It is a long-standing principle of Australian patent law that determining whether or not a patent application is directed towards patentable subject matter should be done separately to determining issues of novelty and inventive step. However, amendments to the Australian Patent Examiners Manual late last year introduced a new practice, encouraging consideration of prior art when assessing subject matter eligibility, which in Australia includes the requirement that the invention be a manner of manufacture. A year on, it seems that this supposed clarification to the Manual has only resulted in confusion and uncertainty about what role prior art plays in determining the existence of patentable subject matter.
The practice of separating considerations of manner of manufacture from those of novelty or inventive step is one rooted in case law and policy decisions. It is reflected in the decision of the High Court in Lockwood Security v Doric Products  HCA 58, which, at , stated generally that “the grounds of invalidity themselves are, and must be kept, conceptually distinct”. More recently, at  of Research Affiliates LLC v Commissioner of Patents  FCAFC 150, the court stated, in relation to the consideration of inventive step in the context of patentability, that, “[t]hat approach is not relevant to Australian law”.
However, an amendment to Section 18.104.22.168 of the Patent Examiners Manual on August 1 last year has expressly recommended that examiners, in assessing patentable subject matter, “consider which features of the claim confer novelty over the prior art”. This recommendation appears as part of an explanation of the second step of the four-part test introduced into the Patent Examiners Manual based on the UK Aerotel Ltd v Telco Holdings Ltd & Ors Rev 1  RPC 7 decision (the Aerotel test). Not only does this change to the Manual conflate the issues of patentable subject matter and novelty, it explicitly states that prior art is relevant to the finding of a manner of manufacture in a claim.
Not long after the amendment to the Manual was made, the International Association for the Protection of Intellectual Property (AIPPI) adopted a resolution on the patentability of computer implemented inventions. The resolution, dated October 2017, states that “[e]ligibility of a [computer implemented invention] for patent protection should not depend on the prior art or any assessment of novelty or inventive step”. This statement is a direct and unequivocal rejection of the recommendation adopted in the amended Manual. However, despite the AIPPI’s stance, the Australian Patent Office (APO) seems to be wholeheartedly applying the Manual’s recommendation. Since June alone, prior art has been cited in patentable subject matter assessments in four of five decisions issued by the APO where manner of manufacture was in issue.
The repercussions of this arguably incorrect approach are that matters of novelty and inventive step are now being dealt with under the guise of patentable subject matter, resulting in some absurd and unfair decisions. For example, in Commonwealth Scientific and Industrial Research Organisation v Technological Resources Pty. Limited  APO 23 (the CSIRO decision), a “method of separating a mined material” was determined not to be a manner of manufacture, despite reciting only physical processing steps. At  of the decision, the delegate states that the determination of the contribution of the invention must be made in light of an “understanding of the common general knowledge and prior art”. By dismissing each of the recited steps as well-known and generic in view of this, the delegate then arrives at the conclusion that the claims lack patentable subject matter.
While, fortunately, the CSIRO decision has since been overturned, the language in the Manual still stands. This is a concerning state of affairs. Our decision makers are not equipped to deal with novelty and inventive step issues under the umbrella of manner of manufacture. For one, there is no guidance given in Australian law as to what documents might be properly considered prior art when assessing patentable subject matter. This is in contrast to the areas of novelty and inventive step, where significant statutory authority and case law exists to help determine permissible documents for decision makers to consider.
While the recommendation remains in place, it seems that the issue of patentable subject matter for software-related inventions in Australia has become more problematic than ever for patent applicants. There is a glimmer of hope, however, in the form of a number of appeals currently afoot in the Australian courts, which seek to overturn some recent Patent Office decisions regarding patentable subject matter, and hopefully steer the law in a more reasonable direction. With many members of the Australian patent attorney profession being in agreement as to the lack of legal support for the Manual’s recommendation, the outcomes of the appeals are eagerly awaited.