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
27 Oct 2016, Seminar, Toronto, Canada

Please join members of the Blakes Commercial Real Estate group as they discuss five key provisions of a commercial real estate purchase agreement that are often the subject of much negotiation but are sometimes misunderstood.

1 Nov 2016, Seminar, Toronto, Canada

What is the emotional culture of your organization?

Every organization and workplace has an emotional culture that can have an impact on everything from employee performance to customer or client satisfaction.

3 Nov 2016, Seminar, Toronto, Canada

Join leading lawyers from the Blakes Pensions, Benefits & Executive Compensation group as they discuss recent updates and legal developments in pension and employee benefits law as well as strategies to identify and minimize common risks.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.