Canada: Canadian Businesses Beware: Blessing of Business Patents in US Will Affect You

Computer and other business-related inventions are not per se unpatentable.1

That is the conclusion confirmed by United States Supreme Court in its widely-anticipated decision in the Bilski case.2 However, the long-simmering debate over the scope of patentability of "business methods," computer software, and other enterprise-related innovations remains unresolved, at least in the United States - which both directly and indirectly dominates the North American market.  The effects of Bilski and other cases will be felt north of the border in a number of ways.

Canadians and others who do business in the United States, or who do business with Americans via the Internet, regardless of location, are advised to revisit the effects of US patents on their customers and markets.  Those who seek patents in Canada - including those who do business solely in Canada - should be aware of the possible impact on Canadian patent law as well. 

Importantly, both offensive and defensive US patent strategies must be considered by Canadians.

Doing Business in the US

In the United States, there remains considerable doubt as to whether a broad range of enterprise-related innovation is protectable.  In Bilski, America's highest court did not rule out possible expansive interpretation of the categories of included subject matter.  Specifically, the court stated that the patent act "precludes the broad contention that the term 'process' categorically excludes business methods." The only exceptions to patentability, the Court stressed, are the exceptions of "laws of nature, physical phenomena, and abstract ideas."

While these three exceptions do impose limits on patentable subject matter in the US3, a very broad range of the types of innovation generally considered most valuable to businesses - computers, software, and other business-related inventions - remains patentable.  It is expected that U.S. courts and the Patent Office will continue to apply the machine or transformation test, but US courts, at both the appellate and Supreme Court levels, have persistently declined to find that computer or software implementations of business-related processes are not patentable.  In its lower-level review of the Bilski case, the US Court of Appeals for the Federal Circuit, which oversees patent cases in the US, commented that:

We... reject calls for categorical exclusions beyond those for fundamental principles already identified by the Supreme Court.  We rejected just such an exclusion in State Street, noting that the so-called "business method exception" was unlawful and that business method claims (and indeed all process claims) are "subject to the same legal requirements for patentability as applied to any other process or method." We reaffirm this conclusion...

Therefore... we decline to adopt a broad exclusion over software or any other such category of subject matter beyond the exclusion of claims drawn to fundamental principles set forth by the Supreme Court.4

These findings were echoed by the Supreme Court in its review of the case.  The future of computer- and other business-related patents in the US seems secure, at least with respect to those that can meet the machine or transformation test.

Doing Business with Americans via the Internet

Those who do business with Americans via the Internet should consider both offensive and defensive effects of US patents on their business, regardless of their location.  Taken together with decisions like that in the NTP case several years ago, the Bilski decision will ensure that US patents related to e-commerce, communications, and other types of networked or distributed processing continue to have impact far beyond the territorial limits of the United States.

The Effect on Canadian Patent Law

The Bilski decision may spill over into Canada in other ways as well: the Canadian Intellectual Property Office (CIPO) has been rejecting computer systems and other enterprise-related patent applications as "unpatentable subject matter."  While some patent applicants, as well as other observers, have questioned CIPO's decision to reject such applications as broadly as they have, CIPO has based its rationale partly on the lower-court US ruling in Bilski.5  Some observers are eager to see what effect the US Supreme Court's ruling in Bilski might have on CIPO's thinking - or that of the courts, as the Amazon One-Click6 case works its way through Canadian federal court system. 

* * * * * * * * * *

Canadians be warned: For most businesses, merged North American markets are inseparable. US patents will affect your business, even if based only in Canada. 

As a result of Bilski, the correct strategy for Canadian businesses continues to be to seek protection for software related inventions and processes in the US.


1. For additional details concerning the Bilski case, please link to our recent circular:

2. Bilski et al. v. Kappos, US Sup. Ct., Slip Opinion No. 08-964 (28 June 2010)

3. Indeed, in Bilski the Court affirmed the rejection of claims drawn very broadly toward the protection of methods of hedging risks in commodities markets.  The rejected claims, however, were so broad that they could have been infringed by individuals passing cash among amongst themselves in a living room.

4. In Re Bilski et al., US Court of Appeals for the Federal Circuit, Slip Opinion No. 2007-1130, at 21 and note 23.

5. See Respondent's Memorandum of Fact and Law in, Inc. v. Attorney General, Fed. Court file T-1476-09, at 27.  CIPO's reliance on Bilski has itself been questioned.

6. Fed. Court file T-1476-09.

About Ogilvy Renault

Ogilvy Renault LLP is a full-service law firm with close to 450 lawyers and patent and trade-mark agents practicing in the areas of business, litigation, intellectual property, and employment and labour. Ogilvy Renault has offices in Montréal, Ottawa, Québec, Toronto, Calgary and London (England), and serves some of the largest and most successful corporations in Canada and in more than 120 countries worldwide. Find out more at

Voted best law firm in Canada two years in a row.
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