The recent Canadian Commissioner of Patent’s decision (No.1290)1 in’s 1-Click application (Canadian Patent Application No. 2,246,933; hereinafter the “1-Click application”) sets the stage for an overhaul of the Canadian Patent Office practice with respect to the determination of patentable subject matter.

The 1-Click application pertains to a method and system for allowing a customer previously registered with an online vendor to place an order for an item with a single click of a mouse button, thereby circumventing the need to re-enter customer identification information such as shipping address and billing information. While the Patent Appeal Board (PAB) found the claims in the 1-Click application to be non-obvious, the PAB upheld the Examiner’s rejection of the claims as being directed to nonstatutory subject matter.

The PAB stated that “an assessment of patentable subject matter involves a consideration of both the form and substance of the claims,” and elaborated a two-step test for assessing the statutory nature of claimed subject matter. The PAB held that while a claim may, on its face, appear to define statutory subject matter, this is not sufficient to establish the statutory nature of claimed subject matter. In order to be considered patentable, not only does the form of the claim have to fall within one of the specified categories of invention2, the substance or essence of the claim or “what has been added to human knowledge” must fall within one of the specified categories of invention. The PAB categorically stated that “a claimed invention cannot be considered as statutory subject matter if the feature or group of features that make it new and unobvious comprise excluded subject matter” and concluded that “a claim which relies on a particular feature or group of features to render it new and unobvious cannot rely on a different feature or group of features in order to qualify as statutory subject matter.”

Although the PAB decision cites the Unites States Court of Appeal Federal Circuit’s decision in In re Bilski3 and the European Patent Office (EPO) decision in Hitachi (T 258/03)4, the test recommended by the PAB is not consistent with either. Instead, the PAB rests its decision for adopting the two-step test on existing Canadian jurisprudence5 and, more importantly, on a 2006 U.K. decision (Aerotel)6.

The two-step test for assessing the statutory nature of claimed subject matter adopted by the PAB appears to be at odds with the EPO’s ruling in Hitachi. The EPO board dismissed the substance or “contribution approach” stating that “determining the technical contribution an invention achieves with respect to the prior art is therefore more appropriate for the purpose of examining novelty and inventive step than for deciding possible exclusion under Article 52(2) and (3).”

Moreover, by determining “substance”, the PAB concluded that the system claims in the 1-Click application were in essence “the same as that of the method claims.” The PAB went on to reject the system claims on the basis that the “essence” of these claims were non-statutory in nature. The approach adopted by the PAB appears to transform the “machine or transformation” test articulated in In re Bilski into a more rigid “machine and transformation” test for determination of the statutory nature of claimed subject matter.

The PAB further concluded that the essence of the claimed subject matter did not result in a change in the character or the condition of any physical object by the claimed system and method (the so called “Lawson test”7); that the essence of the claimed invention amounted to a method of doing business; and finally, that the essence of the claimed invention was not technological in nature. Thus, the PAB held that none of the claims of the 1-Click application recite statutory subject matter as defined in Section 2 of the Patent Act.8 It is interesting to note the may have been adversely affected by the timing of the retirement of two of the original members of the PAB after the first hearing in November 2005, but prior to rendering a decision. While it is not possible to predict the outcome had a decision been issued in 2005, the Aerotel and In re Bilski decisions would not have played any role in guiding the PAB at that time. Furthermore, the current version (revised February 2005) of the Manual of Patent Office Practice (“MPOP”) clearly states 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 based on their inclusion in this category.”9

The PAB clearly disagrees with this view, and indeed the proposed revision to the MPOP does not mention “business methods” at all. The proposed revision instead states:

Fields of human endeavour such as economics, commerce, accounting, record keeping, marketing, and law are not themselves fields of technology. While it is certainly possible for inventions of relevance to such fields to be patentable (i.e. tools for use in their practice), advances in the concepts of their practice are beyond the scope of section 2 of the Patent Act. has until September 5, 2009, to appeal the decision to the Federal Court. Determination of the statutory nature of claimed subject matter is bound to be a contentious issue in Canada for some time to come.