Nasdaq Technology AB
[2021] APO 39
•01 October 2021
IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Nasdaq Technology AB [2021] APO 39
Patent Application: 2019229453
Title:System and method for storing and sharing transactions
Patent Applicant: Nasdaq Technology AB
Delegate: Dr N. R. Madsen – Deputy Commissioner of Patents
Decision Date: 01 October 2021
Hearing Date: Written submissions completed 2 September 2021
Catchwords: PATENTS – section 45 – examiner’s objection – operation of a financial clearing house using blockchain technology – invention in substance directed to a mere scheme – alleged invention not a manner of manufacture – application refused
Representation: Patent attorneys for the applicant: Griffith Hack
IP AUSTRALIA
AUSTRALIAN PATENT OFFICE
Patent Application: 2019229453
Title:System and method for storing and sharing transactions
Patent Applicant: Nasdaq Technology AB
Date of Decision: 01 October 2021
DECISION
The claims of the application, as proposed to be amended, do not define a manner of manufacture. I do not see any subject matter of substance in the body of the specification from which valid claims could be drafted to overcome this finding.
I refuse the application.
REASONS FOR DECISION
BACKGROUND
Nasdaq Technology AB (“the applicant”) filed patent application 2019229453 on 13 September 2019. The application was filed as divisional application of parent application 2017216289. Examination was requested on 19 November 2019 and the application was subjected to two examination reports, the final of which issued on 28 June 2021 (the parent application also being subject to two examination reports before lapsing). In each of those reports, the examiner maintained an objection that the claims do not define a manner of manufacture, reserving any opinion in relation to novelty and inventive step. The applicant requested to be heard on 2 July 2021.
The examination of the present application is governed by the Patents Act 1990 (“the Act”) as amended by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (“the Raising the Bar Act”) as the application was filed after 15 April 2013. Thus, the standard of proof that applies in the present case is the balance of probabilities (subsection 49(1)). I must accept the application if satisfied on the balance of probabilities that the application complies with the Act. If I am not so satisfied, then I can refuse the application.
The final date for acceptance of the application was 3 July 2021, however paragraph 13.4(1)(g) of the Patent Regulations is available to extend the time for gaining acceptance to 3 months (or longer if appropriate under sub-regulation 13.4(3)) from the date of the present decision.
SPECIFICATION
The alleged invention relates to the sharing of transactional data using a distributed computerised ledger (blockchain) system. The blockchain stores transactional data relevant to the activity of a financial clearing house for it to be accessible by a clearing house computer system or other computer systems.
In the introduction section of the specification, it is noted that computer systems are used to handle clearing and settlement of financial transactions. Computerised trading can be a complicated process, involving millions of inputs/transactions per day that require tracking such that clearing and settlement can be performed. In this context, the industry has developed requiring significant hardware and software resources to meet ever increasing functional needs. These systems must be updated and maintained and can be prone to slow settlement and clearing times and overall computational inefficiencies. The specification notes that it would be desirable to improve speed and efficiency of clearing in a computerised environment, and that new techniques are continually sought after.
Usefully, the specification provides an overview of technology involved in the presently described invention. In particular, blockchain technology is introduced and exemplified by the seminal paper published in 2008 by Santoshi Nakamoto called “Bitcoin: A Peer-to-Peer Electronic Cash System”. More broadly, the blockchain is said to be:
…a data structure that stores a list of transactions and can be thought of as a distributed electronic ledger that records transactions between source identifier(s) and destination identifier(s). Every transaction is "to" a destination identifier that is associated with a public/private key pair. In creating a new transaction, outputs from other, prior transactions that are to the "from" address (which may be multiple different addresses derived from the same private key) are used as inputs for this new transaction. The new transaction is then encumbered with the public key associated with the "to" destination identifier. In other words, outputs from prior blockchain transactions are used as inputs for new transactions that are then signed using the public key associated with the destination address. The new blockchain transaction is then submitted to the blockchain. Once on the blockchain multiple such transactions are bundled into a block and the block is linked to a prior block in the "blockchain." Computer nodes of the distributed system then maintain the blockchain and validate each new block (along with the transactions contained in the corresponding block).
It can be useful to think of the blockchain as recording information that represents some form of currency transacted between parties. It is this idea that manifests in the notion of Bitcoin and its function on a distributed ledger. However, it is the case that in simply considering a blockchain as a data structure, a transaction is to be broadly viewed simply as an event that updates the data store of the blockchain. A “transaction” need not be a financial type of transaction but could simply be a data record such as a message, or a more advanced record of information in the form of a computer program that may be executed. Often a program placed on the blockchain is termed a “smart contract”.
I will avoid going into extensive detail regarding the function of blockchain technology for the principal reason that the described invention, and submissions of the applicant, do not focus to a significant degree on this aspect of technology. Suffice to say, the blockchain is being used in the present invention in a manner akin to a data store which has benefits articulated at paragraph [0024] of the specification as follows:
“The blockchain may provide cryptographically safe (e.g., computationally difficult to break) storage to ensure that records added to the blockchain are immutable. The chain of custody for a given trade and how that trade is handled through the clearing process may also be auditable in a public manner (e.g., because one blockchain transaction is linked to a successive blockchain transaction).”
I will note however briefly that the specification discusses the standard process for validating transactions submitted to the blockchain so to make it “immutable”. At paragraphs [0072] and [0073] this is discussed as follows:
Each transaction (or a block of transactions) is incorporated, confirmed, verified, included, or otherwise validated into the blockchain 114 via a proof-of-work mining process. The mining process may involve solving a computationally difficult problem that is also easy to verify. For example, each node may attempt to "mine" a solution to the hash of a block or a transaction. Hashes (also referred to herein as "hash functions," "cryptographic hash functions," and the like) include functions that map an initial input data set to an output data set. The output from a hash function may be referred to herein as a "hash identifier," "hash value," "hash data set," or simply, a "hash"). Generally, the output values from a given hash function have the same fixed length. And if the same hash function is used on the same input data it will result in the same output value. With some hash functions (including those used in the context of blockchain techniques and/or the subject matter of this application) the input value is computationally difficult to determine when only the output value is known. In certain examples, the input value for the hash function is supplemented with some additional random data. For example, an input value of "blockchain" for a hash function may include addition (sic) random data such as three random characters. Accordingly, the data value that is hashed may be "blockchain5h" instead of simply "blockchain." The additional random data is sometimes called a "nonce."
In order to validate a new block into the blockchain (or one transaction), the proof of work process (e.g., the hash operation process) that is performed may include finding an input hash value (i.e., the block) that results in an output hash value that meets a given condition. As the data related to the blockchain transactions in the block are fixed, miners (e.g., computer nodes that all or part of the blockchain (sic)) modify the nonce value that is included as part of the block being validated until the output value of the hash function meets the given condition. For example, a target output value may have zeros as the first four numbers of the hash. This is a problem that may be computationally difficult to determine, yet relatively easy to verify.
Having addressed the basic function of a distributed ledger, I note as per the specification at [0084] that the term blockchain is used to encompass any cryptographically based distributed ledger, and not necessarily the so called blockchain that is only used for the Bitcoin cryptographic currency. Further useful discussion of the function of distributed ledger technology can be found in the decision of the delegate in Advanced New Technologies Co., Ltd. [2021] APO 33 at [31] – [34]. With this in mind, I turn to describe the clearing house functionality presented in the specification.
The specification notes that clearing and settlement processes performed in conjunction with computerised exchanges are important in today’s economy where trillions of dollars are cleared through clearing house computer systems. Paragraph [0018] notes that the clearing process relates to activities from a time a commitment is made for a transaction (for example, a match between a buyer and a seller) until that transaction (or contract) is “settled”. The specification continues noting that normally, the time for completing a transaction (“clearing”) is much longer than the time it takes for a transaction commitment to occur, and that clearing involves the management of post-trading and pre-settlement credit exposure to ensure trades are settled in accordance with market rules even if a buyer or seller might become insolvent prior to settlement. Clearing can also include reporting/monitoring, risk margining, netting of trades to single positions, tax handling, default handling, and the like. The settlement process is discussed in further detail noting settlement occurs after clearing, being the time when securities or interests in securities are delivered. This delivery is usually against the payment of money and might occur a number of business days after execution of a trade.
Risks arising for parties during settlement time are managed by the clearing process. In managing this risk, a clearing house:
…intercedes between two clearing entities (also known as clearing members, which may be the parties to a matched trade identified by an exchange) in order to reduce the risk that one (or more) clearing participants fails to honor its trade settlement obligations. A clearing house reduces the settlement risks by (1) netting (netting means to allow a positive value and a negative value to set-off and partially or entirely cancel each other out) offsetting transactions between multiple counterparties, (2) requiring collateral or margin deposits, (3) providing independent valuation of trades and collateral, (4) monitoring the credit worthiness of clearing participants, and in many cases, (5) providing a guarantee fund that can be used to cover losses that exceed a defaulting clearing participant's collateral on deposit. (Paragraph [0020])
When a trade is executed between two parties, in effect, the clearing house “steps in” between the parties assuming legal counterparty risk for the trade, thus becoming the buyer to every seller and the seller to every buyer. This transferring of trade title is typically called “novation”. Here the clearing house assumes the risk of settlement failures and isolates the effects of a market participant failure. Generally, the invention described in the specification uses clearing house computer systems to interface with a distributed ledger to store trade and/or position information regarding trades. This enables a single distributed record of actions.
The specification, as presently proposed to be amended on 16 June 2021, ends with 19 claims. Claims 1, 9 and 16 are independent claims reflecting a computer system configured to communicate with a blockchain computer system, a non-transitory computer readable storage medium storing instructions, and a method for interacting with a blockchain, each directed to similar subject matter. I provide claim 1 upon which to base further consideration.
A computer system configured to communicate with a distributed blockchain computer system that includes multiple computing nodes, each computing node configured to store a copy, or a portion thereof, of a blockchain of the distributed blockchain computer system, the computer system comprising:
a transceiver configured to communicate with at least another computer system that communicates messages regarding matches between different data transaction requests;
a storage system configured to store data for a plurality of accounts, each one of the plurality of accounts associated with at least a private key and a public key, the plurality of accounts including an intermediary account, wherein a first client identifier and a second identifier are associated, respectively, with first and second accounts of the plurality of accounts;
a processing system that includes at least one hardware processor, the processing system configured to:
receive, via the transceiver, match data that includes data for a match between a first data transaction request that is associated with the first identifier and a second data transaction request that is associated with the second identifier;
based on reception of the match data:
generate a first blockchain transaction that includes data for a first transaction from the first client identifier to an intermediary identifier that is associated with the intermediary account, wherein the data for the first transaction is based on at least one value that is included in the received match data; and
generate a second blockchain transaction that includes data for a second transaction from the intermediary identifier to the second client identifier, wherein the data for the second transaction is based on at least one value that is included in the received match data;
transmit the first and second blockchain transactions to the distributed blockchain computer system for storage into the blockchain, thereby recording into the blockchain the first transaction from the first client identifier to an intermediary identifier and the second transaction from the intermediary identifier to the second client identifier; and
generate a blockchain transaction that includes a programmatic structure, the programmatic structure including a timer condition or time condition, which upon satisfaction thereof, is configured to trigger the generation of at least one new blockchain transaction for subsequent storage on the blockchain,
wherein the at least one new blockchain transaction includes data that is based on the data for the first transaction included in the first blockchain transaction.
While the independent claims are reasonably verbose, it is a relatively straight forward exercise to understand the scope of the process implemented in terms of a “clearing house” and a “distributed ledger”. The preamble to the claim discusses a computer system that is configured to communicate with a distributed network of computing nodes storing a copy of a blockchain. This is clearly an entirely generic description of a distributed ledger system also couched in terms of the configuration of a generic computer arranged to communicate with the distributed system. Quite clearly, this architecture of the preamble of the claim relates to the standard function of distributed ledger systems as described in the specification.
The generically described computer system that communicates with the distributed blockchain computer system itself is configured (via a transceiver) to receive information from another computer, which seemingly could be simply over the internet, regarding matches between different data transaction requests. Consistent with the discussion earlier, these matches may represent requests from for example parties A and B for a transaction between those parties. Such information may be identified by an “exchange”. The computer system also stores data in relation to two parties as accounts associated with first and second identifiers. Each account is associated with a private and public key, this being indubitably standard information required for an entity to interact with the blockchain. An “intermediary” account, which would represent the clearing house assuming the role of buyer to all sellers and seller to all buyers, is also provided in storage.
At this stage of discussion of claim 1 what is present is a computer system capable of receiving and storing data in relation to relevant transacting entities, wherein information received represents trading matches. This computer system can interact with standard blockchain storage technology. Following this, the claim describes a processing method that goes through a number of pre-processing steps before storing certain “transactions” on the blockchain noting as above, that a transaction can be considered merely a message, record or instruction recorded on the blockchain. The method can be broken down into a series of steps as follows:
1. Receive data that represents a match between a first data transaction request associated with a first identifier (e.g., transfer X amount from A to Clearing House) and second data transaction request that is associated with a second identifier (e.g., transfer X amount from Clearing House to B). In essence, it appears reasonable to consider this feature suggests that data is received, potentially from an exchange, that represents a desired transaction between certain parties A and B, that the clearing house is to assume the risk for.
2. Use match data to inform the generation of a first blockchain transaction including data for a first transaction from a first client (party A) to an intermediary account (Clearing House). Unsurprisingly, the data record uses data included in the received match data.
3. Use match data to inform generation of a second blockchain transaction including data for a second transaction from the intermediary account (Clearing House) to a second client (party B). Again, unsurprisingly, the data record uses data included in the received match data.
4. Send these two transactions to the blockchain for recording of transactions in the blockchain from party A to Clearing House and from Clearing House to party B.
5. Create a “smart contract” or in other words, an executable program to be stored on the blockchain that, upon reaching a timed condition, triggers the generation of a new blockchain data record for storage on the blockchain that depends on data contained in the first blockchain transaction. This could for example, be a programmatic instruction that enables the settling of a relevant transaction(s) at the end of a trading day.
The specification discusses a range of further detailed functions of the clearing house and interaction with the blockchain that involve for example, certain data validation steps by the clearing house computer system, along with the querying of digital wallets to identify balances of funds available for the clearing and settling process. Smart contracts are discussed as used to instigate the transfer of funds for example from the wallet of party A to the wallet of party B on the completion of a certain condition. Colloquially speaking this is exemplified in the specification by a situation such as when B can “run a mile in 6 minutes”. A smart contract might also be used to calculate the total fees for a particular account. These smart contracts might be arranged to operate under a “trusted oracle” technique whereby they only function when they are validated or signed by a particular source such as the Clearing House. In any event, the information relevant to each stage of the novation process may be recorded in the blockchain. The specification discusses at [0043] that such step-by-step blockchain recordation of the various actions taken by the clearing house computer may provide a more transparent and/or easily traceable audit trail or the like. It also notes at [0054] that the approach of using the blockchain for storage of information may alleviate costly replication processes for storage systems because the blockchain is the central or golden record for the trades and positions.
I will discuss further aspects of the described invention with respect to the specification where necessary later in the decision.
MANNER OF MANUFACTURE
In National Research Development Corporation v Commissioner of Patents (“NRDC”), [1959] HCA 67, (1959) 102 CLR 252, the High Court provided a statement of the law regarding manner of manufacture. At page 275:-
“… a process, to fall within the limits of patentability which the context of the Statute of Monopolies has supplied, must be one that offers some advantage which is material, in the sense that the process belongs to a useful art as distinct from a fine art …- that its value to the country is in the field of economic endeavour”.
The High Court though was not laying down a precise formulation that can be applied unthinkingly. In D’Arcy v Myriad Genetics Inc (“Myriad”), [2015] HCA 35, at [23]:
“This Court in NRDC did not prescribe a well-defined pathway for the development of the concept of ‘manner of manufacture’ in its application to unimagined technologies with unimagined characteristics and implications. Rather, it authorised a case-by-case methodology.”
That case-by-case approach must have regard to the substance of the claimed invention, not simply the form of the claim. The point was made succinctly in the Myriad case by Gageler and Nettle JJ. At [144]:-
“Whatever words have been used, the matter must be looked at as one of substance and effect must be given to the true nature of the claim.”
Thus, the assessment as to patentable subject matter in this context requires a consideration of the substance of the invention. To further guide the determination of patentable subject matter in the context of computer implemented inventions, a range of principles have been developed. The principles of law that apply to the present matter are themselves substantially uncontroversial, noting however that on a case-by-case basis at times they can be difficult to apply. These principles were usefully summarised and generally accepted by Robertson J in Rokt Pte Ltd v Commissioner of Patents [2018] FCA 1988 at [189] as follows:
“17.1 The Court must decide, as matter of substance not form, whether the claimed invention is the proper subject-matter for a patent: RPL Central at [99]; Research Affiliates at [106], [117].
17.2 This requires consideration of both the claims of the Application and the invention described in the body of the specification: RPL Central at [114].
17.3 The assessment is not done mechanically. There are no precise guidelines or mathematical formula. It is “a question of understanding what has been the work of, the output of, and the result of, human ingenuity” and then applying the developed principles: Research Affiliates at [116]. See further RPL Central at [112]:
Recognising that the claims are to a method and system comprising a combination of integers, it is necessary to understand where the inventiveness or ingenuity is said to lie ...
17.4 One well-settled principle is that a distinction exists between a technological innovation and a business innovation. A technological innovation is patentable. A business innovation is not: Research Affiliates at [94]; RPL Central at [100]. Consequently, a business method or scheme is not, per se, a proper subject for letters patent: RPL Central at [96]. Nor are abstract ideas, mere intellectual information or mere directions for use patentable: Research Affiliates at [101]; RPL Central at [100].
17.5 A computerised business method or scheme can, in some cases, be patentable. However, “[w]here the claimed invention is to a computerised business method, the invention must lie in that computerisation”: RPL Central at [96] (emphasis added). This requires “some ingenuity in the way in which the computer is used”: RPL Central at [104]. It is not a patentable invention “to simply ‘put’ a business method ‘into’ a computer to implement the business method using the computer for its well-known and understood functions”: RPL Central at [96]. In other words, if the ingenuity lies in the business method or scheme alone, the invention will not be patentable despite the computer-implementation.
17.6 Thus, a claimed invention must be examined to ascertain whether it is in substance a scheme or plan, or whether it can broadly be described as an improvement in computer technology: RPL Central at [96]. Contrary to [the applicant’s submissions at [49]], this is a binary distinction: the invention is either an unpatentable scheme or plan, or it is a patentable improvement in computer technology. In conducting the analysis, it is useful to:
17.6.1 ascertain whether the contribution to the claimed invention is technical in nature: RPL Central at [99], Research Affiliates at [114];
17.6.2 consider whether the invention solves a “technical” problem within the computer or outside the computer: RPL Central at [99], Research Affiliates at [103];
17.6.3 consider whether the invention results in an improvement in the functioning of the computer, irrespective of the data being processed: RPL Central at [99], Research Affiliates at [118];
17.6.4 consider whether the invention requires merely “generic computer implementation”, as distinct from steps which are “foreign” to the normal use of computers: RPL Central at [99], [102]; Research Affiliates at [101]; and
17.6.5 consider whether the computer is merely the intermediary, configured to carry out the method using program code for performing the method, but adding nothing to the substance of the idea: RPL Central at [99].”
Similarly, the Deputy Commissioner in Aristocrat Technologies Australia Pty Limited [2016] APO 49 set out a non-exhaustive list of relevant “touch stones” for considering patentability of inventions involving computer implementation arising primarily from the Full Federal Court decisions of Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177; (2015) 328 ALR 458 (RPL Central) and Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150; (2014) 227 FCR 378 (Research Affiliates):
“I conclude that it is relevant to consider a range of matters. Without seeking to be exhaustive, these include:
·there must be more than an abstract idea, mere scheme or mere intellectual information;
·is the contribution of the claimed invention technical in nature;
·does the invention solve a technical problem within the computer or outside the computer;
·does the invention result in improvement in the functioning of the computer, irrespective of the data being processed;
·does the application of the method produce a practical and useful result;
·can it be broadly described as an improvement in computer technology;
·does the method merely require generic computer implementation;
·is the computer merely an intermediary or tool for performing the method while adding nothing of substance to the idea;
·is there ingenuity in the way in which the computer is utilised;
·does the invention involve steps that are foreign to the normal use of computers; and
·does the invention lie in the generation, presentation or arrangement of intellectual information.”
The Full Federal Court decision in Commissionerof Patents v RoktPte Ltd (Rokt) [2020] FCAFC 86 confirmed and applied these principles, and the Full Court did so similarly in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd (Encompass) [2019] FCAFC 161. While not explicitly identified by the Australian Courts, it appears a sensible approach consistent with the above principles for considering patentability, to consider whether the invention constitutes a technical solution and/or solves a technical problem.
Following the Rokt decision, the decision of Burley J in Aristocrat Technologies Australia Pty Limited v Commissioner of Patents (Aristocrat ‘20) [2020] FCA 778 at [91] formulated a two-step approach to considering patentability that can be viewed as follows:
1) Is the claimed invention for a mere scheme or a business method of the type that is not the proper subject of letters patents… if yes then,
2) Is the computer-implemented method one where invention lies in the computerisation of the method…
In addressing the first question, Burley J turned to the idea of a “machine of particular construction” at [98] in finding that an electronic gaming machine comprising a specific set of physical features was directed to a manner of manufacture (my emphasis added):
“…the invention may be characterised as a machine of particular construction which implements a gaming function… Simply put the machine that is the subject of the claims is built to allow people to play games on it. That is its only purpose… physical and virtual features of the display, reels, credit input mechanism, gameplay mechanism and game controller combine to produce the invention. It is a device of specific character.”
EXAMINER’S OBJECTION
In his latest report the examiner maintains an objection under the ground of manner of manufacture and given the nature of this objection, reserves opinion regarding novelty and inventive step. To briefly summarise, in dealing with the applicant’s arguments that propose the claimed invention to be technical in nature as providing an improvement to the functioning of blockchain technology, the examiner states:
“The previous examination report stated that the claimed invention addresses the problem solved by a clearing house in a financial institution, whereby transactions are reconciled by a trusted third party. On page 3 of the response of 16 June 2021 states “The claims as proposed to be amended clarify that the effect of the invention is to control the blockchain in order to provide the clearing house function. Without the invention, blockchain is not suitable for providing such a service …” The invention merely uses blockchain transactions to carry out the method of a clearing house. There is no change to the underlying blockchain technology. It is merely adding further transactions operating on the blockchain, without any enhancements to how the transactions are carried out.”
APPLICANT SUBMISSIONS
The applicant generally argues that the claims are not merely a non-patentable business scheme. In doing so, the applicant refers to foreign prosecution and a finding as to inventiveness. The applicant argues that the examiner is in error as he:
“…assumes that the invention is merely an instruction to use blockchain within a computerised clearing house… [that is] the invention is an instruction to use blockchain for its known purposes in the business of a clearing house without anything more.”
On this point the applicant argues that:
·“…the claims do not actually claim a computer system including a blockchain system. The claims are directed towards a computer system which interacts with a blockchain. It is therefore immediately clear that the claims cannot be for a mere instruction to use blockchain as a clearing house environment”.
·It is thus submitted that it is an error to look for a modification to the blockchain system and that this is not the purpose of the invention.
Following this the applicant argues that the invention instead provides a solution to enable the use of blockchain in a computerised clearing house, in view of the benefits of blockchain discussed at paragraph [0024] of the specification that I have produced above at paragraph [8]. The applicant then refers to discussion during foreign prosecution suggesting that it was not possible to simply “put” a blockchain into a clearing house environment as it could not perform the necessary functionality as follows (as quoted by an International Examiner):
“The Bitcoin protocol aims at securing transactions with the decentralised architecture (distributed blockchain). The person skilled in the art will thus refrain from supplementing the decentralised Bitcoin protocol with the centralised functionality of a clearing house. D1 thus teaches away from the claimed solution.”
More specifically they submit:
·Blockchain known at the time of the invention could not take a transaction between two parties, split it into two separate transactions, and then perform the separate transactions.
·The problem can be formulated as a question of “how” to use blockchain in a computerised clearing house and that the invention is therefore technical in nature. They argue that there is no “amount” of improvement required, and that the authorities make it clear that an invention is patentable unless it is in substance directed towards a non-patentable business method only.
The applicant draws comparison of the present invention with key case law as follows:
·The claimed solution is more than a mere “idea for a computer’; the claims secure particular software or programming that would carry out the [invention]; and that the claims expressly define the manner in which the computer system (1) interacts with the blockchain computer system (1.1) to enable the use of blockchain in a clearing house, noting a lack of inherent adaptability of blockchain for this purpose.
·They also note difference between this case and those of Research Affiliates, RPL Central, Encompass and Rokt lies in there being a technical contribution to enable the business method of a clearing house using blockchain by expressly claiming functionality to this end. They submit that the claims of those cases were defined by an instruction to use a computer to implement a novel method, without anything more. They note “the computer for the present invention is integral – without it, blockchain cannot be utilised in a computerised clearing house environment…”
The applicant also refers to Patent Office decisions in Facebook, Inc. (Facebook) [2020] APO 19 (21 April 2020), Advanced New Technologies Co., Ltd. (Advanced New Technologies 1) [2021] APO 29 (21 July 2021), and Advanced New Technologies Co., Ltd. (Advanced New Technologies 2) [2021] APO 33 (25 August 2021). At this point I note that none of those decisions develop any principles of law and are cases decided on their own merits. Furthermore, as a final point the applicant points to outcomes in foreign jurisdictions. I need not address these points further, it being my task to apply principles developed under Australian law.
CONSIDERATION
Clearing house interaction with a known blockchain network – Substance of the invention
The applicant’s submissions start by suggesting that the claimed invention is not for something that could be regarded as a mere implementation of a clearing house within a known blockchain and that the claims are directed towards a computer system which interacts with the blockchain. Regarding this position, I note the examiner’s objection which argues that “the invention merely uses blockchain transactions to carry out the method of a clearing house”. On this point I do not think that the ultimate answer of patentability can be found. Whether the claimed invention is simply directed to a mere instruction to use blockchain as a clearing house environment does seem to oversimplify the invention which involves a reasonably detailed method where information is received, generated, and recorded in the blockchain in a particular set of steps. To this extent, I accept the claims are to more than the mere implementation of a clearing house within a known blockchain and that it is not mandatory for patentability for there to be an improvement or modification in the blockchain system as such. In other words, the claims appear more detailed than a mere instruction to implement a clearing house in a blockchain, and at the broadest level could potentially be said to be a particular clearing house method generating transactional data for storage and/or execution in a blockchain. I believe this may be what the examiner sought to suggest in his objection. However, at this stage, such a discussion is one more of semantics.
Thus, it remains that I must consider the full scope of the claims and determine the substance of the claimed invention. Such a consideration necessarily involves a construction of the claimed invention with an understanding of for example, the state of the art, the problem solved by the specification, and the nature of the technology used to implement the invention. Such thought processes are evident in Rokt at [104] – [110] where their Honours turned primarily to the specification under the guidance of the expert evidence to determine the true nature of the invention.
Turning first to the specification and my discussion earlier in the decision, the claim is not limited to any particularly characterised distributed ledger system beyond a system which records transactions as blocks in the blockchain. The specification makes clear that this is the normal function of the blockchain as a distributed ledger that was originally developed for Bitcoin but is generally applicable to any number of contexts. As such, the invention does not appear to be addressing a limitation in this technology in a material sense, but instead as admitted at paragraph [0024] of the specification, appears to use a distributed ledger for its well-known function of cryptographically safe and potentially cost-effective storage that is highly trustworthy and thereby usefully auditable. The technological architecture present in the claims appears to simply be a distributed ledger system in its standard networked form that communicates with a generic computer system serving the function of the clearing house. Such an arrangement of physical devices itself is entirely generic and, on this basis, I have no doubt that it is appropriate to move beyond the first question posed by Burley J in Aristocrat in concluding that the claimed invention is not directed to a device of particular construction. It appears quite appropriate to broadly characterise the claim as a specific information management scheme for managing clearing house function.
Fig. 2 is useful in depicting elements of the claimed invention. With reference to my discussion of claim 1 above at [15] – [17], it is clear that the blockchain itself, and the computer system running the clearing functions are generically described. Data is received, representing transactions, by the clearing house computer system and this data is processed and sent for storage in the blockchain. The data is stored in the form of legs representing transactions between buyer and clearing house, and clearing house and seller. A batch readout process is performed of the data stored on the blockchain which appears to be represented in the claim by the automatically triggered “programmatic structure”, or “smart contract”, stored on the blockchain.
Referring to the discussion above at [17], I consider that the substance of the invention can be formulated in a detailed manner as a method of receiving, storing, and processing clearing house managed transactions that use a generic computer to control functions of a clearing house that in turn interacts in a generic manner with a standard distributed leger. The distributed ledger is used for its well-known purpose of immutable, trustworthy, and cost-effective storage. Similarly, the storage and function of a smart contract in the blockchain is also presented in the claimed invention in its generic and well-known technical form. Thus, the substance of the invention is a method involving the receipt, processing, and storage of data in relation to relevant transaction entities by a clearing house system following the ordered steps 1 – 5 identified above at [17] that is merely implemented in a blockchain environment.
Importantly I note that at this stage of consideration I have only arrived at a construction of the subject matter of the claim that reasonably forms the substance of the invention. It remains for me to give full consideration to the variety of factors relevant to considerations of patentability of computer implemented inventions such that I can characterise the true nature of the substance of the invention. I will first address further submissions of the applicant.
Does blockchain possess the required functionality and does the invention lie in “how” to use blockchain?
The applicant’s second line of argument poses that it was not possible to simply “put” blockchain into a clearing house environment as blockchain could not perform the necessary functionality. Here reference is made to an analysis performed by an Examiner of the European Patent Office in the context of a document disclosing the Bitcoin protocol. It is stated that blockchain known at the time could not “split” a transaction into two separate transactions and then perform them separately. This is said to equate to the manifestation of a technical solution because the invention lies in “how” to use the blockchain.
I have difficulty with this argument. Claim 1 as it presently stands, merely uses the blockchain in the form of a standard distributed ledger as a tool for recording information pertaining to transactions amongst three parties, and for recording instructions (in the form of a smart contract) for performing an action in relation to those transactions. While it appears true that Bitcoin transfers currency directly between a payer and a payee in its protocol, I do not see the claim as addressing any technical protocol issues that exist because of how Bitcoin might operate as a physical technology. It remains the case that the blockchain possesses capability to record a transaction between any arbitrary parties A and B. The fact that the parties using Bitcoin may not involve a party that is, by definition, an “intermediary”, is not a “technical limitation” in a system. Instead, this appears to be an administrative limitation. I also note that the specification makes clear that the environment of the present invention is divorced from the specifics of Bitcoin at paragraph [0084] stating:
It will also be appreciated that the term “blockchain” is meant to include the distributed system that makes up the bitcoin network and other cryptographically-based distributed ledgers. Thus, the term blockchain as used herein is not confined to the so-called blockchain that is only used for bitcoin cryptographic currency.
To this extent, and consistent with the benefits of the invention in using blockchain that are discussed in paragraph [0024] of the specification (being immutability and auditability), I cannot see how the present invention solves any problems of “how” to use the blockchain in any manner that solves a technical problem in the blockchain. Instead, I can only see the present invention as relating to the nature of the information stored in the blockchain as an administrative issue. The invention claimed and described does not appear to seek to identify any new mechanism for using or interacting with the blockchain. More specifically, the invention stores separate legs/transactions of a clearance house-managed trade in a blockchain and stores relevant executable timed instructions for resolving those legs/transactions. These separate legs are merely transactions involving parties (in this case three parties being a payer, payee, and an intermediary). It appears clear that the invention lies in “what” information is stored in the blockchain and “when” this information is stored, and it does not appear on the face of the specification and the well-known function of distributed ledger systems, to lie in any element of “how” to use a piece of technology such that there may be any technical ingenuity or improved computer function present. As pointed out by the delegate in Advanced New Technologies 1:
“… [the problem] is more to do with administrative rules employed within a typical blockchain for sharing transaction data… In my view, this appears to be more of a business problem relating to the context of the transactional data [rather] than a technical problem relating to the blockchain itself.”
The applicant also notes that there is no particular “amount” of improvement required and that the authorities make clear that an invention is patentable unless it is in substance directed towards a non-patentable business method only. On the later point, it is true that the substance of the invention in its entirety must be non-patentable for a claim to fail for manner of manufacture, but it would seem rather short sighted to limit this idea to “business methods” only. The case law considers the broader concept of non-patentable schemes, and business methods would sensibly present as a subset of this class. And while it is true that a necessary “amount” of improvement is not specified by any of the case law, it is the case that the invention must lie in more than the mere use of computer as a tool for its well-known benefits to transform a mere scheme into patentable subject matter. On my construction of the claims, the present invention relates to the mere use of distributed ledger technology for its well-known purposes and benefits, the invention not lying in “how” an aspect of technology is used to the extent that any technical problem is overcome or improved computer function can be identified.
Application of the general principles developed by the Federal Court
The applicant argues that the claimed solution is more than a mere “idea for a computer” and that the invention secures particular software or programming. Plainly, the described invention is not directed to particular software or programming and like Encompass at [101] is a computer implemented scheme that leaves it to the user to carry out the performing of the claimed functional steps in relevant electronic devices by a suitably designed program or programs. No programming ingenuity is present in the claim, with the ingenuity of the claimed invention, as noted in the previous section of this decision, lying in “what” and “when” information is stored in the blockchain and processed. The computer system of the clearing house merely “communicates” with the blockchain network by sending data. There does not appear to be anything inherently limiting in the technical nature of blockchain and distributed ledger technology that make it unsuitable for use, for storing data for processing in the context of a clearing house. While the computer technology in the present invention is “integral” to the claimed invention in as much as it does not serve any purpose to view the substance of the invention as potentially some kind of “paper based” process, as per RPL Central at [110] what is required is some ingenuity in operation such that the computer is truly integral to the substance.
“RPL Central does not claim any invention or ingenuity in any program or operation of a computer, or implementation by a computer to operate the method. Accordingly, the ingenuity of the inventors must be in the steps of the method itself. The method does utilise the speed and processing power and ability of a computer but there is no suggestion that this is other than a standard operation of generic computers with generic software to implement a business method.” RPL Central at [110]
Thus, claim 1 does not provide any ingenuity in the way in which computer technology is utilised. The computer technology present does not function in an improved way, and instead the invention lies in the nature and timing of the storage and processing of business data. The specification does not provide a technical problem within or outside computer technology that is solved with the claimed method. At best, the problem that is solved appears to be characterisable as the determination of what information to store and when to store this information in the blockchain to provide a useful record of clearing house function. This appears to be a business problem. Clearly as I have already noted, the technology is generic, and normal computing steps such as receiving and sending data, storing transaction data in the blockchain, and a stored smart contract to process certain data in a blockchain, are used. As a matter of substance, the invention merely uses a technical system in the form of a distributed ledger as a tool for performing the method which stores, manages, and processes certain information to facilitate a business transaction.
The results and benefits of the claimed invention arise from the well-known properties of distributed ledger technology in the context of data storage, providing a mechanism which is immutable and trustworthy, easily auditable and cost effective as a storage technology. Again, these benefits do not arise as a result of the overcoming of any technical limitations in a system. While the ultimate result of the claim being an effectively processed and recorded transaction may be considered practical and useful, this is not in itself sufficient to confer patentability as the result remains of an administrative or business nature (see for example Research Affiliates at [114]). Similarly, while it may be an oversimplification to consider the claimed invention as the mere generation or presentation of intellectual information, it remains a method for conducting a business transaction involving the processing of business information using well-known technological components.
Finally, I refer to problems identified early in the specification where it is noted that the industry faces increasing functional needs in terms of clearing times and computational inefficiency. Briefly I note, that beyond the use of the distributed ledger tool for its well-known benefits, I see nothing in the claimed invention that provides an improvement to clearing times and computational efficiencies. It is the case that such distributed ledger technology is used as a data storage and sharing platform in any number of information transaction contexts. Its use here in the situation of a clearing house is merely one of those contexts that is defined by the mere content of the information stored in the blockchain.
It follows that I find the invention defined in claim 1 is a mere scheme and is not for a manner of manufacture. The same can be said for independent claims 9 and 16.
Comparison to recent Patent Office decisions
The applicant points to the present invention as in essence, overcoming deficiency of the blockchain and in as much, being similar to the inventions defined in Facebook and Advanced New Technologies 1. I have already addressed the argument above in noting that I was not convinced that the applicant had identified any technical problem of blockchain technology as such having been overcome. In Advanced New Technologies 1, it was an inherent property of blockchain that certain information was made publicly visible, although the delegate did not consider this to be a technical problem of the blockchain. The claimed invention in that case sought to overcome this problem by processing a transaction request within a blockchain network wherein the transaction data was irreversibly converted into a non-recognisable form, termed a data abstract. As noted by the delegate in his decision in Advanced New Technologies 2 at [42] and [43].
“That data abstract is used to firstly get approval for the transaction only from transaction nodes and then use the approved data abstract to then get consensus validation from all of the consensus nodes. The delegate noted that, by processing the transaction request in this manner, only the data abstract gets to be stored in the blockchain and not the transaction data.
That process would appear to hinge on a data transformation to conceal the original data and a demarcation of node types that respectively perform sequential approval and validation of transactions based on the transformed data. That, together with the non-storage of the original data in the blockchain, is said to protect the transaction data. No such data transformation or demarcation of functionality amongst nodes, or the like, forms the substance of the claimed invention in the present case.”
In the present case, it is relevant to reiterate that a blockchain is capable of recording transactional data of any type. The claimed method merely implements a process that records certain transactions and data involving a particular “smart contract”. In this light, my analysis found no inherent technical problem of blockchain technology that had been addressed by the claimed invention. Furthermore, my consideration did not find any technical step that had been implemented in the solution that provided ingenuity to the substance of the invention. It appears to be the implementation of particular technical steps to overcome a problem (that itself was not found to be technical) that the delegate considered adequate to confer patentability to the invention in Advanced New Technologies 1.
Thus, in summary, I see the present invention as being similar to that of Advanced New Technologies 2 where the delegate found there to be no technical contribution to the art or improved functioning of a computer system. The computer systems of the present invention are merely an intermediary that enable the receipt, storage, and processing of transactional business information.
Dependent claims and remainder of specification
I have also considered each of the dependent claims. Dependent claims 2-8, 10-15, and 17-19 are directed to additional features related to the storage of further transaction records and various data in the blockchain; the authorisation by a trusted account of certain trigger events for the “smart contract”; and the use of the smart contract to automatically calculate the sum total of relevant transactions. These claims merely define additional elements of the scheme that do not relate to an improvement to computer technology, nor do they overcome any inherent technical limitations posed by blockchain technology. I have also reviewed the specification and it is not apparent to me that there is any content that could overcome a finding as to a lack of manner of manufacture.
CONCLUSION
I conclude that the claimed invention, as a matter of substance is not for a manner of manufacture. On review of the specification, I do not see a particular way the applicant may seek to amend to overcome my finding. As such, I refuse the application.
Dr N. R. Madsen
Deputy Commissioner of Patents