Canadian Federal Court Upholds Patentability of Business Methods

October 2010

In a decision dated October 14, 2010, Judge Michael Phelan of the Federal Court in Ottawa, Ontario, reversed a decision by the Canadian Commissioner of Patents holding that business methods are not patentable subject matter. Inc. v. the Attorney General of Canada and the Commissioner of Patents, 2010 FC 1011 (October 14, 2010). On appeal from the Commissioner's decision, Judge Phelan held that the categorical exclusion of business methods as non-patentable subject matter was inconsistent with Canadian law. Furthermore, Judge Phelan rejected the Commissioner's position that an invention must be physical in nature or involve a physical agent performing acts on a physical object in order to be patentable. Instead, Judge Phelan emphasized that tangibility is not the issue and that the patent laws must accommodate changes in technology.

The patent application at issue in the case involves's "one-click" technology for placing order on the Web. With this invention, the patentability of which has been upheld in the United States, a customer visits a website, enters address and payment information, and a "cookie" is stored in the customer's computer. When the customer wishes to place an order, a server recognizes the customer via the cookie on the customer's computer and recalls the customer's purchasing information. The customer may make a purchase with a single click, that is, without the need to enter any additional information.

The patent application included both system and method claims, and the examiner rejected the patent on the grounds of obviousness and non-patentable subject matter. The examiner's decision was appealed to a Patent Review Panel, which upheld the examiner's conclusion that the invention constituted non-patentable subject matter. The Commissioner of Patents adopted the Panel's decision as her own.

According to the Commissioner, a claim is not patentable unless that part of the claim that is novel and nonobvious also constitutes patentable subject matter. In other words, the Commissioner's approach would require a parsing of the claim to determine which part of the claim is novel and nonobvious and then an analysis as to whether those particular features or aspects of the invention also constitute patentable subject matter. Judge Phelan rejected this piecemeal approach, acknowledging that some elements of any invention would fail to meet the novelty test if the test were applied on an element-by-element basis, and holding that the invention must be considered as a whole in determining whether it addresses patentable subject matter.

The Commissioner also imposed the requirement that an invention must be "technological in nature." In Judge Phelan's opinion, this requirement is not supported by Canadian law, and by imposing this requirement, the Commissioner was making policy rather than interpreting the law. Moreover, Judge Phelan recognized that although the broad aim of the patent laws is to support the advancement of technology generally, adding a "technological" test to the patent system would require a fair amount of subjectivity in interpreting and applying this test and would lead to a lack of predictability. As Judge Phelan concluded, any attempt to define "technology" as such defeats the very flexibility that is crucial to the Patent Act.

Lastly, the court stated that the Commissioner had placed undue emphasis on the laws of foreign countries at the expense of focusing on Canadian patent law. In particular, Judge Phelan felt that the Commissioner had relied too heavily on the United Kingdom's current Patent Act and noted that the Canadian Patent Act was based on the American patent system. Judge Phelan commented favorably on the U.S. Supreme Court's recent decision in Bilski v. Kappos, 130 U.S. 3218 (2010), a summary of which is provided here.


Amicable photo of Toni

Antoinette M. Tease, P.L.L.C.