In the July, 2010 issue of the Cassels Brock Report we discussed the decision of the US Supreme Court in Bilski v. Kappos.1 In Bilski, the Court provided direction on whether non-tangible business methods and processes constituted legitimate patentable subject matter entitling an inventor to a territorial monopoly on those methods and processes in the United States.

By a small majority, the US Supreme Court declined to rule that all software or business method claims are inherently unpatentable, leaving the door ajar for digital age inventors to seek patent protection in the US for otherwise new and novel intangible business method or software processes. The US Supreme Court went further by rejecting the lower Court’s attempt to enunciate a single bright line objective test (the so called “machine or transformation test”) for determining eligible patentable subject matter. The so-called “machine or transformation test” required that a process or business method, in order to qualify as eligible patentable subject matter, either: (a) be tied to a particular machine or apparatus; or (b) transform a particular article into a different state or thing. While the US Supreme Court acknowledged that the machine or transformation test may be a useful and an important tool for consideration, it did not constitute the sole test for patent eligibility under the U.S. Patent Act.

The U.S.S.C. decision in Bilski left us with a significant dilemma – at that juncture, Canada and the US, two major digital age trading partners, had adopted different approaches to the patentability of geographically borderless business methods.

This dilemma has been mollified to a degree by the October 14th, 2010 decision of the Federal Court of Canada in the Amazon.com “one click” patent appeal case.2 In Amazon.com, the Federal Court of Canada, among other findings setting aside the Commissioner of Patents’ rejection of Amazon.com’s one click patent application and directing that the Commissioner reexamine that application on an expedited basis, held that there is no a priori statutory exclusion in Canada for business methods. Thus, business methods can form proper patentable subject matter in Canada when they have practical application and a commercially useful result.

While the Federal Court reaffirmed the requirement that there be a practical application for an invention, thus distinguishing legitimate patentable subject matter from unpatentable mere schemes, abstract scientific theorem or disembodied ideas, the Court specifically rejected the Commissioner of Patents’ interpretation that an assessment of patentable “art” required an assessment of the physicality of an invention and its technological nature. The Court took an expansive approach, noting that the previous case law must not be interpreted to restrict the patentability of practical applications which might, in light of today’s technology, consist of a slightly less conventional “change in character”, or effect that change through a machine such as a computer.

So, having had some time to reflect upon Bilski and Amazon.com, what are the three most significant take aways for our clients:

1.It seems clear that the Courts in both cases recognize that the rapidity of technological innovation, and the development of new business paradigms in result, necessitate an expansive approach to determining the scope of patentable subject matter. Thus, one would anticipate that, unless specifically prohibited at law, intangible methods and processes (and not just business methods) that are new, not simply mere schemes or disembodied ideas, and have practical application and a commercially useful result, will constitute patentable subject matter in Canada. 2.In preparing patent specifications and claims, applicants may take more comfort in the creative process of focusing on the descriptions and elements of the practical application and commercial utility of their inventions, and less on incorporating forced descriptions of transformed matter or machinery and apparatus steps to fit their inventions into a formerly more restrictive definition of patentable “art.” 3.In an increasingly competitive and borderless North America, clients in business sectors (such as financial services, securities, and insurance, as well as Internet-based entrepreneurs) noted more for the novelty of the manner in which they provide goods and services than for the goods and services themselves, should reexamine their methods and processes and consider the opportunity to seek patent protection, or at least the earliest patent protection priority dates available to them, as the law in this area continues to evolve. The story will undoubtedly continue to unfold. On November 15, 2010, The Attorney-General of Canada and the Commissioner of Patents filed Notice of Appeal to the Federal Court of Appeal in the Canadian Amazon.com case. We will report on significant developments as they occur.