a growing number of inventions in emerging technologies in the field of business method which require a relook at 3(k) so that Patent law is not rendered outdated. Madras HC, in this regard, shows the way forward. 

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