Catherine Du Pont-Thibodeau is a J.D. candidate at Osgoode Hall Law School and is taking the Patent Law course.
A topic recently caught my attention while surfing the Internet in search of a subject for this blog: the patentability of business methods in Canada and more particularly Amazon.com’s 1-Click technology. Having very little knowledge of patent law at least so far, I decided to explore this topic to understand what the buzz was all about. Through this short post, I will try to provide some insight on the developments of the Canadian patent law and the impact of the recent rejection of Amazon.com’s 1-Click.
In a nutshell, Amazon’s 1-Click online purchasing method allows a customer to purchase an item with a single mouse-click. For example, a first time user enters his/her identification, billing and shipping information, which is then stored on the vendor’s server. On his/her next visit, he/she can proceed quickly by making the purchase and proceeding directly to the virtual checkout with one click.
Patents for this process took off in the U.S. in 1998, when a U.S. Court of Appeal ruled in State Street Bank & Trust Co. v. Signature Financial Group Inc. that patents could be awarded for business methods. In the aftermath of this decision, many companies rushed to file patent claims for a wide range of business practices. Amazon.com became one of the most visible method patentee with its 1-Click patent.
However, in Canada, Amazon.com’s experience was very different. In 2004, Amazon’s application was rejected by the Canadian Patent Office (the “CPO”) based on obviousness and non-statutory subject matter but that decision was overturned on appeal by the Canadian Patent Appeal Board (the “CPAB”) on the basis that all of Amazon’s 75 claims were inventive in comparison to prior art. But, the CPAB also held that all claims were directed to non-statutory subject matter. This decision has signaled a significant shift in the CPO‘s approach to patentable subject matter and, in particular, software and business method patents. Currently, the issue is now before the Federal Court and is being followed closely by software and business method innovators.
The CPAB referred to the traditional judicial test established in Beloit Canada Ltd. v. Valmet Oy but also relied on the newer four-step approach outlined by the Supreme Court of Canada (“SCC”) in Sanofi-Synthelabo Canada Inc. v. Apotex Inc., and concluded that the invention was not obvious because a person skilled in the art would not have been led “directly and without difficulty” to the claimed invention.
The CPAB then considered the issue of subject matter and here innovated holding that it was necessary to consider both the form of the claim(s) (e.g. whether each claim on its face appeared to define statutory subject matter) and its substance (e.g. what has been discovered or added to human knowledge) to determine whether it fell into excluded subject matter. In other words, the CPAB held that it was not sufficient for the form of a claim to fall within one of the categories of statutory subject matter found in the definition of “invention” in S.2 of the Patent Act, R.S., c. P-4, because the substance of the invention must also fall within one of the statutory categories. In short, a claimed invention cannot be considered as statutory if the feature or group of features that make it new and not obvious fall into excluded subject matter.
The CPAB also adopted a new technological subject matter requirement. It held that “subject matter that is not technological is not statutory subject matter, and cannot fit under one of the categories of invention”. In applying that analysis to the Amazon.com 1-Click patent, the CPAB concluded that “what had actually been discovered … is limited to streamlining the traditional online ordering method, and the benefits and advantages that flow from it. In other words, the essence of the claimed invention is the particular rules for carrying out an online order”. It then added that “concepts or rules for the more efficient conduct of online ordering, are methods of doing business. Even if these concepts or rules are novel, ingenious and useful, they are still unpatentable because they are business methods”. The CPAB further held that the substance of these claims were not statutory subject matter because the substance of the invention failed to qualify as an “art” or “process” within the definition of “invention”. The CPAB rejected the possibility of patenting business methods, stating that “since patenting business methods would involve a radical departure from the traditional patent regime, and since the patentability of such methods is a highly contentious matter, clear and unequivocal legislation is required for business methods to be patentable”. The CPAB sided with the dissenting opinion in Monsanto Canada Inc. v. Schmeiser, and ignored the U.S. decision in State Street Bank & Trust Co. v. Signature Financial Group Inc., and its progeny. Furthermore, although the CPAB acknowledged that the claimed invention did involve some technological aspects, such as the technological capability of a cookie, this was not sufficient for patentability because that technological aspect was known from the prior art. With this new technological requirement, only features that are novel and non-obvious over prior art, constituting the substance of the invention, can be relied upon to qualify as statutory subject matter.
To conclude, this case appears to raise the threshold for obtaining business method patents in Canada. First, this decision seems to indicate that claim form is not determinative and the substance of each claim will be reviewed to determine what has been added to human knowledge. Where that addition is directed to non-statutory subject matter, the claim will be rejected. In particular, the CPAB made it clear that simply adding hardware elements of a “general purpose computer” would not automatically make a system claim patentable. What must be remembered from this decision is that business methods are excluded subject matter and are not patentable under Canadian law. It is however difficult to understand how the CPAB’s new approach to statutory subject matter could be reconciled with existing Canadian law. For example, this decision represents a clear change from the position outline in the 2005 Manual of Patents Office Practice (chapter 12) which provided that “business methods are not automatically excluded from patentability, since there is no authority in the Patent Act or Rules or in the jurisprudence to sanction or preclude patentability”. Not surprisingly, in 2009, the CPO issued a new draft of its chapter to reflect the new changes.
The CPAB’s decision is not necessarily the end of the road for the 1-Click patent since Amazon can still hope that the Federal Court reverses the decision. However, this decision provides a strong signal that the business method patents face a rough ride under the current Canadian law.