IP Osgoode Speaks: Justice Marshall Rothstein on Business Method Patents

IP Osgoode Speaks: Justice Marshall Rothstein on Business Method Patents

Nirav Bhatt is an LLM Candidate at Osgoode Hall Law School.

Last Friday, IP Osgoode hosted a guest lecture by Justice Marshall Rothstein of the Supreme Court of Canada as part of IP Osgoode’s speaker series.  He discussed subject matter patentability, business method patents and possible approaches that a Canadian court might take in deciding a case such as In Re Bilski.

Interim Dean Jinyan Li welcomed Justice Rothstein and highlighted his profound legal career. Justice Rothstein began his lecture by calling it a tribute to Professor David Vaver. After narrating a couple of witty anecdotes, Justice Rothstein noted that the In Re Bilski case, which is to be heard by the US Supreme Court on November 9, would be a landmark decision and therefore made the topic of his guest lecture very timely. He briefly explained the facts of In Re Bilski, and outlined what is acceptable as patentable subject matter. He said, it is undoubtedly, a business method that involves some form of mathematical formula or algorithm.  While the algorithm itself may be an abstract idea, if it has a practical application, the result may be patentable.

Justice Rothstein then discussed the definition of “invention” in Canada, highlighting two types of exclusions. First, he outlined statutory exclusions, such as for abstract theorems, scientific principles and the obvious. Second, the common law exclusions, such as for inventions that are non-economic or unrelated to trade, industry or commerce, inventions relating to medical and surgical methods, and natural phenomena.

Justice Rothstein also referred to the Harvard mouse case, and stated his opinion that he agreed with Justice Binnie’s dissent and the following six interpretive principles: 1) Context of the act is expansive, 2) Check is in definition and statutory exclusions, 3) Patent office has no discretion to deny patent if it meets criteria, 4) Patent cannot be denied because of social, economic or cultural impacts, 5) Patentability and regulation should not be conflated, and 6) the Patent Act does not distinguish between lower and higher life forms.

Noting that business methods have historically not been patentable in Canada, Justice Rothstein discussed Schlumberger Canada Ltd. v. Commissioner of Patents, a case in which the Federal Court of Appeal dismissed a patent application for a computer system for the analysis of soil characteristics data for the purpose of oil and gas exploration on the basis that mathematical formula are excluded. He mentioned, in a more recent case, that Amazon.com filed an appeal to the Federal Court in respect of the decision of the Commissioner of Patents refusing to grant a patent. The Canada Patent Appeal Board, rejected the application, stating that: “even if these concepts or rules are novel, ingenious and useful, they are still not patentable because they are business methods”.

Justice Rothstein then arrived at the US State Street Bank case and commented that under that case, a claimed invention was eligible for protection by a patent in the US if it involved some practical application, specifically if it produces “a useful, concrete and tangible result”. With the 2008 In Re Bilski decision however, the useful-concrete-tangible test was jettisoned for the “machine or transformation” test. Since State Street, thousands of patent applications were filed for business methods and Bilski was an attempt to rein in business method patents.

While Justice Rothstein conveyed that his words should be considered with caution, he found the majority’s decision in Bilski and the machine or transformation test to be challenging.  

Justice Rothstein stated that he favoured Judge Rader’s dissenting opinion and compared it with the six principles set out by Justice Binnie in the Harvard Mouse case. Justice Rothstein also questioned the justification of the court mandated machine or transformation test, stating that the test is not contemporary. Further, he noted that Judge Mayer’s reasons appeared to be grounded in more policy based reasoning and less anchored in statute, and stated that stand alone policy reasons are for the Canadian Parliament (and the US Congress) to address.

Additionally, Justice Rothstein stated that it is necessary to look at entire process claims in the context of their practical application. A patent claim involving hedging unpredictable volume risks in selling or buying consumable commodities might be a practical application. However, if Bilski’s patent is held valid, there could be problems. For example, other industries may wish to pursue hedging volume risks and if Bilski refuses to licence, then what should be done?

Justice Rothstein also pointed out Lord Hoffman’s view (of the House of Lords), which takes a different approach to these issues and focuses on two over-riding principles for patentability. They are: 1) Practical application of the patented invention and; 2) that one cannot patent a manner of human behaviour. Business methods are unpatentable under the human behaviour principle, according to Lord Hoffman’s argument.

In the Q&A session that followed his talk, Justice Rothstein responded to an array of questions.  With respect to patents being denied because of social, economic or cultural impacts, Justice Rothstein emphasized that the statutory and existing common law limits to patentability are the pertinent factors that should be applied in the judgment analysis. One audience member asked about his opinion on the policy based reasoning for the length of the term of the patent granted, and he answered that on a policy basis, it is possible to conceive that in theory, the length of patent protection may be different for different patents and patentees.  He emphasized that investment is a very important criteria to consider, as a huge amount of money may be spent on the research and development of a patented product. So in some cases 20 years might not be enough. In other cases where the investment was minimal it might be too much. But it is simply not practical to consider different lengths for different patents or patentees. Policy makers have decided on 20 years and that is a practical and apparently generally acceptable term.

Powerpoint slides for Justice Rothstein's guest lecture may be found on IP Osgoode’s Events Archive page.