'Practical Application' Business Methods Deemed Patentable By The Federal Court

'Practical Application' Business Methods Deemed Patentable By The Federal Court

Neda Navabi is a JD candidate at Osgoode Hall Law School, and is currently enrolled in Professor Ikechi Mgbeoji’s Patents class, in Fall 2011. As part of the course requirements, students are asked to write a blog on a topic of their choice.

On October 14th, 2010, the Federal Court ruled that Amazon.com should be permitted to patent its one-click order process on its Web sales systemi, following a nearly 12-year battle for a Canadian patentii and the Commissioner of Patents’ denial to grant the patent due to the method’s “obviousness” (an important test for granting applications for patents in patent law).

The one-click method “allows users to pay with one click by using information previously stored in the system” through the system’s server. Justice Michael Phelan of the Federal Court found that the method is novel and the online ordering system which facilitates the one click method adds to the state of knowledge in the area of online ordering systemsiii.

The central issue in this case revolved around the definition of “invention” in Section 2 of the Canadian Patent Act, namely “any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture or composition of matter”, and whether the one-click method fit in this definition. In our era of ever-changing information technology, it has become increasingly difficult to apply patent law concepts that were first developed in the 19th century industrial world, an epoch focused more on machines made of iron or steeliv. Justice Phelan stated in his ruling that there needs to be a ‘practical application’ for the method or process in question, and thus abstract ideas or theorems are not patentable subject-matterv. Where a claimed invention is described simply as a plan, scheme or disembodied idea that has not yet been put into action, it is not to be considered patentable subject matter. In the case of the one-click ordering system, the court found that the practicality of Amazon.com’s ordering system being able to recall the personal and payment information of a customer for the purpose of internet shopping on its site made it a business method that is worthy of patent protectionvi.

Many leading legal experts in Canada have hailed the decision as one that has clarified “an important element of Canadian intellectual property law”vii. Intellectual property lawyer Richard Owens at Stikeman Elliott LLP has deemed the case as “one of the most important in Canadian patent law since the Supreme Court of Canada battles over Harvard University’s genetically modified mouse and Monsanto’s biotech crops”viii. In addition, the case has paved the way for businesses in other distinctive industries to apply for patent protection, allowing for “computer-implemented and business-method inventions” to now be “assessed against the same standards as more conventional industrial inventions”, as denoted by Anne Kinsman, partner at Borden Ladner Gervais LLP in Ottawaix. This can lead to the growth of Canadian businesses as they are encouraged to innovate, knowing that their inventions can be protected. However, with this case now bringing Canada on par with the United States when it comes to business methods being patentable (see: Bilski v. Kapposx), there is, according to Michael Geist, intellectual property professor at the University of Ottawa, a risk of increase in litigation for “frivolous patents” on business methods, as seen in the last ten years in the United Statesxi.

On August 1st, 2011, the Commissioner of Patents issued a Practice Notice further to the Federal Court’s October 2010 decision, revising its “patent examination guidelines to patent examiners for determining whether a patent claim is directed to patentable subject matter”xii. Despite the Amazon.com decision, the Patent Office maintained its position “that only the claim elements that contribute to solve a technical problem are to be considered for patentability, while all other claim elements are to be ignored”xiii. Specifically, patentable subject matter or practical utility cannot be deduced if the identified claim elements do not contribute to solve a technical problem, one involving the application of scientific knowledge for practical purposesxiv. Lawyers Michael Ladanyi and Rob Graham at Heenan Blaikie presented the following example based on the Office’s guideline: “a computer does not become patentable because it has been programmed to do something new, but may be patentable where a computer program causes the computer to become a new solution to a technical problem”xv. By instructing examiners to selectively ignore claim elements and only focus on those that solve a technical problem, it is clear that “the Commissioner has provided patent examiners with the continued power to reject pending business method claims through a subjectively narrow view of what is technical”xvi. A ruling took place on June 21st, 2011 on the appeal of Amazon.com and it is expected that the issuance of the ruling will determine the scope of the Commissioner’s authority to enforce a technological requirement for patentability.

It is important to note that on April 8th, 2011, a motion was set forth by the Canadian Life and Health Insurance Association Inc. and the Canadian Bankers Association seeking a leave to intervene in the appeal by the Attorney General and the Commissioner of Patents from Justice Phelan’s decisionxvii. The two organizations summarized their concerns as three-fold: 1) that the Amazon.com case would become the test case in Canada on the issue of the patentability of business methods; 2) that the decision of the case would extend beyond the interests of Amazon.com and affect the fate of other applications that concern “business method patents”; and 3) that the “net result of the decision […] could be to allow the patenting of ideas or mental steps [in the financial services industry], with the result that their members would be directly impacted [by the decision]”xviii. The proposed Interveners argued that they had “a relevant and useful perspective on the potential effect that the Court’s decision could have on industries such as theirs”xix. Amazon.com opposed the motion, claiming that the proposed Interveners’ interest was merely speculative and jurisprudential and insufficient to warrant interventionxx. The court found that the proposed Interveners did in fact have a direct interest in the outcome of the appeal and that “their contribution to debate could assist the members of the panel hearing the appeal given that their decision may affect the rights of members of the insurance and banking industries who consistently use [business methods and processes].xxi” This motion is yet another example of how revolutionary the Amazon.com case has become in patent law and the potential number of patent applications that may come about in the future with the recognition of “business method” as an invention as per the Section 2 definition of the Patent Act.


i Amazon.com Inc. v. Canada (Attorney General), 2010 FC 1011 [Amazon.com].

ii Gray, Jeff, “Amazon.com wins patent fight” Globe and Mail (14 October 2010), online: Globe and Mail <http://www.theglobeandmail.com/news/technology/amazoncom-wins-patent-fight/article1757820/?cmpid=rss1> [Gray].

iii Ibid.

iv Gray, supra note ii.

v Ibid.

vi Amazon.com, supra note i at para 2-5.

vii Balla, supra note iii.

viii Gray, supra note ii.

ix Balla, supra note iii.

x Bilski v. Kappos, 130 S. Ct. 3218, 561 US.

xi Gray, supra note ii.

xii Landanyi, Michael, Graham, Rob, “CIPO Examination Practice Update Subsequent to Amazon.com” Heenan Blaikie LLP (18 August 2011), online: Heenan Blaikie LLP <http://www.heenanblaikie.com/en/media/BioXML_PublicationsHB/pdf_file/ENEWS_IP_2011-08-18_Tor_EN.pdf>.

xiii Ibid.

xiv Ibid.

xv Ibid.

xvi Ibid.

xvii Canada (Attorney General) v. Amazon.com, Inc., 2011 FCA 127 at para 1.

xviii Ibid., at para 7.

xix Ibid., at para 8.

xx Ibid., at para 9.

xxi Ibid., at para 10.