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Amazon appeals adverse ruling

|Written By Julius Melnitzer

In March 2009, the Patent Appeal Board shocked the intellectual property community with a definitive statement against the patentability of business method patents in Canada.

Peter Wells believes the board may have had an appeal in mind in making its ruling.

The pronouncement came in a lengthy decision that rejected a patent application by, Inc. for a “one-click” shopping system, a ruling the company is now appealing.

“This is the first time we have a Canadian decision categorically stating that [business method patents] are not patentable in Canada,” says Chris Van Barr of Gowling Lafleur Henderson LLP. “As well, the board states that previous decisions allowing [them] are wrong.”

But Peter Wells of Lang Michener LLP says the board may have taken such a categorical approach with an appeal in mind.

“I believe the board anticipated that this case would go to the Federal Court, which has never ruled on [business method patents], and therefore decided to put the issue squarely in its reasons,” he says.

The case arose after a U.S. patent for the one-click feature was issued in 1998. Still, the Canadian Intellectual Property Office rejected the application in 2004. Amazon then appealed to the board.

Despite finding that the one-click innovation was both new and non-obvious, the board ruled the claims advanced were not patentable under the Patent Act because they did not define a technological advance that was either a physical object or an act performed “by some physical agent upon some physical object and producing in such object some change either of character or condition.”

From all appearances, the U.S. Court of Appeals’ October 2008 decision in Bilski v. Doll, which limited the patentability of business method patents, made a significant impression on the board.

The board cited Bilski for the proposition that a process was eligible for patent protection only if it was tied to a particular machine or if it transformed a particular article into a different state.

Arguably, however, the board ventured not only beyond Bilski but also beyond the United Kingdom and the European Union’s conservative positions on patentability.

“The [appeal board’s] reasons can be interpreted not only as holding that inventions must have a physical form but also that the machine must be at the heart of the invention,” says Edward Fan of Torys LLP. “That would take out not just pure [business method patents] but also implemented technologies that affect business dealings.”

In the Amazon case, for example, the board acknowledged that the company’s novel use of cookies to facilitate the one-click system was a technological claim. The claim failed, however, because it was directed to business method patents, which the board regarded as “non-patentable subject matter” under the Patent Act.

“What the board is saying, then, is that a new use for an old invention, which is traditionally patentable, is not patentable when the new use is a business method use,” Van Barr explains.

The ruling represents a significant departure for Canadian law.

“In the past, we’ve always danced between the extremes of U.S. law, which favoured [business method patents], and European Union and U.K. law, which prohibited them,” Van Barr says.

While the appeal board’s decision binds only the application in question, it may very well signal a shift in the intellectual property office’s position on business method patents. Previously, they had been making headway in Canada, although authorities had been treating them more restrictively than the United States had before Bilski.

The current version of the intellectual property office’s Manual of Patent Office Practice makes it clear that business method patents are not automatically excluded as patentable subject matter. But a new version, presently being circulated for comment, does not mention them at all regarding patentability.

“Instead, the new version talks vaguely about computers and software inventions,” says Brian Gray of Ogilvy Renault LLP.

Practitioners are hopeful that greater clarity about both the Canadian and U.S. positions will emerge soon. The U.S. Supreme Court, for example, has granted certiorari in Bilski.

“The real question is whether the technological component test is too restrictive,” Wells says. “Many of the amicus briefs filed in Bilski take the approach that some restrictions are necessary, but care must be had not to make the law too restrictive.”

Although the wording in Canada’s Patent Act on what is patentable is similar to that of American legislation, the U.S. high court has been more expansive in its interpretation of patentability than its Canadian counterpart.

For example, Canada’s Supreme Court famously refused patents on higher life forms in its 2002 decision in Harvard College v. Canada (Commissioner of Patents). The ruling came despite the fact that the patent in question, for Harvard University’s Oncomouse, had received approval in the United States, Europe, Japan, and Australia.

“Just as patenting higher life forms would involve a radical departure from the traditional patent regime, the patenting of business methods would also involve a radical departure and a highly contentious matter that raises a number of extremely complex issues,” Gray says.

But Fan says there’s an important difference.

“The ethical questions are very different when you’re talking higher life forms than when you’re talking about more economical methods of working,” he says.

Still, Alexandra Daoud of Ogilvy Renault cautions that the Amazon case may indeed have a direct impact on other types of patents. Writing in a recent firm bulletin, Daoud focuses on the board’s interpretation of what amounts to “excluded subject matter” under the Patent Act.

“The interpretation of ‘excluded subject matter’ may have an impact on Bio-IT patents in Canada,” she wrote. “With the development of new approaches and modern techniques, new horizons are opening up for biotechnology industries.

Many of the innovations in the field of Bio-IT, while relating to more traditional aspects of science such as genetics, microbiology, and molecular biology, involve computers and software to improve the quality of products and increase the productivity of systems.”

Daoud posits that bioinformatics, which uses computer techniques to organize and analyze biological data, is at risk of “being classified as excluded subject matter.”

A similar fate may await pharmacogenomics, which uses computers to study the impact of genetics on responses to drugs; and genetic testing where scientists use software to interpret data.

“In each of these fields, it will be important to thoroughly disclose and claim tangible machine aspects of innovations,” Daoud wrote. “For example, input, output, and control functions performed by processors should be emphasized and claimed.”

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