Back to the future? Full Court (again) Reverses Test for Software Patents

After 5 decisions in the Aristocrat litigation from 13 different judges, Australia’s position on computer-implemented inventions has undergone another marked realignment.

In Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents [2025] FCAFC 131, the Full Federal Court has rejected the 2021 Full Court’s “two-step” test and affirmed that the correct inquiry is anchored in first principles.

The Court allowed Aristocrat’s appeal, finding that the claims of four innovation patents concerning electronic gaming machines were a patentable “manner of manufacture” within the meaning of section 18(1A)(a) of the Patents Act 1990 (Cth).

There are direct consequences of this decision for patent claims that are directed to computer-implemented inventions (not just those involving electronic gaming machines).

The decision may ultimately be the subject of an application for special leave by the Commissioner of Patents, which must be filed by 14 October 2025.

Which two-step?

On appeal from a 2021 Full Court Decision, a six-judge bench of the High Court was evenly split between “allowing reasons” (in favour of finding of patentable subject matter), and “disallowing reasons” (against finding of patentable subject matter).

A differently constituted 2025 Full Court has expressly adopted the “allowing reasons” of Gordon, Edelman and Steward JJ. Set out below is a more detailed procedural history of the matter.

In finding that Aristocrat’s game was patent eligible subject matter, the High Court’s “allowing reasons” had held that the question to ask is whether the subject matter is:

In our earlier Alert on the split High Court decision, we summarised the “allowing reasons” approach in this way:

 … a “mere method” may become a patentable manner of manufacture when practised in a way that is embodied in a physical form, where an idea consists of the rules of a game, it may be patentable subject matter when combined with physical materials for playing the game.

Now, the 2025 Full Court approach overrides the two-step approach previously set out by the 2021 Full Court. It signals a return to more classical principles expressed in National Research Development Corporation[1] (NRDC) which concerned the new application of known chemicals to rid crop areas of certain weeds as a manner of new manufacture.

This realignment back to NRDC differs from the two other “two-step” tests that have been proposed – a first by Burley J at first instance and a second by the 2021 Full Court — which this 2025 Full Court found it had a “compelling” reason to depart from. Although evenly split, all 6 High Court judges criticised, for different reasons, the 2021 Full Court’s “two step” test.

This will be a great relief to some patentees, particularly in the technology and software industry. Conversely, we expect some clients will pause to evaluate their infringement and litigation risk.

The 2025 Full Court made the following further observations:

• It remains the law that the question whether an invention is a patentable manner of manufacture depends on the characterisation of the invention, which is to be determined from a proper construction of the claim in light of the specification as a whole, and common general knowledge. It is to be determined as a matter of substance, not merely from the form of the claim
• It is appropriate to revert to the approach set out by the High Court in NRDC ­– is there an artificially created state of affairs with economic utility?
• It is too rigid and narrow an approach to say that the implementation of an idea in a computer, using conventional computer technology for its well-known and well-understood functions, cannot constitute a “manner of manufacture”.
• In the 21^stcentury, a law such as s 18(1A) of the Patents Act — designed to encourage invention and innovation — should not lead to a different conclusion where physical cogs, reels and motors are replaced by complex software and hardware that generate digital images

What is an artificial state of affairs?

In NRDC, the High Court held that, to be patentable, an invention must give rise to an “artificially created state of affairs”. 

Applying this test — formulated over 60 years ago — in practice has never been straight-forward. In the context of software, a business method or abstract concept merely implemented on a computer will not be sufficient. There will be better prospects of establishing the existence of patentable subject matter where the invention comprises a technical advance or contribution — for example, an improvement in computer functionality, data processing, or system architecture.

Here, the 2025 Full Court has decided that the integration of novel gaming features into the hardware and software of an electronic gaming machine constituted such an artificial state of affairs, as it resulted in a distinctive and concrete outcome not previously available in conventional gaming machines. 

What is a useful result?

Following NRDC, the artificially created state of affairs must produce a “useful result”. To do so, the invention must have utility in the field of economic endeavour.

A “useful result” will not be satisfied by the (mere) manipulation of information or implementation of a scheme, unless that manipulation leads to a tangible or technical effect. Again, the 2025 Full Court referred to NRDC. Citing the “allowing reasons”, the Full Court repeated these considerations:

…whether the process or product is part of the useful arts rather than the fine or intellectual arts; whether there is an artificially created state of affairs with a useful result including a result of economic significance; and whether the subject matter of a claim is no more than a mere intellectual idea, scheme, or game.[2]

For software-implemented inventions, the prospects of demonstrating patentable subject matter will be higher where the program delivers more than a mathematical calculation or organisation of information — for example where it generates a result that has real-world application or enhances the operation of technology.

Here, the 2025 Full Court emphasised that the claimed gaming machines did not merely implement a set of rules or a game on a generic computer but instead produced a new and useful result by altering the operation and functionality of the gaming machine itself. This practical application, which improved the player’s experience and the machine’s capabilities, satisfied the requirement for a useful result.

When is something implementing an abstract idea, and not useful?

The Full Court provided a number of examples from previous decisions of invention that merely involve the use of a computer to manipulate an abstract idea without producing an artificial state of affairs and a useful result.

 In addition to the decisions considered in the High Court’s “allowing reasons”, the Full Court included the following more recent examples:

• Using GPS-enabled mobile devices to manipulate risk management information (Repipe Pty Ltd v Commissioner of Patents (2021) 164 IPR 1); and
• An improved logistics method for delivering goods to end consumers (Dei Gratia Pty Ltd v Commissioner of Patents [2024] FCA 1145).

How did we get here?

The Full Court’s judgment is the latest in a long-running saga concerning the patentability of Aristocrat’s computer-implemented invention relating to electronic gaming machines. We have previously covered many of the key decisions:

• The High Court has decided the patentability of computer implemented inventions - Aristocrat v Commissioner of Patents
• The High Court to decide - are computer implemented inventions patentable? Aristocrat v Commissioner of Patents
• Game On for Aristocrat

The key decisions are summarised below.

Aristocrat appealed the remittal decision to the 2025 Full Federal Court.

What test to apply – where are we now?  

The 2025 Full Court found that s 23(2)(a) of the Judiciary Act only provides a partial answer to the question. Under that provision, the High Court’s split decision does not create binding precedent and ‘the decision appealed from shall be affirmed’. However, this does not mean that the 2021 Full Court decision creates binding precedent. Rather, their Honours found that the decision ‘affirmed’ under the Judiciary Act was the orders made by the 2021 Full Court (not the reasons for judgment).

Arising from this, some issues could support a special leave application, which may provide an opportunity for the High Court to revisit manner of new manufacture:

• The 2025 Full Court’s decision about the application of the Judiciary Act, and its relationship with the 2022 High Court and 2021 Full Court decisions
• The scope of the 2025 Full Court’s appeal jurisdiction, ruling on the validity of claims, on an appeal concerning remittal orders

Courts have previously indicated that NRDC may not be not the final word on patentability. The concept of “manner of manufacture” is to be developed on a case-by-case basis and is not susceptible to any verbal formula.[7] Given the opportunity, should they grant special leave to appeal, the High Court may set down yet another test.

Given the Commissioner’s view on computed-implemented inventions, we will be watching for a special leave application from the Commissioner.