Halliburton was challenging Smith International, a rival oil and gas industry supplier from its hometown of Houston, Texas. It was not their first battle over the technology.
Last August, a Texas court declared wilful infringement of equivalent US patents. It awarded Halliburton $41 million and barred the use of Smith's Integrated Dynamic Engineering and Analysis System – its IDEAS software – to design drill bits in the US except where certain infringing features had been removed.
The jury in the US case rejected Smith's arguments that Halliburton's patents were invalid. But on 21st July 2005, England's Patents Court, a specialist division of the High Court, agreed with Smith that Halliburton's European patents were invalid. The detailed reasoning stretched Mr Justice Pumfrey's judgment to 84 pages.
This was the first UK trial to hear two parties argue the validity of software-related patents and one of only a small number of cases that have discussed patentable subject matter.
The patents – known as the Orientation patent and the Force Balancing patent – both related to drill bits for drilling in rock. They were "addressed to persons wishing both to design and use simulation systems for drill bit design," according to Justice Pumfrey.
Halliburton said that Smith's IDEAS simulation and modelling program infringed its rights – as did more than 100 drill bits that had been produced using IDEAS. But Smith said the patents were invalid: that not only did they describe a technique that was lacking invention, they described it badly.
Justice Pumfrey summarised one of Smith's key arguments against Halliburton's Force Balancing patent thus: "if reference is made to the specification for a disclosure that enables the skilled man to construct a computer program to assist in the iterative technique claimed, or even enables him to carry it out manually, disappointment will be the result."
It is a requirement of patent law that a patent application must disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art. The sufficiency of a patent specification depends upon the nature of the invention and the attributes of the skilled person.
But Justice Pumfrey said he must guard against imposing too high a standard of disclosure simply because the subject matter is inherently complex. "The general use of computers in modern technologies raises particular problems, because the writing of anything other than a trivial program requires a substantial amount of effort in writing and debugging (programming's version of trial and error), even though much programming requires no creative thought and a competent programmer will be equipped with substantial experience in his area of expertise," he wrote. "When such a programmer forms part of the team which is the notional addressee of a computer-based invention, it is essential to form a view of his capabilities."
Smith argued that the patent required the development of a computer model to carry out the claimed method, "and the amount of effort required to develop such a model is clearly undue."
Justice Pumfrey was minded to agree, after examining what he termed a "formidable case on insufficiency". He confirmed the insufficiencies, but said these did not depend upon a close knowledge of the drilling industry or of the manufacture of drills. "They are, on the contrary," he wrote, "really objections based upon the difficulty of constructing a model given the data and other information made available by the specification."
He rejected Smith's next allegation, that the Force Balancing patent was obvious. It hinged on a design criterion of equalising downforces that Justice Pumfrey considered non-obvious, given that drill bits are not symmetrical structures.
He then had to consider whether the subject matter was patentable.
European patents are granted for inventions which are susceptible of industrial applications, which are new and which involve an inventive step. But schemes for performing mental acts and computer programs "as such" are among the exclusions from the scope of patentability.
Justice Pumfrey acknowledged the difficulty of applying this rule and mocked the simpler approach across the Atlantic. "In the United States, the problem has been solved by allowing just about everything to be patentable subject matter," he wrote. "While this solves the problem, it cannot be an answer, as anyone who has looked at some of the results will agree."
Of the UK position, he considered the law to be "clear, albeit difficult to apply: the contribution the inventor makes must lie in a technical effect, and not merely excluded subject matter."
He talked of the need for patent claims to be "tied down to the industrial activity" to succeed, for "the scope of the claim should be restricted to its technical field."
He criticised two of Halliburton's Force Balancing patent claims for being "directed purely to the intellectual content of a design process, and the criteria according to which decisions on the way to a design are made." He continued: "They are not limited in terms to a computer program, although no doubt are so limited as a matter of reality. They are thus firmly within the forbidden region as schemes for performing a mental act."
He found the claims bad because they were too broad; but he said that problem could be fixed by amendment, noting that the method "has potential technical effect" and that the flaw is in the form of the claim, not the substance of the invention.
His concerns with the Orientation patent were similar. "Everything is lacking," he wrote, observing that the specification "raises the immediate question of what the invention is actually for."
Concluding, Justice Pumfrey found both patents invalid because of insufficiency. But he said that both would probably have survived the attack of obviousness. On patentability, he wrote, "At present, both patents cover unpatentable subject matter, but I envisage that this defect could be cured by amendment, were it not for the insufficiency of the disclosure, which I do not believe can be cured in this way."
So Halliburton's patents fell. The claims described mental acts in the design process; but if they had been tied down to the industrial activity to which the intellectual process was applied, i.e. the production of drill bits using a computer program, then the inventions would have been valid subject matter for a patent.
A draft European Directive sought to clarify the patentability of computer-implemented inventions; but after three years of heated debate it was finally rejected by the European Parliament last month.
Vivien Gray, an intellectual property specialist with Pinsent Masons, the law firm behind OUT-LAW.COM, says the case highlights the confusion that will persist without clarification of our laws. "The European Directive had its problems; but the Commission's original intention – to clarify and harmonise the patent laws of Europe – was entirely understandable."
Gray continued: "This case serves as a good example of the confusion that's set to persist: patents can be granted for software-related inventions, but the rules are so difficult to apply that framing software-related patent applications can be a very difficult and uncertain exercise."
A lawyer for Halliburton indicated that the finding of insufficiency is likely to be the subject of an appeal.