A second Australian Patent Office decision applying the updated examination guidance for computer-implemented inventions following the recent Aristocrat1 decision provides further insight into when a computerised system will be considered to work in an “altered or improved manner”.
In Kyro Card Capital Pty Ltd [2026] APO 31 (“Kyro Card Capital”), the Patent Office considered a payment processing system combining product-scanning, payment and reward-processing functionality. Despite involving physical components of an EFTPOS terminal, optical scanner and reward scheme server interface, and (in amended claims) one-way hashing of card information, most claims were found not to define patentable subject matter. The remaining claims, which required Payment Card Industry (PCI) compliance, were remitted for further examination because it was unclear whether they lacked patentable subject matter or failed to meet the written description or utility requirements.2
The decision follows CQMS Pty Ltd v Joy Global Surface Mining Inc [2026] APO 19 (“CQMS”), the first published Patent Office decision applying the updated framework following Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents [2025] FCAFC 131. We reported on this decision here.
Taken together, the decisions show that physical components and their functional interdependence in a claim is relevant, but not decisive. An additional consideration is whether the invention results in an altered or improved product beyond merely enabling it to perform a mere scheme or plan.
The technologies – wear detection device versus payment processing and rewards
CQMS concerned predicting when components of heavy mining machinery should be replaced. One claim was characterised as a “computerised decision matrix” that generated a replacement recommendation based on wear and cost considerations. The computer was essentially being used to perform a decision-making exercise, and the claim was found not to define patentable subject matter.
Another claim required a wear detection device that collected data representing the current dimension of a physical component. The evidence did not establish that such a wear detection device was part of the common general knowledge. That claim was found patentable due to the sensor interoperation with the software providing altered functionality for detecting the current dimension of a physical component.
Kyro Card Capital concerned a payment processing system implementing a product purchase reward scheme without relying on access to a retailer’s existing point-of-sale (POS) system. An EFTPOS terminal stored product identifiers and prices, received product identifiers from an optical scanner, displayed scanned products, initiated card payment and transmitted transaction data to a reward scheme server.
The amended claims added more detailed reward and refund functionality, including one-way hashing of the primary account number (PAN) used for payment.
When is a system altered in a patentable way?
A consideration arising from the Aristocrat decision is whether there is an altered product (or process) involving an artificial state of affairs and a useful result. In that case, interdependence between a player interface and a game controller that includes feature games and configurable symbols resulted in an altered gaming machine, supporting a finding of patentable subject matter.3
The claimed payment system in Kyro Card Capital involved significant interaction between components, including the EFTPOS terminal, scanner, server, memory, display and card reader. However, the Delegate found that “The payment processing system is not working differently or better in a general sense, as opposed to simply executing a new reward scheme. It follows that the implementation of the payment processing system including POS features and reward server features does not lead to an altered or improved payment system.”
Whether the computerised product or system works differently or better ‘in a general sense’ is an important factor under the updated examination guidance and a positive answer to that is an indicator of patentability. On the flip side, an invention whose contribution lies in executing functions that cause participation in an otherwise-unpatentable scheme is likely not patentable subject matter. Functional interdependence between claim features is not itself sufficient. The addition of reward scheme functionality was found not to alter the payment system as a product generally; it merely gave the system a new scheme to execute.
Consideration of a technical benefit
The use of hashing in the invention considered in Kyro Card Capital provides an interesting example of when an invention with a technical benefit may not constitute patentable subject matter.
The Delegate accepted that the claimed use of hashing improved the security and privacy of PANs. Despite this, the Delegate found that “making use of hashing techniques to secure PANs is not improving or altering the general computer technology present in the claim generally in terms of its inherent functions”4.
In Aristocrat, it was held that 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 patentable subject matter. A key aspect of the Delegate’s reasoning therefore appears to be whether the claimed product or system was improved or altered “generally in terms of its inherent functions”.
The Delegate accepted the security benefit but treated it as an inherent consequence of a known technique applied to what was fundamentally an administrative step, namely comparing hashes to verify that the same card was used.5 Accordingly, using a known technical measure for its known technical benefit may be insufficient when, viewed as a whole, it is simply part of implementing an otherwise-unpatentable scheme. The treatment of hashing also gives an example of what is meant by an alteration or improvement in a general sense, suggesting a focus on whether the inherent operation of the relevant product or system is altered.
Looking forward
Read together, the decisions show two sides of the updated framework. CQMS demonstrates how physical components and software may interact to produce an altered system that is patentable. Kyro Card Capital demonstrates that interdependence between physical and computerised components is not enough where they perform their conventional functions to execute a new scheme that is an add-on to the general and inherent functionality of the product.
It is still early days following the Aristocrat decision. Further decisions from the Australian Patent Office are expected over the next few months, as many cases were deferred pending the Aristocrat decision. These will continue to elucidate the approach of the Patent Office and at some point a case will return to the court, providing further guidance on how to distinguish between an abstract idea manipulated on a computer (not patentable subject matter), and an abstract idea implemented on a computer to produce an artificial state of affairs and a useful result (patentable subject matter).
1 Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents [2025] FCAFC 131
2 Kyro Card Capital at paragraphs 189–190
3 See e.g. Aristocrat, paragraph 82
4 Kyro Card Capital at paragraph 158
5 Kyro Card Capital at paragraphs 164–165
