Canada: Patent Office's Misleading Messages May Discourage Investment In Innovative Software Businesses

Last Updated: April 11 2019
Article by Cameron Gale

The Government of Canada's Intellectual Property (IP) Strategy involves extensive efforts to educate Canadians about how IP tools, such as patents, can be used to protect their business assets. As the IP strategy explains, IP can be used by businesses to extract value from their ideas, create new revenue streams and raise capital.1 However, some of the Canadian Intellectual Property Office (CIPO)'s messaging about patents may make it harder for software-based businesses to attract investors.

CIPO has developed a series of resources and factsheets intended to teach Canadians about "the different IP rights that can turn an idea into a successful business".2 CIPO is also attending trade shows and seminars, and providing informational sessions to inform Canadians about IP. Unfortunately, CIPO has been incorrectly telling Canadian innovators and investors that software-based inventions are not patentable.

CIPO's patent factsheet states that "[s]oftware is considered a literary work and cannot generally be protected with a patent". Similar messages about the patentability of software are included in CIPO's online guide to patents3 and have been shared by CIPO representatives attending symposiums with entrepreneurs. However, this does not reflect the state of the law in Canada. Although the code underlying software may be considered a literary work, numerous software innovations are clearly patentable in Canada and other countries.

There are not many Canadian court decisions considering the patentability of software inventions. However, in 2011, the Federal Court of Appeal considered the patentability of a patent application directed to Amazon's one-click online ordering in Canada (Attorney General) v Amazon.com Inc (Amazon)4. In Amazon, the FCA held that "patentable subject matter must be something with physical existence, or something that manifests a discernible effect or change".5 Many software innovations—such as many artificial intelligence applications or software applications integrated into physical devices like smartphones—can satisfy these requirements. In fact, CIPO issued Amazon's patent following the FCA decision.

Giving Canadian inventors and businesses the wrong impression about the patentability of software may discourage them from using patents to protect and possibly monetize valuable inventions. Furthermore, investors often consider the availability of patent protection when selecting which industries to invest in. Giving investors the impression that software is not patentable may actually discourage investment in software-based businesses.

This type of impact has already been seen in the United States. In the 2014 case of Alice v CLS Bank6, the United States Supreme Court (USSC) held that claims of a patent related to reducing settlement risk in financial transactions were ineligible for patent protection because they were directed to an abstract idea. Following the USSC decision in Alice, a rash of decisions invalidated patents (many software related) for being directed to abstract ideas. The uncertainty around the patentability of software in the United States, and publicity surrounding the Alice decision, had a direct impact on investor decisions.

A recent survey of venture capital and private equity investors found that 74% of those polled considered patent eligibility an important factor in deciding whether to invest in a company.7 Additionally, investors who were aware of USSC decisions on patent eligibility such as Alice indicated that they had shifted investments away from affected industries, including away from software and internet related industries.

Since Alice, the case law on patent eligibility in the United States has continued to evolve. In light of the more recent case law, the Unites States Patent and Trademark Office enacted revised guidelines in January 2019 changing how patent examiners will determine whether the claims of a patent application are eligible to be patented. These changes should result in fewer subject matter objections being issued and increase the availability of patents for software-related innovations.

In Canada, the Amazon decision remains the leading case on the treatment of software patents. However, CIPO's approach to software patents does not appear to follow the guidance from Amazon or earlier guidance from the Supreme Court of Canada (SCC)8 about how patent claims should be evaluated. Rather, CIPO has taken the position that principles of purposive claim construction laid out by the SCC do not apply to the examination of patent applications by CIPO. CIPO's approach is particularly striking given that the Amazon decision dealt directly with the rejection of claims during examination and explained that the patent office's determination of patent subject matter must be based on a purposive construction of the patent claims.9

CIPO's messages to the Canadian public appear to be informed by the same antagonistic approach towards software patents. This approach in both educational outreach and examination is inconsistent with Canadian law on patent eligibility.

While the Government of Canada is making laudable efforts to educate Canadians about using IP as a business tool, it is important that these efforts accurately reflect the state of the law in Canada. Otherwise, CIPO risks confusing innovators and investors about the patentability of software inventions and may discourage investment in innovative Canadian software businesses.

Originally published by The Lawyer's Daily, © 2019 LexisNexis Canada.

Footnotes

1 https://www.ic.gc.ca/eic/site/108.nsf/eng/home.

2 http://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr04320.html.

3 https://www.ic.gc.ca/eic/site/cipointernet-internetopic.nsf/eng/h_wr03652.html.

4 Canada (Attorney General) v. Amazon.com, Inc., 2011 FCA 328, [Amazon].

5 Amazon at para. 66.

6 Alice Corp. v. CLS Bank International, 573 U.S. 208, 134 S. Ct. 2347 (2014).

7 Taylor, David O., Patent Eligibility and Investment (February 24, 2019). Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3340937.

8 See Free World Trust v. Électro Santé Inc., [2000] 2 S.C.R. 1024; Whirlpool Corp. v. Camco Inc., [2000] 2 S.C.R. 1067.

9 Amazon at paragraph 47.

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 Mondaq.com.

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

Authors
Cameron Gale
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
 
In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Blake, Cassels & Graydon LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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

Mondaq.com (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 www.mondaq.com

To Use Mondaq.com 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.

Disclaimer

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.

General

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