Business method claims in South Africa

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Johnny Fiandeiro, Adams & Adams asks whether an ongoing case bought by 3M Future Africa could eventually bring some clarity on business method claims.

The ongoing patent litigation battle between technology company 3MFuture Africa (Pty) Ltd and a group of companies, including The Standard Bank of South Africa Ltd and MTN Group, has raised some interesting points to date and will most likely continue to do so as the matter progresses. To summarize proceedings to date, 3MFuture Africa (Pty) Ltd, as the plaintiff, instituted patent infringement proceedings in March 2010 against The Standard Bank of South Africa Ltd, MTN Group Ltd and MTN Mobile Money SA (Pty) Ltd, collectively the defendants. The plaintiff is the patentee of SA patent no. 2002/2337 entitled “Transaction Authorization System”. In broad terms, the patent is directed towards addressing fraudulent financial transactions by allowing an account holder to selectively designate his/her bank account as being either enabled or disabled, thereby to selectively authorize transactions performed using the bank account.

The patent, at the time during the trial, included a set of claims covering a transaction authorization system, a set of claims directed towards a computer program on a carrier for executing transaction authorization, and a further set of claims covering a method of authorizing a transaction.

The defendants had jointly developed the MTN Mobile Banking system, which the plaintiff initially claimed infringed a number of the system claims and a number of the method claims. The defendants denied infringement and counterclaimed for the revocation of the patent on the grounds of lack of novelty, lack of inventive step, that the method claims comprised a scheme, rule or method of doing business, and that the computer program claims comprised a program for a computer and/or a scheme, rule or method of doing business. During proceedings, the plaintiff ultimately elected only to assert three of the method claims.  Significantly, and prior to the conclusion of the trial in February 2012, the defendants had disabled the allegedly infringing on/off feature from the MTN Mobile Banking system.

The judgment

In the resulting judgment handed down on September 14, 2012 the court found the three asserted method claims to be valid and infringed by the MTN Mobile Banking system. Consequently, and since the plaintiff did not oppose the defendants’ counterclaim for the revocation of the remaining claims, the defendants’ counterclaim in respect of these remaining claims was granted. As a result, the patent was classified to be a partially valid patent, which is specifically dealt with by section 68 of the South African Patents Act.

Section 68 states that in respect of a partially valid patent, if there is a counterclaim for the revocation of the patent, the operation of a revocation order may be postponed to enable the patentee to amend its patent. Once amended in terms of this section, relief may be granted in respect of the claims that, prior to the amendment, were found to be valid and infringed. This section also provides the court with a discretion as to any costs order and as to the date from which damages shall be calculated, and may take into consideration the conduct of the patentee in inserting claims that were ultimately found to be invalid or permitting these claims to remain in the specification.

In view of this discretion, the revocation of the remaining claims was suspended, in order to provide the plaintiff with an opportunity to amend the patent specification, which is the subject of a separate ongoing matter.

Next steps

The judgment is being appealed to the Supreme Court of Appeal. One of the key points being appealed is that the judgment did not specifically deal with the allegation that the three method claims comprise a scheme, rule or method of doing business. As a result of the withdrawal of the remaining claims, and in particular the computer program claims, South African patent law will need to wait longer for judicial guidance as to the allowability and scope of such claims. However, it is hoped that some guidelines will surface when the question of the three method claims, as possible methods of doing business, are considered down the line.

There is a further interesting point worth considering, which relates to the date when the allegedly infringing on/off feature was switched off. Assuming that the patentee’s amendment is allowed, and that the Supreme Court of Appeal ultimately confirms that the three method claims are valid and were infringed, from what date are damages to be calculated? It is arguable that damages should only run from when the patentee’s amendment application is allowed, which would be after the allegedly infringing on/off feature was disabled, and would thus potentially be insignificant, if anything.

This case, with its many twists and turns to date, could continue to raise novel aspects, and extend the boundaries, of South African patent law, especially in respect of business method claims.

Résumé

Johnny Fiandeiro, Partner, Adams & Adams

Johnny is a partner in the Pretoria office of South African IP law firm Adams & Adams, the leading and largest IP law firm in South Africa. He has a BSc in engineering (electrical) and an LLB. He is a patent attorney and has been a partner of Adams & Adams since 2012. Previously he was a partner in the IP department of Bowman Gilfillan for several years, until the department merged with Adams & Adams at the beginning of 2012.

He is a member of the firm’s patent department and concentrates on drafting, filing and prosecuting patent and design applications, both nationally and internationally. He also has experience in litigation and commercial-related aspects involving patents, registered designs and copyright.