Amazon's success as an online retailer is unquestionably without rival. How could an online startup founded in 1994 establish itself as the market leader so quickly? Some would argue that its success is at least in part due to its innovative approach to conducting online sales, which it duly identified and sought protection for via a number of patent applications.

In 1999, Amazon obtained a patent for its "one-click" online ordering method in the United States (U.S. Patent No. 5,960,411). Other companies sought to mimic Amazon's approach, and Amazon successfully asserted this U.S. patent against Barnes and Noble, obtaining an injunction against its use of the one-click ordering system and method. Criticism of the patent system in the United States ensued.

Amazon filed a Canadian patent application in 1998 for another aspect of its one-click online ordering method, leading to a showdown with the Canadian Patent Office.

The application, as amended, has 75 claims, seven of which are independent. Independent claims 1, 19, 33, 51, 60 and 68 are method claims, and independent claim 44 is a system claim. Independent claim 1 is an exemplary independent method claim:

1. A method in a client system for ordering an item, the method comprising:

  • receiving from a server system a client identifier of the client system;
  • persistently storing the client identifier at the client system;
  • when an item is to be ordered,
    • displaying information identifying the item and displaying an indication of a single action that is to be performed to order the identified item; and,
    • in response to the single action being performed, sending to the server system a request to order the identified item along with the client identifier, the client identifier identifying account information previously supplied by a user of the client system wherein the user does not need to log in to the server system when ordering the item; and
  • when account information is to be changed,
    • coordinating the log in of the user to the server system;
    • receiving updated account information; and
    • sending the updated account information to the server system whereby the user does not need to log in to the server system when ordering the item, but needs to log in to the server system when changing previously supplied account information.

Independent claim 44 is the sole independent system claim:

44. A client system for ordering an item, comprising:

  • a component that receives from a server system a client identifier of the client system and that stores the client identifier persistently;
  • a component that orders an item by displaying information identifying the item along with an indication of a single action that is to be performed to order the identified item and by sending to the server system a request to order the identified item along with the client identifier, the client identifier identifying account information previously supplied by a user wherein the user does not need to log in to the server system when ordering the item; and
  • a component that updates account information by coordinating the log in of the user to the server system, receiving updated account information from the user, and sending the updated account information to the server system.

The claims of the application were rejected by the Examiner on the grounds of obviousness and non-statutory subject matter in the Final Action issued on June 1, 2004. Amazon filed an appeal on December 1, 2004, and the Commissioner released her decision on March 5, 2009.

In its recommendations to the Commissioner of Patents, the Board first set out to address the question of obviousness. It identified the test established in Apotex Inc. v. Sanofi-Synthelabo Canada Inc. et al., 2008 SCC 61, and applied it, arriving at the conclusion that the claims of the application were not obvious.

Next, the Board established the following approach for assessing whether the claims defined statutory subject matter:

1. Both the form and the substance of the claims would be considered

By "form", the Board meant the language of the claim that, on its face, defines the invention. Form, as defined, has been the manner by which claims have been adjudged to be either falling under the definition of "invention" under Section 2 of the Patent Act, or falling outside thereof.

"Substance" was then defined as that which had been discovered, that which differentiated the claimed invention from the prior art.

This two-step approach represents a departure from the traditional approach to the determination of whether subject matter is statutory, but a recent Supreme Court decision appears to lend support. In Apotex v. Sanofi-Synthelabo, in discussing obviousness, Rothstein J. said, "The inventive concept of the claims is not readily discernable from the claims themselves. A bare chemical formula in a patent claim may not be sufficient to determine its inventiveness. In such cases, I think it must be acceptable to read the specification in the patent to determine the inventive concept of the claims." Looking further back, the Supreme Court said in Biolyse v. Bristol-Myers Squibb, 2005 SCC 26, that the patented invention is not necessarily co-extensive with the patent claims, which define the exclusive privilege sought.

2. The subject matter identified in the first step must fall into a category of invention

"Invention", as defined in Section 2 of the Patent Act, is "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". It was noted by the Board in its recommendations that, per Lawson v. Commissioner of Patents, 62 C.P.R. 101, for an art to be patentable, it must cause a change in the character or condition of some physical object.

3. Certain subject matter is excluded

The Courts have determined that certain subject matter is excluded. Examples listed by the Board include methods of medical treatment, higher life forms, and computer programs if the substance of a claim is a formula.

In addition, the Board also included business methods in this list, relying upon a dissenting opinion in Monsanto Canada Inc. v. Schmeiser, 2004 SCC 34, [2004] 1 S.C.R. 902, and, surprisingly, the U.S. decision State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F.3d 1368 (U.S. Fed. Cir. 1998). The Board's position regarding business methods seems flawed, especially since, in State Street, the U.S. Federal Court concluded that a computer-implemented method of managing mutual funds was, in fact, patentable subject matter.

The Board did not provide a definition for what qualifies as a business method.

In arriving at its determination that business methods arenon-statutory subject matter, the Board extrapolated from Harvard College v. Canada (Commissioner of Patents), 2002 SCC 76, [2002] 4 S.C.R. 45, wherein Bastarache J. wrote:

[166] Patenting higher life forms would involve a radical departure from the traditional patent regime. Moreover, the patentability of such life forms is a highly contentious matter that raises a number of extremely complex issues. If higher life forms are to be patentable, it must be under the clear and unequivocal direction of Parliament.

The Board stated that business methods have traditionally not been patented in Canada and that their patenting 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.

4. Non-technological subject matter is not statutory

The Board stated that each of the categories of the definition of "invention" under Section 2 of the Patent Act relate to technological areas, and then deduced that non-technological subject matter is not statutory.

The Board concluded that the method claims were directed to "a method for the purchase of goods", stating that these claims define steps to place orders and facilitate administrative aspects of ordering. Such claims, according to the Board, are business methods that the Board believed exempt from statutory subject matter. The Board accordingly affirmed the rejection of these claims on the basis of non-statutory subject matter.

With respect to the system claims, the Board conceded that, on form, these claims fit into the category of machine under Section 2 of the Patent Act. The Board then identified aspects of the claims that it believed were novel and not obvious, in view of the prior art, to determine the "substance" of these claims. It then concluded that "the essence of the claimed invention is the particular rules for carrying out an online order". Applying the test set out in Lawson, the Board concluded that "there is no change either of character or of condition to any physical object itself by the act of ordering the product in one way or another", and thus the system claims were directed to non-statutory subject matter.

The Board indicated that there was no need to continue its analysis, but then proceeded to conclude that the "substance" of the system claims was a business method, and did not represent "technological" improvements that would add to human knowledge, borrowing from the language of Progressive Games v. Commissioner of Patents, 3 C.P.R. (4th) 517, aff 'd 9 C.P.R. (4th) 479.

During the determination of the substance of the claims, the Board identified the new use of a "cookie" (the small string of text stored on a user's computer by a web browser containing bits of information) to enable a user to order online without having to log in. The Board admitted that cookies were "technological", but subsequently determined that a new use of cookies to achieve a seemingly-improved system and method for online ordering was, in fact, not technological and a business method, particularly in light of a prior art finding of non-obviousness.

The Commissioner refused the application based on the advice of the Board. It is noted that this decision is only binding on the application in question, but it does suggest that the prosecution of business method and, arguably, computer software applications will be more difficult in the future.

If Amazon files an appeal of this decision before the deadline of September 5, 2009, it will enable the Federal Court to establish some binding jurisprudence on the issues raised in the Commissioner's Decision, namely the scope of patentable subject matter.