Business methods patentable in Canada according to Federal Court of Appeal

Author: Emir Crowne (Associate Professor, Faculty of Law, University of Windsor)

Commissioner of Patents v Amazon.com Inc., 2011 FCA 328, 24 November 2011

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps006, first published online: January 30, 2012

The Canadian Federal Court of Appeal has held that business methods, when properly construed, can constitute patentable subject matter.

Legal context

Section 2 of the Canadian Patent Act, R.S.C. 1985, c. P-4 defines an ‘invention’ as

any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture or composition of matter.

Any invention under the Act must therefore fit within one of these five categories (or be an improvement of one of those five categories).

The only statutory exclusion found in the Act is sub-section 27(8), which provides that:

No patent shall be granted for any mere scientific principle or abstract theorem.

Facts

On 11 September 1998, Amazon.com filed an application for a ‘Method and System for Placing a Purchase Order via a Communications Network’. It claimed priority over two earlier US applications. The applicant sought a patent for a system of placing orders online using one click (commonly referred to as the ‘one-click patent’). Customers were identified using cookies that were stored locally on their computers; these identifiers were then used to obtain the customer's pre-recorded information from Amazon.com's database.

The Patent Examiner rejected the application, stating that all claims (1 through 75) were either obvious or directed towards non-statutory subject matter. The Patent Appeal Board recommended that the Examiner's findings on obviousness be overturned, but that the application still be denied on the grounds of subject matter eligibility. As is common practice, the Commissioner of Patents accepted those findings wholesale, and imported them into her decision verbatim [Re Kaphan Patent Application No. 2,246,933, 2009 LNCPAT 2; for a detailed discussion of the Commissioner's decision, see Crowne-Mohammed, E., ‘Canadian Patent Appeal Board denies Amazon.com's one-click patent application’, Journal of Intellectual Property Law & Practice, (2010) 5 (1): 5–8].

On appeal to the Federal Court (Amazon.com Inc. v Commissioner of Patents, 2010 FC 1011), Justice Phelan overturned the decision of the Commissioner, holding that business methods could constitute patentable subject matter [for a detailed discussion of the Federal Court's decision, see Crowne, E. and Arman, V., ‘Business methods patentable in Canada according to Federal Court’, Journal of Intellectual Property Law & Practice, (2011) 6 (2): 67–69].

Analysis

At the outset of its decision, the Federal Court of Appeal declared that the lower court's ‘directions amount[ed] to an order to the Commissioner to grant the patent’ (ibid., para 1). Instead, the Federal Court of Appeal held that a purposive construction of the claims at issue (which was a task for the Commissioner alone) might yield patentability. At para 63, which I have parsed into three elements for convenience, the court held that:

It is arguable that the patent claims in issue in this case could fail on the same reasoning, depending upon whether a purposive construction of the claims in issue leads to the conclusion that Schlumberger [denying the patentability of a computer and underlying mathematical formula used to interpret certain measurements obtained when drilling boreholes] cannot be distinguished because the only inventive aspect of the claimed invention is the algorithm—a mathematical formula—that is programmed into the computer to cause it to take the necessary steps to accomplish a one-click online purchase. 

On the other hand, it is also arguable that a purposive construction of the claims may lead to the conclusion that Schlumberger is distinguishable because a new one-click method of completing an online purchase is not the whole invention but only one of a number of essential elements in a novel combination. 

In my view, the task of purposive construction of the claims in this case should be undertaken anew by the Commissioner, with a mind open to the possibility that a novel business method may be an essential element of a valid patent claim (emphasis added).

The Commissioner's view in Re Kaphan Patent Application that patentable subject matter must be ‘scientific’ or ‘technological’ in nature was also expressly disapproved of by the Federal Court of Appeal. Justice Sharlow, writing for a unanimous court, found this requirement vague, highly subjective, and unpredictable. According to her, ‘this test should not be used as a stand-alone basis for distinguishing patentable from non-patentable subject matter’ (para 57). If, according to the court, the Commissioner's adoption of these terms was merely a convenient way to exclude things like fine art or works of art from patentable subject matter then that ‘point could have been made more plainly’ (para 58). In fact, earlier in her judgment at para 53, Justice Sharlow warned about straying too far from jurisprudential principles when speaking about patentable subject matter; she astutely warned that ‘[c]atch phrases, tag words and generalizations can take on a life of their own, diverting attention from the governing principles’.

Practical significance

Any refusal to grant a patent on subject matter eligibility grounds must be grounded in the Patent Act. The subject matter must fall outside the definition of invention set out in section 2 (or be excluded by sub-section 27(8)). At para 60, the Federal Court of Appeal rightly noted that ‘no Canadian jurisprudence determines conclusively that a business method cannot be patentable subject matter’. Their decision seemingly continues this tradition by recognizing that a business method may indeed be an essential element of a valid patent claim.