Every jurisdiction has its own statutes dealing with patentability of an invention. In India, The Patents Act, 1970 [hereinafter referred to as ‘the Act’] defines the criteria for patentability, and also enumerates the exclusions thereof. In an era where computer related inventions are booming at a rapid pace in the fintech sector, it is crucial to understand the interpretation behind the legislative exclusion dealing with said area of technology. Section 3(k) of the Act states that a mathematical or business method or a computer programme per se or algorithms is not patentable. In this respect, The Manual of Patent Office Practice and Procedure states that the term ‘Business Methods’ involves whole gamut of activities in a commercial or industrial enterprise relating to transaction of goods or services. This section is a significant and debated provision of the Act, particularly in present times when software-driven inventions are gaining pace.
The complexity of this section and its jurisprudence thereof was recently dealt with by the Delhi High Court in an appeal filed by Comviva Technologies Limited (hereinafter referred to as the ‘Appellant’) against an order passed by the Assistant Controller of Patents and Design (hereinafter referred to as the ‘Respondent’) refusing an application for grant of patent for an invention titled ‘Methods and Devices for Authentication of an Electronic Payment Card using Electronic Token’ on the ground that the same relates to ‘computer program per se’ and ‘business method’ and hence not patentable under Section 3(k) of the Act.
The application related to financial transaction authentication, in particular, to authentication of a contactless card. While contesting the refusal order, the Appellant emphasized that the application related to authentication of financial transaction and not financial transaction itself. They argued that the claimed method was for communicating electronic token to an electronic payment card, which was implemented by a server, thus contending that the invention was in the nature of a technical process to secure authentication.
On the other hand, the Respondent argued that the application related to authentication of electronic payment card, which helped in improving the security of financial transactions, thus assisting in performing financial transactions. It was averred that the invention provided for a secure electronic payment method to the user which aided in establishing trust between the firm or organisation and their customers thereby leading to a growth of potential customers. Accordingly, the Respondent was of the opinion that the application came under the ambit of “business method” under section 3(k) of the Act, hence, not patentable. Further, they contented that said authentication process would be construed as a financial activity which is non-patentable, placing reliance on the Guidelines for Examination of Computer Related Inventions for the same.
The Court elucidated on the Guidelines for Examination of Computer Related Inventions, 2017, affirming that the term “business method” applies where the activity is in relation to the transaction of goods or services. It however clarified that in a case where the application specifies an apparatus and/or a technical process for carrying out the invention, even partly, the claims need to be examined as a whole. It accentuated that mere use of words such as “business”, “sales”, “transaction”, “payment” by themselves do not signify that the invention falls under the ambit of a business method.
The Court further referred to the observations made in major judgements in this context [Opentv INC v. The Controller of Patents and Designs, C.A.(COMM.IPD-PAT) 492/2022, and Priya Randolph and Another v. Deputy Controller of Patents and Designs, 2023 SCC OnLine Mad 7890]. It also elucidated on the patentability of computer-related inventions in view of the landmark judgement in Ferid Allani v. Union of India [2019 SCC OnLine Del 11867], holding that it is imperative to examine whether an invention results in a technical effect or a technical advancement in such cases.
While examining the present appeal in detail in view of the judicial precedents, the Court noted that the invention improved security by ensuring that only authorised tokens, generated in close proximity and with a limited validity, are accepted for transactions and unauthorized transactions with an invalid token are eliminated.
Aligning with the observations made in the Ferid Allani case mentioned above, the Court explicated that the present invention resulted in a technical advancement in contactless payments by providing a technical solution to the technical problem of how to prevent unauthorised transactions using electronic payment cards. It thus concluded that the invention did not fall under the purview of ‘computer program per se’.
Further, while negating the findings in the refusal order that the application related to a financial transaction and came under the ambit of ‘business method’, the Court clarified that the application does not address a business problem but is instead concerned with the security of the transaction. It further elaborated that the inventive step herein does not lie in the business concept but rather in the technical process. The authentication in the invention finishes before the actual financial transaction begins. Consequently, the impugned order was set aside by the Court and the appeal was allowed.
The decision provides a comprehensive understanding of what amounts to a ‘business method’ under the statutory bar of Section 3(k) and highlights the importance of differentiating the technical and business aspects in an application in order to assess its patentability. Such reassessment concerning business method inventions is a welcome stride towards fostering computer-related inventions, and realisation of a technology driven society.