Canada: Federal Court Of Appeal Provides Direction For Patentability Of Business Methods In Canada

Copyright 2011, Blake, Cassels & Graydon LLP

Originally published in Blakes Bulletin on Intellectual Property, November 2011

The Federal Court of Appeal (FCA) in, Inc. ("Amazon") v. The Commissioner of Patents has given clear directions on how to assess the patentability of innovations, including e-commerce innovations. While the FCA declined to determine the patentability of Amazon's "one-click" technique, it held that "there is no basis to determine conclusively that a business method should not be patentable subject matter."

The FCA clarified that it is the language of the claim that is important, rather than any underlying concept behind the invention. If the claim, which must be construed purposively rather than literally or by isolating claim elements, defines new, useful and non-obvious subject matter that falls within any of the categories provided in the statutory definition of "invention" – namely art, process, machine, manufacture or composition of matter – then the claim defines patentable subject matter. The exceptions to this are where the claim is directed to an abstract idea or scientific theorem, which are specifically excluded from protection by the Patent Act (the Act).

The FCA declined to require claimed subject matter to be "technological" in nature, stating that this term lacks clarity, but noted there is an implication in the Act that patentable subject matter exhibit "physicality". The FCA stated that the understanding of physicality may change because of advances in knowledge, and that the Commissioner must take this into account when applying tests such as "physicality".

The FCA ordered the Canadian Intellectual Property Office (CIPO) to examine once more Amazon's application in accordance with the directions provided in the decision.


In 1998, Amazon filed a patent application for its "one-click" e-commerce technique. The application gained a certain notoriety in the popular press by characterizing the invention as covering the online sale of goods using only one click. In fact, the claims considered by the FCA were directed to a client-server system organized in a way and exchanging data that enabled a previously registered online customer to make subsequent purchases with a single action by using a cookie stored on the customer's computer.

As reported in our October 2010 Blakes Bulletin: Back in Business – Canadian Federal Court Rejects Patent Office Prohibition of Business Method Patents, the Commissioner of Patents rejected all of the claims. On appeal, the Federal Court held that the Commissioner's reasoning comprised a "fundamental error in law" and ordered expedited examination with the direction that the claims constitute patentable subject matter and are to be assessed in a manner consistent with the decision.


Before examining the application again, the Commissioner appealed to the FCA. On behalf of the Commissioner, the Attorney General of Canada argued that whether a claimed invention falls within the statutory definition of "invention" requires the Commissioner to identify, independently of the construction of the patent claims, the "actual invention", and only then to determine whether this actual invention falls within one of the categories enumerated in the statutory definition. Amazon, on the other hand, argued that the claims must be construed purposively, since this is the construction the courts must apply to determine claim validity and infringement, and using a different approach would require a court to approach construction in multiple steps, and to reach different conclusions, depending on the issue to be decided.

The FCA rejected the Commissioner's position, and affirmed the Federal Court's decision that whether the claimed invention falls within the statutory definition of "invention" must be determined following a purposive construction of the claims. The FCA said that there is no basis to determine conclusively that a business method should not be patentable subject matter and that such methods must be evaluated for patentability in the same manner – by applying purposive construction – as any other invention.

During the examination, the Commissioner had devised a three-part test to determine patentability, but the FCA stated that the focus should instead be on the principles to be derived from the jurisprudence with a recognition that particular tests may not be transportable from case to case in view of varying states of knowledge.

The FCA agreed with the Federal Court's requirement that patentable subject matter must be something with physicality, i.e., physical existence, or something that manifests a discernible effect or change, and accepted that the understanding of the physicality requirements may change because of advances in knowledge. However, the FCA noted that it is axiomatic that a business method always has or is intended to have a practical application and, therefore, cautioned that the requirement of "physicality" is not necessarily satisfied merely because a claimed invention has a "practical application".

Of great interest, and a departure from European practice, the FCA also rejected the Commissioner's requirement that a claimed invention be "technological" in nature, noting that the meaning of the term "technological" was unclear, and affirmed the Federal Court's decision that there is no per se prohibition against the grant of a patent for a business method in Canada.

However, the FCA declined to adopt the Federal Court's construction of the claims on the basis that neither court had the evidence required to properly construe the claims, and instead ordered expedited examination in a manner consistent with the FCA decision.

The decision is subject to appeal, with leave, to the Supreme Court of Canada.


The FCA has reaffirmed that business methods may constitute patentable subject matter and that such methods must be evaluated for patentability in the same manner as any other invention. Purposive construction has traditionally been used by the courts in construing the claims of an issued patent prior to any validity and infringement analysis. However, until now it has not been a formal part of the analysis of pending claims by patent examiners. It remains to be seen how the Commissioner will apply the decision and implement the purposive construction requirement in determining subject matter eligibility. This approach is contrary to that of CIPO's current examination guidelines.

Applicants will need to ensure that patent descriptions and at least some of the claims recite a physically discernible effect, directed towards meeting the "physicality" requirement. Similarly, applicants should ideally ensure that at least some of their claims are not, on a purposive construction, restricted to a single inventive aspect that is merely a scientific principle or an algorithm. Instead, applicants should recite the claims from the perspective of how physical components operate to facilitate or improve the manner in which a method is carried out, i.e., the underlying technology used to practise the invention.

Claims in pending applications that had previously been subject to rejection on the ground that the "actual invention" was deemed to be either a business method or not "technological" should now be reconsidered following a purposive construction of the claim. It seems unlikely that examiners will be enthusiastic to take this step voluntarily, so patent applicants should review their pending patent claims and specifically request reconsideration of previously rejected claims where warranted.

By rejecting the Commissioner's "technological" requirement, the decision arguably serves to position the Canadian criteria for patentability of business methods, and software inventions in general, closer to those of the U.S. than to those in the European Union.

However, the purposive construction approach differs in important respects from the "machine or transformation" test advocated by the U.S. Court of Appeals for the Federal Circuit. While the U.S. Supreme Court has rejected the "machine or transformation" test as the only test of statutory patentable subject matter, it offered no clear guidance as to what alternatives may exist and should be applied. In contrast, purposive construction means that there is no requirement for a patent claim to be limited to a specific machine, or to produce some material or physical transformation.

A purposive construction requires that the claims be construed as a whole in view of the knowledge of a person skilled in the particular art with a mind willing to understand the patent, to determine what the inventor intended to claim.

A purposive construction will reveal the claim elements that are essential to the inventor's claimed invention. The FCA confirmed that a purposive construction may determine that a novel and unobvious business method is an essential element of a patentable claim.

The FCA warned that, in a purposive construction, the Commissioner must be alive to the possibility that a claim may attempt, intentionally or otherwise, to disguise non-statutory subject matter, such as a mathematical formula or algorithm, by reciting a non-essential machine that performs the method. An example of such a claim is one where a computer merely automates the performance of a mathematical calculation.

A purposive construction of Amazon's one-click claims by CIPO may lead to a different assessment of what the inventor has invented and may in fact question whether the invention as claimed is even directed to a business method. For example, one could ask: Is the business method the invention or does the invention facilitate the business method? Examined as a whole, it would seem that, if one considers the business method to be the actual online purchase, it is not the business method itself which has changed (in the end a purchase is made online) but rather the way in which the business method is conducted (by implementing a client-server system organized in a particular way and exchanging particular data).

Illustratively, Amazon argued that its one-click technique benefits the customer in a number of ways, including that "the customer is spared the time of re-entering the personal information and increased risk involved in resending personal information to the merchant's computer." One could ask how this differs from the way in which cash registers, and more recently point-of-sale terminals, improved substantially the same business method, i.e., a customer purchase. Would a purposive construction of a claim directed to a cash register not find there to be patent-eligible subject matter in that cash register?

The FCA decision appears to reflect an interpretation consistent with Canadian patent practice prior to the Commissioner's initial rejection of Amazon's application. To be eligible for a patent, a claim, taken as a whole, must define a combination of elements which falls within the statutory definition of "invention". Claims conforming with the U.S. "machine or transformation" test may or may not satisfy this requirement, so it will be important to consider each claim on a case-by case basis.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
26 Oct 2018, Other, Vancouver, Canada

Cybersecurity, including data privacy and security obligations, has become a critical chapter in every company’s risk management playbook.

30 Oct 2018, Other, Toronto, Canada

Please join us for discussions on recent updates and legal developments in pension and employee benefits as well as employment law issues.

12 Nov 2018, Other, Toronto, Canada

Stories aren’t falsehoods. Stories are the root of all effective human communications: they motivate, animate and clarify. If you aren’t telling stories, you probably aren’t getting your point across.

Similar Articles
Relevancy Powered by MondaqAI
Bennett Jones LLP
Borden Ladner Gervais LLP
Norton Rose Fulbright Canada LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Bennett Jones LLP
Borden Ladner Gervais LLP
Norton Rose Fulbright Canada LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions