Introduction

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: https://ipc.court.gov.cn/zh-cn/news/view-3693.html