Landmark SPC Ruling On Patent-Eligible Business Methods – Patent – Intellectual Property

Paving the Way for Digital Innovation and Patent Protection in
China

At the 2024 Global Digital Economy Conference, the China
released the “Global Digital Economy White Paper (2024)”
which shows that the added value of China’s core digital
economy industries in 2023 is estimated to exceed 12 trillion RMB
(approximately 1.7 trillion USD), accounting for about 10% of
China’s GDP. The total digital economy of China, the United
States, Germany, Japan, and South Korea exceeds 33 trillion USD,
with a year-on-year growth of over 8%.

The new generation of technologies, centered around big data,
artificial intelligence, and the Internet of Things, has expanded
and deepened the scope and depth of informatization, thus promoting
the transformation from informatization to digitalization. The
rapid growth of the digital economy is closely related to the rapid
iteration of data processing and digital technologies, reflecting
technological and social progress.

Correspondingly, China has also made full preparations in patent
legislation and judiciary to encourage and promote innovation in
digital technologies.

Legislative and Judicial Updates

The “Patent Examination Guidelines” (Guidelines)
effective from 20 January 2024, introduced significant
modifications to the examination provisions for invention patent
applications involving algorithmic features or business method
features. Firstly, the Guidelines emphasize the principle of
reviewing claims as a whole, rather than simply separating
technical features from algorithmic or business method features.
All content recorded in the claims should be evaluated as a whole
to assess the substantive contribution of the invention.
Consequently, claims involving algorithms and business methods that
include technical features should not be excluded from patent
eligibility merely because they involve intellectual activities.
Finally, when determining whether a claim constitutes a patentable
technical solution, it is necessary to analyze the technical means
involved, the technical problems solved, and the technical effects
achieved, using the “three-element” standard for patent
examination.

The amendments to the Guidelines provide more flexibility and
clear standards for examining the eligibility of digital
technologies that embody algorithm features. By adopting a
moderately relaxed examination standard, the patent examination
standards for digital technologies are kept in line with social and
technological progress, giving digital technology innovations more
opportunities to obtain patent protection, thereby encouraging and
promoting economic growth.

In this context, the Supreme People’s Court (SPC) concluded
an administrative litigation case in November 2024 regarding patent
eligibility of a business method patent based on data processing,
clarifying the patentability of algorithms and business methods
that include technical features. This case sets an important
precedent under the revised Guidelines for evaluating the
eligibility of innovations implemented by computers that combine
technical, algorithmic, and business features.

Summary of the SPC Case

The patent in question is an invention patent application for a
“Method for Automatically Changing Values in Sharing”
submitted by a Chinese information technology company in 2016. This
invention proposes a novel “group buying” business model
and describes a method for automatically changing values in
sharing. By binding the relationship between the sharer and the
invitee and tracking user orders, the system automatically adjusts
the group buying price based on the number of orders, thereby
encouraging more sharing.

The China National Intellectual Property Administration (CNIPA)
and the first-instance court deemed the subject matter of the
patent application to be a business method, which is not protected
under the Chinese Patent Law. After reviewing the case, the SPC, in
November 2024, made a final ruling, overturning the decisions of
the CNIPA and the first-instance court, and recognized the
invention as a patentable subject matter.

In its ruling, the SPC provided a detailed statement on how the
patent application meets the criteria for patentable subject matter
under the Patent Law. The court evaluated the claims as a whole to
determine whether they met the “three-element” standard,
which includes the use of technical means, solving technical
problems, and achieving corresponding technical effects.

• The patent application involves a method for automatically
  settling the final payment, which is a typical business method
  carried out by a computer program. Although “group
  buying” is a business model, the prior art cannot track the
  shared information or determine which users placed orders through
  the shared information on social media, which is a technical issue
  and thus a technical problem in the industry.




• To solve this technical problem, the patent application
  encrypts the first user’s identifier and product identifier in
  the shared link when sharing product information. When the second
  user clicks the shared link, it decrypts the link to obtain the
  first user’s identifier and product identifier and stores them
  in an identification file. After the second user logs in, the
  second user’s identifier is bound to the identification file,
  and the binding relationship is stored in a temporary file on the
  sharing platform. This way, when the second user places an order,
  the system can query the temporary file to determine whether the
  identification file bound to the second user contains the first
  user’s identifier and product identifier, thereby determining
  whether the second user placed an order through the first
  user’s shared link.




• The patent application employs technical means such as
  information encryption and decryption, association binding storage,
  and data matching to solve the technical problem of determining
  which users placed orders through shared information, to achieve
  the technical effect of accurately tracking the use of shared
  links.




• Updating the final payment value based on invitation
  information is merely a business operation adopted after solving
  the above technical problem. Using this operation or other
  operations does not negate the technical nature of the solution in
  tracking orders. Therefore, the claimed solution in the patent
  application is a technical solution as defined by the Patent
  Law.

The SPC emphasized that when evaluating the patent eligibility
of business methods implemented by computers, the technical and
business features in the patent claims should be considered as a
whole. Unless it is evident that the invention does not constitute
a technical solution, it should not be excluded from patent
protection merely because it includes non-technical content.
Business methods, that incorporate technical means, solve technical
problems, and achieve technical effects, meet the standards for
patentable subject matter.

The SPC indicated in its ruling that the examination of the
eligibility of business method patents could follow relatively
lenient standards unless it is evident that they do not constitute
a technical solution. However, during substantive examination,
stricter standards can be applied to assess the technical
contribution of the patent application by comparing it with prior
art technologies, thereby fairly and reasonably determining the
scope of patent protection. If substantive examination standards
are incorporated into the examination of subject matter
eligibility, it may inappropriately raise the standards and exclude
inventions that should be protected under the Patent Law.

Impact and Conclusion

The SPC’s ruling is a milestone in the examination of
business method patents implemented by computers and aligns with
the latest revisions of the “Patent Examination
Guidelines.” By recognizing the technical contributions of
such inventions, the court has set a precedent for more inclusive
and balanced patent eligibility standards.

The revised patent regulations and the SPC’s ruling have
promoted more consistent patent examination and confirmation. China
is committed to the development of the digital economy, promoting
the integration of digital technology with the real economy. This
balanced patentability standard will play a crucial role in
fostering innovation in the field of algorithms and digitalization
and ensuring fair and reasonable patent protection for inventors
and enterprises. They can look forward to a more friendly and
predictable legal environment to protect their technological
advancements.

SPC ruling:

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