Iowa Lottery
[2010] APO 25
•21 October 2010
IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Iowa Lottery [2010] APO 25
Patent Application 2007240153
Title:Lotto Game
Patent Applicant: Iowa Lottery
Delegate: P M Spann - Deputy Commissioner of Patents
Decision Date: 21 October 2010
Hearing Date: Heard by written submission
Catchwords: PATENTS – examiner’s objections - lotto game - whether a manner of manufacture - prize pool merely information not an artificially created state of affairs - payment of prizes not a “concrete, tangible, physical or observable effect” – method not patentable merely because it is operated in whole or part using a computer system – claims directed to a scheme - application refused .
Representation: Patent applicant: Mr S Berggren, patent attorney, Spruson & Ferguson, Sydney
IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2007240153
Title:Lotto Game
Patent Applicant: Iowa Lottery
Date of Decision: 21 October 2010
DECISION
Patent application 2007240153 is refused pursuant to subsection 49(2) of the Act.
REASONS FOR DECISION
This matter concerns examiner’s objections in respect of the application and whether I should exercise the Commissioner’s power to refuse the application under subsection 49(2) of the Patents Act 1990.
Background
Patent application 2007240153 was filed as a divisional application on 6 December 2007. The parent application, 2002305717, was filed as an international application under the Patent Cooperation Treaty (PCT/US02/16710) on 24 May 2002 and claims priority from US patent application 60/293,406, filed on 24 May 2001. Following entry to the national phase it was the subject of two adverse examination reports including objections that the subject matter claimed was not a manner of manufacture and, having not obtained acceptance under subsection 49(1) of the Act, lapsed at the end of the period prescribed for that purpose.
Three adverse examination reports have issued in relation to the present application with the last indicating the intention of the Commissioner to set the matter for hearing. The applicant in turn has filed a number of submissions and proposed amendments in response. A fee payable for the applicants response to the second examination report was not paid when due and consequently the application lapsed. However an extension of time under s223(2)(a) for the payment of the fee has been recently allowed by the delegate and hence the application is restored. Its final date for acceptance is 10 March 2011.
The patent specification
The subject matter of the application concerns lottery games and more particularly lotto type games. A number of existing games of that type are described in the specification including Keno and Powerball® which are also well known in Australia. A feature of those games is that the probability of winning is low. This means that large jackpots are possible but are also necessary to ensure the interest of a large player base is maintained.
Apparently this had led to a phenomenon of “jackpot fatigue” where higher and higher jackpots need to be offered to attract the same player interest. To support these, a very significant player base is required and has led to cooperation between gaming jurisdictions at state level to achieve a higher jackpot pool. The specification indicates from this point of view that it is desirable to further extend the cooperation of gaming jurisdiction across national boundaries. As a result the size of jackpot prizes can be increased significantly however there are a number of challenges including differences in the lotto games, their regulation, currencies and player expectations.
A game system said to address theses issues is then described and is reflected in the claims. The main independent claims (there are also three omnibus claims) as most recently proposed to be amended on 3 September 2010 are in the following form:
“1. A prize pool for a lottery game played among a plurality of member lotteries, at least two of which are from diverse jurisdictions, the prize pool comprising:
a system of prize levels including a jackpot prize and at least first and second subordinate prizes;
a super pool of accumulated funds that is used to pay the jackpot prize and inflate the second subordinate prize; and
wherein, in a drawing having a jackpot prize winner in at least one jurisdiction, a member lottery in a jurisdiction without a jackpot prize winner pays out of its own funds the first subordinate prizes and contributes money to the jackpot winner and second subordinate prize winners in each jurisdiction having a jackpot winner, and
wherein one or more of the jurisdictions sets a jackpot prize limit such that money in the super pool in excess of the jackpot prize limit is awarded as second subordinate prizes.”
“3. A method of paying prizes in a lottery game to be played among a plurality of groups, the prizes comprising a jackpot and first and second subordinate prizes, the method comprising the steps of:
collecting a fee for entry into the lottery game by each player;
accumulating an individual group prize pool for each group participating in the lottery game from a first portion of the entry fee;
accumulating a super prize pool from a second portion of the entry fee;
creating a jackpot prize limit in one or more of the groups;
paying the first subordinate prizes from individual group prize pools; and
paying the jackpot and the second subordinate prizes from the super prize pool in one or more groups having a jackpot winner such that money in the super prize pool in excess of the jackpot prize limit is awarded as the second subordinate prizes.”
“12. A method of managing a prize pool for a multi-group lottery game, the method comprising the steps of:
collecting a fee for entry by a player into the game;
allocating, by a computing device, a first portion of the fee to a group prize pool for a group associated with the collection of the entry fee;
allocating, by the computing device, a second portion of the fee to a super pool; playing the lottery game and determining, by the computing device, if there are any jackpot prize winners and any subordinate prize winners;
allocating, by the computing device, the super pool to groups in which a jackpot prize winner is located;
paying subordinate prize winners in groups not having a jackpot prize winner from the group prize pool with which they are associated;
creating a jackpot prize limit in one or more of the groups;
paying jackpot prize winners from the super pool up to any jackpot prize limit for the group with which they are associated; and
paying subordinate prize winners in groups having a jackpot prize winner with money from the super pool in excess of the jackpot prize limit for the group with which they are associated.”
The examiner’s objections
The examiner’s objection is that:
“The application is not for a manner of manufacture within the meaning of paragraph 18(1)(a) of the Patents Act because it merely relates to a set of rules for playing a game (ie the lotto game / pool of funds). There does not appear to be any defined subject matter that could be considered an application of science and technology.
From Grant v Commissioner of Patents, "a physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required." None of the claims as presently defined can be said to result in “an artificially created state of affairs”. The claims are merely directed to a game having a number of prizes associated with rules for determining the prizes.”
The applicant’s attorneys have made a number of submissions. These include most recently the following which I will refer to as appropriate in my reasons below.
“Claims 1 to 2 and 15
Claim 1, its dependent claim 2, and omnibus claim 15, as amended, are directed to "A prize pool for a lottery game". These claims are not claims to a process or method, so the Grant case is of limited relevance since that case deals specifically with the patent-eligibility of a method claim. Rather, the question as posed by NRDC is whether the "prize pool" is an "artificially created state of affairs" whose "significance ... is economic", ie. that possesses "economic utility".The Applicants submit that the claimed "prize pool" is indeed an "artificially created state of affairs". It is unquestionably a man-made artefact as opposed to a natural phenomenon. The specification at page 2 line 12 states that the game (including the Super Pool that lies at its heart) may be "computerized", i.e. managed by a properly programmed computing device. The specification on page 8 at lines 22 to 24 further states "The funds allocated to the jackpot prize are ... held in trust or escrow ... to form the Super Pool" These passages clearly disclose that the Super Pool is created and maintained by specific human actions, whether directly or indirectly via a properly programmed computing device.
The fact that the "prize pool" is a sum of money that may never be physically present in a single location, as cash or in some other physical form, but rather is maintained in virtual form by means of accounting records of entries such as entry payments and prize payouts, by no means detracts from this argument.
The Applicants further submit that the significance of the prize pool is in the area of economic endeavour. Games of chance such as lotteries have been a conducted on a large scale as a profitable exercise for centuries. Such games produce enjoyment for their participants, and, if well run, profits for their operators and (often) tax revenue to the public purse. Moreover, the competition among rival lottery games is intense. Any innovative improvement, such as the "Super Prize Pool" disclosed in the present specification, and claimed in claims 1 to 2 and 15 as amended, that may lead to a larger player base is therefore potentially economically valuable.Therefore, the Applicants submit that independent claim 1, as amended, its dependent claim 2, and the corresponding omnibus claim 15, as amended, are directed to a "manner of
manufacture".Claims 3 to 11 and 16
As mentioned above, independent method claim 3 has been amended to more clearly define the invention. Independent method claim 3, as amended, commences "A method of paying prizes in a lottery game..." and concludes with two steps of "paying prizes" as promised by the preamble.The Applicants submit firstly that the Grant decision cited by the Examiner in objection 2 mentioned above specifically rejects (at [38]) a requirement that a claimed method be an "application of science and technology", which was one of the reasons for the "manner of manufacture" objection (numbered 2) to the original "game" claims.
Rather, the Grant decision stated that a claimed process requires a "concrete, tangible, physical, or observable effect" in order to fall into the category of a "manner of manufacture".
Such an "effect" was equated to the "artificially created state of affairs" requirement laid down by the NRDC case. The Applicants submit that the end result of the claimed method, the payment of prizes in a lottery game, falls within the meaning of an "observable effect". In other words, claim 3 as amended does not merely recite abstract mathematical calculations, but actually results in a concrete, observable output in the form of prize payments. Indubitably, a recipient of such a prize would be able to observe the effect of the payment of the prize, as many advertisements for lottery games testify. Indeed in the view of some, there is no more "concrete" phenomenon in the modern world than the acquisition of wealth. This holds regardless of the fact that the claimed prize payment is not limited to physical forms of money such as cash or bullion.
Further, such a result (the payment of a prize in a lottery game) is quite unlike the "abstract, intangible situation" said in Grant to be the result of Grant's method. In Grant, the applicant in that application argued that the result was that "financial rights and obligations have changed" (at [27]). The amended method claim 3 results in far more than a change in "rights and obligations".
Therefore, the Applicants submit that independent method claim 3, as amended, its dependent claims 4 to 11, and the corresponding omnibus claim 16, as amended, are indeed directed to a "manner of manufacture".
Claims 12 to 14 and 17
As mentioned above, independent method claim 12 has been amended to recite that certain steps, namely the allocating and determining steps, are implemented "by a computing device".Claim 12, as amended, is directed to "A method of maintaining a prize pool for a multi-group lottery game". The amendments to claim 12 make clear that the prize pool is maintained in virtual or electronic form by the creation and updating by a computing device of electronic information stored within the computing device.
The Grant decision, citing Welcome Real-Time SA v Catuity Inc (51 IPR 327), stated (at [30]) that "part of the invention was the application and operation of the method in a physical device". This was further elaborated (at [32]) with the statement that "a change in state or information in a part of a machine" constituted the "concrete transformation" required as a result of a method claim that falls into the category of "manner of manufacture". The Applicants submit that the same reasoning applies to claim 12, as amended. The "change in state or information" occurs as a result of the computing-device-implemented steps in claim 12 as amended. Each computing-device-implemented step updates or transforms the electronic information defining the prize pool, thereby "maintaining" the prize pool in electronic form.
Furthermore, the Applicants submit that this "concrete transformation", i.e. the maintenance of the prize pool in electronic form, which is the result of claim 12 as amended, possesses "economic utility" as required by NRDC. As argued above with reference to claim 1, the "prize pool" that is maintained as a result of the method of claim 12 as amended is of "utility in the area of economic endeavour" (CCOM Pty Ltd v Jiejing Pty Ltd (28 IPR 481), at 514).
The Applicants therefore submit that independent claim 12, as amended, its dependent claims 13 and 14, and the corresponding omnibus claim 17, are directed to a "manner of manufacture".”
Manner of manufacture
Subsection 18(1)(a) of the Act provides that an invention is a patentable invention if, so far as claimed in any claim, it “is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies”. The High Court in National Research and Development Corporation v Commissioner of Patents [1959] 102 CLR 252 has provided a definitive statement of the law in this regard which has been summarised as a requirement for “a mode or manner of achieving an end result which is an artificially created state of affairs of utility in the fields of economic endeavour” (CCOM Pty Ltd v Jiejing [1994] FCA 1168 at [128]). It has subsequently been the practice, at least in submissions to the patent office, to take a very technical and literal approach to these words forgetting that in NRDC the Court was itself dealing with a rather narrow approach that had been applied on the basis of what had become known as Morton's rules (G.E.C.'s Application (1943) 60 RPC 1). Consequently the Court stated that:
“The word "manufacture" finds a place in the present Act, not as a word intended to reduce a question of patentability to a question of verbal interpretation, but simply as the general title found in the Statute of Monopolies for the whole category under which all grants of patents which may be made in accordance with the developed principles of patent law are to be subsumed. It is therefore a mistake, and a mistake likely to lead to an incorrect conclusion, to treat the question whether a given process or product is within the definition as if that question could be restated in the form: "Is this a manner (or kind) of manufacture?" It is a mistake which tends to limit one's thinking by reference to the idea of making tangible goods by hand or by machine, because "manufacture" as a word of everyday speech generally conveys that idea. The right question is: "Is this a proper subject of letters patent according to the principles which have been developed for the application of s. 6 of the Statute of Monopolies?"
and
“The truth is that any attempt to state the ambit of s. 6 of the Statute of Monopolies by precisely defining "manufacture" is bound to fail. The purpose of s. 6, it must be remembered, was to allow the use of the prerogative to encourage national development in a field which already, in 1623, was seen to be excitingly unpredictable. To attempt to place upon the idea the fetters of an exact verbal formula could never have been sound. It would be unsound to the point of folly to attempt to do so now, when science has made such advances that the concrete applications of the notion which were familiar in 1623 can be seen to provide only the more obvious, not to say the more primitive, illustrations of the broad sweep of the concept.”
10.These statements make it clear that the understanding of the “manner of manufacture” requirement should not be constrained, for example, by existing notions of science and technology. On the other hand they should also not be taken to justify an expansion of the scope of patentable subject matter to fields that have never been patentable according to the long standing principles governing application of s. 6 of the Statute of Monopolies. The exclusion of designs, schemes and plans seems to be an example of those principles which are fundamental to the ambit of the Statute of Monopolies.
11.So much is clear from the decision of the Full Federal Court in Grant vCommissioner of Patents [2006] FCAFC 120. In Grant the Court found that a method of protecting an asset including steps of establishing a trust, making a gift to the trust, making a loan from the trust and securing the loan was not a manner of manufacture. Its conclusion the Court stated:
“Whether the method is properly the subject of letters patent is assessed by applying the principles that have been developed for determining whether a method is a manner of manufacture, irrespective of the area of activity in which the method is to be applied. It has long been accepted that "intellectual information", a mathematical algorithm, mere working directions and a scheme without effect are not patentable. This claim is "intellectual information", mere working directions and a scheme. It is necessary that there be some "useful product", some physical phenomenon or effect resulting from the working of a method for it to be properly the subject of letters patent. That is missing in this case.”
12.I consider that the same can also be said in relation to all the subject matter of the present application. What is claimed, in whatever guise, is a scheme and not an artificially created state of affairs within the principles articulated in the NRDC decision. In considering the applicant’s submissions I note that in relation to claims 1-2 and 17 it is argued that Grant is distinguished because what is claimed is not a method and more significantly that the claimed prize pool is an artificially created state of affairs whose significance is economic. While clearly of economic significance and a creation of human activity, I however consider the prize pool to be merely information (ie the size of a potential future payment) generated in or reflective of the operation of the scheme defined in the claims. Information even if represented in a physical way has never been considered sufficient for patentability save for some material advantage or mechanical effect in the arrangement of the information. See for example Re Cooper’s Application for a Patent (1901) 19 RPC 53 and Re Virginia-Carolina Chemical Corporation's Application (1958) RPC 35).
13.I further do not consider the claiming of a product characterised by the features of a scheme by which it is produced or is affected, even if a real, physical thing, fundamentally alters the question of patentability over the claiming of the scheme as a method. Clearly Mr Grant would have had no better success had he claimed a house characterised by his asset protection scheme. As observed in the Virginia-Carolina decision care should be taken not to allow the form of words use to claim an alleged invention to cloud the real issues of manner of manufacture and it should not be the case that:
“claiming clauses ostensibly directed towards a manner of manufacture cloak the real nature of the applicant’s disclosure”
14.In relation to the second group of claims (3-11 and 16) concerning a method of paying prizes, it is said that the requirement stated in Grant [30] for a “concrete, tangible, physical or observable effect” is met by the payment of prizes. I fail to see how this is in any way different to the situation in Grant where the method involved a number of legal and financial transactions. The Court stated at [32]:
“A physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required. In NRDC, an artificial effect was physically created on the land. In Catuity and CCOM as in State Street and AT&T, there was a component that was physically affected or a change in state or information in a part of a machine. These can all be regarded as physical effects. By contrast, the alleged invention is a mere scheme, an abstract idea, mere intellectual information, which has never been held to be patentable, despite the existence of such schemes over many years of the development of the principles that apply to manner of manufacture. There is no physical consequence at all.”
15.Obviously a financial transaction, or otherwise, the legal transfer of an asset, is not the sort of physical or observable effect that the Court was referring to, and this is apparent from its reference to the situation in Welcome Real-Time v Catuity Inc [2002] FCA 445 finding at [30] that Mr Grant’s method:
“… is quite different from the invention in Catuity, which was a method involving components such as smart cards and point of sale terminals, and produced tangible results in the writing of new information to the Behaviour file and the printing of the coupon (at [128]). While there was not a physically observable end result in the sense of a tangible product, the invention involved an application of an inventive method where part of the invention was the application and operation of the method in a physical device.”
16.Claims 12-14 and 17 are directed to a method of managing a prize pool. They are limited in some respects by utilising a computing device to allocate fees and prizes. It is said that this results in “a change in state or information in a part of a machine” and therefore reflects a “concrete transformation”. More particularly it is said that “Each computing-device-implemented step updates or transforms the electronic information defining the prize pool, thereby "maintaining" the prize pool in electronic form.”
17.I find it difficult to extrapolate this effect from the words used in the claim. Nevertheless I do not believe it can be said that the effect identified is one that is substantial or central to the operation of the claimed method. As I indicated in my decision in Invention Pathways Pty Ltd [2010] APO 10 I do not believe there is any authority in Australian law for the proposition that the mere identification of a physical effect is sufficient for patentability. It must in my view be an effect “…of such substance or quality that the method considered as a whole is “proper subject of letters patent according to the principles which have been developed for the application of s. 6 of the Statute of Monopolies” ”.
18.The subject matter of the present application is essentially a lottery game. It does not in my view become patentable because it is operated in whole or part using a computer system in the normal or an unspecified way. Rather some substantial effect or transformation must be present in the use of the computer or other physical device, as indeed was the case in Catuity.
Conclusion
19.I have found that there are lawful grounds for objection to the present patent application. In particular I find the claims are not directed to a manner of manufacture.
20.Furthermore, I consider that no patentable subject matter is disclosed in the specification such that a further opportunity for the applicant to propose amendments would not serve any useful purpose.
21.Consequently, pursuant to subsection 49(2) of the Act, I refuse the application.
P M Spann
Deputy Commissioner of Patents
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