The Canadian Federal Court of Appeal, addressing whether Amazon’s famous “one-click” business method was properly considered statutory subject matter under the Canadian Patent Act, allowed Amazon’s appeal from the Patent Appeal Board but directed the Commissioner of Patents to reexamine the patent on an expedited basis, not with the lower court’s direction that the claims at issue constituted patentable subject matter, but instead directing that the Commissioner identify the actual invention after a purposive construction of the claims. Canada (Attorney General) v. Amazon.com Inc., 2011 FCA 328 (Federal Court of Appeals, Canada, Nov. 24, 2011) (Sharlow, J.).  In its decision, the court noted that nothing in Canadian jurisprudence prohibits business methods as patentable subject matter.

Amazon’s 1998 Canadian application for an invention entitled “Method and System for Placing a Purchase Order Via a Communication Network” claimed priority to two U.S. applications.  The claims of the Canadian application were directed to systems and methods covering Amazon’s “one-click” internet shopping business method.  The patent examiner rejected all claims in the application on grounds of obviousness and lack of patentable subject matter.  Amazon challenged the rejections before the administrative Patent Appeal Board of the Canadian Intellectual Property Office, which recommended the commissioner reverse the examiner’s obviousness rejection but uphold the rejection for lack of patentable subject matter.  The commissioner issued a ruling following the board’s recommendations, refusing to grant the patent.  The commissioner adopted a two-part analytical framework in which Amazon’s claims were first analyzed to determine the literal meaning of the claims, or the “actual invention,” and then to determine whether the actual invention fell within the enumerated categories in the statutory definition of invention.  Amazon appealed the commissioner’s ruling to the Federal Court, which allowed the appeal, quashed the commissioner’s decision and ordered an expedited reexamination with the direction that the claims constituted patentable subject matter.  The commissioner then appealed to the Federal Court of Appeal.

In its analysis, the Court noted that Section 2 of the Canadian Patent Act provides that “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.”   Recognizing that precedent of the Supreme Court of Canada required that the commissioner’s identification of the actual invention must be “grounded in a purposive construction of the patents claims,” the court found that the commissioner’s two-step analysis for patentable subject matter was incorrect in law.  The court further instructed that identification of the actual invention cannot be determined solely on a basis of literal reading of the patent claims.  Despite finding that the commissioner had used an incorrect analysis, the court viewed it as an open question whether Amazon’s claimed patentable subject matter. 

Examining the question of whether business methods constitute patentable subject matter, the Court’s noted that patent-eligible subject matter “must not be a disembodied idea but have a method of practical application.” The court further noted that Canadian Supreme Court precedent provides that patentability cannot rest on use of a computer programmed according to a novel mathematical formula. 

Practice Note:   This decision followed a line of reasoning similar to that of the “transformation” prong of the “machine-or-transformation” test of U.S. patent jurisprudence, with increased emphasis on the transformation prong of the test.  An interesting comparison may be drawn with recent decisions of the U.S. Patent and Trademark Office’s Board of Patent Appeals and Interferences (BPAI, or the Board) heightening the threshold for patent-eligible subject matter under § 101 for method claims that include tangential use of machine elements but are otherwise found ineligible under § 101 for being susceptible to performance by human thought alone.  For example, in Ex Parte Vilalta, 2011 WL 6012377 (BPAI, Nov. 29, 2011) the Board found that so called "Beauregard claims" unpatentable under §101 as interpreted by CyberSource. The Board has also held that claim scope must be determined before a § 101 analysis can be complete. See Ex Parte Black, 2011 WL 6012476 (BPAI, Nov. 28, 2011).

The Board has also concluded that a claim that covers a “purely software embodiment” is not patent eligible (Ex Parte Cohen, 2011 WL 6012432 (BPAI, Nov. 29, 2011)) but that a “web based system” is patent eligible because such a network based requires “more than software per se, because a web, upon which a web-based system is based, is physical, in addition to software, in that it requires computers and routers and telecommunications equipment to operate.”  Ex Parte Vogel, 2011 WL 6012447 (BPAI, Nov. 21, 2011).