Fintech Patents - Communisis Plc v The TALL Group of Companies Ltd

 

Jane Lambert

Intellectual Property Enterprise Court (HH Judge Melissa Clarke) Communisis Plc v The TALL Group of Companies Ltd and others [2020] EWHC 3089 (IPEC) (17 Nov 2020)

This was a claim for patent infringement and a counterclaim for revocation on grounds of obviousness and excluded matter. The action and counterclaim came on for trial before Judge Melissa Clarke on 14 and 15 July 2920. By her judgment of 17 Nov 2020 she found the patent to be invalid and not to have been infringed (see Communisis Plc v The TALL Group of Companies Ltd and others [2020] EWHC 3089 (IPEC) (17 Nov 2020).

The Parties

The claimant was Communisis Plc, the proprietor of UK patent no GB2512450  entitled "A method of generating a payment/credit instrument", the patent in suit.  The defendants were The TALL Group of Companies Ltd and its wholly-owned subsidiaries, Checkprint Ltd, and DLRT Limited.  Each party manufactures cheques, cheque books and cheque fraud prevention systems to major banks and financial institutions. 

The Patent in Suit

The invention for which the patent was granted is described as follows in the abstract by reference to this drawing:

"A code 34 is generated and applied to a payment or credit instrument such as a cheque 10 or credit slip. The code is created by means of an algorithm that operates on a string. The string could be a sort code 26, account number 28 or serial number 24 from the cheque. Further steps can be added to the code generation such as interchanging digits between strings, or converting the base of the string (e.g. to base 43) so that the code is shorter in length. Base-converted strings could be concatenated. The code, or Unique Coded Number (UCN), provides a means to identify instances where the personalised details on a payment or credit instrument have been changed."

The Claims

The claims that were alleged to have been infringed were 1 and 6.  At paragraph [29] of her judgment, Judge Melissa Clarke said: 

"Claim 1 is a method claim and Claim 6 is a product claim, but they are otherwise not materially different. It is common ground that they can be treated together for the purposes of the action. The parties have split Claim 1 into integers for ease of reference, as follows:
1.1. A method of generating a payment/credit instrument comprising:
1.2. Generating a code based on at least one string of information to be applied to the payment/credit instrument during generation thereof;
1.3. Applying at least one string of information to the payment/credit instrument; and
1.4. Applying the generated code to the payment/credit instrument in at least one location of the payment/credit instrument during generation thereof by a printing technique,
1.5. Wherein the or each string of information is converted to a code by conversion to a higher base; and
1.6. Wherein the payment/credit instrument is a cheque or credit slip, and
1.7. Wherein the at least one string of information is one or more of a bank sort code, a payment/credit instrument serial number and an account number for the payment/credit instrument."

The Issues

The claimant alleged that the defendants had infringed claims 1 and 6 by doing, authorizing, directing or procuring various acts in the UK in relation to the invention without its consent.  The defendants admitted those acts and that for the purposes of those proceedings only they jointly and severally participated in them. However, they denied infringement arguing that the acts complained of did not fall within any of the claims. They also counterclaimed for revocation alleging obviousness over 3 pieces of prior art and excluded subject matter.

The Counterclaim

S.72 (1) (a) of the Patents Act 1977 provides that the court may revoke a patent on the ground that the invention for which it was not granted was not a patentable invention.  S.1 (1)  sets out the conditions for the grant of a patent. One of those conditions is that the invention involves as "inventive step" (s.1 (1) (b)). Another is that the grant of a patent is not excluded by subsections (2) (s.1 (1) (d)). Subsection (2) excludes mathematical method and the presentation of information. 

It is important to note that the exclusions under s.1 (2) are subject to the proviso that "the foregoing provision shall prevent anything from being treated as an invention for the purposes of this Act only to the extent that a patent or application for a patent relates to that thing as such. "  That proviso has been applied in such a way as to allow many computer-implemented inventions to be patented.

Inventive Step

S.3 provides:

"An invention shall be taken to involve an inventive step if it is not obvious to a person skilled in the art, having regard to any matter which forms part of the state of the art by virtue only of section 2 (2) above (and disregarding section 2 (3) above)."

At paragraph [80] of her judgment, Judge Melissa Clarke said:

"It is convenient to assess inventive step using the structured approach set out by Oliver LJ in Windsurfing International Inc v Tabur Marine (Great Britain) Ltd [1985] RPC 59 and restated by Jacob LJ in Pozzoli SPA v BDMO SA [2007] EWCA Civ 588, [2007] FSR 37, [2007] BusLR D117, [2007] Bus LR D117:

"i) (a) Identify the notional 'person skilled in the art';
(b) Identify the relevant common general knowledge of that person;
ii) Identify the inventive concept of the claim in question or, if that cannot readily be done, construe it;
iii) Identify what, if any, differences exist between the matter cited as forming part of the state of the art and the inventive concept of the claim, or the claim as construed;
iv) Ask whether, when viewed without any knowledge of the alleged invention as claimed: do those differences constitute steps which would have been obvious to the person skilled in the art or do they require any degree of invention?"

Identifying the Person skilled in the Art

The judge referred to paragraph [23] of Mr Justice Henry Carr's judgment in Hospira UK Ltd v Cubist Pharmaceuticals LLC  [2016] EWHC 1285 (Pat) in which he set out the legal principles be applied for identifying the skilled addressee.:

"i) A patent specification is addressed to those likely to have a real and practical interest in the subject matter of the invention (which includes making it as well as putting it into practice).
ii) The skilled addressee has practical knowledge and experience of the field in which the invention is intended to be applied. He/she (hereafter "he") reads the specification with the common general knowledge of persons skilled in the relevant art, and reads it knowing that its purpose is to disclose and claim an invention.
iii) A patent may be addressed to a team of people with different skills. Each such addressee is unimaginative and has no inventive capacity.
iv) Although the skilled person/team is a hypothetical construct, its composition and mind-set is founded in reality. As Jacob LJ said in Schlumberger v Electromagnetic Geoservices [2010] EWCA Civ 819; [2010] RPC 33 at §42:

'… The combined skills (and mindsets) of real research teams in the art is what matters when one is constructing the notional research team to whom the invention must be obvious if the patent is to be found invalid on this ground.'"

Her Honour directed herself as follows at paragraph [30] of her judgment:

"It is common ground that a patent specification is addressed to those likely to have a real and practical interest in the subject matter of the invention (which includes making it as well as putting it into practice); such persons are those with practical knowledge and experience of the field in which the invention is intended to be used. The skilled addressee of the Patent reads the specification with the common general knowledge of persons skilled in the relevant art at the application date of the patent (here, 1 February 2013), and knowing that its purpose is to disclose and demarcate an invention. The skilled person reads prior art documents with interest but is unimaginative and has no inventive capacity. He may be a team of persons with differing expertise or a single person with all the practical knowledge and experience needed. Although the skilled person is a hypothetical construct, his or her composition and mind-set is founded in reality."

There was a dispute as to the characterization of the skilled addressee which the judge resolved at paragraph [41]. In her view, the patent would be read by those with both financial/banking and cryptographic expertise which could reside in the same person.

 Identifying the Relevant Common General Knowledge of that Person

The learned judge noted at [44] that the common general knowledge of the skilled addressee would include:

"i) the use of various identifying data on cheques including the sort code, account number and cheque serial number;
ii) the concatenation of the above information into data strings, and the printing and display of the same on cheques;
iii) the requirement for and use of machine-readable data and symbols on cheques;
iv) that physical security measures are used on cheques;
v) the inadequacy of physical security measures for digitised systems and digitally transmitted cheque systems, and the requirement for "image-survivable" security features;
vi) some understanding of the forms of cheque fraud, specifically those relating to tampering with personalisation data;
vii) the use of cryptography in security applications;
viii) the existence, use and strength of cryptographic techniques;
ix) a basic knowledge of mathematics and implementation of mathematical methods of programming;
x) simple principles of digital security such as:

• The principles and use of digital signatures;
• Private and public key encryption including the use of commonly known protocols such as RSA;
• The use of reversible and irreversible cryptographic functions;
• The use of hashing functions including commonly known hashing functions such as SHA-1 and SHA-2 including SHA-256, message authentication codes and checksums;
• The use of different bases for the display of outputs of cryptographic functions such as encryption algorithms and hashing functions etc, including the use of hexadecimal display of the outputs of common hashing functions such as SHA-1;

xi) sufficient understanding of the application of algorithms to numeric strings to appreciate that this is a suitable method of encoding."

In cross-examination, the claimant's expert also accepted that the common general knowledge would also include the defendants' expert's statements about the use of cryptography in the banking industry and that cheques and credit slips could be printed with personalisation data and drawer data simultaneously as happened with company cheques and travellers' cheques.

Identifying the Inventive Concept of the Claim in Question

At paragraph [7] pf her judgment. Judge Melissa Clarke noted that Judge Hacon had directed each of the parties to file a supplemental statement of case on the alleged inventive concept of the patent at the case management conference.  There is no further mention of that direction or of any supplementary statements of case in the judgment. It appears from paragraph [83] that the claimant's expert did not identify the inventive concept in his report. The judge noted that submissions had been made on the meaning of integer 1.5 of claim 1 that did not assist her. 

Subparagraph (iii) of the Windsurfing/Pozzoili test states that if the inventive concept cannot be identified, the claim can be construed instead.  That appears to have been the approach that she took in carrying out steps (iii) and (iv) of the test.

The Prior Art

The defendants relied on the following:   

• US patent application US20020065786A1 Method and apparatus for depositing paper checks from home or office ("Martens");   
• US patent 3,990,558 Method and apparatus for preparing and assessing payment documents ("Ehrat"); and 
• US patent for a method of authenticating a cheque through a software program ("Martin").

Martens

It was common ground that Martens disclosed all of the integers of claim 1 except, in relation to integer 1.5, namely generation of the code by conversion to a higher base.  The judge analysed the patent application and concluded at [93] that the only real difference between Martens and claims 1 and 6 if the patent in suit is that there is no express disclosure in Martens that the codes can be generated by conversion to a higher base. That posed the question whether "donning the mantle of the skilled person reading Martens on 1 February 2013 without the benefit of hindsight, i.e. forgetting that the skilled person has any knowledge of the Patent, is it obvious that a code could be generated by converting the Personalisation Data or X to a higher base?"  Her Honour concluded at [96] that it would have been obvious to the skilled addressee that the code could be generated by conversion to a higher base.  She noted that there would not be much benefit from doing so but that was beside the point.  The patent was obvious over Martens.

Ehrat

The claimant acknowledged that Ehrat disclosed all of the integers of claim 1 except:

"i) In relation to integer 1.2, it discloses that the code is applied to the payment/credit instrument "during generation thereof"; and
ii) In relation to integer 1.5, that the information is converted to a code "by conversion to a higher base".

The judge read the patent and found that it disclosed integer 1.2.  She then considered the second issue and noted at [103] that 

"it would be obvious to the skilled person reading Ehrat at the priority date, that the crypto number could be produced by use of one of a number of common cryptographic methods such as RSA or SHA-1. Equally, it is obvious that it could be produced by conversion to a higher base, although once again it is likely that the skilled reader would consider that was poor security." 

The claimant's expert also appeared to acknowledge in cross-examination that the essence of the patent and the defendants' method had been disclosed in Ehrat.   For all those reasons, Judge Melissa Clarke found that the patent was obvious.

Martin

In view of her findings in Martens and Ehrat, the judge dealt with Martin shortly.  It was agreed that all the integers of claim 1 except 1,2 and 1.5 were present.  On reading the patent she found that Martin disclosed an alternative whereby the bar code is printed at the same time, and in the same process which satisfied claim 1.2.  She also concluded that it would be obvious to a skilled reader of Martin at the priority date that one method of encryption which could be used would be conversion to a higher base,  It followed that the patent was obvious over Martin.

Excluded Matter

The learned judge referred to the Court of Appeal's judgment in Aerotel Ltd. v Telco Holdings Ltd and others  [2006] Info TLR 215, [2007] Bus LR 634, [2007] BusLR 634, [2006] EWCA Civ 1371, [2007] RPC 7, [2007] 1 All ER 225 which set out a four-stage test to be applied when considering excluded subject matter:
(i) properly construe the claim; 

(ii) identify the actual contribution (which it says can be done by asking what the inventor has really added to human knowledge, looking at substance and not form);

(iii) ask whether it falls solely within the excluded subject matter; and 

(iv) check whether the actual or alleged contribution is actually technical in nature.

Applying that test Her Honour could not identify an actual contribution to human knowledge for the purposes of the second step. As for the third and fourth, she was satisfied that the alleged contribution was excluded as a mathematical method under section 1 (2) (a) of the Patents Act 1977.   Consequently, there was no invention for which a patent could be granted for the purpose of the Act.

Infringement

Having construed the patent between paragraphs [47] and [76] of her judgment. the judge considered whether the defendants' product and method fell within claims 1 or 6.   She concluded at paragraph [120] that it did not:

"The Defendants' product achieves the generation of a code applying quite a different, much more secure and effective cryptographic process, namely applying a standard secure hash function to the information string, in which the input numerical value and output numerical value are different. The information string is first converted to a lower base (binary), the hash function is applied, and the output in binary is then converted to a higher base for display in hexadecimal."

In the absence of an inventive concept and a contribution to the art, the doctrine of equivalents could not apply.

Summary

The judge summarized her findings at paragraph [123]:

"i) Claims 1 and 6 of the Patent are invalid for obviousness over the Prior Art: Martens, Ehrat and Martin.
ii) Claims 1 and 6 of the Patent are invalid for excluded subject matter pursuant to section 1(2) Patents Act 1977.
iii) The claim for infringement is dismissed."

Comment

For those who are new to patents, this is a good introduction to:

• the construction of claims;
• obviousness; and
• excluded matter.

The judge cites the authorities, distils the ratio of each case and explains how she applies it,  Another advantage of the case is that the technology is easy to understand.

Anyone wishing to discuss this article or any of the topics discussed can call me on 020 74040 5252 during office hours or send me a message through my contact form.