Update: Patentability of Business Method Inventions in Canada



In Canada, as in many other jurisdictions, the patentability of business method inventions is being hotly contested. Should, for example, one be able to patent a method of selling over the Internet? Should the answer depend on whether you are selling physical products, digital content or services? Should you be able to patent a method of (a) managing inventory, (b) insuring risks, (c) securing investments or (d) reducing taxes?

A test case that will hopefully offer some guidance – Amazon.com Inc. v. Commissioner of Patents 2010 FC 1011 (the “Amazon decision”), currently under appeal – is working its way through the Canadian court system. The Federal Court of Appeal is expected to deliver its judgement in the case by year end; however, it seems likely that the Supreme Court of Canada will be asked to thereafter render its opinion on this important question.

Because business methods are foundational to our information age economy, both operating businesses and inventing businesses have been struggling with this uncertain patentability. Operating businesses need to know if it is unreasonably risky to conduct business using a business method that may be the subject of a pending patent application or an issued patent of questionable validity. Inventing businesses need to know if the significant cost and effort to patent a business method invention is a reasonable investment.

The Canadian Intellectual Property Office similarly has been grappling with this uncertainty, and to its credit, the Office has tried to update its examination policy as the Amazon case has progressed through the courts.

On August 1, 2011, the Office issued Practice Notice PN20011-04: “Practice Subsequent to the Amazon.com Decision” in an attempt to incorporate into its examination policy, guidance that the Federal Court Trial Division provided on October 14, 2010 in the Amazon decision. We reported on the Trial Division decision in the December 2010 issue of Knowledge Bytes.

Categories of Invention

In the Practice Notice, the Office states, uncontroversially, that an invention is patentable subject matter only if it is at least one of an: art, process, machine, manufacture and composition of matter, in accordance with section 2 of the Patent Act.

Solution to a Technical Problem

More controversially, the Office asserts that:

  • an invention cannot belong to any of the five categories of patentable subject matter unless it provides a solution to a technical problem; and
  • non-technical inventions don’t “relate to the manual and productive arts” and “lack practical utility”.

The Office elaborates that

The term “technical” is here taken to mean “involving or concerned with applied and industrial sciences”, and more generally as referring to “technology” in the sense of “the application of scientific knowledge for practical purposes, especially in industry”, “machinery and equipment developed from scientific knowledge”, and “the branch of knowledge dealing with engineering or applied sciences”.

Claimed Invention versus Inventive Concept

Even more controversially, the Office asserts that assessing whether an invention is patentable subject matter entails assessing both: (a) the invention as claimed by the patent applicant; and (b) the underlying inventive concept as interpreted by the Examiner.

If either the invention as claimed or the underlying inventive concept as interpreted by the Examiner is not at least one of an art, process, machine, manufacture and composition of matter that solves a technical problem, then the Office considers that the claim is not patentable.

In framing this bifurcated test for patentable subject matter, the Office has imported the notion of inventive concept from the Supreme Court of Canada, which promulgated the concept for the different purpose of evaluating obviousness1.

The Office asserts that the inventive concept aspect of the test for patentable subject matter is necessary because patent applicants try to finesse the claimed invention branch of the test by including nonessential physical elements to a claim for an otherwise abstract method, and so those nonessential physical elements should be ignored.

The contrary position is that the inventive concept branch of the test is overly subjective – giving an Examiner too much discretion – and that the Examiner is obliged to examine the claims as deliberately presented by the applicant.

The proper test under Canadian patent law will evolve to reflect the final judicial resolution of the Amazon case; however, in the meantime, businesses can use the Office’s policy guidance to better predict over the short-term the patentability of business method inventions.


1 in Apotex Inc. v. Sanofi-Synthelabo Canada Inc., 2008 SCC 61, [2008] 3 SCR 265