## Facts

- Aerotel owned a patent for a pre-payment telephone system using a special telephone exchange that verified a caller’s code and credit, connected the call if sufficient credit existed, and terminated the call when credit ran out.
- Telco was sued for infringement and counterclaimed for revocation, arguing the patent was excluded subject matter (a business method).
- The Patents Court granted summary judgment for Telco and ordered revocation on excluded-subject-matter grounds; Aerotel appealed.
- Macrossan sought a patent for an online system that collected user inputs to form a company, generated the required documents, and filed them electronically.
- The Patent Office refused Macrossan’s application as excluded subject matter (a method of doing business and a computer program “as such”); the High Court affirmed; Macrossan appealed.
- The Court of Appeal heard both appeals together because each raised patentability exclusions under the Patents Act 1977/EPC framework.

## Issues

1. What structured approach should be used to decide whether a claimed invention is excluded from patentability as a business method or computer program “as such”?
2. Whether Aerotel’s pre-payment telephone system claim was excluded subject matter or a patentable technical invention.
3. Whether Macrossan’s online company-formation system was excluded subject matter or made a patentable technical contribution.

## Decision

- The Court of Appeal adopted a four-step approach for excluded-subject-matter analysis: construe the claim; identify the actual contribution; ask whether it falls solely within excluded matter; and check whether the contribution is technical in nature.
- Aerotel: appeal allowed; revocation order set aside because the invention’s contribution was a technical telephone system/exchange arrangement, not solely a business method.
- Macrossan: appeal dismissed; the claimed contribution was the computerisation of a business/administrative process using conventional computing, falling within excluded categories without a technical contribution.

## Legal Principles

- Excluded-subject-matter analysis requires focusing on substance: the “actual contribution,” not claim drafting form.
- Four-step test:
  - Properly construe the claim.
  - Identify the actual contribution.
  - Determine whether the contribution falls solely within excluded subject matter (e.g., business method, computer program “as such”).
  - Confirm whether the contribution is technical in nature.
- A claim with a commercial purpose may be patentable if its contribution is a technical arrangement producing a technical effect (e.g., a new telephony system configuration).
- Implementing a business or administrative method on conventional computers and networks, without more, remains excluded as a business method and/or computer program “as such.”

## Conclusion

The Court of Appeal standardised UK analysis of patentability exclusions with a four-step test, distinguishing patentable technical contributions from excluded business methods and computer programs: Aerotel’s hardware-based prepayment telephony system was patent-eligible, while Macrossan’s online automation of company formation was not.


Aerotel Ltd. v. Telco Holdings Ltd., [2006] EWCA (Civ) 1371 (Eng.)