Protecting Non-Traditional Patents in India:  Algorithms, Business Models, and More

While traditional patents cover tangible inventions and industrial processes, the rise of the digital economy has introduced a need for protecting non-traditional intellectual property like algorithms, business methods, and software innovations. India’s evolving innovation landscape has seen increased attention to non-traditional patentable subjects like algorithms, business methods, and AI-based technologies. However, the Indian patent regime, guided by the Patents Act, 1970, maintains specific exclusions under Section 3(k), which bars the patenting of business methods, algorithms, and computer programs “per se.” This exclusion has sparked significant debate as technology progresses and innovations in these areas become critical for competitiveness.

Non-traditional patents, particularly those covering algorithms and business models, can be a significant driver of innovation in emerging industries such as fintech, e-commerce, and artificial intelligence (AI). By granting exclusive rights to groundbreaking technologies, these patents signal value to investors, helping startups and SMEs in India secure funding and establish a competitive edge. This exclusivity also allows these companies to protect their intellectual property and carve out strong market positions both locally and globally. Licensing patented technologies can also foster collaboration between traditional industries and new tech-driven sectors, creating opportunities for cross-industry partnerships that accelerate growth and technological advancements.

The developments in Indian jurisprudence have shown significant shifts in the interpretation of patent laws, particularly concerning non-traditional inventions such as algorithms, business models, and software innovations. The judgments prove that a more flexible approach to patentability is considered in these cases, focusing on the technical contributions of such innovations rather than merely their business implications.

Ferid Allani v. Assistant Controller of Patents (2019)[1]– This landmark case provided clarity on software and algorithm-related patents. The court held that software demonstrating a “technical effect” or a “technical contribution” could qualify for patents. This decision provided a gateway for software-driven innovations to seek patent protection in India, albeit under strict scrutiny.

The Madras High Court’s (MHC) ruling in Priya Randolph Vs. Deputy Controller of Patents and Designs, Maharashtra[2] (2023) is an important addition to discussions about non-traditional patents in India, particularly regarding the patentability of business methods. The invention related to the completion of transactions in e-commerce, from the purchase of a product to its delivery via an e-commerce platform, a logistic company, and a delivery executive. The application was rejected after hearing by referring to Section 3(k) and concluding that the claimed invention is a business method. The Court reversed the refusal of the Deputy Controller, highlighting that denying a patent solely due to its business-related aspects overlooked the innovation’s technical essence. The invention addressed data privacy in e-commerce transactions, specifically concealing purchaser details using an integrated system of software, hardware, and firmware.  The Court clarified that assessing patentability should go beyond the label of “business method.” It must evaluate whether the invention resolves a technical problem or achieves a technical effect. This ruling provides a framework for inventors in the digital and e-commerce domains to argue for patent protection if their innovations exhibit technical contributions, even when tied to business models.

But contradictory to these cases, the Delhi High Court upheld the rejection of a patent application for a system facilitating media gifting, OpenTV Inc. v. Controller of Patents and Designs (2023)[3]. Despite technical features like network architecture, the court deemed the invention to be a business method at its core. The ruling reaffirmed the strict interpretation of Section 3(k) but also called for legislative reconsideration to align with global trends in recognizing digital innovations​. The Delhi High Court urged the government to revisit the exclusions in Section 3(k).  The court emphasized that such revisions are essential to prevent stifling innovation and to address the needs of startups, particularly in AI and blockchain technology​.

Examining global approaches to patenting non-traditional inventions like software and algorithms offer valuable insights. In the United States, the Alice-Mayo test[4] assesses whether such inventions include an “inventive concept” to transform abstract ideas into patentable applications, though its inconsistency is often criticized. The European Union permits patents for inventions solving technical problems in a non-obvious way[5], supporting innovations like AI-based systems. China recognizes patents for algorithms addressing technical issues, with its 2021 Patent Examination Guidelines[6] enabling protection for AI and smart manufacturing systems. Similarly, Japan emphasizes industrial applicability, granting patents for AI and business-related inventions with practical utility[7]. These frameworks showcase a balanced approach, emphasizing technical contributions while preventing monopolization of abstract ideas.

The debate over non-traditional patents in India reflects the tension between fostering innovation and a balanced patent system. Cases like Priya Randolph and OpenTV Inc. illustrate the judiciary’s pivotal role in shaping the interpretation of Section 3(k). India’s patent ecosystem must evolve to meet the unique challenges provided by non-traditional patents. Clear guidelines should define what constitutes a “technical effect” or “advancement” in software and business methods. As India continues to emerge as a global hub for technological innovation, updating its patent framework to accommodate non-traditional inventions is essential.

By Vidhya Prathap C

Patent Analyst

Disclaimer: The content on this blog is for informational purposes only and does not constitute legal advice.

Images generated using AI.

[1] MANU / DE / 4323 / 2019

[2] MANU/TN/7513/2023

[3] MANU/DE/3117/2023

[4] https://crsreports.congress.gov/product/pdf/IF/IF12563

[5] https://www.epo.org/en/legal/case-law/2022/clr_i_d_2.html

[6] https://www.eagle-ip.com/publications/proposed-examination-guidelines-for-the-new-chinese-patent-law-topic-1-patent-term-adjustment/

[7] https://books.openedition.org/putc/15392?lang=en