Aerotel Ltd. v Telco Holdings Ltd & Ors Rev 1

Patentability exclusions under the European Patent Convention must be assessed by examining the substance of the claimed invention. The court endorsed a four-step method: construe the claim, identify the actual contribution, ask whether that contribution consists solely of excluded subject matter as such, and check whether it is technical.

A business method is not excluded only when it is abstract or completes a transaction. A computer program includes an operative program on a physical medium. Physical hardware alone does not avoid an exclusion. A genuinely new physical combination may nevertheless be patentable where the contribution is technical and extends beyond excluded subject matter.

These were two appeals concerning patentability exclusions under the European Patent Convention and the Patents Act 1977.

In the Aerotel appeal, Telco had counterclaimed for revocation of Aerotel’s patent. Lewison J granted summary judgment and revoked the patent: [2006] EWHC 997 (Pat). Aerotel appealed after settling with Telco, retaining a commercial interest because infringement proceedings against another company remained pending.

In the Macrossan appeal, the Comptroller rejected an application for an automated method of producing company-formation documents. Mann J dismissed the appeal: [2006] EWHC 705 (Ch). The central questions were the correct approach to the exclusions for business methods, computer programs and mental acts, and whether the claims made a relevant technical contribution.

1. Disposition. The Aerotel appeal was allowed. The Macrossan appeal was dismissed. The court also rejected Mr Macrossan’s apparent-bias objection and refused remittal to the Patent Office.
2. The court worked directly from Articles 52(2) and 52(3) of the European Patent Convention. Section 1(2) of the Patents Act 1977 was intended to have the same meaning, as confirmed by section 130(7). The exclusions were heterogeneous. There was no general principle requiring them to be construed either narrowly or widely.
3. The court declined to follow the approaches in Pension Benefits, Hitachi and Microsoft/Data Transfer which treated the presence of physical hardware as sufficient to avoid the exclusions. The categories were not confined to abstract or intangible subject matter. A computer program included an operative program stored on a medium which caused a computer to execute it.
4. The court was bound by its own decisions in Merrill Lynch, Gale and Fujitsu, which adopted a technical-contribution approach subject to the qualification that novel or inventive excluded matter did not itself count as a technical contribution. The Comptroller’s structured formulation was a permissible and helpful reformulation of that approach: (1) construe the claim; (2) identify the actual contribution; (3) ask whether it consists of excluded subject matter as such; and (4) check whether it is technical.
5. On the Aerotel claims, the system was a new physical combination of known types of apparatus. Its contribution was not merely a business method and was technical. The method claims concerned use of that new apparatus and likewise escaped the exclusion. The judge below had misunderstood the expert evidence.
6. On the Macrossan claims, the contribution was an interactive system replacing work otherwise done by a solicitor or company-formation agent. It was a method of doing business as such. The exclusion was not limited to abstract methods or completed transactions. The same contribution was also a computer program as such, with no technical effect beyond running a standard program.
7. The court expressed doubt about the wide mental-act reasoning provisionally stated in Fujitsu, but did not decide the issue because the Macrossan claims were excluded on the business-method and computer-program grounds.

• Court of Appeal (Civil Division): Aerotel’s appeal allowed; Macrossan’s appeal dismissed.
• High Court, Chancery Division (Patents Court): Lewison J granted summary judgment and revoked Aerotel’s patent: [2006] EWHC 997 (Pat).
• High Court, Chancery Division: Mann J dismissed Mr Macrossan’s appeal from the Comptroller’s decision: [2006] EWHC 705 (Ch).