Business Method Patents: The State of the Art after the Decision

Business Method Patents: The State of the Art after the Decision

A major source of controversy in Canadian patent law is the treatment of business method patents. Up until recently business methods were not considered to be patentable (see the Patent Commissioner’s decision in and U-Haul). However, much has changed after the Federal Court’s decision in the case.

Phelan J. addressed the issue of patentability of business methods in, Inc. v. Canada (Attorney General) in a decision released on October 14, 2010. The result: business methods may be patentable ‘in appropriate circumstances.’ Amazon’s patent application met the ‘appropriate circumstances’ requirement. Thus, the court remitted the case to the Patent Office for expedited re-examination on the basis of the court’s finding that patentable subject-matter was present.

The Amazon application related to the placement of an online order allowing the buying of a product from an internet website with a single click. The two independent claims included 1) a system claim disclosing a “machine” which is used to implement’s 1-click ordering system, and 2) a process claim disclosing a “process” which uses stored information and cookies to enable customers to order items over the internet simply by clicking on them.

Noted below is a synopsis of an in-depth analysis of Phelan J.’s decision that is discussed more fully in our case comment (soon to be published in the Intellectual Property Journal).  We conclude that Phelan J.’s decision in Amazon is far from satisfactory. The decision gives rise to more ambiguity, confusion and unanswered questions. In this post, we critique only the court’s reasoning and do not take a position on the ultimate correctness of the decision or on whether business methods should or should not be patentable in Canada.

We criticize the Federal Court’s decision under five headings:

(1)   the expansive meaning given to “art” in the Patent Act;

(2)   the elimination of any ‘technological requirement’ for patentability;

(3)   the reliance on foreign jurisprudence;

(4)   the application of a “purposive” interpretative approach to determine patentability; and

(5)   the failure sufficiently to defer to the Patent Office’s decision. 

As to (1): According to the court, for an invention to be patentable as an ‘art,’ it must meet the threefold test proposed by Denault J. in Progressive Games , i.e. a) it must not be a disembodied idea but have a method of practical application; b) it must be a new and innovative method of applying skill or knowledge; and c) it must have a commercially useful result. Although Denault J.’s decision was affirmed by the Federal Court of Appeal, the threefold test was neither endorsed nor expressly rejected by the appellate court. This threefold test may itself be wrong for confusing issues of novelty and unobviousness with the question the court had to deal with, that is, subject-matter; but, in any event, the Amazon court expands the test by loosening the “practical application” requirement to some “slightly less conventional change in character.” The bounds of this ‘less conventional change’ are not suggested, nor is the nature of the change in the Amazon application indicated. No longer, apparently, need patentable subject matter necessarily relate to any technology.

On point (2): Although obiter, Phelan J. was of the view that there is no technological requirement with respect to patentability of inventions. He may be correct in his assertion; however, he failed to articulate adequate reasoning why no technological requirement is needed or why the technological requirement is not desirable.

Not only does this new approach to patentability appear inconsistent with indications in domestic and international law, it also may have unforeseen and undesirable ramifications such as opening the door to the sort of absurd patents that have been decried in the United States, such as the patenting of dance steps and methods for training animals.

Regarding (3): Phelan J. heavily criticized the Commissioner for her reliance on European jurisprudence. However, without stating why reliance on Australian jurisprudence is better than reliance on European jurisprudence, Phelan J. himself found support for his decision in the Australian case law. It is noteworthy that there are significant differences between the Statute of Monopolies 1623 (Eng.), which regulates patentability in Australia, and the Canadian Patent Act.

On point (4): Phelan J. was unimpressed by the Commissioner’s “form and substance approach” in determining patentability because he thought it inconsistent with the purposive approach to claim interpretation. But he really conflated three different points: how to construe claims, how to determine patentability, and how to interpret statutes. While the first and the third tasks may require a purposive approach, there is absolutely no support for using the purposive approach that is applied to claim interpretation to determine patentability.

With respect to (5): the recent trend in administrative law is towards affording respect and deference to the expertise of the administrative decision maker. Phelan J. criticized the Patent Commissioner on every single aspect of her decision.  This hardly represents either respect or deference.

While some may believe that the Federal Court’s decision has answered one of the most difficult concepts that CIPO, practitioners, applicants and the courts in Canada are grappling with, (whether or not business methods are patentable), the shortcomings of the reasoning in the decision detract from its becoming the final word on this issue. A notice of appeal to the Federal Court of Appeal has recently been filed by the Attorney General of Canada and the Commissioner of Patents.