Court revokes Aerotel's landmark patent

Aerotel has lost the right to its patent for telephone systems in a case against phone service provider WaveCrest.

The patent is more than 20 years old and has therefore expired. But litigation has continued over alleged infringements while the patent was in force. Since the patent has been found to be invalid, the infringement claims fall.

Patent attorneys, lawyers, judges and businesses have often had trouble determining exactly what inventions are and are not eligible for patent protection, particularly where the invention involves software. A 2006 ruling in the Court of Appeal was designed to settle the issue by clarifying the rules that patent examiners and judges should apply to assess whether inventions are for patentable subject matter.

The ruling concerned two unrelated cases that were heard together, that of Neal Macrossan, who was denied a patent, and that of Aerotel, which settled out of court before the Court of Appeal hearing.

The Aerotel patent at the centre of that case has now been revoked. The High Court has decided the patent is obvious in the light of prior inventions, and the ground it covers is excluded by the rule governing what a patent can cover.

When heard together, the Aerotel/Macrossan cases were important because the hearings produced rulings from the Court of Appeal which clarified what was 'excluded matter'.

The European Patent Convention (EPC), reflected in UK law in the Patents Act, says that there is some material which cannot be patented. Section 52 of the EPC says that "European patents shall be granted for any inventions which are susceptible of industrial application, which are new and which involve an inventive step."

It goes on to list things that shall not be regarded as inventions:

  • discoveries, scientific theories and mathematical methods;
  • aesthetic creations;
  • schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers;
  • presentations of information.

The Aerotel/Macrossan rulings clarified how these exclusions should operate, by introducing a four-step test:

  1. properly construe the claim
  2. identify the actual contribution
  3. ask whether it falls solely within the excluded subject matter
  4. check whether the actual or alleged contribution is actually technical in nature.

The UK Intellectual Property Office, then the UK Patents Office, said that the rulings would form the basis of future practice. "The Office takes the view that Aerotel/Macrossan must be treated as a definitive statement of how the law on patentable subject matter is now to be applied in the UK," it said within weeks of the judgment.

The Court of Appeal allowed Aerotel a patent for its telephone system after a lower court had revoked the patent in granting a summary judgment for a company called Telco. The Court of Appeal said the claimed invention amounted to a new combination or arrangement of hardware and restored Aerotel's patent. The High Court has now conducted a full hearing on the patent in a different case and the patent has been revoked once more.

Israeli company Aerotel, which Judge Fysh QC said existed to license and litigate the patent, sued pre-paid calling card company WaveCrest for infringement of the patent. WaveCrest counter-claimed, arguing that the patent was not valid.

"Mr Iain Purvis QC (who appeared with Ms Kathryn Pickard for the defendants) pointed out that the courts in the Telco case (unlike this court) had to accept any disputed facts in Aerotel's favour," said the Court's ruling. "Moreover, they were not made aware of alternative ways of making a call which were part of the state of the art at the priority date and which also differed from the 'conventional' way of making a call referred to by the Court of Appeal. Had the Court of Appeal he submitted, been aware of the alternatives to 'conventional' calling at the priority date, it would not have reached the conclusion it did."

Aerotel's patent dated from 1985 and covered what it said was a new way of making pre-paid phone calls from any telephone. The High Court found that the idea behind the patent was not new, in fact it was obvious to anyone involved in the industry.

It also found that it was not an inventive step when compared with other innovations in the telecoms field in the 1980s. The Court heard that British Telecom had a similar system in place, called AccountCall, at the time.

"I am of the view that there is no degree of invention required whatever in relation either to an initial decision to arrange for pre-payment rather than post- payment for the telephone calls made by AccountCall or to the implementation of such a decision," said Judge Fysh. "The Patent is therefore in my judgment also invalid on the ground of obviousness in the light of the use of BT AccountCall."

The Court also found that the invention covered by the patent was ineligible for one because it fell within the exclusion outlined in the EPC.

"The election to solicit pre-pay clientele is unarguably a 'business method'," wrote Judge Fysh. "The consequence in 'computer terms' forms no part of the invention; it is done with appropriate software. Moreover, even if it did form part of the invention, it would therefore only involve the construction of appropriate computer programs and would also be excluded from patentability."