Business Method Patents In Canada- the Amazon case

On October 14, 2010, the Federal Court of Canada released its highly anticipated decision in Amazon.com, Inc. v. Canada (Attorney General)(1) quashing the rejection by the Commissioner of Patents (the “Commissioner”) of the Amazon.com ‘one-click’ patent.  In doing so, the Federal Court found that there is no categorical exclusion in Canadian law for business method patents; that computer-implemented inventions that achieve “commercially applicable results” are generally patentable if there is some “transformation or change of character”; and that the Commissioner, in attempting to implement policy through application of a “novel legal test” without the support of the Patent Act or Canadian jurisprudence, had committed an error of law “far outside the Commissioner’s jurisdiction.” 

This decision was appealed by the Patent Office to the Federal Court of Appeal which heard argument on the matter on June 21, 2011.  A decision by this court is expected shortly.  In the meantime, the Canadian Intellectual Property Office has not issued revised guidelines following the trial decision and it is not clear that it has yet revised its prior policy of rejecting business method patents.  However anecdotally it appears that the patent office has been rejecting such applications primarily on novelty or obviousness grounds..

Background

The patent application at issue claimed a method and a system for internet shopping.  The method claims and the system claims were virtually identical.  The steps described in the method were simply converted in the system claim to unspecified components for performing the method.  In the system and method described, a customer enters payment information upon visiting a website.  The website stores the information and gives the customer a unique identifier linked to that information, generally in the form of an electronic “cookie”.  When a customer places an order for a product by a single mouse click, the website uses the customer’s identifier to retrieve payment information and creates the order without requiring the customer to log in or input any additional payment information..

The Commissioner’s Errors

The Commissioner rejected both the method and system claims on the basis that they did not claim an invention as defined in section 2 of the Patent Act(2) (the “Act”).

The Trial Court held that the Commissioner had misapplied foreign and Canadian jurisprudence leading to a number of specific errors in her analysis.

Firstly, the Court found that the Commissioner departed from the basic principles of purposive claim construction by looking past the language of the claims to the “substance” of the claimed invention.  She found that the system claims, which on their face claimed patentable subject matter, a machine, “in substance” claimed non-patentable subject matter, namely a business method. Further, the Court found that the Commissioner erred by parsing the claims into individual elements and determining the issue of patentable subject matter with reference only to those elements she found novel, rather than the claimed invention as a whole.  All of the essential elements when purposively construed must be considered but it is not wrong to exclude non-essential elements.

In its analysis of the system claims however, the Court made no attempt to determine whether the system or computer used to implement the invention was essential or not.  This left questions as to whether the simple addition of a computer to run a method on a general purpose machine is enough to prevent such claim from being considered unpatentable subject matter.

Secondly, the Court found that the Commissioner adopted a restrictive definition of ‘art’ that relied too heavily on the physicality of an invention.  The Court found that while ‘art’ requires a practical application - some sort of manifestation, effect or change of character - this definition should not be overly restrictive or limited to the conventional understanding of a practical application in light of today’s technology.

In considering the definition of “art” the Court applied a Supreme Court case Shell Oil Co. of Canada v. Canada (Commissioner of Patents)(3) which had concerned the new use of a known substance, namely a plant innoculant and obiter comments made therein.

Again however in this discussion the Court was extremely vague about the level of physicality that would be required to make the invention patentable subject matter.  The Court ruled that there must be some manifestation or effect or change of character, and seemed to accept that this change in character can be effected through simply manipulating a machine.  This seems to open the door to allow patenting of processes that simply manipulate data in a general purpose computer.  In considering the Amazon claim, the Court found the “physical effect, transformation or change of character” in the customer manipulating their computer by creating an order.

Thirdly, with reference to the Supreme Court’s decision in the Harvard College v. Canada (Commissioner of Patents)(4),  the Court rejected the Commissioner’s reading of Harvard Mouse which the Commissioner had interpreted as a caution not to expand the categories of patentable subject matter.

Fourthly, the Court found that the Commissioner erred in finding that there has been a “tradition” in Canada to exclude business methods from patentability.  The Court found that referring to a claimed invention as a business method does not alter the applicable legal approach or analysis; nor does it call for a categorical rejection of the claimed invention as patentable subject matter.  On appeal the Commissioner has no longer argued that business methods are not patentable per se.

Lastly, the Court found that the Commissioner erred in determining that an invention must be technological or scientific in nature.  The Court found that no such requirement exists under Canadian law.  On appeal the Commissioner has continued to maintain that there should be a “technological” exclusion.

The Federal Trial Court’s de novo Analysis of the Patent

The Trial Court found that the process claims were patentable subject matter as an art and process, and that the system claims were patentable subject matter as machines.  In the Court’s view the claimed invention was not merely a scheme but was the practical application of the one-click concept put into action to achieve an undisputed commercially applicable result.  The Court found that physicality resided in the customer manipulating their computer and creating an order.  However in so doing the Trial Court gave no consideration as to whether the computer was adding anything of substance to the method claimed and did not address any of the concerns that have bothered U.S. courts as to whether there would be inappropriate “pre-emption” of a mental process.

Conclusion

This decision, if it stands on appeal, would seem to allow a class of business methods and abstract processes considerably broader than allowed currently in the United States.  Claims for business methods are patentable where they have some practical application, embodiment or link to hardware where such hardware is one of the essential elements of the claim purposively construed.  Arguably, only if a claimed invention can be described merely as a scheme, plan, or disembodied idea not put into action, will  the claimed invention not be considered patentable subject matter.

In the final result, the Trial Court found that the Commissioner had erred in finding that the claimed invention was not patentable subject matter and remitted the application for an expedited re-examination on other issues of patentability that were not raised at court.  The Court of Appeal is expected to rule on this matter shortly, so stay tuned.

Brian Gray is a senior partner in the Intellectual Property Department of Norton Rose Canada LLP and practices in Toronto.  Mr. Gray’s practice focuses on litigation and dispute resolution  in patent, copyright, trade-mark and advertising matters.  He counsels clients with patent and trade-mark portfolios and is involved in resolving patent, trade-mark and copyright disputes.

Mr. Gray is a former chair of the International Bar Association’s Intellectual Property Committee. He has taught patent and trade-mark law at the University of Toronto and has taught copyright law at McGill University.

Mr. Gray received his LLB from the University of Toronto, and his MA (Government) and his BA (Chemistry and History) from Cornell University.  Brian can be contacted on +1 416 216 1905 or by email at brian.gray@nortonrose.com