Date: 20101014
Docket: T-1476-09
Citation: 2010 FC 1011
Ottawa, Ontario, October 14, 2010
PRESENT: The Honourable Mr. Justice Phelan
BETWEEN:
AMAZON.COM,
INC.
Appellant
and
THE ATTORNEY GENERAL OF CANADA, and
THE COMMISSIONER
OF PATENTS
Respondents
REASONS FOR JUDGMENT AND JUDGMENT
I. INTRODUCTION
[1]
This
is an appeal of a decision by the Commissioner of Patents to deny the
Appellant’s patent for a “business method”, having found that it was not
patentable subject matter under s. 2 of the Patent Act, R.S.C. 1985, c. P-4
(Patent Act).
[2]
In
coming to the conclusion she did, the Commissioner in effect created a test for
assessing patentable subject matter, outlined new exclusions and requirements
for patentability and outlined her view of the scope of patentable ‘art’. Her decision
not only raises significant questions of law and interpretation, but extends
into policy-making which stands to fundamentally affect the Canadian patent
regime. This appeal is thus of consequence not only to the Appellant, but to
many who navigate our patent system. It also revisits the powers given – and not
given – to the Commissioner under the Patent Act and the limitations
which the statutory regime and jurisprudence impose upon her.
[3]
At
its core, the question is whether a “business method” is patentable under
Canadian law. For the reasons which follow, the Court concludes that a
“business method” can be patented in appropriate circumstances.
II. BACKGROUND
[4]
Amazon.com
seeks a patent for an invention entitled “Method And System For Placing A
Purchase Order Via A Communication Network” (claimed invention). The
application was filed on September 11, 1998 and claimed priority from two
American patents.
[5]
The
claimed invention further enables internet shopping. The customer visits a website,
enters address and payment information and is given an identifier stored in a
“cookie” in their computer. A “server” (a computer system operating a
commercial website) is able to recognize the “client” (customer computer with
the identifying cookie) and recall the purchasing information which is now
stored in the vendor’s computer system. The customer can thus purchase an item
with a “single click” – the order is made without the need to ‘check out’ or
enter any more information.
[6]
There
are 75 claims in the patent; some relate to the “method” whereas the others relate
to the “system” (i.e. the machine enabling this process). For the purposes of
this appeal the parties have agreed that two independent claims, Claim 1 and
Claim 44, are at issue:
Claim 1
1. A method in a client system
for ordering an item, the method comprising: receiving from a server system a
client identifier of the client system; persistently storing the client
identifier at the client system; where an item is to be ordered,
displaying information
identifying the item and displaying an indication of a single action that is to
be performed to order the identified item; and
in response to the single
action being performed, sending to the server system a request to order the
identified item along with the client identifier, the client identifier
identifying account information previously supplied by a user of the client
system wherein the user does not need to log in to the server system when
ordering the item and
when account information is
to be changed,
coordinating the log in of the user to
the server system;
receiving updated account information;
and
sending the updated account information
to the server system
whereby the user does not
need to log in to the server system when ordering the item, but needs to log in
to the server system when changing previously supplied account information.
Claim 44
44. A client system for ordering an
item, comprising:
a component that receives
from a server system a client identifier of the client system and that stores
the client identifier persistently;
a component that orders an
item by displaying information identifying the item along with an indication of
a single action that is to be performed to order the identified item and by
sending to the server system a request to order the identified item along with
the client identifier, the client identifier identifying account information
previously supplied by a user wherein the user does not need to log in to the
server system when ordering the item; and
a component that updates
account information by coordinating the log in of the user to the server system
receiving updated account information for the user, and sending the updated
account information to the server system.
[7]
The
remainder of the claims are variations on the above theme and describe, inter
alia, what information is stored, order cancellations and how multiple
‘single actions’ are consolidated.
[8]
The
patent application process was lengthy and involved multiple amendments to the
claims. On June 1, 2004, the Examiner rejected the patent on the basis of
obviousness and non-patentable subject matter. The Appellant appealed the
decision and appeared before a Patent Review Panel (Panel). This process was delayed
due to the retirement of two members, requiring a second hearing before a new
Panel. A decision was finally rendered on March 4, 2009. The Commissioner
accepted the finding of the Panel, making their report the reasons for her
decision. The Panel’s Reasons are referred to here as the Commissioner’s
Reasons.
III. COMMISSIONER’S
DECISION
[9]
The
Commissioner overturned the Examiner’s finding on obviousness. Although the use
of a “cookie” to track information is not new, she found the inventive concept
– a simplified “one-step” process in ordering – to be novel and non-obvious. The
decision rejected the idea that an invention is obvious on account of a
non-technical ‘distinguishing feature’ (here, the one step process). This
finding is not at issue in this appeal; it is agreed that the invention is
novel.
[10]
The
claims were rejected, however, on the basis that they did not conform to
section 2 of the Patent Act and accordingly were non-patentable subject
matter.
|
2.
In this Act, except as otherwise provided,
…
“invention”
« invention »
“invention” means any new
and useful art, process, machine, manufacture or composition of matter, or
any new and useful improvement in any art, process, machine, manufacture or
composition of matter;
|
2.
Sauf disposition contraire, les définitions qui suivent
s’appliquent à la présente loi.
…
« invention »
“invention”
« invention »
Toute réalisation, tout procédé, toute machine, fabrication ou composition de
matières, ainsi que tout perfectionnement de l’un d’eux, présentant le
caractère de la nouveauté et de l’utilité.
|
[11]
The
Commissioner’s logic in coming to this conclusion is fundamental to this
appeal. It is based on a “four step” approach which the Appellant submits has
no basis in Canadian jurisprudence. Further, they submit that the assumptions
and legal ‘principles’ enunciated constitute misinterpretation and
misapplication of foreign and domestic law. The Respondent, on the other hand,
submits that the Commissioner’s approach is supported by fundamental principles
of patent law, dating to the origins of the patent system and drawn from both Canada and abroad.
Even
the Commissioner acknowledged the novel path down which the analysis ventured. The
Panel Report stated that there was considerable debate as to the proper
approach to assessing patentable subject matter and it was incumbent on the
Commissioner to set out the correct approach (Panel Report at para. 20).
A. Form
and Substance of the Claims
[13]
According
to the Commissioner, an important starting point is analysis of both the form
and the substance of the claims. An invention must, on its face, relate to an
art, process, machine, manufacture or composition of matter (it must fit the
‘form’ requirement). This is not, however, sufficient; one must then look to
what has been “invented” or “discovered” in order to determine the substance of
the invention. The Commissioner found support for this approach in Lawson v.
Commissioner of Patents (1970), 62 C.P.R. 101 (Lawson), Shell Oil Co. of Canada
v. Canada (Commissioner of Patents), [1982] 2
S.C.R. 536 (Shell Oil), Tennessee Eastman Co. et al v. Commissioner
of Patents, [1974]
S.C.R. 111 (Tennessee Eastman) and Schlumberger Canada Ltd. v.
Commissioner of Patents, [1982] 1 F.C. 845
(C.A.) (Schlumberger). She also cited a more recent case from the United Kingdom in support of this
practice and the “four step approach” (Aerotel Ltd. v. Telco Holdings Ltd
& Others, [2006] EWCA Civ 1371 (Aerotel)).
[14]
In
what seemed like an aside, the Commissioner made a further comment which would
become important in her later analysis, and hotly debated in this appeal. She
stated that a claimed invention is not patentable if what makes it new and
unobvious comprises non-statutory subject matter. In view of this, a claim
cannot rely on a particular group of features which are not new but which
together are new and patentable in order to make it so. This conclusion seems
to flow from the decision in Schlumberger, where the Federal Court of
Appeal found that use of a computer did not make a mathematical formula
patentable. Again, she referred to elaboration in more recent case law from the
United
Kingdom.
[15]
As
will be addressed in greater detail later in this judgment, the Commissioner’s
“aside” leads to a further separation of the enquiry. On this approach, an
analysis of the patentability of what is new, apart from the invention as a
whole, is required.
B. Definition
of the Relevant Categories
[16]
The
Commissioner’s statement that the claims must fit into one of the five
categories listed in the Patent Act is not challenged. However, nearly
every aspect of her subsequent discussion on this issue is. On determining that
the relevant categories are “art” and “process” she launched into a consideration
of the meaning of art. Her definition, which the Appellant has submitted is
“restrictive”, stressed the physical nature of inventions. Inventions are
either a physical object (such as a machine) or a change of character or
condition of a physical object. The Commissioner relies on Lawson, as
cited in by Wilson J. in Shell Oil at page 555:
An art or
operation is an act or series of acts performed by some physical agent upon
some physical object and producing in such object some change either of
character or condition…It is concrete in that it consists in the application of
physical agents to physical objects and then is apparent to the senses in
connection with some tangible object or instrument.
[17]
The
Commissioner also references Wilson J’s discussion of art as “learning or
knowledge”, understood in the context of terms such as “the state of the art”
or “the prior art”. It must also have a practical application. In the mind of
the Commissioner this knowledge must also be scientific or technological. She
concluded that where a claimed invention is neither physical in nature nor
producing an act or series of acts performed by a physical agent on a physical
object to produce some change or effect, it is not patentable.
C. Excluded
Subject Matter
[18]
The
third step in the Commissioner’s approach was a consideration of what is
excluded either explicitly by the Patent Act or by jurisprudence. She
came to the immediate conclusion that business methods have “traditionally”
been excluded in Canada based in part on the dissent in Monsanto Canada Inc.
v. Schmeiser, 2004 SCC 34 (Schmeiser). There, Arbour J. listed ‘business
methods’ as an example of how the Patent Act has been interpreted to
exclude certain subject matter from patentability. In including it she relies
on State Street Bank & Trust Co. v. Signature Financial Group Inc.,
149 F.3d 1368 (Fed.
Cir. 1998) (State
Street), an American
decision. However, the Commissioner appears to have recognized that State
Street actually strongly endorsed the patentability of business methods and
so states that she accepts Arbour J’s statement “notwithstanding the reference
to State Street Bank” (Commissioner’s Decision at paragraph 142).
[19]
In
addition to the above justification, the Commissioner reasoned that the
exclusion carries through from subject matter exclusions in the United
Kingdom,
citing a case from 1901 and Fox’s 1957 Digest of Canadian Patent Law. Both
these authorities are clear that one cannot have a patent for a “mere scheme or
plan”, including for the conduct of a business. She also quoted at length from
a more recent case, CFPH LLC’s Application, [2005] EWHC 1589 (Pat.) (CFPH),
where the British
Court
discussed the policy reasons behind the business methods exclusion.
[20]
Finally,
the Commissioner referred to the concurring decision of Justice Dyk in In re
Bilski, 88 USPQ 2d 1385 (2008) (Bilski/USCA), a more recent U.S.
Court of Appeals’ decision which re-examined the business methods exclusion, in
order to illustrate the bearing the English system has on the American system
and the rationale of limiting patents to inventions related to “manufacture”. It
should be noted that the Supreme Court affirmation of this case, Bilski v. Kappos, 130 U.S. 3218 (2010) (Bilski/USSC), was released
after the Commissioner’s decision and indeed after this appeal was heard.
D. Technological
Requirement
[21]
The
final step in the Commissioner’s analysis is dependent on her assumption that
in order to be patentable an invention must be technological in nature. This
conclusion is justified by reference to the patent scheme, jurisprudence and the
dictionary meaning of technology. The Commissioner’s Reasons refer to the
“technological” nature of all five categories of invention, the requirement in
the Patent Rules that a description refer to a “technical problem” and the
language in the Agreement on Trade Related aspects of Intellectual Property
Rights (TRIPS). Further, according to Bastarache J. in Harvard College v. Canada
(Commissioner of Patents), 2002 SCC 76 (Harvard Mouse), the Patent
Act was designed to protect advances in technology.
[22]
Again,
the Commissioner referred at length to the English consideration of this issue,
returning to the decision in Aerotel as it relates to the “technical
contribution” approach to assessing patentable subject matter. The Commissioner’s
Reasons acknowledge that there has been a divergence between the European
Patent Office (EPO) and the English courts; the EPO has determined the
technical nature of the invention is best left to the obviousness analysis
given the problems with the contribution approach. Notwithstanding this, the Commissioner
found this to indicate that the EPO did consider both technical and
non-technical features, albeit in relation to the inventive step.
[23]
On
the basis of this analysis, the Commissioner concluded that subject matter that
was “non-technological” in nature is also non-statutory.
E. Commissioner’s
Assessment of the Patent
[24]
The
Commissioner’s assessment of the Appellant’s patent faithfully followed her
four step approach. In considering the first step she refused to be limited by
only the “grammatical sense” of the claims, as this would prefer form over
substance. She found that the method claims were in form related to a process
and the system claims in form directed to a machine. However, in substance the
claims were the same: both described a method. What was “added” or “discovered”
was limited to streamlining the ordering method and the benefits that flowed
from this. In order to be statutory, the invention had to “fit” into the
definition of an art or a process.
[25]
Applying
Lawson, the Commissioner found no change in physical condition of the
goods ordered, only in how the order was placed. Consequently, the claimed
invention was not statutory subject matter.
[26]
Although
she had already determined that the claimed invention did not meet the
requirements of the Patent Act, the Commissioner went on to consider the
final two “steps” of her test. She found that the claims were also excluded as
a business method. They added nothing to human knowledge other than retailing
concepts or rules for ordering – regardless of the concepts’ novelty, to patent
them would represent a “radical departure” from the current regime and require
parliamentary approval. Somewhat oddly, in light of her discussion of the
exclusionary “tradition”, the Commissioner went on to emphasize that although
patents may have been issued for business methods in the past, if this is
inconsistent with the Patent Act, that practice should be corrected.
[27]
Finally,
the Commissioner considered each of the features identified in the patent in
order to assess whether they were technological, had a technological effect or
were cumulatively such. She found that most did not, with the exception of the
use of cookies, which might potentially be technological. However, their technological
use was already known – no “technical effect” had been added to human
knowledge.
IV. STANDARD
OF REVIEW
[28]
The
central issues in this appeal go to the scope and definition of “art” and “method”,
as well as judicially interpreted excluded subject matter. The interpretation
of s. 2 of the Patent Act is a question of law which attracts a
correctness standard: Harvard Mouse, above, at para. 150.
[29]
The
second issue, the method used by the Commissioner to assess the claims and the
invention, is also a question of law. The Patent Office has essentially charted
a legal test for determining patentability. The approach also engages questions
of claim construction, an analysis which warrants no discretion.
[30]
Nevertheless,
if the relevant legal tests were applied and the Commissioner was correct in
determining business methods and non-technological inventions are not patentable,
the application of the tests and the question of whether the invention was a
business method would be subject to a reasonableness standard: Harvard Mouse,
above at para. 151.
[31]
Finally,
in the event there was a fundamental error of law which prevented the
Commissioner from coming to the right decision, it is within this Court’s
discretion to decide the issue de novo pursuant to s. 41 of the Patent
Act: CertainTeed Corp. v. Canada (Attorney General), 2006 FC 436 at
para. 27; Canada Packers Inc. v. Canada (Minister of
Agriculture),
[1989] 1 F.C. 47, 26, C.P.R. 3d 407 (C.A.) at 417.
V. ANALYSIS OF
THE LAW
A. Adoption of
International Principles
[32]
This
case highlights the challenges in looking to international legal principles to
interpret the Canadian patent regime. In an area of the law where advancing human
ingenuity often creates novel legal questions to which there may be no
immediate answer in Canadian jurisprudence, it can be useful to look to other
regimes. However, this must be done mindfully. Despite the international
conventions and principles of reciprocity, regimes can be fundamentally
different. Something which may be patentable in one country, will not be here,
or vice-versa. Also, it may be patentable for an entirely different reason. While
international jurisprudence can provide guidance, these cases and the
particular Canadian context of the question before the Court (i.e. what is patentable
subject matter) must correspond to Canadian law. Some jurisdictions will be
more applicable than others given the history, language and prior
interpretation of their patent legislation.
[33]
The
Commissioner relied heavily on foreign jurisprudence throughout her decision,
particularly on that of the United Kingdom, Europe and the United States. This becomes troubling
and even problematic when she ignores fundamental differences between the
foreign and the domestic regimes, or ignores Canadian legal principles
altogether. Specifically, her reliance on English and European systems does not
take into account that both, in implementing the European Patent Convention
(EPC), have fundamentally different legislation than Canada for determining
patentable subject matter. Under those systems, there is no definition of
“invention”, but a series of exclusions. Jurisprudence in those systems thus often
interprets claims not to see whether they disclose an “invention” within the
meaning of a statute, but whether they should be classified as excluded subject
matter under Article 52. The Convention states:
(1) European patents shall be granted for any
inventions which are susceptible of industrial application, which are new and
which involve an inventive step.
(2) The following in particular shall not be
regarded as inventions within the meaning of paragraph 1:
(a) discoveries, scientific theories and
mathematical methods;
(b) aesthetic creations;
(c) schemes, rules and methods for performing
mental acts, playing games or doing business, and programs for computers;
(d) presentations of information.
(3) The provisions of paragraph 2 shall exclude patentability of
the subject-matter or activities referred to in that provision only to the
extent to which a European patent application or European patent relates to
such subject-matter or activities as such.
Article
52, European Patent Convention
[34]
The United Kingdom’s current Patent Act is
worded to be in conformity with the EPC. Even before the Convention, the
language used to describe an “invention” in their statutory regime differed
from the Canadian Patent Act. It has long been acknowledged that our pre-confederation
Patent Act is derived not from the British statute, which post-dates
ours, but from that of our American neighbours: “The principles underlying
Canadian patent law both before and since Confederation accordingly approximate
rather to those of the United States than to those of British patent law”: O.M.
Biggar, Canadian Patent Law and Practice, Toronto: Burroughs &
Company (Eastern) Limited, 1927 at p. 2; see also Harvard Mouse, above
at para. 3. It is not surprising that the language used in the American and
Canadian Acts to describe patentable subject-matter is almost identical.
[35]
Despite
the fact that the American and Canadian patents systems understandably have
roots in the British common law, the above shows that the regimes have evolved
in different ways and thus English law cannot be adopted unthinkingly. Further,
courts in this country have warned against the British authorities when
evaluating patentable subject matter: Tennessee Eastman, above, at
120-121. Equally, decisions from the United Kingdom have noted the inapplicability of the
American regime to their legislation. The Court in Aerotel, a decision
cited more than once by the Commissioner, made it clear that the position in the
USA, in both the absence of
an equivalent to s. 52 of the EPC and the “wide scope” given to patentable
inventions, was very dissimilar to the position in Europe:
The “exceptions”
referred to in the US cases, e.g laws of nature, have some
equivalents in Art.52(2). But that is really, as we have pointed out, because
they are by their very nature incapable of being the subject of a legal
monopoly. The fact that there are some parallels between what is declared by
the judges to be unpatentable in the US and what is declared by Art. 52(2) to be
an excluded category of invention is no guide as to the interpretation of Art.
52.
Aerotel, above at para. 13.
[36]
A
reading of Aerotel and CFPH also reveals that the exclusions in
the UK and European regime are
largely concerned with policy. In CFPH the British Court entitles part
of the discussion “The Items Were Excluded for Policy Reasons” and speaks at
length to the “hard” and “soft” nature of exclusions and the principles behind
them: CFPH, above at para. 30. While this discussion may be interesting,
adoption of these policy rationales by the Patent Office is inappropriate and
wrong in law. Any doubt as to whether the Commissioner may consider policy when
granting a patent was firmly settled by Bastarache, J, speaking for the
majority in Harvard Mouse:
I disagree that s.
40 of the Patent Act gives the Commissioner discretion to refuse a patent on
the basis of public policy considerations independent of any express provision
in the Act. The non-discretionary nature of the Commissioner's duty was
explained in Monsanto, supra, a case cited by Rothstein J.A. At pages
1119-20, after citing s. 40 (then s. 42) of the Patent Act, Pigeon J., speaking
for the majority, stated:
I
have underlined by law [in s. 42] to stress that this is not a matter of
discretion: the Commissioner has to justify any refusal. As Duff C.J. said in Vanity
Fair Silk Mills v. Commissioner of Patents (at p. 246):
No
doubt the Commissioner of Patents ought not to refuse an application for a
patent unless it is clearly without substantial foundation....
Some commentators
remark that the Canadian courts have in the past excluded certain subject
matter from patentability on moral, ethical or policy grounds… While it is true
that certain categories of invention were excluded from patentability with
these policy concerns in mind, these exclusions were justified by reference to
explicit provisions of the Patent Act….
Harvard Mouse, above, at paras. 144-145
[37]
The
Commissioner is thus bound by Canadian patent regime and its interpretation by
the Courts. On this she has no discretion. International jurisprudence, and
certainly the policies advocated therein, is not determinative, but at most a
potential guide when applied correctly and mindfully. As becomes evident, many
of the Commissioner’s errors stem from her adoption of a policy role and the
importation of policies not concordant with Canadian law.
B. Form and
Substance Approach
[38]
Over
the past ten years, the Supreme Court has made it clear that an invention is
defined by the claims, and that these are to be interpreted in a “purposive
manner”: Free
World Trust v. Électro Santé Inc., [2000] 2 S.C.R. 1024 (Free World Trust).
In so doing they explicitly rejected the “form and substance approach” from
previous years. In Whirlpool Corp. v. Camco Inc., [2000] 2 S.C.R. 1067
the Court confirmed that purposive construction is to be used in assessing
validity and infringement. The rationale given by the Court included not only a
desire for consistency, but also recognition that the intention of the author
of the patent – determined with a mind willing to understand – is integral to
the operation of the patent regime. A subjective examination of the “substance”
of the claims leads to uncertainty. As stated in Free World Trust at
paragraph 46:
Once the inquiry is
no longer anchored in the language of the claims, the court may be heading into
unknown waters without a chart. The one-step approach has to build flexibility
and common sense into the initial claims construction because there is no
second step.
[39]
Instead
of relying on these, now basic, principles of claim construction, the
Commissioner returns to language such as “form and substance” and “what has
been discovered” as articulated in earlier case law. Although the Commissioner
attempts to confine this analysis to patentable subject matter, a return to ‘form
and substance’ language, no matter what the context, is confusing and
unnecessary. Further, it represents a departure from the clear direction of the
Supreme Court to apply purposive construction universally.
[40]
Section
2 of the Patent Act requires an invention to be “new and useful”. Speaking
for the Court in Calgon Carbon Corp. v. North Bay (City), 2005 FCA
410, Rothstein JA (as he then was) gave a simple interpretation of this
requirement: “Useful points to practicality as opposed to theory. New means
that there is a contribution to knowledge, something that was not known before”
(at paragraph 10). It is thus not wrong to speak of “what has been invented” so
long as this is determined with reference to the essential elements as
disclosed through purposive construction of the claims, rather than through a
subjective, secondary consideration by the Patent Office as to the “substance
of the invention”.
[41]
The
stated goal of the Commissioner, to avoid raising form over substance, is
secured through a purposive construction of the claims. Reading the claims with
a “mind willing to understand” does not translate into wilful blindness. Purposive
construction captures the substance of the claims in determining their
essential elements. If the inventor is simply claiming an idea, or a theory,
the means of implementation (i.e. a human mind or a computer) could be replaced
and the invention would remain in essence the same. Thus, the decision in Schlumberger,
notwithstanding the fact that it was decided close to twenty years before Free
World Trust, would suggest that where a computer is not an “essential
element” it does not constitute the substance of the invention.
[42]
The
rejection of purposive construction, and in essence a holistic consideration of
the claims, also allowed the Commissioner to parse the claims into their novel
and non-novel components in order to evaluate patentability. As discussed
above, it is problematic to suggest that “what has been discovered” stands
apart from the claims as a whole. This is particularly so where the
Commissioner has found that what is claimed is novel (although certain elements
were old) and not obvious.
[43]
Principally,
the Commissioner’s conclusions are not supported by Canadian law. Although Shell
Oil defines “art” as adding something to human knowledge, there is no
suggestion that this ‘contribution’ be assessed apart from the invention as a
whole. It
is conceivable, and indeed expected, that some elements of the invention are
not new. In fact, in Shell Oil the compounds at issue were old. The
Court, however, did not leave the compounds out of the analysis of the subject
matter; they were clearly part of the invention. It is contrary to settled law to
purport to look at ‘what has been invented’ and ‘substance’ by failing to look
at the invention as a whole.
[44]
The
decision in Progressive Games is also illustrative. The trial judge
found that the physical manipulation of cards met the application aspect of the
test in Shell Oil, a finding upheld on appeal. Of course, the use of
cards is not novel. The rules in and of themselves are just an idea; but they
require the use of cards in order to constitute the whole “invention” or even
“inventive concept”. The patent was found non-statutory because nothing of
substance had been added, not because the rules, which were claimed to be
new, were excluded matter. Schlumberger, the case relied on by the
Commissioner, and its unique circumstances were discussed above: the Court did
not appear to consider the computer an ‘essential element’ in the invention.
[45]
Finally,
to the extent the Commissioner relies on jurisprudence from the United Kingdom to show the “actual
contribution” of the invention and the extent to which it is statutory must be
assessed; her discussion is incomplete and pointed in the wrong direction. Both
CFPH and Aerotel, the two cases cited, concern the interpretation
of Article 52 of the EPC and thus, as discussed above, have little application
in the Canadian context. The attempt to articulate this test seems to be in
part a function of the “as such” clause in article 52(3); subject-matter is
excluded “only to the extent” that a patent relates to it “as such”. No such
provision exists in Canada. The decisions also make
it clear that this is an unsettled area and there has been little consistency in
the “approach” which should be adopted in undertaking this analysis. Indeed, the
Commissioner herself recognizes that Europe and the UK have different ideas as
to when the novelty of a contribution should be assessed. Finally, the decision
in CFPH actually suggests that, unlike some “hard exclusions”,
discoveries – which are excluded but as a “soft” exclusion – should not be
assessed apart from the invention as a whole:
The detractors of
your patent are not allowed to say: the discovery does not count and the rest
was obvious. They are not allowed to dissect your invention in that way. The
discovery is an integral and all-important part of your invention. The law does
not object to that. It only objects when you try to monopolize your discovery
for all purposes […]
CFPH, above, at para. 34.
[46]
American
courts have also rejected the idea that the claims be separated on the basis of
what is new and what is not. For the reasons discussed above, I find this
jurisprudence more applicable and the reasoning employed more persuasive but
not determinative. As stated by the majority of the Court of Appeals for the
Federal Circuit in Bilski/USCA at 1394:
(T)he Court
has made clear that it is inappropriate to determine the patent-eligibility of
a claim as a whole based on whether selected limitations constitute patent-eligible
subject matter…Diehr, 450 U.S. at 188 (“It is inappropriate to dissect
the claims into old and new elements and then to ignore the presence of the old
elements in the analysis.”) After all, even though a fundamental principle
itself is not patent-eligible, processes incorporating a fundamental principle
may be patent-eligible. Thus, it is irrelevant that any individual step or
limitation of such processes by itself would be unpatentable under § 101…
[47]
The
Commissioner has simply adopted a novel legal test by which to assess
patentable subject-matter. It is not supported by recent Canadian jurisprudence
or the Patent Act. This is an error of law and far outside the
Commissioner’s jurisdiction.
C. Definition
of Art/Change of Character or Condition
[48]
On
a preliminary note, it is immaterial that the Commissioner discussed the
definition of “art” only and more generally and did not consider “process”
separately. It is generally accepted that “method” and “process” are the same
thing and that ‘art’ may include either: see Lawson, above, at
para. 34 citing to Refrigerating Equipment Ltd. v. Drummond & Waltham
System Inc., [1930] 4 D.L.R. 926 at 937. Indeed, many of the principal
cases dealing with what is an art have in fact concerned processes, Shell
Oil being a prime example. The issue is whether in her discussion of “art”
the Commissioner adopted the correct legal definition, encompassing the courts’
interpretation of patentable processes.
[49]
The
Appellant alleges that the Commissioner has adopted too restrictive a
definition of ‘art’ by ignoring Shell Oil and returning to the “physical
manipulation” test outlined in Lawson. I note, however, that the
Commissioner explicitly discusses Shell Oil; the reference to Lawson
is within the context of that decision. The crux of the debate is her
interpretation of Shell Oil to mean that “practical application” necessarily
includes the change of character or condition in a physical object. I
also note that she has injected a requirement that the “new learning or
knowledge” outlined in Shell Oil be technological or scientific in
nature.
[50]
Shell
Oil
is unequivocally the starting point for the definition of a patentable ‘art’. It
focuses the inquiry on whether there is a practical application of the
discovery or idea:
What then is the
"invention" under s. 2? I believe it is the application of this new
knowledge to effect a desired result which has an undisputed commercial value
and that it falls within the words "any new and useful art". I think
the word "art" in the context of the definition must be given its
general connotation of "learning" or "knowledge" as commonly
used in expressions such as "the state of the art" or "the prior
art". The appellant's discovery in this case has added to the cumulative
wisdom on the subject of these compounds by a recognition of their hitherto
unrecognized properties and it has established the method whereby these
properties may be realized through practical application. In my view, this
constitutes a "new and useful art" and the compositions are the
practical embodiment of the new knowledge.
At 549
[51]
The
decision in Lawson is forty years old and was a useful starting point in
Shell Oil for Wilson J to discuss a “more expansive” definition of art. However,
it is not the authoritative guide for what constitutes patentable art. Although
Wilson J did not reject the decision, she referred to it as part of the ongoing
effort to create a wider definition which explicitly stepped beyond manufacture
of goods and even manufacturing techniques:
In Tennessee
Eastman Co. v. Commissioner of Patents … (t)he Court, however, affirmed
that “art” was a word of very wide connotation and was not to be confined to
new processes or products or manufacturing techniques but extended as well to
new and innovative methods of applying skill or knowledge provided they
produced effects or results commercially useful to the public.
An effort to
articulate this broader concept of the term "art" was made by
Cattanach J. in Lawson v. Commissioner of Patents (1970), 62 C.P.R. 101.
In that case a patent was being sought on a new method of describing the
boundaries of a plot of land. The application was rejected, again not because
the subject-matter of the application was not an "art" within the
meaning of the definition in the Act but because, like the new use for the
adhesive in Tennessee Eastman, it related to professional skills rather than to
trade, industry or commerce. In the course of his reasons Mr. Justice Cattanach
said at pp. 109-10;
An art or operation is an act or series of acts performed by some physical
agent upon some physical object and producing in such object some change either
of character or of condition. It is abstract in that, it is capable of
contemplation of the mind. It is concrete in that it consists in the
application of physical agents to physical objects and is then apparent to the
senses in connection with some tangible object or instrument.
In the earlier development of patent law, it was considered that an invention
must be a vendible substance and that unless a new mode of operation created a
new substance the invention was not entitled to a patent, but if a new
operation created a new substance the patentable invention was the substance
and not the operation by which it was produced. This was the confusion of the
idea of the end with that of means. However, it is now accepted that if the
invention is the means and not the end, the inventor is entitled to a patent on
the means.
At 554-555
[52]
There
are thus three important elements in the test for art as articulated by Wilson
J.: i) it must not be a disembodied idea but have a method of practical
application; ii) it must be a new and inventive method of applying skill and
knowledge; and iii) it must have a commercially useful result: Progressive
Games, Inc. v. Canada (Commissioner of Patents), 177 F.T.R. 241 (T.D.) at
para. 16, aff’d (2000), 9 C.P.R. (4th) 479 (F.C.A.).
[53]
The
practical application requirement ensures that something which is a mere idea
or discovery is not patented – it must be concrete and tangible. 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. The language in Lawson 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 through a machine such as a computer.
[54]
As
the Supreme Court reminded us in Harvard Mouse, not everything under the
sun is patentable but the definition of invention in the Patent Act is
broad and encompasses “unforeseen and unanticipated technology” (at paragraph
158). The Patent Act is not static; it must be applied in ways that
recognize changes in technology such as the move from the industrial age to the
electronic one of today.
[55]
Jurisdictions
with patent regimes similar to our own have also struggled to pin down what is
required to bring an idea or a discovery beyond simply that. As mentioned
above, the US Supreme Court delivered the decision in Bilski/USSC quite
recently, squarely addressing patentable processes. While the decision does not
answer all questions of US patentability of business processes, it appears that
the US Supreme Court rejected the “machine or transformation” test as in violation
of the expansive interpretation which should be given to §101 (the equivalent
to our s. 2) – they saw nothing in the statute or in the plain meaning of
language which would require “process” to be tied to a machine or an article.
In essence, they rejected the type of physicality advocated by the
Commissioner. The majority called it “a useful and important clue, an
investigative tool, for determining whether some claimed inventions are
processes under § 101” (slip op. At 8). Four of the justices went on to discuss
the changing nature of technology and the limitations posed by this type of
thinking:
The
machine-or-transformation test may well provide a sufficient basis for
evaluating processes similar to those in the Industrial Age – for example, inventions
grounded in a physical or other tangible form. But there are reasons to doubt
whether the test should be the sole criterion for determining the patentability
of inventions in the Information Age.
Slip op.
at 9
[56]
The
US
Court
also recognized the need for some sort of balance, and stressed that it was not
commenting on the patentability of all these new technologies. The facts of the
case – the invention disclosed was found to be an abstract idea – did not
require further comment from the Court on exactly how far in the opposite
direction it was willing to go.
[57]
Australian
jurisprudence is also useful; that regime has not followed the United Kingdom (Australia
relies on a definition of invention rather than exclusions) and several courts
have looked instead to American jurisprudence for guidance on patentability;
see CCOM Pty Ltd v. Jiejing Pty Ltd (1994) 28 IPR 481 (CCOM Pty)
and Grant v. Commissioner of Patents [2006] FCAFC 120 (Grant). In
CCOM Pty the Court confirmed that the leading case law on the
patentability of processes “requires a mode or manner of achieving an end
result which is an artificially created state of affairs of utility in the
field of economic endeavour" (at 514). Grant specifically
considered whether what was alleged to be a “business method” was patentable. The
Australian Federal Court noted that an “artificially created state of affairs”
was meant in the sense of a “concrete, tangible, physical or observable effect”
(at paragraph 30):
[32]
A physical
effect in the sense of a concrete effect or phenomenon or manifestation or
transformation is required. In NRDC, an artificial effect was physically
created on the land. In Catuity and CCOM as in State Street and AT&T, there
was a component that was physically affected or a change in state or
information in a part of a machine. These can all be regarded as physical
effects. By contrast, the alleged invention is a mere scheme, an abstract idea,
mere intellectual information, which has never been held to be patentable,
despite the existence of such schemes over many years of the development of the
principles that apply to manner of manufacture. There is no physical
consequence at all.
[Emphasis
added]
[58]
The
Australian
Court’s
interpretation of physical effects is quite broad. It is on point, however, as some
sort of embodiment or change in state is required. This is consistent with the
notion that for something to show practical application it must manifest in
some way so that it is no longer simply a scheme or idea. However, that this
does not mean that the “physical effect” – whatever it may be – must be of the
inventive concept itself. As stated earlier, in Progressive Games, above,
manipulation of the cards was enough to constitute a practical application of
the idea. The rules themselves were used in such a way so as to create a change
in character or effect. They themselves did not change form.
[59]
Further,
it is not necessary for the material objects in question to physically change
into another thing. Justice Denault, writing the trial decision in Progressive
Games, explicitly rejected the Commissioner’s finding that the subject
matter was non-patentable because “there was no change in character or
condition of any material objects” (at para. 8).
[60]
The
Commissioner’s articulation of the test for art is too restrictive in requiring,
as discussed in greater detail below, that the knowledge in question be
scientific or technological in nature. Further, her application of the test
suggests that the goods themselves must be changed in some way. Her
interpretation of practical application does not take into account a wider
definition of physical, “change in character or condition” or the concrete
embodiment of an idea.
D. “Business
Method Exclusion”
[61]
There
is no basis for the Commissioner’s assumption that there is a “tradition” of
excluding business methods from patentability in Canada. The only
Canadian jurisprudence cited was made as obiter and in dissent by Arbour
J. in Schmeiser.
[62]
The
Commissioner’s Reasons even indicate an awareness of contradiction presented by
the Commissioner’s previous reliance on State Street, a decision
which clearly endorsed the patentability of business methods. On the contrary,
it seems that until quite lately the Patent Office’s policy was to grant
patents for business methods so long as they were an art within the meaning of
section 2 of the Patent Act. The previous Manual of Patent Office
Practice (MOPOP), 12.04.04 (rev. Feb. 2005) stated 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”. The manual required
that they be assessed like any other invention. The evidence indicates this
practice was followed. The only explanation for the Patent Office’s change of
heart in the newly revised manual appears to be the Commissioner’s own decision
in the case at bar.
[63]
The
Commissioner’s reliance on the UK jurisprudence is misguided for the reasons
discussed above. There is not, nor has there ever been, a statutory exclusion
for business methods in Canada as there is in the UK. A
comparison of the two regimes is an inappropriate attempt to read in words that
do not exist. The very passages cited by the Commissioner represent a
discussion of the policy behind the business method exclusion. As discussed
above, this policy should have had absolutely no bearing on her decision.
[64]
The
implicit suggestion that the American jurisprudence supports this exclusion is
not sustainable. The Commissioner’s citation of the concurring decision in Bilski/USCA
fails to mention that the majority’s reasons clearly rejected the determination
of patentability with reference to a “business method” category:
We further
reject calls for categorical exclusions beyond those for fundamental principles
already identified by the Supreme Court. We rejected just such an exclusion in State Street, noting that the so-called “business
methods exception” was unlawful and that business method claims (and indeed all
process claims) are “Subject to the same legal requirements for patentability
as applied to any other process or method”...We reaffirm this conclusion.
Bilski/USCA, above at 1396
[65]
The
majority in Bilski/USSC affirmed this conclusion, making reference to
the fact that the word “method” is within the definition of “process”. They
noted that this did not mean all business methods would be patentable, noting
that they are subject to the same requirements as other inventions under the
Act.
[66]
The
Australians have adopted similar language:
[26] We do not
consider that the question here is whether a business system, in the sense of a
system for use in a business, is or is not patentable. Patent protection is
afforded to an invention that complies with the requirements of the Act,
including manner of manufacture. The fact that a method may be called a
business method does not prevent it being properly the subject of letters
patent; see Catuity at [125]–[126].
…
[47] Mr Grant’s asset protection scheme
is not unpatentable because it is a “business method”. Whether the
method is properly the subject of letters patent is assessed by applying the
principles that have been developed for determining whether a method is a
manner of manufacture, irrespective of the area of activity in which the method
is to be applied. It has long been accepted that “intellectual
information”, a mathematical algorithm, mere working directions and a scheme
without effect are not patentable. This claim is “intellectual information”,
mere working directions and a scheme. It is necessary that there be some
“useful product”, some physical phenomenon or effect resulting from the working
of a method for it to be properly the subject of letters patent. That is missing
in this case.
Grant, above [Emphasis added]
[67]
It
is noteworthy that in both the above cited cases the claimed inventions were found
to be non-patentable subject matter. Not, however, because they were business
methods but because they were mere “schemes” or disembodied ideas. To put it
into the Canadian context, they did not have a practical application. In this
sense a mere business scheme will have no practical embodiment and, like any
other abstract idea or theorem, will of course be non-patentable. That is not
the case with the business method claimed in the present case.
[68]
The
approach in the USA, Australia, and as it ought to be
in Canada, makes an
eminent amount of sense given the nature of our legislation. It allows business
methods to be assessed pursuant to the general categories in s. 2 of the Patent
Act, preserving the rarity of exceptions. It also avoids the difficulties
encountered in the UK and Europe in attempting to define a “business
method”. There is no need to resort to such attempts at categorization here. Contrary
to what the Commissioner suggests, to implement a business method exception
would be a “radical departure” from the current regime requiring parliamentary
intervention.
E. “Technological” Requirement
[69]
The
Commissioner’s decision introduced one more novel and unnecessary requirement
for patentability into the Canadian patent regime: the technical or
technological requirement. She also suggests that “new and useful knowledge”
must be “scientific or technological” in order to constitute a patentable art. Thus,
according to this reasoning, one must now assess whether an invention – and
specifically what has been added to human knowledge – is technological in
nature.
[70]
In
fairness, in this instance the Commissioner does glean some of her rationale
from the language in the Patent Rules and Canadian jurisprudence, but this does
not translate into an endorsement or imposition of a “technical test”. There is
no reference to such a test in the Canadian jurisprudence (or none was advanced
in this Court). It was not within the Commissioner’s jurisdiction to introduce
one. Once again, the Commissioner’s heavy reliance on the “technical
contribution approach” as discussed in the UK did not
correspond with the reality of our Patent Act or recognize the range of
opinions as to its application and appropriateness. It is not a simple test but
a challenging feature of their regime and a “horribly imprecise concept”: CFPH,
above at paragraph 12.
[71]
Even
if patents generally concern the protection of advances in technology broadly
defined, it is difficult to see how introducing this sort of technological test
into the Canadian patent system would do anything but render it overly
restrictive and confusing. It would be highly subjective and provide little
predictability. Technology is in such a state of flux that to attempt to define
it would serve to defeat the flexibility which is so crucial to the Act. This
view is supported by authorities in both the USA and Australia: see Bilski/USCA,
above at 1395 and Grant, above at paragraph 38. The current assessment
of subject matter, without reference to such concepts, is preferable.
VI. APPLICATION
TO THE PATENT AT ISSUE
[72]
Having
determined that the Commissioner fundamentally erred in the legal principles
used to determine patentability this Court will now examine the claims de
novo in order to determine whether they are patentable subject matter.
[73]
The
Court finds that a purposive construction of the “system claims” (e.g. claim 44
and its associated dependant claims) clearly discloses a machine which is used
to implement Amazon.com’s one-click ordering system. The described components
(e.g. a computer) are essential elements in implementing an online ordering
process. This is not merely “a mathematical formula” which could be carried on
without a machine or simply a computer program. A machine is patentable under
s. 2 of the Patent Act. The Commissioner herself found that “in form”
the claims disclosed such an invention; it was only when she took a second step
to subjectively consider the “substance” that she found otherwise. As discussed,
this is unsupported in law. The Court therefore finds the machine claims to be
patentable subject matter.
[74]
Turning
to the process claims, the Commissioner clearly erred by “parsing” the claims
into their novel and obvious elements in order to assess patentability. When
viewed as a whole it is clear that the claimed invention is a process which
uses stored information and ‘cookies’ to enable customers to order items over
the internet simply by ‘clicking on them’. It is accepted that the “one-click”
method is novel; the Court finds that an online ordering system which
facilitates this adds to the state of knowledge in this area.
[75]
The
new learning or knowledge is not simply a scheme, plan or disembodied idea; it
is 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
is not an issue. The “physical effect”, transformation or change of character
resides in the customer manipulating their computer and creating an order. It
matters not that the “goods” ordered are not physically changed.
[76]
It
is undisputed that this invention has a commercially applicable result and is
concerned with trade, industry and commerce. Indeed, its utilization in this
very realm seems to be at the root of the Commissioner’s concern.
[77]
In
light of the above, the Court finds the process claims to be a patentable as an
art and process. As discussed at length earlier in this decision, there is no
need to continue the analysis once this has been determined. There is no
exclusion for “business methods” which are otherwise patentable, nor is there a
“technological” test in Canadian jurisprudence. Even if there was some
technological requirement, in this case the claims, when viewed as a whole,
certainly disclose a technological invention.
VII. CONCLUSION
[78]
The
absolute lack of authority in Canada for a “business method exclusion” and the
questionable interpretation of legal authorities in support of the
Commissioner’s approach to assessing subject matters underline the policy
driven nature of her decision. It appears as if this was a “test case” by which
to assess this policy, rather than an application of the law to the patent at
issue.
[79]
There
may be (and the Court is not suggesting that there are) other reasons why the
Commissioner might have rejected this patent. One might question the
sufficiency of disclosure in the system claims but no one has claimed that it was
insufficient. That matter was not considered by the Commissioner. The Examiner’s
principal finding was in relation to obviousness. In both the United
States
and Europe there have also been concerns as to whether the claimed invention
was obvious. The obviousness analysis, however, should not occur at the
“patentable subject matter” stage of the analysis. A finding that there has
been new learning or knowledge which has contributed to the state of the art
does not entail, nor should it pre-empt, an obviousness analysis. It is a
separate test which asks whether one would be led to the “new knowledge” easily
and without difficulty, not whether it adds to the state of the art.
[80]
Although
clearly not determinative of this decision, the Court notes that this invention
has been found to be patentable subject matter in several other jurisdictions,
including in the United States and in Europe. In the latter, despite an
explicit exclusion for “business methods”, the claims were not found to be
such.
[81]
The
misapprehension of the Commissioner and the Examiner as to the patentability of
the subject-matter in these claims is a fundamental error of law, one which may
have tainted the entire analysis. No evidence was given to this Court as to the
validity of the claims in other respects. As such, the Court cannot evaluate
them in any regard beyond the issues argued on this appeal and will not grant
the Patent as requested by the Appellant.
[82]
The
Court allows the appeal with respect to the Commissioner’s findings on statutory
subject-matter. The Commissioner’s decision is quashed and is to be sent back
for expedited re‑examination with the direction that the claims
constitute patentable subject matter to be assessed in a manner consistent with
these Reasons.
JUDGMENT
THIS COURT
ORDERS AND ADJUDGES that the appeal is
allowed with respect to the Commissioner’s findings on statutory
subject-matter. The Commissioner’s decision is quashed and is to be sent back
for expedited re-examination with the direction that the claims constitute
patentable subject matter to be assessed consistent with the Reasons for
Judgment. The Appellant shall have their costs on a party and party basis in
the usual manner.
“Michael
L. Phelan”
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