Smart cards and loyalty program software patentable in Australia: Welcome Real-Time SA v Catuity Inc [2001] FCA 445

In the decision Welcome Real-Time SA v Catuity Inc [2001] FCA 445, the invention by Welcome Real-Time is in the field of smart cards which record the number of points awarded to a person participating in many loyalty programs.

Generally each merchant has their own loyalty program. Prior to the invention, it was a problem to store information on every available loyalty program in the smart card because the quantity of memory required to store information on all of the loyalty programs available – which may be thousands – generally exceeded the smart card’s memory.

The invention was to add a merchants loyalty program to a file on the smart card the 1st time the cardholder used the card at the merchants point of sale terminal. Consequently, only the loyalty programs that the cardholder participated in were loaded onto the card, greatly reducing the memory requirements.

His Honour followed NRDC and expressed the view that the invention produced an artificially state of affairs, in that the cards can be issued making available to consumers many different loyalty programmes of different traders as well as different programs offered by the same trader. What was involved here is not just an abstract idea or method of calculation. Moreover, the result is beneficial in a field of economic endeavour – namely retail trading – because it enables many traders including small traders to use loyalty programs and thereby compete more effectively. His Honour further was of the opinion that the patent is not to a business method, in the sense of a particular method or scheme for carrying on a business. The patent is for a method and a device, involving components such as smartcards and point of sale terminals.

While his Honour expressed doubt that a manner of manufacture required a “physically observable effect”, his Honour’s comments suggests to me that it is prudent to plainly incorporate computing machine features into the claims to tie the software to a machine as appropriate. Claim 1 of the patent specification is notable for its inclusion of computing machine features:

Method of processing coded information during a purchase or payment operation by a customer, holder of a card (4) with a chip (5), at a trader’s, in which the contents of the memory (14) of the chip card are read and a coupon (12) is or is not printed on the basis of the information arising from the contents of said memory, characterized in that, with the memory of the chip card including [c] a first identification file (18), termed the Member file, identifying the card-holding customer, a second accounting file (22), termed the Points file, and a third file (21), termed the Behaviour file, relating to the behaviour of the card holder towards the user trader or traders, a specified algorithmic processing is performed dependent, on the one hand, on the date of the operation and, on the other hand, on the information contained in said files, including the Behaviour file, the algorithmic processing including a step of incrementing or decrementing the Point [sic] file by a predetermined number of points depending on the frequency and/or the nature of first, second or xth visit by the card holder over a time period of specified duration, the coupon is printed only if the number of points contained in the Points file is greater than a specified value then data is written to the Points file, new information is written to the Behaviour file, and said coupon is or is not printed on the basis of the result of said algorithmic processing.