Are Business Methods Patentable?

Are Business Methods Patentable?

This is a time of significant innovation in the realm of business to reduce inefficiencies and capture potential market gains. Despite the significant barriers that currently exist, innovators should be able to protect these new and useful innovations through patents.

Firstly, according to the Canadian Intellectual Property Office (CIPO), business methods are prohibited from patentability: "A patent is granted only for the physical embodiment of an idea... or for a process that produces something saleable or tangible. You cannot patent... a method of doing business."1 This policy has been supported by CIPO in practice."2

Secondly, although business methods are not explicitly excluded in the Patent Act, patenting may be impossible where the invention involves the "exercise of personal judgement... and so does not enable the precise replication that is necessary for industrial application."3 Indeed, s.27(3)(d) of the Act requires the specification of the necessary sequence, if any, of the various steps in a process.4 This may therefore prevent the patent of business methods where discretion may be required in the application of the method across industries or across businesses with varying business structures or characters.

Furthermore, according to the American Intellectual Property Law Association, "business methods are most frequently patented as implemented on a computer."5 As a result, many of the issues relating to the patentability of computer programs remain a significant hurdle. Historically, many countries have been loathe to grant patents for computer programs for fear of impeding the "technological progress in this volatile industry."6 CIPO and the courts have upheld this policy, such as in a Federal Court of Appeal case that upheld the denial of a patent, despite the description of the invention as "not the computer program, [but] the complex process, which is effected by computer, of transforming measurements into useful information,"7 because it constituted "mere scientific principle or abstract theorem," which is not patentable.8

Thus, at first glance, business methods are unlikely to be patentable in Canada. Other jurisdictions, however, have allowed for the patentability of business methods, such as the U.S,9 and Australia.10 Moreover, Canadian courts have espoused a broad interpretation of the Patent Act. The Supreme Court has crafted an 'expansive interpretation' that includes "methods of applying skill or knowledge provided they produce effects or results commercially useful to the public.'"11 Business methods, in the application of business acumen to devise resolution to specific issue or to reduce inefficiency, may well result in commercially useful results to the public - especially where they result in reduced unit prices. Furthermore, the dissent in Harvard, found that "statutory subject matter must be framed broadly because by definition the Patent Act must contemplate the unforeseeable."12 The majority agreed to a broad definition, recognizing the need to "encompass unforeseen and unanticipated technology," although noting that the scope of invention was finite.13

Thus, in realizing the need to maintain an expansive definition, and where a business method is capable of precise definition, the courts should adopt a stance toward business methods that allows for patentability to protect business innovation.

1 Canadian Intellectual Property Office, Industry Canada. Available online at
2 David Vaver. Intellectual Property Law: Copyright, Patents and Trademarks. (Toronto: Irwin Law), 1997, 128.
3 David Vaver, Canada's Intellectual Property Framework: A Comparative Overview, 17 I.P.J. 125 (2004), 17.
4 R.S.C. 1985, c. P-4, s.27(3)(d)
5 Brian Kahin, "What Are Business Methods?" Presentation, Centre for Information Policy, University of Maryland. Available online at
6 Vaver. Intellectual Property Law: Copyright, Patents and Trademarks, 129.
7 Schlumberger Ltd. v. Canada [1982], 56 C.P.R. (3d) 257 (F.C.A.), at 4.
8 Ibid, at 5. However, CIPO now holds that if the program is "connected with a process or apparatus that effects some physical change," it is considered to be patentable (David Vaver, Canada's Intellectual Property Framework: A Comparative Overview, 17 I.P.J. 125 (2004), 18.)
9 State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir., 1998)
10 Vaver, Canada's Intellectual Property Framework: A Comparative Overview, 18.
11 Ibid), 16.
12 Harvard College v. Canada (Commissioner of Patents), [2002] 4 S.C.R. 45 at 43.
13 Ibid, at 158.