Canada: Federal Court Holds "Business Methods" Patentable In Canada In Decision Over Amazon.Com "One Click" Patent

In a decision reminiscent of the recent In re Bilski decision in the U.S., the Federal Court of Canada has found that patents relating to "business methods" can constitute patentable subject matter in the highly anticipated decision of v. The Commissioner of Patents. In his decision dated October 14, 2010, the Honourable Mr. Justice Michael Phelan discusses differing laws and disparate judicial decisions respecting the patentability of "business method" patents across the globe, and is a necessary read for those wishing to implement a cogent global IP strategy.


The Invention, Inc. filed Canadian patent application no. 2,246,933 entitled, "Method and system for placing a purchase order via a communications network" (the "'933 application") on September 11, 1998. The '933 application sets out a method and system which allows a purchaser to place an order for items over the Internet. This method and system of conducting Internet commerce differs from that known in the art.

In the known system, a server computer may provide an electronic version of a catalogue that lists available items. A potential purchaser may browse through the catalogue using a browser and select various items that are to be purchased. This selection is generally based on the "shopping cart" model – when the purchaser selects an item, the server metaphorically adds that item to a shopping cart. When the purchaser is done selecting items, all the items in the shopping cart are "checked out", and the server computer system then prompts the user for information to complete the order, including, for instance, the purchaser's name, credit card number, and shipping address. The server then typically confirms the order by sending a confirming Web page to the purchaser computer system and schedules shipment of the items. Although intuitive, this shopping cart model has a downside in that it requires many interactions by the purchaser. The overhead of confirming the various steps of the ordering process and waiting for, viewing, and updating the purchaser-specific order information can be cumbersome. Also, each time an order is placed, sensitive information is transmitted over the Internet and is susceptible to being intercepted and decrypted.

In the '933 application, however, provides a method and system for single-action ordering of items in a client/server environment that reduces both the number of purchaser interactions needed to place an order and the amount of sensitive information that is transmitted. In particular, the server system uses a client identifier sent from the purchaser's computer to associate the purchaser's computer with the purchaser's payment and shipment information (purchaser-specific account information). The server stores the client identifier in the purchaser's computer in a "cookie" when the purchaser enters his identification, billing and shipping information (purchaser-specific account information), usually at the time of the purchaser's first visit. On a subsequent visit to the Web site by the purchaser's computer, the server recognizes the client identifier in the "cookie" as belonging to that purchaser. The purchaser may then browse items, and decide to buy an item by clicking on only one button which sends the request to order the item along with the client identifier. The effect of this single-action is to instantly order the item. The server system will receive the purchase request, automatically retrieve the purchaser's account information (which is now stored in the vendor's computer system) using the client identifier, and combine the retrieved account information to generate the order. Only one click of the purchaser's mouse is required. The order is made without the need to "check out" or enter any more information, and as such, no sensitive information is transmitted via the Internet.

The Decision of the Examiner and the Patent Appeal Board

The patent examiner at the Canadian Intellectual Property Office ("CIPO") rejected the application for being an obvious ordering method and system. The examiner also alleged that the subject matter of the claims was directed to non-patentable subject matter under section 2 of the Patent Act,R.S.C. 1985, c. P-4, on the basis that the essence of the claimed invention did not fall into one of the categories of "invention" ("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").

Having been rejected by the examiner, the '933 application was considered by the Patent Appeal Board and the Commissioner of Patents and a decision was rendered on March 5, 2009 (Decision no. 1290). The Board concluded that the prior art did not disclose performing a single action to instantly order an item as set out in the claims. They also found there was no suggestion in the prior art to modify a subscription-based shopping model such that with one-click, an identifier (cookie) is sent in conjunction with the product ordering information, thus retrieving purchaser-specific account information, so that the order is instantly placed. According to the Board, "The advantages of such a streamlined ordering process pointed to by the Applicant are indicative of some ingenuity (or inventive step)." As a result, the Board disagreed with the examiner and found that the skilled technician would not have been led directly and without difficulty to conceive of what had been claimed in the '933 application, i.e. it was not obvious.

The Board, however, agreed with the examiner that the invention was directed to non-statutory subject matter on the basis that the substance of the claimed invention was not technical in nature. According to the Board, "where the claimed invention, in form or in substance, is neither a physical object (a machine, manufacture or composition of matter) nor an act or series of acts performed by some physical agent upon some physical object to produce in that object some change of either character or condition (art or process), it is not patentable ... certain types of subject matter are excluded from patentability in Canada. A claimed invention which in form or in substance amounts to a business method is excluded from patentability." For this broad statement excluding business methods from patentability, the Board relied upon a statement made in obiter by a Justice of the Supreme Court of Canada in reasons dissenting in part from those of the majority in the case of Monsanto Canada Inc. v. Schmeiser, at paragraph 133. This was a noteworthy stance for the Board to take given that the previous Manual of Patent Office Practice (MOPOP) had stated that business methods were not "automatically excluded from patentability". The Board also relied upon statements made by the U.S. Court of Appeals for the Federal Circuit (CAFC) in In re Bilski, 88 USPQ 2d 1385 and decisions in the U.K. to support its position.

The Decision of the Federal Court of Canada

Adoption of International Principles

Justice Phelan noted that this case highlighted the challenges in looking to foreign case law or international legal principles to assist in interpreting the Canadian patent regime: "In an area of the law where advancing human ingenuity often creates novel legal questions to which there may be no immediate answer in Canadian jurisprudence, it can be useful to look to other regimes. However, this must be done mindfully. Despite the international conventions and principles of reciprocity, regimes can be fundamentally different. Something which may be patentable in one country, will not be here, or vice-versa. Also, it may be patentable for an entirely different reason. While international jurisprudence can provide guidance, these cases and the particular Canadian context of the question before the Court (i.e. what is patentable subject matter) must correspond to Canadian law. Some jurisdictions will be more applicable than others given the history, language and prior interpretation of their patent legislation."

His Honour noted, for instance, that under the English and European systems which implement the European Patent Convention ("EPC"), there is no definition of "invention", but instead a series of exclusions. In this respect, Article 52(2)(c) of the EPC specifically states that, "schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers" shall not be regarded as inventions. In addition, a review of U.K. case law revealed that the exclusions in the U.K. and European regimes are largely concerned with policy. In Canada, on the other hand, the Commissioner of Patents has no discretion to refuse a patent on the basis of public policy considerations independent of any express provision in the Act – the Commissioner has to justify any refusal. International jurisprudence is therefore "at most a potential guide when applied correctly and mindfully" in Canada.

Definition of "art" and "process"

Justice Phelan noted that in Canada it is generally accepted that "method" and "process" are the same thing and that "art" may include either. There are three important elements in the test for "art": i) it must not be a disembodied idea but have a method of practical application; ii) it must be a new and inventive method of applying skill and knowledge; and iii) it must have a commercially useful result. The practical application requirement ensures that something which is a mere idea or discovery is not patented – it must be concrete and tangible. This requires some sort of manifestation or effect or change of character. However, Justice Phelan noted that it is important to remain focussed on the requirement for practical application rather than merely the physicality of the invention. One must not "restrict the patentability of practical applications which might, in light of today's technology, consist of a slightly less conventional 'change in character' or effect that [is] through a machine such as a computer." While not everything under the sun is patentable, the definition of "invention" in the Patent Act is broad and encompasses "unforeseen and unanticipated technology".

Application to the '933 Application

The Court found that a purposive construction of the "system claims" at issue clearly disclosed a machine which is used to implement's one-click ordering system. The described components were found to be essential elements in implementing the on-line ordering process, and not merely a "mathematical formula" which could be carried on without a machine or simply a computer system. A machine as such is patentable under s. 2 of the Patent Act.

As to the process claims at issue, the Court found they claim an invention which uses stored information and "cookies" to enable customers to order items over the internet simply by clicking on them. This novel on-line ordering system added to the state of knowledge in this area. As noted by Justice Phelan:

The new learning or knowledge is not simply a scheme, plan or disembodied idea; it is a practical application of the one-click concept, put into action through the use of cookies, computers, the internet and the customer's own action. Tangibility is not an issue. The "physical effect", transformation or change of character resides in the customer manipulating their computer and creating an order. It matters not that the "goods" ordered are not physically changed.
It is undisputed that this invention has a commercially applicable result and is concerned with trade, industry and commerce. Indeed, its utilization in this very realm seems to be at the root of the Commissioner's concern.

In view of the foregoing, Justice Phelan also found the process claims to be patentable as an art or process. The Court therefore found that the '933 application disclosed patentable subject-matter, contrary to the decision of the Commissioner of Patents. His Honour, however, would not grant a patent as requested by since the Court was not asked to assess the validity of the claims in other respects. As such, the decision of the Commissioner of Patents was quashed and the application was sent back for expedited re-examination.

As an important aside, it is interesting to point out that Justice Phelan also made the following comments in obiter:

There may be (and the Court is not suggesting that there are) other reasons why the Commissioner might have rejected this patent. One might question the sufficiency of disclosure in the system claims but no one has claimed that it was insufficient. That matter was not considered by the Commissioner.

Subsection 27(3) of the Patent Act states that the specification of an invention must: (a) correctly and fully describe the invention and its operation or use as contemplated by the inventor; (b) set out clearly the various steps in a process, or the method of constructing, making, compounding or using a machine, manufacture or composition of matter, in such full, clear, concise and exact terms as to enable any person skilled in the art or science to which it pertains, or with which it is most closely connected, to make, construct, compound or use it; (c) in the case of a machine, explain the principle of the machine and the best mode in which the inventor has contemplated the application of that principle; and (d) in the case of a process, explain the necessary sequence, if any, of the various steps, so as to distinguish the invention from other inventions. In accordance with section 84 of the Patent Rules, the claims must be clear and concise and must be fully supported by the description independently of any document referred to in the description. As such, a person skilled in the art must be able to understand, in view of the specification alone when read in light of their common general knowledge, what the invention is, what it does, and how to make it work.

According to the MOPOP, if the desired result requires a novel and unobvious application of hardware or software, a greater level of detail regarding how this result is to be achieved is necessary. Computer-implemented inventions are often described in terms of a flow chart that illustrates the algorithm or logic tree on which the operation of the invention is based. Where the algorithm or logic performed by the computer lies at the heart of the invention, a full description of the algorithm or logic tree must be provided. Moreover, in order for the person skilled in the art to be able to put each step in the flow chart into operation, the description must be enabling. That is, the person skilled in the art must be able to do this without recourse to inventive ingenuity or undue experimentation. The description must therefore provide any information necessary to enable the algorithm to be practiced. As stated in MOPOP, "Where very little explanation is given regarding how a step in a method is to be implemented by a computer, this will generally be understood as an indication that the applicant, rightly or wrongly, does not consider the implementation of that step to require inventive effort on the part of the person skilled in the art."

Unfortunately, patent applications regarding computer-implemented inventions are all too often bereft of sufficient disclosure and therefore open to attack. Applications for computer-implemented inventions should be drafted with a sufficiently detailed description of the hardware, program modules, and data structures involved, along with flow charts describing the algorithms or computer logic used to implement the invention. If you are wishing to implement a cogent global IP strategy with respect to computer-implemented business method patents, one must be concerned not only with patentability of the subject matter in various jurisdictions, but also with whether the application provides a sufficiently enabling disclosure.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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