Canada: Federal Court Of Appeal Overturns Commissioner On’s 1-Click: Business Methods Not Excluded From Patentability

Last Updated: November 27 2011
Article by Michael Ladanyi

Originally published in November 2011

On November 24, 2011, the Federal Court of Appeal released its judgment in The Attorney General of Canada and The Commissioner of Patents v., Inc., 2011 FCA 328. The Court ruled that business methods may be patented in Canada but stopped short of establishing a strict test to determine whether a claim directed to a business method contains patentable subject matter. filed a patent application for its "1-Click" online purchasing process in September 1998 (Canadian Patent Application No. 2,256,933). On March 3, 2009, following a hearing before the Patent Appeal Board, the Commissioner of Patents refused to grant the patent (see "CIPO Rejecting Business Method Patents," November 2009). The Commissioner's refusal was appealed to the Federal Court, which rejected the Commissioner's "form and substance" analysis, and the Commissioner's requirements that patentable subject matter must be technological and not a business method (see "Federal Court of Canada Grants's Appeal for 1-Click Business Method Patent Application," October 2010). In its ruling, the Federal Court went on to apply the test set out in Shell Oil Co. of Canada v. Canada (Commissioner of Patents), [1982] 2 S.C.R. 536, and Progressive Games, Inc. v. Canada (Commissioner of Patents), 177 F.T.R. 241 (T.D.) at para. 16, aff'd (2000), 9 C.P.R. (4th) 479 (F.C.A.), for determining whether an art was patentable subject matter, namely: (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.

In its application of this test, the Federal Court determined that's claims were patentable subject matter through a purposive construction of the essential elements of the claims. The Commissioner and Attorney General of Canada appealed to the Federal Court of Appeal arguing that the Commissioner's analysis was the correct approach.

In allowing the appeal, the Federal Court of Appeal affirmed the Federal Court's rejection of the Commissioner's analytical framework. Accordingly, the patentability of subject matter may not be determined solely on literal wording of the claims. Rather, the identification of the inventive concept of the claims must be based on a purposive construction of the claims to "ensure that the Commissioner is alive to the possibility that a patent claim may be expressed in language that is deliberately or inadvertently deceptive." By way of example, the Court noted that "what appears on its face to be a claim for an 'art' or a 'process' may, on a proper construction, be a claim for a mathematical formula and therefore not patentable subject matter."

The Federal Court of Appeal also found the Commissioner's requirement that claims be "technological" in nature "is likely to be highly subjective and unpredictable in its application" and "this test should not be used as a stand-alone basis for distinguishing patentable from non-patentable subject matter." The Court further stated that "because a patent cannot be granted for an abstract idea, it is implicit in the definition of 'invention' that patentable subject matter must be something with physical existence, or something that manifests a discernible effect or change."

However, the Federal Court of Appeal ruled that the Federal Court erred by construing the claims in the absence of expert evidence. As a result, without "the benefit of expert evidence about how computers work and the manner in which computers are used to put an abstract idea to use," the Federal Court engaged in a literal interpretation of the claims. As the Federal Court of Appeal would be in a similar position to construe the claims, the Court referred the construction of the patent claims back to the Commissioner for re-examination on an expedited basis in accordance with the Court's reasons.

Although the test to determine the patentability of an art is, presumably, the one used by the Federal Court in its decision, the Federal Court of Appeal did not explicitly direct the Commissioner to use that test. Accordingly, it may be open to the Commissioner to devise a new analytical approach to assess the patentability of business methods so long as none of the Commissioner's previously rejected tests are used.

Additionally, the Federal Court of Appeal did not rule on the correctness of the Federal Court's construction of the claims or application of any test for patentable subject matter. Instead, the Federal Court of Appeal suggested that for a business method claim to be patentable, the claim must be distinguished from the claims ruled to be unpatentable in Schlumberger Canada Ltd. v. Canada (Commissioner of Patents), [1982] 1 F.C. 845 (C.A.). In Schlumberger, the patent claims were rejected because the Court found that the only novel aspect of the claimed invention was a mathematical formula – that the formula was programmed into a computer was insufficient to render the claims patentable.

According to the Federal Court of Appeal in the present decision, the distinguishing test for a business method claim must be something more than "a practical embodiment or a practical application" as "a business method always has or is intended to have a practical application." The Court further stated that's "particular business method – itself an abstract idea – is realized by programming it into the computer by means of a formula or algorithm, which is also an abstract idea." In the Court's view, "the task of purposive construction of the claims in this case should be undertaken anew by the Commissioner, with a mind open to the possibility that a novel business method may be an essential element of a valid patent claim."

Although the Federal Court of Appeal did not construe the claims, it did reach the following conclusions: (1) that's claims are directed to a business method; and (2) that the business method is an abstract idea. While the Court has directed the Commissioner to re-construe the claims, the Court appears to imply that the Commissioner should start from the position that's claims are directed to an abstract idea, which may well influence the outcome.

Nevertheless, in a positive step for prospective patent filers, by ruling that each one of the Commissioner's tests for refusing's claims is improper, the Court has left open the door for the patentability of business methods in Canada.

The parties have 60 days to seek leave to appeal this decision to the Supreme Court of Canada.

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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