Patenting the Internet of Things – the European perspective

It is estimated that by 2025 there will be 26-30 billion devices in the workplace and home equipped with sensors, processors and embedded software, and connected to the Internet of Things⁽¹⁾.  By collecting and sharing information over the internet, these devices will be able to function autonomously, enabling the automation of processes that were previously performed manually.  Practical applications of the Internet of Things range from smart home devices such as a smart fridge that automatically orders groceries when they run out, to a smart city with automated traffic management, water supply, and waste management systems.  The Internet of Things is therefore expected to have a transformative effect on many different sectors of industry and society.

Management consultancy firm Bain and Company predicts that the combined market for the Internet of Things, including hardware, software, systems integration, and data and telecom services, will grow to $520 billion by 2021, more than double the $235 billion estimated to have been spent in 2017⁽²⁾.  This rapid expansion of the Internet of Things will be accompanied by the development of new hardware and software, for example relating to the collection and sharing of information by the physical devices, or the processing of this information.  Given the potential size of the global market, companies will, and should, try to patent these developments where possible.

According to the EPO, more than 5000 EP patent applications were filed in 2016 alone for inventions relating to autonomous objects (2016 is the most recent year for which detailed statistics are available from the EPO).  In addition, in the three years to 2016, the growth rate for patent applications in this technical field was 54%, making it one of the fastest growing technical fields for EP patent filings (the overall growth rate of EP patent applications for all technical fields over the same period was 7.65%).  The top 5 applicants for EP patents relating to the Internet of Things over the period of 2011 to 2016 were: 1. Samsung Group, 2. LG Group, 3. Sony Corporation, 4. Nokia Corporation, and 5. Huawei Technologies Co. Ltd⁽¹⁾.

The EPO estimates that in the period from 2011-2016, 18% of newly filed EP patent applications in this technical field originated from Japan, making it second only to the US in terms of the number of filings, which accounted for 25% of newly filed EP patent applications in this technical field over the same period.  The top two Japanese applicants for patents in this technical field were Sony and Panasonic, who between them accounted for 30% of the Japan originating applications.  However, the number of newly filed EP patent applications in this technical field originating from other countries such as Korea and China is rapidly accelerating, which may put Japan’s position under threat in the future⁽¹⁾. 

Within EPC countries, which together made up a combined 29% of newly filed EP patent applications in this technical field over the same period, the main countries in terms of the number of newly filed patent applications in this technical field were Germany (8%), France (6%) and the UK (3%)⁽¹⁾.  As these three countries are the three biggest economies in the EPC, this is perhaps unsurprising, but it suggests that a significant proportion of the Internet of Things market in Europe may be covered by validating an EP patent relating to the Internet of Things in Germany, France and the UK.

Inventions in the technical field of the Internet of Things may relate to hardware, software, or a combination of hardware and software.  Where the invention relates to hardware, the invention may be patentable at the EPO if it meets the standard requirements for patentability that are applicable to all inventions at the EPO (novelty, inventive step and industrial applicability).  However, increasingly, inventions in this technical field relate to software, for example software for controlling the physical devices, or for processing information collected by the physical devices and shared over the internet.  Such software may improve the autonomous functioning of the physical devices, or the automation of processes performed by the physical devices.  Such software related inventions can be patentable at the EPO, provided they meet certain criteria.

At the EPO, software related inventions are referred to as computer-implemented inventions, and there is a well-established procedure at the EPO for assessing the patentability of such inventions, as discussed below.  In a recent update to the EPO’s Guidelines for Examination, the EPO has affirmed that the same well-established procedure is applicable to newly developed computer implemented technologies relevant to the Internet of Things, such as artificial intelligence and machine learning.

EP law explicitly specifies that some types of innovation, including mathematical methods, methods for doing business, and programs for computers (software programs), are not considered to be inventions, and that these types of innovation are therefore excluded from patentability to the extent to which an EP patent application relates to these innovations “as such”.  However, the meaning of the words “as such” is not defined in EP law, and is therefore left open to interpretation.  In fact, case law from the EPO Boards of Appeal shows that it is possible to obtain patents relating to these types of excluded subject matter at the EPO in many circumstances, provided that the patent is appropriately drafted to present the invention in a way that meets the EPO’s requirements.

According to the case law of the EPO Boards of Appeal, these exclusions from patentability can be overcome merely by including any “technical” feature in the claim.  Unfortunately, the EPO has not provided a clear definition of what “technical” means in this context.  In practice, predicting whether or not the EPO will consider a feature to be “technical” is a matter of judgement based on knowledge of previous decisions by the EPO Boards of Appeal relating to excluded subject matter.  However, it is clear from the case law of the EPO Boards of Appeal, and from the EPO’s Guidelines for Examination, that the EPO definitely views pure business methods (for example purely financial or administrative methods) or computer code to be non-technical.  In contrast, a feature involving a physical object is generally viewed as technical by the EPO – for example the act of writing with pen and paper has been deemed by an EPO Board of Appeal to be a technical feature.  For software related inventions, this means that these exclusions from patentability can be overcome merely by specifying a computer processor, or some other piece of computer hardware, in the claims (although this is not necessarily essential for the invention to be considered to be “technical”).

However, overcoming these exclusions from patentability is only the first hurdle.  While simply including any technical feature in the claim overcomes the test of whether or not the innovation is excluded subject matter “as such”, the EPO then moves on to a more difficult test.  When assessing software related inventions that are not excluded from patentability “as such”, the EPO effectively combines its assessment of “excluded subject matter” with its assessment of “inventive step”.  This approach, which is discussed below, means that where software inventions are refused by the EPO, they are more typically refused by the EPO on the basis that they lack inventive step, rather than because they represent excluded subject matter “as such”.

For assessing inventive step of all inventions, the EPO uses the so-called “Problem-and-Solution” approach.  According to this approach, an invention is considered patentable by the EPO if it provides a non-obvious technical solution to a technical problem.  Since the solution must be a “technical” solution, only the “technical” features in the claim can contribute to inventive step.  “Non-technical” features, for example pure business method steps or computer code, cannot contribute to inventive step. 

The EPO modifies its “Problem-and-Solution” approach when examining innovations that represent a combination of technical and non-technical features ⁽³⁾.  In particular, when assessing the inventive step of software related inventions, the EPO essentially follows a three step process.  Firstly, the EPO identifies which features of the claim are technical and which features of the claim are non-technical.  Secondly, the EPO formulates a technical problem that has been solved by only the technical features of the claim.  In this step, the EPO puts the non-technical features of the claimed invention in the technical problem.  For example, the EPO creates a legal fiction where the non-technical features are placed in a “requirements specification” which is available to the skilled person (before the priority date), and which forms a part of the problem the skilled person is trying to solve.  In effect, the non-technical features of the claimed invention are assumed to form part of the prior art, even if these non-technical features are in fact novel.  For example, the technical problem formulated as a result of this process may be as specific as “how to implement [the non-technical features of the claimed invention] on a computer”.  Thirdly, The EPO determines whether or not the technical features of the claimed invention would have been obvious to skilled person starting from the technical problem in view of the cited prior art (and the “requirements specification”).

Therefore, in order to be patentable, the claimed invention must have technical features that are non-obvious to a skilled person who has both: (i) knowledge of the real prior art; and (ii) knowledge of the non-technical features in the claim.

This highlights the importance of convincing the EPO that claimed features are “technical”, because otherwise they will not be able to contribute to inventive step, and worse they will in effect be assumed to form part of the prior art.

These requirements are easy to meet if the software implements an already patentable method, for example a new and inventive method of controlling a specific technical system or process.  In contrast, these requirements are more difficult to meet if the software does not implement an already patentable method.  The requirements can be met, however, provided that executing the software produces a technical effect which goes beyond the normal physical effects produced when an ordinary piece of software is executed on a computer.  Examples of such a further technical effect include control of a technical process or of the internal functioning of the computer itself or its interfaces.

The EPO’s Guidelines for Examination provides some examples of “technical” effects which may be relevant to software inventions relating to the Internet of Things, including (i) encoding data for reliable and/or efficient transmission or storage (and corresponding decoding), e.g. error-correction coding of data for transmission over a noisy channel, compression of audio, image, video or sensor data; (ii) encrypting/decrypting or signing electronic communications; generating keys in an RSA cryptographic system; (iii) optimising load distribution in a computer network; (iv) use of a neural network in a heart-monitoring apparatus for the purpose of identifying irregular heartbeats; and (iv) use of a neural network for the classification of digital images, videos, audio or speech signals based on low-level features (e.g. edges or pixel attributes for images)⁽⁴⁾⁽⁵⁾.

When drafting patent applications relating to the Internet of Things that will be filed at the EPO, and where the invention relates to software, it is therefore important to make sure that the patent application fully describes any and all technical effects achieved by the claimed invention.  Taking this approach makes it more likely that an EPO Examiner will accept that the features of the claimed invention are “technical” in nature, and can therefore validly contribute towards inventive step.  The patent application should therefore describe possible applications of the software, or the output of the software.  For example, if the software or its output can have an effect on a real-world technical system or process, this should be described in the patent application.

In summary, EPC countries represent a significant market for products and services relating to the Internet of Things, and the EPO has a well-established procedure for examining applications in this technical field.  Although obtaining patents at the EPO for software related inventions can be more difficult than for hardware related inventions, it is still possible to obtain patent protection for software related inventions in many circumstances, provided the EPO is convinced that the invention is sufficiently “technical”.

References

(1)  Patents and the Fourth Industrial Revolution, The inventions behind digital transformation, December 2017, The EPO in co-operation with the Handelsblatt Institute.

(2)  https://www.bain.com/about/media-center/press-releases/2018/bain-predicts-the-iot-market-will-more-than-double-by-2021/

(3)  EPO Guidelines for Examination, G-VII-5.4.1

(4)  EPO Guidelines for Examination, G-II, 3.3

(5)  EPO Guidelines for Examination, G-II, 3.3.1

This article was originally published on the Japanese Patent Attorney Association website, under the title “モノのインターネット（IoT）関連技術の特許権取得 － 欧州の観点より”. View the original article (in Japanese) here.