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With "One-Click," Business Methods Are Patentable in Canada

In a decision of the Federal Court of Canada released on October 14, 2010,, Inc. v. Canada (AG), the court allowed an appeal from a ruling by the Commissioner of Patents that had originally denied a patent application by Inc. for its pervasively successful one-click online ordering technology. The Commissioner had held that the subject matter of Amazon’s application did not qualify as patent-eligible subject matter under the Patent Act. In overturning this finding, the court instead held that the Commissioner had applied wrong legal tests in rejecting Amazon’s patent application, and articulated a new test that does not preclude computer-implemented innovations and business methods from being patented in Canada if they are directed to subject matter that meets the general test of what may constitute an "invention" under Section 2 of the Patent Act.

Amazon’s patent application is titled "Method and System for Placing a Purchase Order Via a Communication Network." The invention as claimed allows a customer to purchase an item online with a single click of a mouse. For this reason, the application has variously been referred to as the "one-click" patent application.

In rejecting the claims of the application, the Commissioner had applied a four-step approach to determine the subject matter eligibility issue. This four-step approach drew heavily on foreign jurisprudence, particularly the United Kingdom’s. This reliance drew a key criticism from the court, which held that the Commissioner had ignored "fundamental differences between the foreign and the domestic regimes" as they pertained to patents and ignored "Canadian legal principles altogether." The court held that the Commissioner has no discretion to deviate from the Canadian patent law and its interpretation by the courts, and that the Commissioner erred in adopting a policy role inconsistent with established Canadian legal principles.

To determine whether Amazon’s patent application claimed eligible subject matter, the court focused on whether the claims amounted to a patentable "art" pursuant to the definition of "invention" in Section 2 of the Patent Act. Relying on a decision of Supreme Court of Canada in Shell Oil Co. of Canada v. Commissioner of Patents, the court concluded that the test for patentable "art" has three components, namely the subject matter of the claim (a) must not be a disembodied idea, but have a method of practical application; (b) must be a new and inventive method of applying skill and knowledge; and (c) must have a commercially useful result.

Thus, as formulated by the court, the Commissioner’s reasons for excluding business-method patents can no longer be a barrier to obtaining a patent for a business method in Canada. By the same token, there is no longer a requirement in Canada that eligible subject matter exhibit a "technical character" or that it support a "technical contribution," as the Commissioner had previously maintained.

When describing the three-part test articulated above, the court focused on its first element – the "practical application" requirement. The court explained that this requirement ensures that something that is a mere idea or discovery is not patentable – it must be concrete and tangible. According to the court, this requires some sort of manifestation or effect or change of character. However, it is important to remain focused on the requirement for practical application rather than merely the physicality of the invention. A "mere business scheme" will have no practical embodiment, and will be non-patentable like any abstract idea or theorem.

The court also held that it is not necessary to transform a material object into another form in order to meet the subject matter requirement in Section 2 of the Patent Act. In so holding, the court in a sense mirrored the findings of the US Supreme Court in Bilski, which recently rejected the "machine-or-transformation" test as the sole test under the US equivalent of the subject- matter test pursuant to Section 2 of the Patent Act.

Having determined that the Commissioner had erred in law by applying the wrong test, the court proceeded to consider the claims afresh and determined that they claimed patentable subject matter. For the system claims of the application, the court held that the recited elements included machines (e.g., a computer) that were essential elements in implementing the online ordering process for which protection was being sought. Similarly, the court held that the method claims in question were directed to the practical application of the one-click concept, put into action through the use of "cookies," computers, the Internet and the customer’s own action. According to the court, the physical effect manifested by these claims resided in the customer manipulating their computer and creating an order. It was irrelevant in the view of the court that the goods ordered were not themselves physically changed.

Overall, Amazon is a landmark decision that potentially heralds a new era of increasing acceptance for patents directed to computer-implemented inventions and business methods in Canada. It is unclear at this stage how broadly the Patent Office and ensuing court rulings will interpret and apply this important decision.