Full Judgment Text
$~2
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
Date of Decision: 08 May, 2023
+ C.A.(COMM.IPD-PAT) 8/2023, I.A. 5785/2023
ONEEMPOWER PTE LTD. ..... Appellant
Through: Mr. Ayush Sharma and Ms. Parul
Parithi, Advocates.
versus
THE CONTROLLER OF PATENTS AND DESIGNS
..... Respondent
Through: Mr. Harish Vaidyanathan Shankar,
CGSC with Mr. Srish Kumar Mishra,
Mr. Sagar Mehlawat and
Mr. Alexander Mathai Paikaday,
Advocates.
Ms. Himanshi Kharb, Assistant
Controller of Patents and Designs
(through video link).
CORAM:
HON'BLE MR. JUSTICE SANJEEV NARULA
JUDGMENT
SANJEEV NARULA, J. (Oral):
1. Oneempower Pte Ltd. (Appellant), a loyalty marketing and commerce
technology company, challenges the rejection of their patent application No.
10508/DELHNP/2013 for the invention titled “ A Transaction Reward
System ”. The crux of the present dispute lies in the characterisation of
Appellant’s invention as a business method and a computer programme per
C.A.(COMM.IPD-PAT) 8/2023 Page 1 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
se by the Assistant Controller of Patents and Designs [ hereinafter,
th
“ Controller ”], vide order dated 24 November, 2022 [ hereinafter,
“ impugned order ”]. In this comprehensive exposition, while deciding the
appeal under Section 117A of the Patents Act, 1970, we embark on an
examination of the Appellant’s arguments pertaining to the ‘technical effect’
of the claimed invention as well as a scrutiny of the Controller’s reasoning
for rejecting it under Section 3(k) of the Patents Act.
THE SUBJECT INVENTION
2. Let us first delve into the essence of the invention, peering beneath
the surface to unravel the claims made by the Appellant in the subject
invention.
3. The subject invention is a Transaction Reward System [ hereinafter
interchangeably, “ TRS ” or “ subject invention ”] which enables the user to
select a portion of available reward in order to offset the cost of purchase,
against a selected reward remotely, and without interference of the retailer
and without influencing operation of the retailer processor. It is intended to
eliminate the need to modify the retail payment terminal for applying
available rewards, as the purchaser would be in direct contact with the
financial institution facilitating the transaction, through a mobile/
communication device. The reward points are applied at the financial
institution’s end, thereby reducing the complexity and cost of the entire
process.
4. The constituent elements of the TRS are depicted and explained
hereunder:
C.A.(COMM.IPD-PAT) 8/2023 Page 2 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
Figure 1
4.1. The TRS (point 30) consists of a reward and transaction processor
system (point 32), which stores the information regarding reward
entitlement associated with a particular purchaser (point 16). It is this reward
and transaction processor system that applies a portion of purchaser’s
available reward in order to offset the cost of purchase. Information related
to reward redemption is received by the reward interface (point 34) via a
first communication from the purchaser. TRS relays reward redemption
information to the reward and transaction processor system. Transaction
interface (point 36) receives information concerning a purchase from the
retail processor (points 38 and 40), which is conveyed via a second
communication from the retail processor. The transaction interface thereafter
communicates the information indicative of user’s purchase, to the reward
C.A.(COMM.IPD-PAT) 8/2023 Page 3 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
and transaction processor system.
5. The method of executing a transaction on the TRS is as follows:
Figure 2
5.1. The reward redemption information pertaining to selection of a part of
an available award is first received by the reward interface from the
purchaser. This information is then communicated to the reward and
transaction processor system. Thereafter, the transaction interface gathers
information concerning a purchase from the retail processor associated with
C.A.(COMM.IPD-PAT) 8/2023 Page 4 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
a given retailer. This information is also communicated to the reward and
transaction processor system. Finally, the TRS offsets the selected available
reward with the cost of the purchase, in accordance with the reward
redemption information.
CONTENTIONS OF THE PARTIES
On behalf of the Appellant
6. Mr. Ayush Sharma, counsel for Appellant, raises the following
grounds of challenge:
6.1 The Controller has erred in classifying the subject invention as a
business method, devoid of a technical effect. As compared to the
conventional system, subject invention is more cost-effective and
economical as it does not require retail payment terminals to be modified to
cater to the loyalty marketing system and it eliminates the interference of
retailers. TRS discloses a simpler, faster and more efficient solution for
calculation and offsetting of rewards against the cost of the purchase. It
therefore, solves a technical problem and mere usage of words such as
‘enterprise’, ‘business’, ‘supply chain’, ‘order’, ‘sales’, ‘transactions’,
‘commerce’, ‘payment’ etc. in claim specification would not render it a
business method. Further, the technical problem that was resolved by the
TRS must be examined keeping in mind that the invention was claimed in
the year 2012.
6.2. Reliance on Yahoo Inc. v. Assistant Controller of Patents and
C.A.(COMM.IPD-PAT) 8/2023 Page 5 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
1
Designs and Ors. by the Controller is incorrect as Appellant’s invention is
not a method of doing business or an improvement in the method of doing
business. Instead, there is no exchange of amount or payment involved in
Appellant’s TRS.
6.3. The impugned finding that Appellant’s TRS is both, a computer
programme per se and also a business method, is erroneous and based on
incorrect application of Section 3(k) of the Patents Act as an invention can
never be both of these aspects. In the impugned order, the Controller has
noted that TRS is “ an improvement in user’s awareness of relevant software
might contribute towards an improvement in the user’s efficiency in
accomplishing a given task - perhaps because a newly located application
could use the standard, existing hardware more efficiently or improve the
user's workflow ” . This clearly shows that the claimed invention has a
technical character and the findings in the impugned order are inconsistent
and contrary to each other.
6.4 Controller has failed to consider the judgment passed in Ferid Allani
2
v. Union of India , wherein the Court observed that a ‘technical effect’ or a
‘technical contribution’ could be demonstrated even though it may be based
on a computer programme. Therefore, an application cannot be refused
solely because a computer programme is used for effectuating a part of the
invention. The Appellant’s invention must be examined as a whole, having
due regard to its technical effect and contribution.
6.5. Rejection of the application under Section 2(1)(ja) of the Patents Act
1
2012 (49) PTC 502 (IPAB).
C.A.(COMM.IPD-PAT) 8/2023 Page 6 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
for lack of inventive step is not supported by proper reasoning. The
Controller did not analyse and compare the features of independent claims 1
and 15 with prior art [D1], and has simply noted that Figures 6-10 of D1
show all the steps in detail and claim 14 thereof explains how the points will
be redeemed. The dependent claims 2-14 and 16-34 have also not been
considered.
On behalf of the Controller
7. Mr. Harish Vaidyanathan Shankar, Central Government Standing
Counsel, defends the impugned order, contending that observations made
therein are in consonance with the settled law. Appellant’s TRS is a pure
business method, which cannot be granted a patent in terms of Section 3(k)
of the Patents Act. He asserts that the subject invention, at best, improves
the user interface for points/ reward redemption but does not improve the
architecture of the computer and make a significant technical contribution.
Thus, it can be categorized as a computer programme per se .
8. The Court also acknowledges the participation of Ms. Himanshi
Kharb, Assistant Controller of Patents and Designs, who was afforded an
opportunity to expound upon the objections raised in the impugned order,
for comprehensive understanding.
ANALYSIS
9. The Controller thoroughly deals with every claim of the subject
2
2019 SCC OnLine Del 11867.
C.A.(COMM.IPD-PAT) 8/2023 Page 7 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
invention and concludes that the same is nothing more than a ‘business
method’ or ‘computer programme per se ’, falling within the scope of
exclusionary Section 3(k) of the Patents Act. They also hold that TRS lacks
inventive step. Since the subject invention has been excluded on two
grounds, the Court shall first assess the objection pertaining to TRS being a
‘business method’. If indeed the said objection is sustainable and the
Appellant’s application is liable to be excluded from patentability, there
would not be any need to delve into other grounds of challenge.
10. Let’s now turn our attention to Controller’s perspective for
concluding that TRS qualifies as a business method, devoid of any
identifiable technical character. This reasoning is outlined in the following
extracts of the impugned order:
“11. I do not find the submission persuasive in view of following: The problem
being solved is allowing purchaser to pay through cards for their purchases with
reward points at any retailers around the world. This problem in itself is not
technical in nature. Therefore, the proposed solution which although has well
known hardware components is at heart a non-technical solution to a non-
technical problem relates to loyalty marketing systems. Therefore, the claims fall
under 'business method'. In the present application, the focus is to provide reward
redemption to the purchaser who can select at least a portion of an available
reward for a purchase and the reward and transaction processor system is
arranged to offset the selected reward against a cost of the purchase in accordance
with the reward redemption information.
12. […] It is important to note that the ability to pay with reward points instead of
actual financial transaction is still a financial transaction wherein instead of
money certain reward points are used to buy a product. No technical effect has
been brought out by the applicant in the written submissions. In the FER response,
the applicant has brought out the technical effect as a rewarding a transaction.
Whereas the method comprises of performing a series of steps by the user in order
to offset a reward against a purchase. To evaluate the technical effect we need to
see whether the problem being solved is technical or not. Is the rewarding
transaction solving any technical problem? No, because this is an administrative
problem and not a technical one. Therefore, there is clearly no technical effect in
the proposed solution rather an administrative solution to an administrative
problem. No technical advancement has been brought out by the applicant in the
FER response and the written submissions.
C.A.(COMM.IPD-PAT) 8/2023 Page 8 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
13. Business method is a “a process, technique or means of computing or
processing administrative, financial and management data that are utilized for
conducting particular types of commerce”( Report on a Review of the Patenting of
Business Systems). The CRI guidelines define business methods as the whole gamut
of activities in a commercial or industrial enterprise relating to transaction of
goods or services. In Yahoo v controller of Patents, the Hon’ble High Court has
said that “Even the technical advance that is claimed over the existing art is only
an improvement in the method of doing business and S.3(k) is clear that business
method cannot be patented, the fact that there is an advance has not improved the
case”.… The present application is a pure business method since the primary
objective of the application is enhancement of user experience through some
changes in loyalty marketing systems. Therefore, the alleged invention falls under
the category of business method of section 3(k).
14. […] As evident from the explicit exclusion under section 3(k) of the Patents
Act, 1970 and IPAB decision in OA/22/2010/PT/CH, business methods cannot be
granted patent in India, howsoever disguised as technological innovations.
Therefore, it is concluded that the technical advance proposed in the alleged
invention is simply a method of doing business, even if it is a technically smarter
way of doing business and, therefore, cannot be patented in accordance with
provisions of Section 3(k) of the Patents Act, 1970.
15. The applicant has further argued that it is respectfully submitted that the
claims, as amended, include various hardware elements/components such as a
reward and transaction processor system (32), and a retail processor (38, 40). The
mentioned hardware/software components are doing their well-known generic
functions, which in itself cannot be regarded as a technical character of the said
alleged invention as merely defining physical components to carry out a not
technical procedure on a computing device/processor does not count to the same.
The steps as described above are non-technical in nature. Now, to implement these
steps the system as claimed describes various engines which are data processing
means/components programmed to carry out their defined functions which are fed
into them, this mere fact does not impart technical character of the said invention.
Therefore, the said claims represent a set of instructions executed on a general-
purpose and conventional computer/processor/computing platform without
showing any technical advancement as a whole, and thereby attract the exclusions
for computer program per se under section 3(k) of the Patents Act, 1970. These
steps merely represent a computer implementation of administrative considerations
using standard technology for its intended purpose. The subject matter of these
claims does not relate to a technical solution but a mere administrative or
organizational i.e. business solution without providing any technical solution to
any technical problem. The applicant submits that “the claimed subject matter, in
substance, is not a method of doing business, rather it is a technical process and
therefore does not fall under the excluded category of a business method”, but
while analyzing the present set of claims, it has been found that the alleged
technical process as claimed to be realized therein is in itself a method of doing
business.
16. […] The subject matter of these claims does not relate to a technical solution
C.A.(COMM.IPD-PAT) 8/2023 Page 9 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
but a mere administrative or organizational i.e. business solution. The context of
the current application relating to processing of payment card transactions
represents merely the computer implementation of administrative considerations
using standard technology for its intended purpose. The technical solution as
claimed relates to a mere office or organizational automation of a standard
procedure of randomizing the login credentials of the user with the help of
financial institutions who would be data associated with a particular transaction
and authenticate with a financial institute. The same relates to a business or
administrative solution without providing any technical solution to any technical
problem. Moreover, it is submitted that while examining the claims to be under
ambit of business method, it is not only the form, but also the substance of the
claims which is taken into account. From this perspective, it is clear that although
the claims have been defined as a method as well as a system, but in pure
structural and functional sense, the subject matter of these claims merely defines a
business strategy. Therefore, these claims as such relate to a business method and
are considered to be falling under section 3(k), The Patents Act, 1970 (as
amended). ”
11. The subject invention relating to loyalty reward marketing system is
focused to provide reward redemption to the purchaser who can select at
least a portion of an available reward for a purchase, and the transaction
processor system is arranged to offset the selected reward against a cost of
the purchase, in accordance with the reward redemption information. The
operations involved in TRS, as per the claims made in the patent application,
and the Court’s remarks thereon are as follows:
(i) Receipt of reward redemption information: The reward interface
receives information about reward redemption from the purchaser. However,
this is essentially data management, which is common in business operations
where rewards or loyalty programmes are in place.
(ii) Receiving information about a purchase: The transaction interface
procures information about a purchase from the retail processor. This again,
is typical of many transactional business operations.
(iii) Offsetting rewards against a purchase: The selected reward is set-off
C.A.(COMM.IPD-PAT) 8/2023 Page 10 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
against a purchase based on the reward redemption information. This is a
financial calculation and adjustment technique, that is fundamentally an
administrative process.
(iv) Rewarding the purchaser: The TRS calculates and delivers instant
rewards that the purchaser may have earned on the payment transaction.
This element is also commonly found in reward or loyalty programmes, and
is essentially a business method.
12. The afore-noted features indicate that TRS principally involves
receipt and processing of data concerning reward redemption, offsetting the
selected reward against a purchase, and rewarding the purchaser with any
instant rewards earned through the payment transaction. Keeping the
foregoing in mind, in the opinion of the Court, the subject invention is
purely a ‘business method’ and falls within the ambit of Section 3(k) of the
Patents Act.
13. Next, we shall discuss the technicalities. While TRS may be utilising
technology or computer systems for their implementation, the underlying
essence of the invention is primarily related to conducting business or
organizing commercial transactions, rather than providing a technical
solution to a technical problem. The Appellant has endeavoured to interpret
a ‘business method’ in a technical manner, asserting that the invention in
question offers a technical solution. The objective is to justify its exclusion
from the scope of the prohibition mentioned in Section 3(k) of the Patents
Act. However, even if we assume that the invention in question possesses a
technical character, it would not support the Appellant’s argument. This is
because Section 3(k) explicitly prohibits the patenting of ‘business
C.A.(COMM.IPD-PAT) 8/2023 Page 11 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
methods’, whereas computer programmes, in general, have been qualified
with the phrase ‘ per se ’. The Guidelines for Examining Computer Related
Inventions, 2017 [“ CRI Guidelines ”], as well as the Manual of Patent Office
Practice and Procedure, 2019, provide that if a particular subject matter
primarily involves business, trade, financial activity, or transactions, or if it
pertains to a method of buying or selling goods, it should be classified
strictly as a business method, ineligible for patent protection. Business
methods do not require incentives and protections offered by intellectual
property rights as businesses tend to adopt more efficient methods for their
3
operation out of necessity. Therefore, the fact that a business method may
achieve greater efficiency over existing methods, as is claimed by Appellant,
is immaterial as business methods are excluded from patentability
altogether. A business method which is specifically excluded under Section
3(k) of the Patents Act, cannot escape the embargo even if it is achieved
through any technical means in a computer programme. This means that
even if the business method claim is achieved through any technical means
or using a computer programme, it would still fall under the exclusionary
provision of Section 3(k). The underlying principle here is that technical
implementation of a business method does not convert it into a patentable
invention. Further, merely because the subject invention has included a
hardware element/ component, it would not constitute sufficient grounds to
prevent the application of the exclusionary provisions. The procedure for
examination of a patent application places emphasis on the substance of an
3
Yahoo Inc. v Assistant Controller of Patents and Designs , OA/22/2010/PT/CH at Paragraph 41.
C.A.(COMM.IPD-PAT) 8/2023 Page 12 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
invention, rather than its form. It is crucial to focus on the central idea or
substance of the claimed invention. If the ultimate outcome is an enhanced
method of conducting transactions, it will still be categorized as a business
method. If a business method is disguised as a computer programme, it
would not escape the bar under Section 3(k) of the Patents Act. Therefore,
asserting that the subject invention possesses a technical character cannot
serve as a defence against its non-patentability as a business method under
Section 3(k). The procedure of handling reward redemption and payment
transactions is common in the business world, and automating this procedure
using standard technology does not make it a technical invention.
14. Thus, despite the presence of some technical elements, such as a
reward and transaction processor system and retail terminals, the essence of
subject invention, which is a ‘business method’, does not get changed. These
technical elements are only used as tools to execute the underlying business
method and they perform well-known and generic functions. TRS does not
expound a technical solution to a technical problem, but rather facilitates a
business solution to a business problem. It is fundamentally a computer
implementation of administrative considerations, using standard technology
for the intended purpose. The key focus of subject invention is a business
strategy, namely, improving customer experience by streamlining the
process of reward redemption. As such, it falls within the definition of a
‘business method’ under section 3(k) of the Patents Act, and is consequently
non-patentable. The alleged technical process is in itself a method of doing
business. The invention does not lie in the computer programme or the
software, but rather in the method of administering the rewards system. The
C.A.(COMM.IPD-PAT) 8/2023 Page 13 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13
subject matter of Appellant’s claims does not relate to any technical
solution, but a mere administrative or organisational business solution,
without providing any technical solution to a technical problem. Subject
invention’s main contribution is to business methods rather than technology
and therefore, it cannot be afforded protection under patent law.
15. Hence, the Court remains unpersuaded by the arguments put forth by
the Appellant. As the invention claimed in the subject application falls
within the purview of the exclusionary provision, being solely a business
method, there is no need to delve into the question of non-patentability
regarding ‘computer programme per se ’ or the aspect of lack of inventive
step therein.
16. Dismissed.
SANJEEV NARULA, J
MAY 8, 2023
nk
rd
(Corrected and released on 03 June, 2023)
C.A.(COMM.IPD-PAT) 8/2023 Page 14 of 14
Signature Not Verified
Digitally Signed
By:SAPNA SETHI
Signing Date:03.06.2023
14:54:13