Siemens Nixdorf Informationssysteme AG v Keycorp Limited
[2004] APO 25
•17 September 2004
OFFICIAL NOTICE
DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS
Application : No. 724901 in the name of SIEMENS NIXDORF INFORMATIONSSYSTEME AG
Title: Network-assisted Chip Card Transaction Process
Action: Opposition under sec. 59 of the Patents Act 1990 by KEYCORP LIMITED
Decision: Issued 17 September 2004.
Abstract
The invention relates to networked EFTPOS and ATM terminals and the like which will accept electronic payment cards which incorporate an integrated circuit (“smart cards”). Prior art systems have required each terminal to include a number of different “transaction partners” to cater for the increasing number of different types of cards. The invention proposes that a code be determined from a card when the card is inserted in the terminal, which is then used to determine the network address of a transaction partner located within the data network. A particularly advantageous data network for the purposes of this invention is the internet.
The opposition was dismissed. It was found that upon the proper application of the rules for construction of patent specifications the meaning of the expression “transaction partner” was clear to a satisfactory degree, and when it was given its appropriate meaning the claimed invention was novel and involved an inventive step over the prior art. The prior art relied upon by the opponent was principally the electronic payments system which was in widespread use in Australia at the priority date of the claims and which utilized the functionality known as “split dialling”.
Costs were awarded against the opponent.
PATENTS ACT 1990
DECISION OF A DELEGATE OF THE COMMISSIONER OF PATENTS
Re:Patent Application No. 724901 by Siemens Nixdorf Informationssysteme AG, and an opposition thereto by Keycorp Limited under section 59 of the Patents Act 1990.
BACKGROUND
Application 724901 was filed under the Patent Cooperation Treaty as International Application PCT/DE1998/000297 by Siemens Nixdorf Informationssysteme AG on 3 February 1998, claiming priority from German application 197 10 249.2 filed on 12 March 1997. Australia was one of the countries designated. PCT/ DE1998/000297 was published under the PCT as WO 1998/040851 on 17 September 1998, and in Australia was allocated the application number 63910/98. The application entered the national phase of processing on 28 September 1999, having undergone international preliminary examination under the PCT. After being subjected to national examination, the application was advertised accepted on 5 October 2000 and given the six-figure number 724901.
A notice of opposition to application 724901 was filed on 5 January 2001 by Keycorp limited, and the statement of grounds and particulars was served on 5 April 2001. This statement was subsequently amended. The grounds of opposition specified in the statement of grounds and particulars are that the specification does not comply with the following provisions of the Patents Act 1990: subparagraph 18(1)(b)(i) (novelty), subparagraph 18(1)(b)(ii) (inventive step), paragraph 18(1)(a) (manner of manufacture) and section 40.
The serving of evidence in support, answer and reply was somewhat protracted, requiring a number of extensions of time, but was completed on 10 February 2004. The applicant objected to one extension of time to serve evidence in support, but the objection was not upheld (Siemens Nixdorf Informationssysteme AG v Keycorp Limited [2001] APO 62).
The present matter was heard on 13 July 2004 in Sydney. The applicant was represented by Mr Paul Massey, assisted by Mr Lee Pippard, of the patent attorney firm Spruson & Ferguson, Sydney, and the opponent was represented by Mr Peter Franke, assisted by Mr Simon Ellis and Ms Leanne Oitmaa, of the patent attorney firm Watermark, Sydney.
THE PARTICULARS
The statement of grounds and particulars cites a number of prior patent documents in relation to the grounds of novelty, inventive step and manner of manufacture, including the specification of Australian patent 724872 in the name of the present opponent. The remainder of the documents comprises United States Patents and International Applications. Particulars are also given of various items of common general knowledge, including some Australian Standards, in the area of the invention. The only adequate particulars given in relation to the section 40 ground involve two aspects of non-clarity.
THE EVIDENCE
Each party has provided expert evidence in statutory declaration form from people with backgrounds in the field of the invention. Graham Low and Ken Hansen were the declarants for the opponent and Andrew Robert Fisher and Geoffrey Robert Coffill were the declarants for the applicant. Each of the declarants for the opponent provided second declarations for the evidence in reply. The evidence in support also included copies of each of the documents cited in the particulars.
Professor Low's background in the decade or so before the priority date of the present invention was as an academic at the University of New South Wales engaged in reviewing and monitoring developments in computing equipment and software applications, in particular in relation to data networks and security aspects thereof. Mr Hansen worked in the electronic payments and banking industry both in Europe and Australia before the earliest priority date, with his involvement dating back to the sale of the first Electronic Funds Transfer - Point of Sale (EFTPOS) system in Australia in 1984. Mr Fisher's relevant background is in "smart cards", but only goes back to the same month in which the earliest priority date occurs. Mr Coffill worked for the Commonwealth Bank of Australia from 1979 to 2001, and for a number of years prior to the earliest priority date was responsible for, and oversaw, the bank's EFTPOS and Automatic Teller Machine (ATM) systems.
More details of what is contained in the evidence, where relevant, will be given later in the decision.
THE SPECIFICATION
The specification commences by stating that the invention relates to
"processes and arrangements for the electronic settlement of goods and services, in particular by payments, by means of chip cards and utilizing open data networks."
"Chip" refers to an integrated circuit chip. Cards with these chips incorporated in them are used to pay for goods and services. They are a close relation of the ubiquitous credit card or key card having a magnetic stripe, of which they may be considered to be an evolutionary development. In Australia their use is not widespread as yet, the magnetic stripe card predominating. However, I gather from the specification and from the evidence that they may have gained a stronger foothold in Europe. The chip may comprise just a memory, or it may also comprise a microprocessor. Memory cards simply store data. A microprocessor card, on the other hand, can add, delete and manipulate information in its memory on the card. According to the specification a number of different card types are known: credit card, debit card, preloaded electronic purse and smart card with reloadable electronic purse. The specification refers to a number of different "electronic purse" solutions which had been or were being developed (this does, of course, reflect the situation in 1997), and goes on to state:
"It has emerged that although some of these cards use the same hardware equipment for the most part, they differ with respect to different software programs and protocols and specific security modules in the chip card acceptance terminal. Accordingly, solutions have been disclosed in which a chip card terminal, which handles the chip card during a payment transaction, is equipped with a number of different software modules, and to which a plurality of security modules are connected. Because it is expensive and inflexible, however, this solution is not suitable for widespread use.
The object of the invention is therefore to disclose a solution in which widespread use of a large number of different chip cards is possible without each terminal having to be equipped for all these cards."
Before proceeding to the inventive concept, I need to explain in general terms what is embraced by two expressions that are central to this invention. They are "transaction partner" and "transaction host". There is some indication in the evidence that at least the former of these may not have widespread currency in the art.
10. The specification asserts that it is common in the prior art in Australia for a terminal (such as an EFTPOS terminal) to contain a transaction partner which is specific to a vendor or service. If it is a requirement that two different cards be used for two different services in the terminal, then two transaction partners may be required. The specification further states that
"it is possible for the transaction partner to run as processes on high performance computers".
Mr Fisher explains his perception of a transaction partner as being:
"the entity which enables the vendor terminal to perform a specific transaction. A transaction partner can be implemented as an application program, for example."
My understanding is that a specific example commonplace in Australia would be an entity such as MasterCard or Visa Card, implemented as an application program.
11. A "transaction host" on the other hand I understand to be the entity which "hosts" the transaction between the vendor and the purchaser, that is, the entity which, for example, shifts money from the purchaser's account to the vendor's account (or the vendor's bank). In the Australian context such a transaction host would commonly be a bank.
12. Thus, Mr Coffill (in paragraph 12 his first declaration) interprets a "transaction partner" as referring to:
"a module or arrangement, which enables a transaction to be performed between a vendor terminal and a specific destination host."
13. Mr Franke in his submissions expressed the view, however, that "transaction partner" was not clearly defined and was vague and uninterpretable. I shall return to this question presently.
14. The inventive concept, then, is, I think, articulately expressed by Professor Low (and in turn quoted with apparent approval by Mr Massey in his submissions):
"the principal difference [of the invention] would appear to be that in the case of the Siemens Nixdorf patent, the card terminal determines the transaction type and directs the request to the appropriate transaction partner. This is accomplished by determining the network address of the transaction partner from the code of the transaction process."
15. The working advantage that ensues from this difference is properly stated by Mr Fisher to be that:
"a multi-functional vendor terminal configured in accordance with the invention does not need to contain a number of transaction partners. Rather, the transaction partners may be distributed over a network and contacted from vendor terminals via cryptographically secured network connections. The multi-functionality is essentially removed from the vendor terminals and positioned at the location of the transaction partners……
this provides significant advantages to vendors, in that, terminals are less complex and therefore less expensive……if the vendor wishes to deal with several types of chip cards or transactions, the vendor needs neither a plurality of terminals nor a terminal with a plurality of integrated transaction partners. If the issuer of a particular card wishes to change an application, it is not necessary to modify the vendor terminals. The transaction partner associated with the issuer can merely be reconfigured to point to a different application."
16. In a similar vein, Mr Coffill states:
"Removing the transaction partners from the vendor terminals and distributing the transaction partners throughout the network, as defined by the Siemens' invention, provides an enhanced EFTPOS system by lessening intelligence contained solely in the vendor terminal, and replacing that with increased intelligence and increased processing capability in the chip-card and in a remotely located transaction partner. As a consequence, the interaction of the card and a "less-functional" vendor terminal can cause a transaction to be performed with the desired transaction partner at a location not determined by the terminal or any organisation associated therewith (e.g. a transaction acquiring bank).”
17. As an indicator of where this invention is heading, it may be instructive to observe that the preferred embodiment is mainly focussed on the use of an open network "as is represented ……by the Internet and the IP protocol family." The preferred embodiment envisages conventional EFTPOS terminals being utilised, as well as personal computers. It also envisages a terminal according to the invention being built into a vending machine for goods or services, including information terminals. According to the specification, input and output units are then, for example, the selection buttons for an item and the output mechanism for the selected item.
18. The specification concludes with twenty-one claims comprising, apart from an omnibus claim, two independent claims, claims 1 and 16, which are as follows:
"1.A process for purchasing transactions secured by a chip card, which can be connected to a data network, said process comprising the steps of:
determining a code for a transaction process according to which the transaction is to be executed, wherein said code is determined by an operating program contained in said terminal after the chip card has been connected to the terminal;
determining the network address of a transaction partner from the code of the transaction process;
establishing a connection to the transaction partner protected by cryptographic processes utilizing the operating program; and
processing the transaction, wherein said operating program acts as an intermediary between the chip card and the transaction partner.”
"16. An arrangement for processing transactions secured by a chip card, which can be connected to a terminal connected to a data network, said arrangement comprising:
- a first device for determining a code for the transaction process to be used by means of the connection of the chip card to the terminal;
- a means for address mapping from the code, a transaction partner that can be contacted over the data network;
- a connection device for establishing a connection to the transaction partner,
- at least one second device contained in the terminal and the transaction partner with which the connection between the terminal and the transaction partner can be protected against manipulations; and
- a third device contained in the transaction partner for enabling transactions with the chip card to be processed securely using the terminal as an intermediary.”
SUBMISSIONS
19. At the hearing, the case for the opponent principally consisted of a number of section 40 issues (which predominantly had not been particularised in the statement of grounds and particulars, although reference had been made to a few of them in the evidence) and an assertion of lack of novelty and an inventive step. The assertion of lack of novelty and inventive step was based, firstly, on the "split dialling" process in use in the Australian electronic payments system outlined by Mr Hansen in his evidence. Secondly, Mr Franke contended that the broad nature of the concept of a “transaction partner” meant that the “security module” which is described in the preferred embodiment as being incorporated in the terminal came within the ambit of “a transaction partner” and that the invention was thus an “illusory” invention. A third line of reasoning put forward by Mr Franke was that the broad wording of the claim permitted a transaction partner present within the terminal to fall within its scope, and thus the prior art could be read onto the claim. Mr Franke indicated that he would not be relying on any of the patent documents which were cited in the statement of grounds and particulars and included in the evidence.
20. In response, by recourse to the specification and the evidence of the declarants (including those for the opponent), Mr Massey provided a construction of the description and claims of the specification in rebuttal to what had been put by Mr Franke.
I will provide more details of the parties' submissions, where relevant, later in my decision.
DECISION
21. In proceedings such as these before the Commissioner the onus rests with the opponent to clearly establish its case in reaching a conclusion on any issue, and the standard of proof required is the civil standard of proof on the balance of probabilities (see, for example, Dunlop Holding's Ltd.'s Application [1979] RPC 523). As a tribunal, I am entitled to act on any material which is "logically probative" (T. A. Miller Ltd. v The Minister for Housing and Local Government and Another (1968) 1 WLR 992). In F. Hoffman-La Roche AG v New England Biolabs Inc [2000] FCA 283 Emmett J of the Federal Court found that in opposition proceedings the Court (and by implication the Commissioner of Patents in her role as a tribunal) should be "clearly satisfied that the patent, if granted, would not be valid". Where questions of fact such as obviousness and existence of invention are involved "the grant should not be refused unless it has been clearly shown that the grounds of opposition have been clearly made out" (Montecatini v Eastman Kodak (1971) 45 ALJR 593).
Section 40
Construction and clarity
22. In his written submissions provided at the hearing, Mr Massey extensively surveyed the case law on construction of patent specifications. In doing so, he referred me to the decision of Flexible Steel Lacing Co v Beltreco Ltd 49 IPR 331 at [70]-[81] and the review of the rules of construction by Hely J in that decision. Of relevance to this matter are the following:
"73 When determining the nature and extent of the monopoly claimed, the specification must be read as a whole. But as a whole it is made up of several parts, and those parts have different functions: Welch Perrin& Co Pty Ltd v Worrel (1961) 106 CLR 588 at 610, DecorCorporation Pty Ltd v Dart Industries Inc (1988) 13 IPR 385 at 391, 398. The claim, cast in precise language, marks out the legal limits of the monopoly granted by the patent. What is not claimed is disclaimed: Walker v Alemite Corporation (1933) 49 CLR 643 at 656, Electric & Musical Industries Ltd v Lissen Ltd (1939) 56 RPC 23 at 35 and 39. The specification describes how to carry out the process claimed and the best method known to the patentee of doing that.
74 Hence, although the claims are construed in the context of the specification as a whole, it is not legitimate to narrow or expand the boundaries of monopoly as fixed by the words of a claim, by adding to those words glosses drawn from other parts of the specification: Welch Perrin at 610, Decor at 391, 398, Braas & Co GmbH v Humes Ltd (1993) 26 IPR 273 at 284. If a claim is clear and unambiguous, it is not to be varied, qualified or made obscure by statements found in other parts of the document. (Welch Perrin at 610, Interlego AG v Toltoys Pty Ltd (1973) 130 CLR 461 at 478-479, Electric & Musical Industries at 41, Rosedale Associated Manufacturers Ltd v Carlton Tyre Saving Co Ltd [1960] RPC 59 at 69, Cooper Industries Inc v Metal Manufactures Ltd (1994) 29 IPR 106 at 113, Lantech Inc v First Green Park Pty Ltd (1995) 31 IPR 327 at 333).
75 It is legitimate, however, to refer to the rest of the specification to explain the background to the claims, to ascertain the meaning of technical terms and resolve ambiguities in the construction of the claims. Where the language of the claim is "obscure or doubtful" (Martin v ScribalPty Ltd (1954) 92 CLR 17 at 97 per Taylor J) the doubt was sometimes resolved by referring to words in the body of the document to explain it. (See Welch Perrin at 610-611; Electric & Musical Industries at 41-42, Interlego at 478-479, Decor at 400, Melbourne v Terry Fluid Controls Pty Ltd (1994) 28 IPR 302 at 308, Freeman v T J & F L Pohlner Pty Ltd (1994-1995) 30 IPR 377 at 383-384, Sartas No 1 Pty Ltd v Koukourou& Partners Pty Ltd (1994-1995) 30 IPR 479, 486).
76 In Decor at p 410, Sheppard J rejected the notion that the claims are first to be construed without reference to the body of the specification, and it is only if ambiguity is exposed by that process that reference to the body of the patent is permissible. In his Honour's view, that approach ignores the "fundamental rule of construction" that the specification must be read as a whole, and the modern approach to interpretation, which requires that the context be considered in the first instance, and not merely at some later stage when ambiguity might be thought to arise. In addition, Sheppard J enunciates that "if there is disclosed in the specification an intention on the part of the draftsman that words used elsewhere are to have a particular meaning, that meaning must be given those words because the draftsman has used his own dictionary" (Sheppard J at 410-411).
77 The decision of Aickin J, in Minnesota Mining & Manufacturing Co v Beiersdorf (Australia) Ltd (1980) 144 CLR 253 exemplifies that approach. Focussing on the "essence of the invention" (at 267), Aickin J proceeded to construe various terms in the claim which were in dispute. In the course of so doing, his Honour made repeated reference to the body of the specification in order to understand the context in which words had been used. His Honour did this even though the specification did not provide a "dictionary" for such terms, and without first making a finding that any of the terms or questions were ambiguous. At 272 his Honour said:
‘This is not a case where the specification supplies its own dictionary meaning but it is legitimate to look at the specification to see whether it shows the word to have been used in some special sense. In fact it shows that it was not so used.’”
23. Hely J went on to endorse the approach of Sheppard J referred to in par 76, which is of particular significance in the present matter.
24. "Other principles of construction" cited by Hely J were:
·A patent specification should be given a purposive construction rather than a purely literal one: Catnic Components Ltd v Hill & Smith Ltd [1982] RPC 183, per Diplock LJ at 243, cited in various Australian cases including Decor at 400 - Rule (6); although it is noted by Gummow J in Nicaro Holdings Pty Ltd v Martin Engineering Co (1989-1990) 16 IPR 545 at 560-561, that a purposive approach was adopted in the pre-Catnic decision of Commonwealth Industrial Gases Ltd v M W A Holdings Pty Ltd (1970) 44 ALJR 385 at 388.
· The hypothetical addressee of the patent specification is the non-inventive person skilled in the art before the priority date (Welch Perrin at 610, Populinv HB Nominees Pty Ltd (1982) 41 ALR 471 at 476, Fisher & Paykel Healthcare Pty Ltd v Avion Engineering Pty Ltd (1991) 103 ALR 239 at 254, 260, Decor at 397, Stanway Oyster Cylinders Pty Ltd v Marks (1996) 66 FCR 577 at 582-583). The words used in a specification are to be given the meaning which the hypothetical addressee would attach to them, both in the light of his own general knowledge and in the light of what is disclosed in the body of the specification: Decor at 391 - per Lockhart J.
· There is a fine line between, on the one hand, reading down the words of a patent claim to reflect how a person skilled in the art would understand it in a practical and commonsense way, and, on the other hand, impermissibly limiting the clear words of a claim because a reader skilled in the art would be likely to apply those wide words only in a limited range of all the situations they describe: Stanway Oyster Cylinders at 585 - per Drummond J.
· It is permissible for an invention to be described in a way which involves matters of degree. Lack of precise definition in claims is not fatal to their validity, so long as they provide a workable standard suitable to the intended use: Stanway Oyster Cylinders at 585; Minnesota Mining at 274. The consideration is whether, on any reasonable view, the claim has meaning (Elconnex Pty Ltd v Gerard Industries Pty Ltd (1991) 32 FCR 491 at 512-513, Tye-Sil Corp Ltd v Diversified Products Corp (1991) 20 IPR 574 at 585). In determining this, the expressions in question must be understood in a practical, commonsense manner (Nesbit Evans Group Australia Pty Ltd v Impro Ltd (1997) 39 IPR 56 at 95, Martin Engineering Co v Trison Holdings Pty Ltd (1989) 14 IPR 330 at 338). Absurd constructions should be avoided (Stanway Oyster Cylinders at 582-583) and mere technicalities should not defeat the grant of protection (Tye-Sil at 585).
· As a general rule, the terms of a specification should be accorded their ordinary English meaning: Electric & Musical Industries at 41, Elconnex at 512-513, Interlego at 478, Minnesota Mining at 270.
· Evidence can be given by experts on the meaning which those skilled in the art would give to technical or scientific terms and phrases and on unusual or special meanings given by such persons to words which might otherwise bear their ordinary meaning: Sartas No 1 v Koukourou at 485-486, N V Philips Gloeilampenfabrieken v Mirabella International Pty Ltd (1993) 26 IPR 513 at 531-532, Leonardis v Sartas No 1 Pty Ltd (1996) 67 FCR 126 at 137-138, Patent Gesellschaft AG v Saudi Livestock Transport and Trading Co (1996) 33 IPR 426 at 455.
· However, the construction of the specification is for the Court, not for the expert witness. Insofar as a view expressed by an expert depends upon a reading of the patent, it cannot carry the day unless the Court reads the patent in the same way: Allsop Inc v Bintang Ltd (1989) 15 IPR 686, 697. See also Glaverbel SA v British Coal Corporation [1994] RPC 443 at 486, Sartas No 1 v Koukourou at 485-486, Patent Gesellschaft at 455.
25. Turning now to claim 1, the only significant difference between the parties in respect to the construction and clarity of this claim centred on the expression “transaction partner”.
26. At the hearing Mr Franke embarked upon a detailed analysis of this claim by stating that as the preamble to the claim is expressed as “A process for…”, the claim is not specifically limited to the rest of the preamble. I disagree with this. In regard to the effect of the word “for”, a claim to a method or process will often operate differently to a claim to, say, an apparatus, so that a reference to the purpose of the process will be limiting upon the claim. I consider this to be the case here. However, on my understanding this issue was not to play any significant role in the case put by Mr Franke for the opponent, so for present purposes it may be disregarded.
27. Mr Franke then stated, correctly I believe, that the term “chip card” is to be taken as meaning a card with an integrated circuit, with or without a processor. Initially I had some difficulty in conceiving why in that case the applicant would wish to limit itself to a chip card, as it would appear that in function a magnetic stripe card is the equivalent of chip card with only a memory. It occurred to me that it may be essential to the invention that the chip card have a processor. Further confusion was created by one of the declarants categorizing a magnetic stripe card as a “smart card”. However, upon reflection it would seem probable that a chip card having a memory only would have functional capabilities not possessed by a magnetic stripe card which enabled it to be utilised according to the present invention.
28. Mr Franke noted that “terminal” is intended broadly, and is not limited to a POS terminal or the like, a fact to which I have already alluded. Likewise, “data network” is not defined and could be the Australian ATM/EFTPOS network, and “open network” in 1997 could be the public switched telephone network (PSTN). In relation to a “code for a transaction process”, Mr Franke cited Mr Fisher as saying that this can be either read from the card, or determined “according to a transaction process selection (e.g. selecting savings or credit with an EFTPOS card)” and went on to assert (citing Coffill, Hansen and Fisher) that reading data to identify the card issuer from data read from a card, and to define the path by the transaction, was well known at the priority date. Furthermore, the phrase “after the chip card has been connected to the terminal” does not even require that the code-determining step uses card data, it could be just selecting “savings” on a terminal (per Fisher).
29. Mr Franke then observed that the “determining the network address of a transaction partner” could be anywhere in the network, and that as the network address on the PSTN is a phone number, a system which uses the IIN (Issuer Identifier Number) or similar to select a phone number from a table is “determining a network address from the code”. Likewise “establishing a connection to the transaction partner protected by cryptographical processes is a step in any on-line transaction (per Low) and conventional terminals use the terminal to establish a connection (per Coffill, Low, Hansen and AS 2905 (an exhibit to the first Low declaration)). Finally (apart from the transaction partner aspect), Mr Franke drew attention to the fact that the term “intermediary” is very general. With this I agree. Mr Franke also said that the claims do not exclude having a transaction partner in the terminal. I agree with this as well. However, I do not agree with the conclusion Mr Franke sought to draw from that that the transaction partner as defined in the claim can reside in the terminal. This would appear to be the sort of absurd construction that Stanway Oyster Cylinders v Marks (supra) teaches should be avoided. The claim requires that the network address of a transaction partner be determined from the code of the transaction process, this code itself being determined by an operating program contained in the terminal, and a connection to the transaction partner be established. Were the transaction partner to be part of the terminal, it is difficult to see how its address could be considered to have been “determined”, nor a connection to it be established. Moreover, such a construction would be at odds with the whole thrust of the specification and thus contrary to the approach endorsed by Hely J in Steel Lacing Co v Beltreco (supra) of considering the context in the first instance, not at some later stage when ambiguity might be thought to arise.
30. I turn now to the expression “transaction partner” contained in claim 1, which is pivotal to this whole matter. In his written submissions provided at the hearing Mr Franke had this to say in regard to this expression:
"The term transaction partner is not easily understood with reference to the specification and drawings. It is not well defined so that it is clear what is allegedly transferred to the network from a conventional system. The specification makes it clear that it is preferred that a security module 19a is provided (P6 l 26 et seq). The module contains secret keys, for each respective transaction partner, as well as buffer memory. The main function of conventional SAMS [Security Access Modules] is to provide cryptographic security for transactions, so it is not clear what advantage is gained. Under Coffill’s definition (para 12) [see earlier in this decision], the security modules are transaction partners.
The transaction partner is accordingly not defined with sufficient clarity to distinguish it and its functions from the prior art electronic payment network in Australia. Merely stating that it is different does not make it so, and the claims do not define something which is different from the prior art.”
31. As Mr Massey noted in his submissions, by and large the experts did not experience any great difficulty in attributing a meaning to the expression “transaction partners”, and their views were reasonably consistent with each other and with my reading of the specification. That suggests to me that the claims achieve an appropriate degree of clarity in this respect.
32. In order to attribute a precise scope to the expression “transaction partner”, it is necessary to read the specification as a whole and consider the context in which the expression is used. I must also consider the connotation created by the words themselves, even though this invention is at a somewhat conceptual level so that that exercise may not be quite as straightforward as it would be in the case of other inventions. And, finally, I must take into account the evidence of the experts in the field on what meanings the person skilled in the art would give to technical or scientific terms and phrases and on unusual or special meanings given by such persons to words which might otherwise bear their ordinary meaning.
33. The Concise Oxford Dictionary. Ed. Judy Pearsal. Oxford University Press, 2001 defines a transaction as “an instance of buying or selling; the action of conducting business” and a “partner” as “a person who takes part in an undertaking with another or others, especially in a business or firm with shared risks and profits”. Clearly the notion of a “person” is not appropriate to the present context, where the transaction partner is a module or arrangement which can be implemented as an application program. However, the concept that a transaction partner constitutes an entity which is a participant in whatever transaction is occurring is, I think, an important perception that is conveyed by the dictionary definitions which I have quoted. It is also, in my view, a true reflection of what is described by the specification. Thus, while the Coffill interpretation of a transaction partner that it refers to
“a module or arrangement which enables a transaction to be performed between a vendor terminal and a specific destination host”
is sound so far as it goes, it is only if “enables” is construed as being confined to an environment of participation in the transaction that a proper understanding of the true limitation upon the scope of the claim of the expression “transaction partner” is gained.
34. Thus the line of reasoning advanced by Mr Franke that a security module incorporated within a terminal comes within the ambit of a “transaction partner” falls down once the expression “transaction partner” is seen in this light. I think such a security module manifests itself in EFTPOS terminals and ATM’s in the entering of a PIN (Personal Identification Number) via a key pad (PIN Pad). While if in place a security module (along with other hardware and software) in a sense “enables” a transaction to take place, it is not a participant in the transaction as such and does not fall within the scope of this expression.
35. My findings in relation to the clarity and construction of claim 1 generally flow onto claim 16.
36. The statement of grounds and particulars cites two instances of non-clarity of claim 16, as follows
“The meaning of ‘an arrangement’ in claim 16 is not clearly either an apparatus or a method, and hence is unclear.
It is not clear in claim 16 how a second device can be contained in the terminal and the transaction partner.”
37. Regarding the first of these, I have some difficulty understanding the basis of this allegation of lack of clarity. But in any case both parties seemed agreed that what the claim does in fact define is a system, which I think disposes of the issue.
38. Regarding the second matter, what is being defined here is what, in the preferred embodiment, is an encryption and decryption arrangement. It is perfectly consistent with the nature of these devices that these should be considered as being located in two apparatus in communication with each other.
39. At the hearing, Mr Franke implicitly raised an additional clarity issue in relation to claim 16 by asking the rhetorical question “The term ‘by means of the connection’ – what does this mean?”. While the wording used in this expression is a little contorted, it is clearly referring back to the prior reference to “a chip card, which can be connected to a terminal”. Thus it does not seem unclear to me. Mr Franke also made several observations on the scope of claim 16, particularly vis à vis claim 1. These seemed essentially correct, but nothing would appear to ensue from them.
40. Mr Franke raised a number of additional clarity issues with several of the dependant claims. None of these clarity issues were mentioned in the statement of grounds and particulars, and although some were mentioned in the statutory declarations of Professor Low and Mr Hansen, Low and Hansen appear to have been able to resolve them. I should note here that I view with some concern the manner in which these clarity issues were raised at such a late stage in the proceedings with no forewarning to the applicant. Nevertheless I have considered all the instances of alleged non-clarity pointed to by Mr Franke, but have failed to identify any which I believe cause there to be any doubt about the precise boundaries of the monopoly defined by the claim. Occasionally the wording used in the claims is a little awkward (I note in this regard hat the original PCT application was in German), but not to the extent that it detracts from the clarity of expression in the claims in question.
41. As an example, claim 8 reads
“The process as claimed in any one of claims 1 to 7, wherein the determination of the network address of a transaction partner suitable for the transaction process is established by means of a query sent to a transaction partner assigned to the terminal.”
Mr Franke described as a “major clarity problem” the fact that the claim refers to two different transaction partners, and only one term is used for both. In my view there is no doubt that two distinct transaction partners are being referred to: one is “a transaction partner suitable for the transaction process”, and the other is “a transaction partner assigned to the terminal”.
42. Another example of the sort of clarity problem brought up by Mr Franke is the occurrence of the term “the server” in claim 9. He observed that a server was not previously defined. In so far as the explicit use of that term is concerned, this is true. However, the existence of a network as defined in claim 1 implies a client/server system, as Professor Low’s evidence establishes. Thus I do not see there being a true antecedent problem with the reference to “the server”.
43. The statement of grounds and particulars also stated that
“The complete specification does not describe the invention fully, including the best method of performing the invention.”
and that
“Claims 1 to 20 are not fairly based on the matter described in the specification.
Particulars: Claims 1 and 16, and hence all dependent claims, have a scope which is broader than the disclosure.”
44. This was the extent of the particulars on these points. Moreover there was nothing in the evidence or submissions pointing to any sufficiency or fair basis problems. I do not consider the complete specification is lacking in either of these respects.
45. Accordingly I find that that the opposed application satisfies all the requirements of section 40 of the Patents Act.
Novelty
46. The test for determining whether the invention lacks novelty is the "reverse infringement test" as set out in Meyers Taylor Pty Ltd v Vicarr Industries Ltd (1977) 137 CLR 288 at 235 where Aickin J stated:
"The basic test for anticipation or want of novelty is the same as that for infringement and generally one can properly ask whether the alleged anticipation would, if the patent were valid, constitute an infringement."
Infringement occurs when "each and every one of the essential features" of the claim has been disclosed by the alleged anticipation: see Rodi and Wienenberger AG v Henry Showell Ltd [1969] RPC 367 at 391.
47. At the hearing Mr Franke submitted that the invention defined by the present claims lacked novelty on three bases. The first of these was that the invention was anticipated by the Australian card processing unit as it existed at the priority date of the present claims. Mr Franke relied principally on the evidence of Mr Hansen for evidence of the configuration of the Australian system at the relevant time.
48. Mr Hansen states that
“Magnetic and/or IC cards are connected to merchant payment terminals either by swiping or inserting. The terminal looks at data on the card and can determine which host (transaction partner), communication path and transaction path to be undertaken. An American Express card will be recognised as such by the terminal and then connected to the AMEX Host. The transaction process will be determined by the application software within the terminal (operating program).”
49. Mr Hansen appears here to be equating a transaction partner to a transaction host, although, as observed by Mr Massey, Mr Hansen appears in his evidence in reply to concur with the Coffill and Fisher view of a transaction partner. I think that in the above quote the role of AMEX is as a transaction host, and not as a transaction partner as I have construed that expression to mean earlier in this decision.
50. Mr Hansen continues:
“For the purpose of illustration I will first describe the operation of the payment network of Annex KJH-1 subsequent to the insertion of a Westpac payment card into anyone of terminals 11a, 11b or 11c. If a Westpac payment card is inserted into any one of these three terminals, then the card is processed by the operating system then the card is communicated to the Westpac host.
However, not only Westpac cards are recognised by the terminals 11a, 11b and 11c. NAB, ANZ and CBC cards [and, it would seem, AMEX cards] are also recognised by the terminal (operating program) and the Westpac Host (transaction partner). When it is a NAB, ANZ or CBC card that has been inserted in the terminal (11a, 11b or 11c) then the identity of the issuing authority is recognized by the terminal and by the Westpac host and a connection is made by the vendor’s host (Westpac) to the purchaser’s host (NAB, ANZ or CBC, as the case may be). The card issuer by way of the IIN determines the process and path of the transaction, as described in paragraph 4, above.”
51. Once again, I think Mr Hansen has misapplied the label “transaction partner”. It appears that the role of Westpac in this system vis à vis the other banks is as a conduit from the terminal to the purchaser’s bank, rather than as a transaction partner. This is pretty much confirmed by the next two paragraphs of Mr Hansen’s declaration, which state:
“The configuration of the Australian payments network at [the priority date] was thus very much like the network that is shown in Figure 2 of that application and which is described at lines 1 and 2 of page 3 of that application as being ‘prior art’.
The configuration of the Australian payments network at [the priority date] however differed from Figure 2 of the opposed application in that the opposed application describes …….a network in which for a terminal such as terminal 11b to accept cards from two different vendors, then the terminal 11b must include two transaction partners 13b1 and 13b2 connected to their own security modules 14b1 and 14b2 respectively” [my emphasis].
52. It is notable that the Figure 2 referred to in the above passage had the transaction partners in the terminals. Thus it would appear that the systems which Mr Hansen is describing as prior art all involve arrangements where the transaction partners are located in the terminal, and not at some other address in a network.
53. In relation to split dialling, Mr Hansen stated:
“The industry has defined the term split dialling to describe the consequence of a terminal opening communication with multiple processing hosts via a telephone-dialling network. The host is determined by information contained on a payment card (token) and selected by the terminal. The terminal application program determines the communication path and host payment processor computer. In my opinion the Siemens Patent describes a similar method using IC (Integrated Circuit) payment cards and the Internet network. The difference is that the Internet network allows far more flexibility for addressing and security. The method behind Siemens’ invention is a logical application of split dialling using the Internet network. In both cases information on the card and the terminal operating determine the connection to a specific payment scheme host.”
Mr Franke further submitted in relation to split dialling that:
“The process of split dialling (see Hansen 1 para 4,5; Coffill 14) involves reading a code from a card, looking up a table, dialling the phone number, establishing a protected connection, and process the transaction with the operating program acting as intermediary. It is difficult to imagine a terminal where the operating program is not intermediary.”
54. Notwithstanding the application of split dialling, I think it is pretty clear from the evidence that electronic payments systems in use in Australia, like those of the prior art described in the present specification, utilized transaction partners that were present in the terminals and not at some other address in the network. Given the construction I have placed upon claim 1 and claim 16, I am compelled to find that those electronic payments systems do not anticipate the present invention.
55. The second basis upon which I think Mr Franke contended that the claimed invention lacked novelty was that the concept of a “transaction partner” was broad enough to encompass the security module which is described in the preferred embodiment as being incorporated in the terminal of the preferred embodiment, in consequence of which Mr Franke asserted that the invention was an “illusory invention”. I am not sure how something disclosed in the describing of a preferred embodiment might justify a conclusion that the invention lacked novelty, but in any case as I have stated when construing the claims I do not agree with the basic premise upon which the argument is founded.
56. The third basis upon which lack of novelty was argued was that the scope of claim 1 is such that it includes a system where the transaction partner is present in the terminal. Once again this has been effectively addressed in the course of construing the claims earlier in this decision, to the effect that I reject the premise that the claims allow of the construction upon which this argument is based.
57. Although at the hearing Mr Franke stated that the opponent no longer wished to rely on the seven patent documents in the evidence, for the sake of completeness I have considered them. The most relevant citation would appear to be WO 1997/005582 (which in Australia became Patent No. 724872) to the present opponents, Keycorp Limited. The declarants were in close agreement that there was no disclosure in the Keycorp specification of the feature of the address of a transaction partner being determined from the code of the transaction process, and I am satisfied that this is the case. I consider this feature to be a novelty conferring one.
58. Hence I find the claims of the opposed application to be novel in light of the prior art in the evidence of this opposition.
INVENTIVE STEP
59. The effect of subsections 7(2) and 7(3) of the Patents Act, in the case of applications filed before 1 April 2002, is that a claimed invention will lack an inventive step if it is obvious in the light of:
(a)common general knowledge; or
(b)common general knowledge considered together with information in a single document or through doing a single act, provided that the document or act could reasonably be expected to have been ascertained, understood and regarded as relevant to work in the relevant art in the patent area by the person skilled in the art.
60. As a precursor to any inventive step consideration, the state of the common general knowledge in the art has to be established. The common general knowledge is the background knowledge attributable to the person skilled in the art. A widely accepted definition of common general knowledge is that provided by Aickin J in Minnesota Mining and Manufacturing Company and Another v Beiersdorf (Australia) Limited 144 CLR 253 at 292:
"The notion of common general knowledge itself involves the use of that which is known or used by those in the relevant trade. It forms the background knowledge and experience which is available to all in the trade in considering the making of new products, or the making of improvements in old, and it must be treated as being used by an individual as a general body of knowledge."
61. The state of the common general knowledge is a question of fact which must, in general, be determined on the basis of evidence from persons whose background enables them to testify authoritatively as to the common general knowledge in the particular art. Indirect evidence such as widespread publication or admissions made in patent specifications may also serve to indicate something is common general knowledge.
62. Three of the four declarants attracted criticism from the other side regarding their ability to provide evidence as to what was the state of the common general knowledge at the priority of the opposed application. Mr Massey appeared to take an unduly restrictive view of the relevant technology for this purpose. He put it as being the chip card technology, but I consider it is broader than that, covering all electronic payments systems. Furthermore, I agree with Mr Franke that in the case of this invention, it would be reasonable to additionally expect the person skilled in the art to have expertise in distributed processing and client/server architectures plus the internet. Mr Massey drew attention to Professor Low’s lack of knowledge or experience in smart card technology and its specific applications. He also noted his status as an academic, as indicating his lack of exposure to the practical world. I think both those points are valid, except that I would substitute electronic payments systems for smart card technology. I did, however, consider that Professor Low’s clearly extensive knowledge of computing and data communications was very useful in providing the technical background of the invention, even if it did not assist greatly in revealing the common general knowledge.
63. Mr Franke was equally unimpressed by the evidence of Coffill and Fisher on the common general knowledge, noting that the only practical experience the former had had in the area was in managing electronic payment systems, and not in the technology of electronic payment systems, and noting that the latter only came to the field at the priority date of the present claims, and only had expertise in smartcards, not EFTPOS. However in my view these factors might equally indicate a considerable aptness and suitability on the part of Coffill and Fisher to provide evidence of the common general knowledge, and accordingly I have accorded substantial weight to their evidence.
64. Mr Massey seemed to accept Mr Hansen was well-qualified to provide evidence on the common general knowledge, and I concur.
65. Turning now to the common general knowledge, Mr Franke asserted it was common general knowledge that chip cards could be, and increasingly would be, used for financial transactions. Mr Massey, however, sought to limit this a little, quoting Coffill’s evidence that he did not
“consider that network transactions utilizing microprocessor-based chip cards represented an arrangement generally known or used in Australia”.
66. I think I have to accept this evidence, although the specification itself refers to such systems as being prior art, and it is a little surprising that such systems had not been elevated to common general knowledge, even though all implementations of such systems may have occurred outside Australia.
67. Other items of common general knowledge invoked by Mr Franke were the Australian card system in existence at the priority date, including the relevant Australian Standards, knowledge of the internet, including its use for financial transactions, and use of cryptography to secure transactions. I do not think Mr Massey differed on any of these, with the possible except of the last, on which, once again, he seems to have attempted to place limitations. In particular, he quoted Mr Coffill’s statement that:
“The feature of the claims of establishing a cryptographically protected connection between the terminal and the transaction partner was not known at the priority date.”
the reason, according to Coffill being that
“the transaction partners of the conventional system of Figure 2 of the Siemens’ application are logically resident within the terminal.”
68. Be that as it may, I tend to think that cryptographical protection of a connection where the need for such protection presented itself would be a mere workshop improvement, and as such be incapable of being considered as involving an inventive step.
69. So far as lack of inventive step in light of common general knowledge considered together with a single document is concerned, as a preliminary step it must be established whether the person skilled in the art could be reasonably expected to have ascertained, understood and regarded as relevant the document. Mr Massey contended that the opponent had not satisfied this requirement. In support of this, he cited the following passage from the decision of Branson J in E I Du Pont de Nemours & Company v Imperial Chemical Industries PLC [2002] FCA 230 (12 March 2002):
“107 Before the applicant is entitled to place reliance on the information contained in any of the above documents, it must establish that the information was information that the hypothetical skilled worker "could, before the priority date of the relevant claim, be reasonably expected to have ascertained, understood and regarded as relevant to work in the relevant art in the patent area" (see s 7(3) of the Act).
108 Considerable evidence was led at the hearing as to the nature and extent of the search effort required to identify from electronic data bases the Lubrizol patent using search terms that the nature of the work in the relevant art in the patent area would suggest should be used. I do not consider it necessary to review all of that evidence. My conclusion, having given consideration to the whole of the evidence, is that although it is possible to identify the Lubrizol patent by using appropriate search terms in a search of relevant electronic data bases, the applicant has failed to establish that the patent was reasonably ascertainable in the sense required by
s 7(3) of the Act. I accept the submission of the respondent that the search exercise of which the applicant called evidence was likely to have been influenced by knowledge of the result sought to be achieved, and not such as would reasonably be expected to be undertaken by the hypothetical skilled worker.”
70. There has not even been an attempt on the part of the opponent in the present matter to provide evidence establishing that its patent documents could have been ascertained understood and regarded as relevant. Even had evidence been provided, I note that the above case of E I Du Pont de Nemours & Company v Imperial Chemical Industries PLC seems to impose reasonably strict requirements for it to be considered that patent documents locatable in electronic databases could have been ascertained, understood and regarded as relevant. Since the opponent has been unable to negotiate this preliminary hurdle, I am led to conclude that the ground of lack of inventive step, if it is to succeed at all, must succeed having regard to common general knowledge alone. It is, of course, the case that the Australian card system in existence at the priority date would meet the requirement of being ascertainable, understood and regarded as relevant, but since I also consider it to be common general knowledge it will be sufficient that I confine my consideration of it to that context.
71. Mr Massey assessed the problem addressed by the invention to be as enunciated in the specification as the object of the invention, namely, to provide a solution in which widespread use of a large number of different chip cards is possible without each terminal having to be equipped for all these chip cards. I do not quite agree with this, however, as it seems to incorporate a part of the solution in the problem. In my view the problem is expressed as being how to cater for a large number of different chip cards, involving a large variety of transaction partners, within each terminal.
72. Mr Massey then submitted that faced with such a problem, the question is whether it would have been a matter of routine for the skilled non-inventive worker to proceed to the claimed invention, and what would be routine can be considered using the “obvious to try” approach. He then cited several court decisions relating to the “obvious to try” approach. However, the cases cited by Mr Massey would seem no longer applicable after the decision in Aktiebolaget Hassle v Alphapharm Pty Ltd [2002] HCA 59 (12 December 2002). The proper test now appears to be:
“Would a person skilled in the art be directly led as a matter of course to try the claimed matter in the expectation that it might well solve the problem?”
This is a paraphrasing of the reformulation of the "Cripps question" by Graham J in Olin Mathieson Chemical Corporation v Biorex Laboratories Ltd [1970] RPC 157 which the High Court in Aktiebolaget Hassle v Alphapharm Pty Ltd accepted was the proper approach to the question of whether the taking of a series of steps to arrive at an invention could be considered as a matter of routine.
73. Both Professor Low and Mr Hansen conclude in their evidence that the invention is obvious. Professor Low appears to do so on the basis that “the invention is a particular implementation of a more general client server paradigm.” I do not see the fact that the present invention can be broadly categorized as a client/server configuration necessarily means it is lacking an inventive step. Mr Hansen considers that the invention is obvious because it connects chip cards and the internet “in the most obvious way that is clearly based on evidence within the payments industry”. The conclusions reached by both Low and Hansen carry strong overtones of ex post facto analysis. Furthermore, I observe that in the case of Mr Hansen’s evidence his assertion as to obviousness seems to relate to the situation at the date of making of his statutory declaration, rather than the priority date of the claims, and it is not spelt out whether the common general knowledge upon which he relies is that at the priority date of the claims or at the date of making his declaration.
74. It follows from my earlier findings on the state of the common general knowledge that if claims 1 and 16 are finely dissected into their integers, then each of those integers is common general knowledge. However, a finding of obviousness requires more than that all the parts which make up a combination are common general knowledge. It also requires that it would have been obvious to a non-inventive skilled worker in the field (that is, the person skilled in the art) to not only select the separate integers which make up that combination, but also to select the particular combination of those integers in question (see Minnesota Mining & Manufacturing and 3M Australia v Beiersdorf (Australia), supra). By “obvious” is meant “very plain” - see General Tire & Rubber Company v Firestone Tyre and Rubber Company, (1972) RPC 457.
75. If it is correct that network transacting which utilizes chip cards is not common general knowledge in Australia, then I think it is clear that the allegation of lack of inventive step based on the common general knowledge must fail. That feature constitutes the field of the invention, and were it not to be common general knowledge it is impossible to contemplate such a greenfields invention as being anything but non-obvious.
76. However, even if network transactions utilizing chip cards were to have been common general knowledge, then I consider the allegation would still fail. As I have already stated, I consider the problem that this invention addresses is how to cater for a large number of different chip cards, involving a large variety of transaction partners, within each terminal of the network. To me the obvious response to this would be that which present specification indicates is the prior art approach, namely, to create ever more complex terminals having ever more processing power. The present invention goes the opposite way – it takes advantage of the functional capabilities of chip cards and a realization of the possibility for transaction partners to be located on the network away from the terminal to opt for more rudimentary terminals. As such the solution to the problem which is achieved by the invention defined in claim 1 and claim 16 has, to me, a definite quality of an inventive step about it.
77. Accordingly I find that the evidence in this matter does not establish that the claimed invention is lacking in an inventive step.
MANNER OF MANUFACTURE
78. The particulars for this ground challenge the “inventive merit” of the invention in light of public knowledge, including the seven patent documents that the opponent has particularised in relation to the grounds of novelty and inventive step. In his oral submissions, Mr Franke just briefly addressed this ground and seemed to rely on a (perceived) lack of novelty and a lack of inventive step as implying lack of inventive merit. Since I have already found that the claimed invention is both novel and involves an inventive step over the prior art (including the prior art which is “revealed on the face of the specification” (per Bristol-Meyers Squibb Co v FH Faulding & Co 46 IPR 553)), this reasoning falls down. In his written submissions, however, Mr Franke stated as follows:
“As the claim does no more than claim to well known principles, it does not on its face recite an invention and so fails on the basis of lack of manner of manufacture as established in N V Philips Gloeilampenfabrieken v Mirabella International Pty Ltd 32 IPR 449 and Ramset Fasteners (Aust) Pty Ltd v Advanced Building System Pty Ltd and Anor 34 IPR 256.”
79. However, he did not enlarge on this in his oral submissions. While the invention is, as I have said, at a somewhat conceptual level and clearly it relies on some well known principles, the claims are not directed to those principles as such. The assertion that the claim is no more than a claim to well known principles is, in my view, unfounded.
80. Therefore, I find that the invention which is the subject of the application is a manner of manufacture as required by paragraph 18(1)(a) of the Patents Act 1990.
CONCLUSION
81. The opposition fails on all the grounds which were relied on. I therefore dismiss the opposition.
Unless the Commissioner is served with a notice of appeal within 28 days of the date of this decision, I direct that the application proceed to sealing.
COSTS
82. In proceedings such as these it is usually the case that costs follow the event. I see no reason to vary that approach on this occasion. I therefore award costs against Keycorp Limited.
E J Knock
Delegate of the Commissioner of Patents
Patent attorneys for the applicant : Spruson & Ferguson, Sydney
Patent attorneys for the opponent : Watermark, Sydney
0
1
0