Canada: A Business Method In The Madness: The Future Of Business Method Patents In Canada

By Christopher Van Barr ,

Published 4/1/00

"Though this be madness, yet there is method in 'it."

The US Experience

Hamlet knew a hawk from a handsaw, but others were fooled by his apparent madness. Likewise, commentators have recently rallied against the apparent madness of allowing business method patents in the U.S. Until recently, such patents were rejected on grounds that the alleged invention was outside the ambit of patentable subject matter. However, in State Street Bank & Trust Co. v. Signature Financial Group Inc., the U.S. Court of Appeal laid to rest the "ill-conceived" prohibition against business method claims and held that Signature’s financial services patent was valid.

For those interested in e-commerce, "business method" patents seek to protect systems and methods for doing business, for example methods for facilitating "buyer-driven conditional purchase offers". In some cases, methods are claimed for doing business on-line, giving rise to the label "Internet patents". Some recent examples of U.S. business method patents are:

U.S. Patent No. 6,029,141 issued to, Inc. for an Internet-based customer referral system (the so-called "affiliate" program which allows Web sites to refer customers in exchange for commissions);

U.S. Patent No. 5,794,207 issued to Inc. which covers "reverse auctions" or buyer-driven methods of conducting commerce on the Internet;

U.S. Patent No. 5,960,411 issued to, Inc. for the One-Click® method which stores billing and shipping information so that customers need only click their mouse once without re-entering information;

And, strangely, U.S. Patent No. 5,851,117 issued to Butcher Company titled "Building Block Training Systems and Training Methods", which is a method for teaching a janitor how to clean commercial washrooms and the like.

The stakes are high. Some business method/Internet patents appear to be seeking control of the underlying framework of electronic commerce. Once issued, these patents do not sit like trophies on a shelf. They are enforced, licensed and litigated. They are property rights upon which companies, such as, build their financing . They are threats to competition for companies such as Barnes and Noble, whom sued shortly after obtaining its One-Click patent on September 28, 1999, obtaining an interlocutory injunction against Barnes and Noble on December 2, 1999, just before the holiday season..

Not in Canada? Pity

To date, Canada has stood on the sidelines in the debate over business method patents. The Canadian Manual of Patent Office Practice states that methods or schemes of doing business do not comprise patentable subject matter. The question is, why not?

Much of the discussion concerning business method patents has avoided the issue of whether the principle of patenting business methods is supportable, instead focusing on the fact that allowing business method patents will lead to the issue of numerous patents of questionable value. But a bad patent does not a bad principle make, and there are good reasons why Canada should, and will, follow the United States’ lead in issuing business method patents.

State Street

First, a note about State Street. This decision involved US Patent No. 5,193,056 issued to Signature Financial Group Inc. for a system allowing monitoring and recording of financial information and the making of all calculations necessary to maintain a partner fund financial services configuration. This configuration allows several mutual funds ("spokes") to pool their investment funds into a single portfolio ("hub") allowing for economies of scale in administering the fund while obtaining tax advantages of a partnership.

The court noted that it was the US Congress’ intention that patentable subject matter include "anything under the sun that is made by man". The court then held that an invention is not unpatentable simply because it relates to a method of doing business. Business methods, the court went on, should have been "subject to the same legal requirements for patentability as applied to any other process or method".

The Canadian Experience

This type of "substance over form" reasoning was employed almost 20 years ago by the Canadian Federal Court of Appeal in Schlumberger Canada Ltd. v. Commissioner of Patents, the last Canadian court case to consider the patentability of software. In that case, the court considered a patent application relating to a process whereby measurements in oil and gas exploration boreholes were recorded on magnetic tapes, transmitted to a computer programmed according to certain mathematical formulae and converted by the computer into useful information such as charts and graphs. The Court found that invention was merely the discovery that certain mathematical calculations resulted in useful information and that, since the calculations could have been performed by humans as a series of mental operations, the subject matter was not patentable under the Patent Act.

Of importance, however, the Court held that the fact that a computer is used to implement a discovery does not change the nature of the discovery. That is, the invention is subject to the same first principles of patentability, computer or no computer.

This kind of analysis ought to apply equally to business method patents. While a patent in Canada may not be granted for any "mere scientific principle or abstract theorem", the Patent Act contains no specific exclusion relating to business method patents. And no Canadian court has clearly rejected the principle of business method patents. Where business method patents have been rejected, it has been on other grounds. For example, in Lawson v. Commissioner of Patents, the court considered a patent application for a method of subdividing land to provide greater density, staggered building locations, etc. The court rejected the patent application not because it was a business method, but because such a method comprised the skill of a solicitor, planning consultant and surveyor and, as such, was an "art" that belongs to the professional field and not an "art" in the industrial sense as defined in s. 2 of the Patent Act.

It has been suggested that the court in this case misplaced its objection to patentability. So-called professional" arts may be properly unpatentable because they lack "utility", not because they are outside the scope of categories included in an invention.

Canadian Courts Keep a Poker Face

Interestingly, a recent court decision has confirmed the utility of a method for a game, which is akin to a method of doing busines. In Progressive Games, Inc. v. The Commissioner of Patents the Court considered the patentability of an application entitled "Poker Game". The invention related to a modified version of a five-card stud poker game which can be played in a casino or cardroom environment. Although the applicant was granted a patent in the U.S., the Canadian Intellectual Property Office (CIPO) rejected the application on grounds that the method claims were not directed to either an "art" or a "process" within the meaning of section 2 of the Patent Act and thus were not patentable subject matter.

The court, in considering the appeal, determined that the definition of "art" includes a process that:

i. is not a disembodied idea but has a method of practical application;

ii. is a new and innovative method of applying skill or knowledge; and

iii. has a result or effect that is commercially useful.

The Court then concluded that the applicant’s changes in the method of playing poker met two of the above criteria, namely that (i) this was a practical application; and (iii) the result was commercially useful. However, the court rejected the application on grounds that it did not result in (ii) a new and innovative method of applying skill or knowledge as commonly used in the expression "the state of the art" because the applicant’s "changes in the method of playing poker - i.e. by adding a new player referred to as ‘the house’ – did not substantially modify the poker game as it existed nor did they create a new game."

The court left the door open just wide enough to suspect that the decision could have been otherwise had the invention related to an entirely new kind of game.

The Future of Business Method Patents in Canada

The question is probably not if, but when, Canada will allow business method patents. Not only do Canadian courts consider U.S. court decisions as instructive, but section 2 of the Patent Act, which defines patentable subject matter, is in fact based on the early U.S. patent statutes. Can Canada be far behind its southern neighbour in granting these patents?

Once the taboo is lifted, and a method relating to a "business" loses its visceral, knee-jerk judicial reaction, one is left with a method. Is the method new? Is it inventive? Is it useful? These are the benchmarks of patentability, not whether the method is patentable in view of dubious but established ways of pigeonholing subject matter. If a court were convinced that the method in question employed a novel method of applying skill or knowledge and otherwise met the statutory requirements, there would appear to be no reason why the court would not follow the U.S. court in State Street.

On a policy level, the U.S. is allowing e-commerce and financial-based companies to gain a competitive advantage by patenting their methods of doing business. If Canada wants to take a leadership role in the exploding Internet economy, it has to protect the intellectual property of companies that develop, create and invent in this space. There is every reason to believe that this protection will be granted.

To File or Not to File

In fact, it is now clearly possible to obtain a "business method" patent in Canada, provided that hardware or other physical apparatus, which is directed toward traditionally patentable subject matter, is included in the claims. An example is Canadian Patent No. 2,137,498 issued on February 1, 2000 to Walker Asset Management Limited Partnership (the corporate parent of This patent, entitled "remote gaming system", is for a "method of providing credit value to a gaming device". The inclusion of nominal hardware in the claims ("numeric keyboard of a telephone", etc.) narrows the scope of the claimed invention only minimally and shows that, practically speaking, business method patents will be issued by CIPO.

Inventors should consider filing applications now for "pure" business methods and also for methods including apparatus. If the law remains unclear, an applicant can still wait 5 years before requesting examination (the equivalent of 20 "Net years"). One could, of course, wait until Canadian courts follow their counterparts in the U.S. Likewise, patent agents may ponder and muse: "To patent, or not to patent business methods, that is the question." But Canada is a country where the patent is awarded to the first person to file. So the answer is simple: "Don’t wait for other inventors to jump the queue ahead of you".

Christopher Van Barr, an Associate in the Ottawa office, practises in all areas of intellectual property and industrial property law with emphasis on patent and trademark litigation. He can be reachde by telephone at (613) 786-8675 or be e-mail at

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
16 Jan 2018, Seminar, Birmingham, UK

Join Gowling WLG's pensions team as they explain some of the biggest challenges facing trustees and employers in the coming year and provide practical ways of dealing with them.

23 Jan 2018, Seminar, London, UK

Join Gowling WLG's pensions team as they explain some of the biggest challenges facing trustees and employers in the coming year and provide practical ways of dealing with them.

25 Jan 2018, Seminar, Birmingham, UK

2018 is set to be another big year in employment, with employers set to face new challenges and responsibilities. At our event, looking ahead to next year, we will be discussing four key issues you might face in 2018, providing useful tips and answering your questions.

In association with
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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

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