Code, Courts, and Conundrums: Traversing The Shifting Sands of Section 3(k)

The intricate tapestry of intellectual property law in India is woven with threads of precision, dynamism, and a nuanced understanding of technological evolution. Among its many strands, the realm of computer related inventions (CRIs) occupies a particularly enigmatic niche, where legal interpretation and technological innovation intersect in a dance as complex as it is consequential. At the heart of this intricate weave lies the enigmatic Section 3(k) of The Patents Act, 1970 (hereinafter referred to as “the Act”)—a statutory provision that has been both the sentry guarding the gates of patent eligibility and the crucible through which the ingenuity of countless innovators has been tested.

The phrase “computer programme per se,” was introduced with deliberate intent through the Patents (Amendment) Act of 2002. Initially, the absence of the term “per se” in Section 3(k) of the Act meant that all computer related inventions were categorically excluded from patentability. Later, the term “per se” was introduced in Section 3(k) to ensure that CRIs, other than computer programs as such, are not unfairly rejected. Despite this inclusion, there was significant ambiguity regarding what would constitute a patent eligible subject matter and what would not.

This article seeks to traverse the multifaceted landscape of Section 3(k) of the Act, charting judicial interpretations and the pivotal role it plays in sculpting the patentability of CRIs.

1. The CRI Guidelines 2017

The Indian Patent Office (IPO) revised the guidelines for the examination of CRIs in 2017, providing clarity with respect to patentability criteria and streamlining the process of examination of CRIs. However, unlike the CRI guidelines issued by the IPO in 2013, which explicitly defined the term “technical effect”, the CRI guidelines 2017 lacked this definition leading to inconsistent interpretations. The lack of the term “technical effect” in the CRI guidelines 2017 raised the question of whether older, now-superseded guidelines, the 2013 version, can still play a role in assessing patentability, particularly when they are non-enforceable drafts. As a result, challenges surrounding the patentability of CRIs persisted.

2. The case that heralded a paradigm shift in the interpretation of Section 3(k) of the Act

Jurisprudence has played a pivotal role in refining the interpretation of Section 3(k) of the Act. Recognizing the need to adapt to today’s digital world, the Courts have emphasized the importance of evaluating technical contribution or technical effect of the inventions.

In the pantheon of Indian patent jurisprudence, Ferrid Allani v. Union of India [2019 SCC Online Del 11867], dated 12 December 2019, emerges as a landmark decision that reshaped the understanding of Section 3(k) of the Act and its application to CRIs. This case heralded a nuanced judicial recognition of innovation in the digital era, charting a course that blends technological progress with the sanctity of statutory boundaries. The Hon’ble High Court and the erstwhile Intellectual Property Appellate Board (IPAB), while revisiting principles already articulated in the CRI guidelines, provided clarity on patentability of CRI’s. The Court made critical observations regarding Section 3(k) of the Act, stating that the prohibition applied only to “computer programmes per se” to ensure that genuine inventions which are developed, based on computer programs are not refused patents.

The judgment noted: “if the invention demonstrates a technical effect or a technical contribution, it is patentable even though it may be based on a computer program”. The Hon’ble Court highlighted that the meaning of ‘technical effect’ must be evaluated in light of the solution to a technical problem that the invention, taken as a whole, seeks to address. The Hon’ble Court, while emphasizing on the necessity of evaluating technical contributions or technical effect of inventions stressed that “Innovation in the field of artificial intelligence, blockchain technologies and other digital products would be based on computer programs, however the same would not become nonpatentable inventions – simply for that reason. It is rare to see a product which is not based on a computer program…”.

The Ferrid Allani decision epitomizes the judiciary’s commitment to harmonizing legislative intent with the imperatives of innovation. By underscoring the relevance of technical contributions and embracing the evolving dynamics of a digital world, the judgment fortifies the intersection of law and technology, presaging an era where innovation is duly rewarded without contravening statutory limits.

3. Settled legal principles on “Computer programme per se” and “Technical effect”

After the Ferrid Allani decision, the concept of “technical effect” remains a cornerstone in the evaluation of CRIs under Section 3(k) of the Act. While the guidelines may evolve, the underlying test for technical effect remains consistent across various decisions, offering clarity for patent applicants.

Subsequently, the Courts have reinforced the importance of ‘technical effect’ in many decisions. In Microsoft Technology Licensing, LLC v. Assistant Controller of Patents [2023:DHC:3342], dated 15 May 2023, the Hon’ble Delhi High Court affirmed that “It is essential for the Indian Patent Office to adopt a more comprehensive approach when assessing CRIs, taking into account technical effects and contributions provided by the invention rather than solely focusing on the implementation of algorithms and computer-executable instructions. An invention should not be deemed a computer program per se merely because it involves algorithms and computer-executable instructions; rather, it should be assessed based on the technical advancements it offers and its practical application in solving real-world problems.”

In Raytheon Company v. Controller General of Patents [C.A.(COMM.IPD-PAT) 121/2022], dated 15 September, 2023, the Hon’ble Delhi High Court clarified that the requirement for novel hardware is no longer valid under the CRI guidelines, 2017, and reaffirmed that “the patent office needs to examine if there is a technical contribution or as to what is the technical effect generated by the invention as claimed”.

The understanding of “technical effect” was reaffirmed in Microsoft Technology Licensing LLC v. Assistant Controller of Patents (OA/36/2020/PT/CHN), dated 03rd July 2024. The Hon’ble Madras High Court opined that, “Indeed, it is reasonable to conclude that the intention was to exempt from exclusion something more than a computer programme, such as something developed on a computer programme but with an impact on the functioning of the hardware/computer…”

More recently, in AB Initio Technology LLC v. Assistant Controller of Patents [2024:DHC:5708], dated 30th July, 2024, the Hon’ble Delhi High Court reaffirmed that core test for determining patentability is the “technical effect” and clarified that “If an innovative input [in form of a program] allows the hardware to process the output faster, then it would amount to a 'technical effect'”. These rulings underscore the expansive scope of “technical effect” embracing innovations that optimize hardware performance through software-driven improvements and highlight the ongoing evolution of patent eligibility for CRIs.

3.1 Deciphering the Algorithmic Maze

The term “algorithm” is not explicitly defined in the statutes, and its interpretation is guided by general dictionary definitions such as the Oxford Advanced Learners Dictionary, which describes an algorithm as “a set of rules to solve a specific problem”. Under Section 3(k) of the Act, “a mathematical or business method or a computer programme per se or algorithms”, are excluded from patentability. Recent decisions by the Indian Courts demonstrate that inventions based on algorithms can still qualify for patent protection if they contribute to produce a technical effect.

In the judgment of Lava International Ltd. v. Telefonaktiebolaget LM Ericsson [2024:DHC:2698], dated 28th March, 2024, the Hon’ble Delhi High Court clarified that a mere algorithm, if not implemented within a system or method that enhances the functionality of a device or hardware, does not meet the patentability criteria. It emphasized that “If the invention results in a further technical effect that transforms or enhances the functionality and effectiveness of a general-purpose computer, the invention should not be rejected as a 'computer program per se'”. The example of a smart thermostat algorithm dynamically adjusting environmental conditions was cited to demonstrate how such an algorithm, when applied in practice to improve energy efficiency or user comfort, could produce a technical effect.

The hon’ble Delhi High Court’s ruling in Blackberry Limited vs. Controller of Patents and Designs [C.A. (COMM.IPD-PAT) 318/2022], dated 30th August, 2024, reaffirmed the application of test of technical contribution in cases involving algorithms. In this case, the invention, which managed media content based on user preferences, was found to meet the test for technical contribution. While it involved algorithms, the Court noted that their combination with software produced a technical effect—enhancing device functionality without necessitating hardware modifications. This satisfied the criteria for patentability, underscoring that when algorithms contribute to a technical solution, a patent may be granted.

In contrast, in Blackberry Limited vs. Assistant Controller of Patents and Designs [C.A. (COMM.IPD-PAT) 229/2022], dated 30th August, 2024, the invention which sought to simplify data configuration between servers, was rejected by the IPO as it was driven by an algorithm. The Court observed:

“41. Given the findings from the above analysis of the Claims and the Complete Specification, it is evident that the core functionality of the subject patent is driven by conditional logic and procedural steps. Accordingly, in terms of the judgment of the Coordinate Bench of this Court in Lava International v. TLM Ericsson, 2023:DHC:2698, given that the technical contribution of the subject matter for which patent protection is sought is solely covering a complex sequence of instructions, the objection under Section 3(k) of the Act raised by the Controller is justified.”

“52. Insofar as the patentability of inventions incorporating algorithms is concerned, if the invention relates purely to a set of instruction or policies which determine the flow without any substantial change in the hardware, such instructions even if they have a bearing on the manner in which the flow of data occurs would not be entitled to patent protection in India. But if the algorithm instructions are thereafter implemented through computer software coded for this purpose and result in a technical effect or technical contribution then the test applicable to computer software can also be applied and patentability can be adjudged. In such a case the inventive feature would have to be the implementation and not the algorithm itself.”

These cases provide an acumen as to how an algorithm may transcend from being a mere set of instructions to a patent eligible matter.

3.2 Business methods: A Reassessment of Exclusions

Recently, the Courts have also revisited the exclusion of business methods under Section 3(k). 

In OpenTV Inc. v. The Controller of Patents and Designs [2023:DHC:3305], dated 11th May, 2023, the Applicant argued that the technical nature of the system should render it eligible for patent protection, irrespective of its business utility. Yet, the Court held firmly to the premise that Section 3(k) imposes an absolute bar on business methods, irrespective of their technical complexity. The Court emphasized that currently exclusion of business methods under Section 3(k) is absolute and is not restricted by the term ‘per se’, as in the case of computer programs.

Contrasting with the stance adopted in OpenTV, the Madras High Court, in Priya Randolph v. Deputy Controller [2023:MHC:5450], dated 20th December, 2023, exhibited a more nuanced and flexible interpretation. Here, the invention at hand sought to address a technical issue—protecting user privacy in e-commerce transactions—by concealing physical address information. The Court took a discerning approach, emphasizing that the invention's technical nature was not subordinate to its business context. The Court recognized that the primary objective of the invention was not merely to facilitate a business transaction, but to provide a substantive, technical solution to a pressing issue in the realm of data privacy.

The judicial trajectory continued in Comviva Technologies Limited v. Assistant Controller of Patents and Designs [2024:DHC:8990], dated 12th November, 2024, where the Delhi High Court sought to clarify further the boundaries of the business method exclusion. The Court referred to Clause 4.5.2 of the CRI Guidelines, which provides that merely incorporating business-related terms—such as “sales”, “transactions”, or “payments”—does not, in and of itself, render an invention ineligible for patent protection. The Court underscored the necessity of a holistic examination of the invention's substance: if the claim specifies a technical process or apparatus that resolves a technical issue, even when framed within a business context, it may still be deemed patentable.

Together, these decisions form a critical tapestry that delineates the contours of patent eligibility under Section 3(k). As such, the evolving judicial approach emphasizes the need for a nuanced assessment of the substance of the invention, ensuring that Section 3(k) is applied in a manner that aligns with the realities of contemporary technological innovations.

Reflecting on Section 3(k)'s Past, Gazing into its Future

As we conclude this intricate exploration of Section 3(k) of the Act, it becomes evident that this provision is not merely a legal stipulation but a philosophical compass guiding the nation’s journey through the labyrinth of intellectual property jurisprudence. By delineating the contours of patent eligibility in the realm of CRIs, judicial decisions have infused a measure of predictability into what was once an opaque landscape, thereby engendering confidence among innovators.

This evolving landscape has contributed to significantly boost patent filings of CRI inventions in India. According to the Indian Patent Office’s Annual report 2022-2023, filings for computer and electronics patent applications rose by approximately 45% from 11,126 in 2019-20 to 20,355 in 2022-23. Also, the number of patents granted in the field of computer science and electronics have increased from 2,141 to 3,718 during the same period.

In essence, Section 3(k) is less a static provision and more a dynamic indication to India’s ability to harmonize tradition with innovation, jurisprudence with pragmatism, and national interest with inclusive relevance. As India strides boldly into a future driven by artificial intelligence, blockchain, and digital transformation, this provision will remain a cornerstone of its intellectual property edifice—a touchstone against which the creativity, ingenuity, and technical prowess will continue to be measured.