On October 14, 2010, the law on the patentability of business methods in Canada was clarified by the Federal Court of Canada in the release of its decision, Amazon.com, Inc. v. The Commissioner of Patents. The Federal Court held that business methods were patentable under appropriate circumstances. The Court also clarified the legal principles applicable in the determination of patentable subject matter under Section 2 of the Canadian Patent Act. While the Commissioner of Patents has elected to appeal the decision, the Federal Court has provided a sound legal framework founded in Canadian jurisprudence that is applicable to patent protection of business methods.
Background
Amazon.com sought patent protection for an invention entitled, "Method and System for Placing a Purchase Order Via a Communication Network". The invention comprised the underlying technology for Amazon's well known one-click online ordering process. The Canadian patent application was filed on September 11, 1998, and claimed convention priority from two United States patent applications, and now issued under US Patent No. 5,960,411.
The Canadian Patent Office issued a final action in 2004 rejecting the claims in the application as being directed to non-statutory subject matter and being obvious in view of the prior art. The Applicant appealed the final rejection to the Patent Appeal Board (PAB). On March 5, 2009, the Commissioner of Patents reversed the obviousness rejection but upheld the non-statutory subject matter rejection in PAB Decision No. 1290. In the PAB decision, the Commissioner applied a form/substance test for determining patentable subject matter based largely on a reinterpretation of existing Canadian legal principles and with heavy reliance on foreign jurisprudence, particularly from the UK and Europe.
The Commissioner of Patent's decision was appealed by Amazon.com to the Federal Court of Canada and heard on April 19, 2010.
The Decision
In its decision, the Federal Court clarified and rejected outright a number of assertions and conclusions advanced by the Commissioner of Patents in the PAB decision.
The Court took exception to the Commissioner's application and heavy reliance on foreign jurisprudence. The Court found that the Commissioner erred in applying UK and European jurisprudence, which is fundamentally different from the Canadian patent system. The Court stated that the Commissioner is bound, without discretion, by Canadian jurisprudence and its interpretation by the courts.
The Court found that there was no basis for the Commissioner's assertion that business methods should be excluded from patentability under Canadian jurisprudence. The Court stated that business method inventions are to be assessed pursuant to Section 2 and the provisions of the Patent Act.
The Court rejected outright the Commissioner's form and substance analysis. According to the Commissioner, form is assessed by determining whether the claim fits into one of the five categories of subject matter set forth in Section 2 of the Patent Act. The substance is assessed by parsing the claim into novel elements and non-novel elements, and then determining if the novel elements (i.e., what has been discovered) falls into one of the five categories under Section 2. The Court found that it was an error in law to dissect a claim into old and new elements and then ignore the old elements in the determination of patentable subject matter. The Court stated that the principles of purposive construction were to be applied according to the Supreme Court of Canada in Free World Trust and Whirlpool.
The Court further rejected the requirements advanced by the Commissioner that in order to be patentable the subject matter must be scientific or technological in nature, and cause a change in character or condition of a physical object.
The Court also rejected the Commissioner's definition of art as being overly restrictive. The Court followed the decision of the Supreme Court in Shell Oil and re-affirmed the broader definition for art set forth in Progressive Games. According to Progressive, an art (i) must not be a disembodied idea but have a method of practical application; (ii) must be a new and innovative method of applying skill and knowledge; and (iii) must have a commercially useful result.
Following these principles, the Court found that method claim 1 and system claim 44 constituted statutory subject matter. System claim 44 was directed to a machine configured to implement the one-click ordering process and did not merely constitute a mathematical algorithm that could be carried out without a machine or computer. Method claim 1 met the requirements of an art under Section 2 as set forth in Progressive Games, namely, the one-click process was new, had practical application through the use of computers, cookies, the Internet and the customer's own actions, and had a commercially applicable result.
The Court ordered Amazon.com's application back to the Commissioner of Patents for expedited examination.
Conclusion
Notwithstanding the appeal1 lodged by the Commissioner of Patents, the Federal Court decision in Amazon.com greatly clarify the law with respect to the patentability of business methods under the current legal regime in Canada. The decision further provides a useful legal framework for applicants seeking patent protection for business method based inventions.
Footnotes
1. The Commissioner of Patents filed an appeal to the Federal Court of Appeal on November 15, 2010. The hearing of the appeal is expected this Spring, with a decision expected the latter part of 2011.
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