On 14th October 2010 the Federal Court of Canada issued a much-anticipated ruling in the appeal of a decision by the commissioner of patents to deny a patent to Amazon.com for a "business method", having found that it was not patentable subject matter under the Patent Act. The court's decision considered whether a business method is patentable under Canadian law and will have potential significance for many who navigate Canada's patent system. Canadian patent applicants, both domestic and foreign, will be greatly affected by the decision.

The case started in 1998 when Amazon.com sought a patent for a "method and system for placing a purchase order via a communication network". The claimed invention has uses in internet shopping, where it enables a customer to purchase an item with a single click. In 2004 a Canadian patent examiner rejected the patent on the basis of both obviousness and non-patentable subject matter. Amazon.com appealed the examiner's rejection. The commissioner of patents ultimately accepted the findings of a patent review panel and overturned the examiner's rejection on the basis of obviousness. However, the commissioner rejected the claims of the application for non-compliance with Section 2 of the Patent Act and as non-patentable subject matter. 

The decision clearly stated that there was no basis for the commissioner's assumption that there is a "tradition" of excluding business methods from patentability in Canada. This decision represents a return to this approach in Canada and allows business methods to be assessed pursuant to the general categories in Section 2 of the Patent Act.

Interestingly, the court found that a purposive construction of Amazon.com's "system claims" clearly disclosed, as an essential element, a machine in the form of a computer used to implement the one-click online ordering process. Such claims went beyond being directed to a mere "mathematical formula" which could be carried out without a machine or simply a computer program. Since a machine is patentable under the Patent Act, the court found that the system related to patentable subject matter.

Regarding the process claims, the court found that the claimed invention was clearly a process to enable customers to order items over the Internet by clicking on them. The court found that a system to facilitate online ordering adds to the state of knowledge, and that this new knowledge was a practical application of the "one-click" concept, put into action through the use of cookies, computers, the Internet and the customer's own action. Tangibility was not found to be an issue. The "physical effect", transformation or change of character was found to reside in the customer manipulating his or her computer and creating an order. In the Federal Court's determination, it did not matter that the ordered "goods" were not physically changed. Accordingly, the court also found the process claims to be patentable as an art and process.

The court concluded that there was no exclusion for "business methods" which are otherwise patentable. Even if there were some technological requirement in Canadian jurisprudence (although the court expressly said there was no such requirement), the claims of Amazon.com's patent application when viewed as a whole were found to disclose a technological invention.

IP portfolio managers should now seriously consider patenting valuable business methods in Canada. Unlike in the United States, it is possible to obtain a patent quite rapidly in Canada. In particular, it is possible to expedite prosecution with the payment of a modest government fee. In certain instances where securing patent rights in the United States is key, it is possible to secure the rights in Canada and then to obtain corresponding patent rights in the United States by adequately using the Patent Prosecution Highway between Canada and the United States. Using this mechanism, patent protection for such innovations can then be obtained very rapidly in the United States. This is another incentive for obtaining patent protection in Canada.

This article first appeared in IAM magazine. For further information please visit www.iam-magazine.com.