Canada: USPTO Clarifies Criteria for Patentable Subject Matter

Two developments in the United States may mean that it will be easier to patent business methods, software and similar types of inventions. In Ex parte Lundgren, the U.S. Patent and Trademark Office Board of Patent Appeals and Interferences ruled that U.S. law does not require that an invention meet a "technological arts" criterion in order to be patented. USPTO then released a set of interim guidelines for USPTO examiners to use in evaluating inventions. The guidelines require that an invention accomplish a "practical application" in order to be patentable. These developments appear to broaden the scope of patentable subject matter, although the subject matter must still meet the stringent "novelty" and "obviousness" standards in the United States.

In Ex parte Lundgren, the Board of Patent Appeals considered an application for a method of calculating managerial compensation meant to reduce incentives for collusion within an industry. Because the method was not limited to computer or other machine implementations, the examiner had rejected it as "an economic theory expressed as a mathematical algorithm without the disclosure or suggestion of computer, automated means, or an apparatus of any kind." According to the examiner, both the invention and the practical application to which it was directed were "outside the technological arts." The Board, however, reversed the examiner’s rejection. The majority determined that U.S. law includes no technological arts criterion for patentability, and declined to create such a test. As the technological arts requirement was the only ground the examiner entered in this appeal, his rejection could not be sustained.

The guidelines prescribe a multistep process for determining whether an invention is patentable. The first step is to establish whether or not an invention falls within the defined statutory categories—namely, machines, manufactures, compositions of matter or processes. If not (as, for example, a musical composition, literary work or legal document), the guidelines prescribe that the invention is not patentable.

The guidelines further specify that an invention that is within a statutory category must also avoid several judge-made exceptions to patentability, such as laws of nature, natural phenomena and abstract ideas. To be patentable, an invention that falls within any of these exceptions must be directed toward a "practical application" of the law, of a phenomenon or of an idea. This means that the invention must either (a) transform an article or a physical object into a different state or thing; or (b) otherwise produce a useful, concrete and tangible result. The guidelines specifically refer to Lundgren and other decisions, and advise that USPTO personnel should no longer rely on technological arts in making patentability determinations.

The final consideration, according to the guidelines, is whether the claimed invention preempts any abstract idea, law of nature or natural phenomenon. Even if an invention represents a practical application of an abstract idea, etc., it is not patentable if it encompasses every substantial practical application of that idea and hence, in effect, amounts to a patent on the idea itself. For example, a computer that "solely calculates a mathematical formula" or a computer disk that "solely stores a mathematical formula" would not be considered patentable. However, an invention that produces a useful, concrete and tangible result (such as transforming data into a share price, or into a signal representing a patient’s heart condition or into a form useful for illuminating a display) would be patentable.

Together, Lundgren and the guidelines may represent a loosening in the requirements for patentability in business methods, software and other areas. The effect of these developments is that examiners may no longer rely on technological arts or other requirements in rejecting patent applications. As long as an invention produces a useful, concrete and tangible result, the subject matter of the invention should be patentable.

Neither the Board decision nor the guidelines are legal decisions of, or binding on, the courts; they represent the way the USPTO intends to review patent applications. Indeed, the United States Supreme Court has recently agreed to hear Metabolite Labs v. LabCorp, a case that could be construed as covering the patentability of mental processes performed by an examining physician. A ruling in this case might affect the positions taken in Lundgren and the guidelines. Members of the financial services community, including American Express, are preparing briefs arguing that the case has no relevance to the patentability of business methods. It must also be remembered that many jurisdictions other than the United States, including Canada,¹ Europe and Japan, still require an invention to include some type of technical aspect or step to be patentable.

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