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New guidance on business-method patents ‘troubling’

|Written By Julius Melnitzer

After protracted and sometimes confusing litigation, the Canadian Intellectual Property Office in December 2011 granted Amazon.com Inc.’s patent application for a one-click shopping system that related to the placement of online purchase orders with a single mouse click.

There’s lingering uncertainty around business-method patents, says Michael Ladanyi.

Although a U.S. patent for the one-click feature had issued in 1998, the Canadian intellectual property office subsequently refused to issue one to Amazon.

On appeal, Canada’s Patent Appeal Board shocked the intellectual property community with a definitive statement against the patentability of business method s in Canada. The board also categorically stated that previous decisions allowing business-method patents were wrong.

But in November 2011, the Federal Court of Appeal rejected the board’s analysis and ordered the office to re-examine whether the one-click patent was “patentable subject matter.” Shortly thereafter, it granted the patent.

“The court specifically rejected CIPO’s requirement that patentable subject matter must have a technological component,” says Michael Ladanyi of Heenan Blaikie LLP.

“Unfortunately, the decision left some uncertainty as to how business-method patents would be handled both by CIPO and the courts going forward.”

But that’s not to say the case hasn’t added some clarity to the law.

Both the Federal Court and the Federal Court of Appeal saw the board’s ruling that a “traditional business-method patent exclusion” existed in Canada as a radical departure from the country’s patent regime.

In the Federal Court’s view, there was not and there had never been any categorical prohibition on such patents. Rather, the test for what was patentable was the one enunciated by the Supreme Court of Canada’s 1982 decision in Shell Oil Co. v. Commissioner of Patents.

In that case, the top court stated that a patentable “art” didn’t just include “new processes or products or manufacturing techniques” but embraced “new and innovative methods of applying skill or knowledge provided they produced effects or results commercially useful to the public.”

Shell had set out three conditions that an invention must meet in order to be patentable: it had to be a method of practical application that was more than an abstract idea; it had to be a new and inventive method of applying skill and knowledge; and it had to have a commercially useful result.

As the Federal Court saw it, Canadian patent legislation should be construed “in ways that recognize changes in technology such as the move from the industrial age to the electronic one of today.”

This meant business-method patents were patentable if directed to subject matter that met the general test of what constituted an “invention” under s. 2 of the Patent Act.

Finally, it wasn’t necessary to transform something material into another form to meet the subject-matter requirement in the act. It was irrelevant, then, that the goods ordered by the one-click method didn’t themselves undergo some physical change.

The Court of Appeal substantially affirmed the Federal Court’s reasoning regarding patentable subject matter. It ruled that no legal rationale existed for excluding business methods as potential patentable subject matter.

The Court of Appeal also rejected the intellectual property office’s stance that patentable subject matter had to be scientific or technological in nature and agreed with the Federal Court’s view that what was “technological” was subjective and unpredictable and couldn’t of itself be a bar to excluding certain inventions as patentable subject matter.

But the decisions still left a host of questions unanswered regarding the fate of individual applications for business-method patents and the intellectual property office did little to alleviate the uncertainty when it released three draft practice notices in April 2012.

The notices describe the way in which the office proposes to examine patent applications going forward.

“The draft guidelines in their current form are quite troubling,” says Ken Bousfield of Bereskin & Parr LLP.

According to Bousfield, the direction from the Federal Court of Appeal has done little to moderate the office’s approach to claims examination.

“Undeterred by the law or the clear rebuke by both the Federal Court and the Federal Court of Appeal, CIPO appears once again to be returning to its twice-rejected form-and-substance approach for evaluating patentable subject matter, rebranding it as a search for inventive concept,” he says.

More particularly, Bousfield objects to the office’s position that an inventive concept must have a physical existence, manifest a discernible effect or change or provide a solution to a technical problem.

“The emphasis on technical is difficult to reconcile with the decisions in both the Federal Court and the Court of Appeal that Canadian law does not require that inventions be technological,” says Bousfield.

“Hopefully, the draft guidelines will not be the final word on the topic. But if they are, they may hasten further litigation.”

As it turns out, the patent bar may not be unhappy with that prospect.

“The entire profession is waiting for the Supreme Court of Canada to sweep away all the mess that exists around patentable subject matter,” says Bousfield.

“One only hopes that this badly muddled area of law will be corrected soon.”

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