Legal Commentary

Patent ruling signals new way of doing business

By David Canton

For the London Free Press – November 22, 2010

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Traditionally, they have been reserved for inventions that are tangible

The recent Federal Court of Canada decision in Amazon.com Inc v. the Attorney General of Canada held that a “business method” can be patented in Canada.

This essentially allows an idea, without an actual physical manifestation, to be patented if the right tests are met. The Federal Court in Amazon overturned the previous ruling by the Commissioner of Patents that rejected Amazon’s efforts to patent a business method.

Patents have been traditionally granted for tangible inventions. In other words, they can be held in your hand or touched. Business methods are an intangible process.

“Business method” patents (BMPs) are a class of patents covering new methods of conducting business. For example, in the Amazon decision, Amazon sought to patent single-click online ordering as a proprietary invention.

“One-click ordering” allows users to make online purchases with a single click of the mouse, the payment information having already being entered by the user. The result is that users do not need to enter billing and shipping information every time a purchase is made; the information is entered once and future purchases require only one click to complete the check-out.

Amazon obtained a U.S. patent for the 1-click method years ago.

According to patent agent Natalie Raffoul, the reasoning and final decision in Amazon follow closely that of the leading U.S. case, re Bilski. Ms. Raffoul pointed out similar to Amazon, the U.S. Supreme Court in re Bilski decided an abstract idea is not patentable; so the business method in question must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing.

Business method patents have been controversial in both Canada and the U.S. They aren’t typical in that they do not attach to a tangible item but instead to a more abstract idea or process. Detractors have used this to support the claim that they should not be allowable under patent law. Critics have also voiced concern about the implications to start-up businesses.

In Amazon, Justice Phelan held the appropriate test to identify a business method patent is the test set out in the Progressive Games Inc. v. Canada (Commissioner of Patents) decision: 1) there must be a practical application; 2) it must be a method of applying skill and knowledge and; 3) it must have a commercially useful result.

Justice Phelan decided Amazon’s single-click ordering met these criteria and was a tangible new business method, not simply a scheme or abstract idea, which was put into action through the use of cookies, computers, the Internet and the customer’s own action.

The Amazon decision signals a divergence from the old process in Canada as it is the first case to recognize business method patents are patentable. The case bears watching because the decision has been appealed and could be overturned.

Full post as published by eLegal Canton on November 22, 2010 (boomark / email).