South Africa: Patentability Of Business Methods

The debate regarding the patentability of business methods and computer programs has been sparked in South Africa, as elsewhere in the world.

According to the South African Patents Act (Act no 57 of 1978) a patent may be granted for any new invention which involves an inventive step and which is capable of being used or applied in trade or industry or agriculture (section 25(1)). However, anything which consists of, inter alia, a scheme, rule or method of doing business, or a program for a computer shall not be regarded as an invention for purposes of the Act (section 25(2)).

This position is in line with the European Patent Convention (article 52), and the UK Patents Act, 1977 (section 1). This is not surprising, since the South African Patents Act, 1978 was framed to accord, at least as far as the definitions of invention, novelty and obviousness and the approach to patentability in general are concerned, with the European Patent Convention and UK patent legislation.

The approach of TRIPS is different : article 27 provides that patents shall be granted for any inventions in all fields of technology. In fact, it is stated that patents shall be available and patent rights enjoyable without discrimination as to the field of technology. Article 27 does not define the concept "fields of technology" expressly to exclude schemes or rules or other mental steps; yet, the use of the term "technology" could be interpreted to indicate an intention that inventions should have some technical content. In the list of inventions set out in article 27.2 and 27.3 which may be excluded from patentability by WTO member countries, business methods are not included.

Further, again in line with the European Patent Convention and the UK Patents Act, the South African Patents Act provides (section 25(3)) that the exclusionary provision of section 25(2) shall prevent anything from being treated as an invention for purposes of the Act, for example for purposes of patentability, only to the extent to which a patent application or patent relates to that thing as such (author’s emphasis).

There is no case law or other authority in South Africa placing an interpretation on the combined effect of the provisions of section 25(2) and (3). South African authors (e g Burrell South African Patent and Design Law , 1999 at 47 - 48) tend to deal only with the exclusionary provision of section 25(2) to conclude that, as the law stands at present, a scheme, rule or method for doing business is not patentable. However, in accordance with the rules of interpretation it cannot be assumed that the legislature intended to enact a meaningless provision; therefore the provision of section 25(3) must be given a meaning in the context of its reference to section 25(2).

From the wording of section 25(3) it seems that the intention of the legislature was to place a limitation on the application of section 25(2), namely that an invention consisting of a scheme or rule or method of doing business will be disqualified from patentability only if the invention entails nothing but that scheme or rule or method. Conversely, if the invention includes any further features, the combined whole may well be patentable. Such an interpretation would be in line with developments in the UK and USA.

The provisions of section 1(2) of the UK Patents Act, 1977 are substantially coterminous with section 25(2) and (3) of the SA Patents Act. The UK courts have applied a strict approach to this provision, by looking to the substance of a claim to ensure that it does not contain excluded matter dressed up as patentable subject matter. It has been stated that the key to patentability is whether the claim, in addition to the excluded subject matter, also includes a technical contribution to the art. In applying this principle, the UK patent office takes the following approach (as reported by Lubbock "Patents for business methods" Intellectual Propert Briefing Ashurst Morris Crisp, Summer 2000) :

• a claimed invention is not excluded from patentability merely because some of its features are excluded by section 1(2);
• the quantum and level of the technical contribution made by the invention to the known art must be considered;
• the whole content of the claim is assessed to determine whether the invention makes a (technical) contribution which goes beyond excluded subject matter and which is sufficient to support a patent.

The wording and structure of article 52 of the European Patent Convention in regard to business methods and computer programs are very similar to those of the SA and UK Patents Acts. The European Patent Office Board of Appeals has held computer software to be patented as long as it is claimed in a way which exhibits the potential for a technical effect. The same approach is likely to be followed in regard to business methods. However, a proposal has recently been tabled at a diplomatic conference to revise article 52 by amending it to provide in general and non-exclusionary terms that patents can be granted for all inventions in all fields of technology. Such an amendment would obviously create an opening for business methods as such to become patentable. This proposal is part of the ongoing consultation at European Commission level in regard to the question of whether the current patent system in fact meets the needs of all potential users of the system.

The position in the US is different. The US Patents Act (title 35, section 101) has no express statutory exclusion of business methods or computer programs from patentability. Over the years, US court decisions and patent office practice have excluded business methods from patentability - but this has changed. The US patent office has in fact implemented a class of patentable subject matter including financial and business practice management and other business-related topics. It has been reported that numerous patents have issued for business processes and methods in the context of electronic commerce. In an article published in Managing Intellectual Property ("Business discovers the value of patents" by Bratic, McLane and Sterne (Sept 1998) MIP 72)) the authors show that in 1997 the third largest class of patents granted by the US patent office related to information processing systems and organisation.

It is against this background that the AIPPI (International Association for the Protection of Intellectual Property) at its recent (March 2001) world congress in Melbourne, Australia, debated the question of the patentability of business methods. The debate took account of the underlying principles that the patent system is designed to compensate research and the creation of new inventions, and that the Paris Convention (article 1) in fact warrants the right to protect inventions arising out of economic activities. The need to protect business methods has arisen from the increased use of electronic systems in business, and patent laws have over time progressively adapted to new subject matter and should adapt also to the need to protect methods of doing business. It was also accepted that creations of a purely abstract nature are generally excluded from the scope of patent protection and that, generally speaking, inventions in order to be protected by patents must not only be useful but must possess a technical content.

It was resolved that inventions including methods used in all fields of industrial, commercial and financial activities, also business methods, should be entitled to patent protection provided that the invention as defined in the claims has a technical content. It is evident that the resolution did not go so far as to require patent protection for business methods per se.

The question was considered whether the novel and inventive feature required for patentability should lie in the technical part of the invention; it was agreed that this was not required. The assessment of novelty and inventiveness should be made on the merits of each case, and even the application of known methods to new fields may be found to be inventive. The lack of recorded prior art was seen as an issue to be addressed, and the creation of prior art databases was encouraged.

This resolution reinforced the earlier resolution by FICPI (International Federation of Intellectual Property Practitioners) at its congress in Vancouver in June 2000, when it was resolved that there was an urgent need to harmonise legal conditions for patent protection, to secure adequate protection for commercially highly valuable innovations in information technology as applied to any section of business. The relevant authorities, on international, regional and national levels, were urged to embark on worldwide harmonisation efforts.

In the light of these developments it is clear that an authoritative interpretation needs to be placed on statutory provisions such as those contained in section 25(2) and (3) of the South African Patents Act, if necessary by legislative amendment. At the same time, harmonisation on an international level needs to be promoted, to avoid disparity in protection which may create imbalances in business equity. The lack of a harmonised approach does in fact undermine the fundamental principles of the patent system, namely of a just reward for innovation and investment, and an incentive to stimulate further research and innovation.