In January of this year, the Canadian Intellectual Property Office (CIPO) issued Patent No. 2,246,933 to Amazon.com for its “one-click” technology, thereby marking the beginning of business method patents in Canada.
This came more than 13 years after Amazon’s initial patent application, which was rejected by the Canadian Commissioner of Patents (Commissioner) for falling outside of the Canadian Patent Act’s definition of patentable “invention.” Last November, the Federal Court of Appeal (FCA) allowed Amazon’s appeal of the Commissioner’s decision to reject its patent application, and ordered that the Commissioner re-examine the application “on an expedited basis” (see Canada (Attorney General) v. Amazon.com, Inc., 2011 FCA 328).
While the result of that judgment has been the registration of the first business method patent in Canada, some distance is yet to be covered in clarifying the extent to which business methods are patentable in Canada.
Amazon’s patent application, entitled “Method and System for Placing a Purchase Order via a Communication Network” disclosed a method of collecting and storing payment information during an individual customer’s first online purchase transaction, such that this information needn’t be re-entered if that same customer makes subsequent purchases from the same computer.
The system work as follows: The merchant’s computer assigns an individual’s payment information a unique identifier (a cookie), then sends the identifier to the customer’s computer, where it is stored. Upon returning to the online store, the customer is identified by the stored cookie, and after selecting an item for purchase, is prompted to make a single action, typically a click, to complete the transaction.
One-Click: Business Method, Art or Invention?
The main issue raised on appeal to the FCA was whether One-Click was an “invention” for the purposes of the Patent Act. Section 2 of the Patent Act defines an “invention” as follows:…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 (emphasis added).In deciding to reject Amazon’s One-Click patent application, the Commissioner of Patents devised three tests, based on case law, that he believed to be implicit in the meaning of “art” for the purposes of the Patent Act. According to the Commissioner, One-Click failed those three tests, and was therefore not “art”:
- It did not add to human knowledge anything technological in nature;
- It did not cause a change in the character or condition of a physical object; and
- It was merely a business method, and business methods were not patentable.
The FCA, somewhat unappreciative of the Commissioner’s inventive analysis, dismissed the question of whether One-Click was “technological in nature” as unclear and unhelpful.
Moreover, the FCA clarified the notion of inventions being required to cause a change in the character or condition of a physical object. This “physicality requirement” was described in Lawson v. Canada, wherein the court held that “there must be some manual, chemical, or physical effect to transform or reduce something to a different state or thing” (Lawson v. Canada (Commissioner of Patents) (1970) 62 C.P.R. 101).
Tempering the Lawson decision in light of the current state of technology, the judge in the lower court found that the physicality requirement could be met by virtue of the invention having a “practical application.”
The FCA did not accept that a mere practical application was sufficient to constitute an invention. Rather, “it is implicit in the definition of ‘invention’ that patentable subject matter must be something with physical existence, or something that manifests a discernible effect or change.”
Finally, in regard to whether or not a business method was patentable subject matter, the FCA answered this question in the affirmative. This question turned on s. 27(8) of the Patent Act, which bars the granting of a patent for a “mere scientific principle or abstract theorem.”
The crux of this issue is that a business method may be patentable insofar as the novel aspect of the business method is not a mere scientific or abstract theorem — i.e., an idea. Given the possibility that novel business methods might entail more than mere ideas, the FCA referred the construction of the claims of the patent back to the Commissioner of Patents. The result was that the Commissioner decided to grant Canada’s first business method patent.
Business Methods Patents for All?
So, is this January’s granting of the One-Click patent indicative of a dramatic shift in the patentability of business methods? The short answer is that we’ll have to wait and see. Since the FCA did not elaborate on what it means to “manifest a discernible effect or change,” potential business method patentees must be extra careful not to land on the wrong side of the interpretation of this decision.
While Amazon may have been successful with One-Click, this is but a benchmark of what business methods may be passable. As such, patent applicants cannot take for granted the potentially high hurdle that remains in the form of the “physicality requirement.”