Patents

Canadian Court Concludes That Business Methods Can Be Patented

Matthew Powell
Published November 16th, 2010

In an October 14, 2010 ruling in the case of Amazon.com Inc. v. Canada (Commissioner of Patents) 2010 FC 1011, the Federal Court of Canada confirmed that an invention by Amazon.com Inc. (“Amazon”) of a “one-click” Internet ordering system and process is patentable under Canadian law. In its ruling, the Court quashed the Commissioner’s form/substance approach to assessing the patentability of claimed subject matter, and cleared the way for business method patenting in Canada. While the Commissioner has now lodged notice that the decision will be appealed, the Court’s decision remains useful to Applicants for having effectively framed the issues for the ongoing debate.

Background

Amazon filed Canadian Patent Application No. 2,246,933 in September 1998, and the Examiner issued a final office action in June of 2004 rejecting claims 1 to 75 under Sections 2 and 28.3 of the Canadian Patent Act for being directed to non-patentable subject matter and for being obvious, respectively. The case was referred to the Canadian Patent Appeal Board (“CPAB”), which held Hearings both in 2005 and in 2008. On March 5 2009, Commissioner’s Decision No. 1290 was issued by the Commissioner of Patents at the recommendation of the CPAB, reversing the obviousness rejection and upholding the non-patentable subject matter rejection.

Non-patentable subject matter rejections had been encountered for years by those pursuing patents at the Canadian Intellectual Property Office (“CIPO”), particularly in the computer and business-process fields. Examiners supported the rejections with assertions that business method and related system claims were directed to non-vendible subject matter, or did not produce an essentially economic result in relation to trade, commerce or industry. Commissioner’s Decision No. 1290 in the Amazon case established a form/substance approach to assessing whether claimed subject matter was patentable. The decision was seized on by Examiners, and the approach was used to reject claims in the computer, business-process, and even medical fields where Swiss-style (or “use”) claims were sought. Following the publication of the decision, CIPO moved to modify chapters in the CIPO’s Manual of Patent Office Practice (“MOPOP”) to adopt this form/substance approach.

Rejections based on the form/substance approach were difficult to deal with as this approach required both the form of a claim and its substance to fit into one of the five categories of invention (machine, process,… etc.) set out in Section 2 of the Canadian Patent Act. Assessing a claim’s form was conducted on a prima facie basis; assessing a claim’s substance was more involved and included distilling out of the claim that which was already known and considering whether only that which was considered new fell into one of the categories set out in Section 2. All too often, the “new” subject matter recited in business method and related system claims was found to be uncategorizable under Section 2.

The Court Decision

Fortunately, the Federal Court pointedly rejected the form/substance approach as unsupported by either recent Canadian jurisprudence or the Patent Act, stating that the Commissioner’s adoption of the form/substance approach was an error of law, and outside the Commissioner’s jurisdiction. The Court also reinforced its position by stating that, for the past 10 years, the Supreme Court of Canada has made it clear that claims are universally to be interpreted in a holistic, purposive manner and not to be parsed into their novel and non-novel components in order to evaluate patentability. Those familiar with the Bilski line of decisions in the United States will appreciate the Court’s clarification that in Canada, as in the U.S., it is inappropriate to dissect claims into old and new elements and then to ignore the presence of the old elements in an analysis.

The Federal Court also stated that “there is no exclusion for “business methods” which are otherwise patentable, nor is there a “technological” test in Canadian jurisprudence.”

Before quashing Commissioner’s Decision No. 1290 and ordering Amazon’s application back to the CIPO for expedited examination in a manner consistent with the Court’s reasons, the Court indicated that one may question the sufficiency of Amazon’s disclosure in respect of the system claims. Since non-patentable subject matter rejections had, even before the form/substance approach came into use, been occasionally underpinned by assertions that any purportedly novel implementing hardware or software is insufficiently described, Applicants may take the Court’s comment as a useful reminder to ensure all claimed subject matter is thoroughly described and supported by the specification and figures.

Notice of Appeal

The Commissioner has now lodged a notice of appeal of the Court’s decision for consideration by the Federal Court of Appeal. While the argument for the exclusion of business methods appears to have been abandoned, one of the Commissioner’s allegations is that rejection of the form/substance approach was an error in law. Some uncertainty is therefore bound to persist in the short term. Despite this, Applicants will at least be pleased that the debate as to how subject matter is to be assessed for patentability has been framed and raised out of the trenches of case-by-case patent prosecution.