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Recent Developments on the Scope of Patentable Subject Matter

Published: 07/15/2010

By Stephen I. Selznick

Whether or not non-tangible businesses processes, such as digital and internet business processes, are patentable is an issue that has vexed inventors and their advisors for a number of years. Generally, a pure process, much like an apparatus or method of manufacture, is considered a legitimate patentable subject matter - i.e. matters which, if novel, unobvious and possessing utility, may entitle an inventor to a territorial monopoly for their invention. But, in our fast-changing digital economy, there has been an explosion of new forms of pure processes not contemplated when patent legislation was initially drafted, especially in the financial, marketing and commercial sectors. Inventors today are looking to protect entirely new categories of processes and methods of conducting business which highlight the need to distinguish between patentable subject matter and pure abstract, unpatentable ideas.

On June 28th, 2010, the Supreme Court of the United States rendered its much anticipated decision in Bilski et al v. Kappos, which dealt with this very issue. The case, which involved an inventor who claimed protection for (i.e. a monopoly over) a process by which commodities buyers and sellers in the energy market could protect, or hedge, against price changes, garnered a great deal of domestic US and international attention as it wound its way through the US Courts.

In the end, the Supreme Court concluded that the Bilski invention was not the proper subject matter for a patent. Nevertheless, the majority declined to rule that all software or business method claims are inherently unpatentable, and went further by rejecting the lower Court’s attempt to enunciate a single bright line test as the sole determinate. In so doing, the US Supreme Court has left the door ajar for innovative Digital Age inventors.

In the lower Court ruling in the Bilski case, the US Federal Circuit Court had confirmed both the earlier examination and US Board of Patent Appeals and Interferences rejection of the Bilski patent claims. The US Federal Circuit Court had prescribed a single two-pronged “objective” test for determining whether a business method or claimed process constitutes eligible patentable subject matter. The so-called “machine or transformation test” required the process or business method either to: (a) be tied to a particular machine or apparatus; or (b) transform a particular article into a different state or thing.

While the US Supreme Court acknowledged that the machine or transformation test may be a useful and an important tool for consideration, it did not constitute the sole test for patent eligibility under the U.S. Patent Act.

The US Supreme Court decision in Bilski should be noted with interest by those in Canada and elsewhere who look to capitalize on the opportunities presented by the Digital Age economy; not the least of which is the ability to conduct business without regard to geographic borders and thus be in a position to compete with domestic US concerns in their home market without the necessity of having to be situated in the United States.

It will also be interesting to monitor domestic Canadian reaction to the US Supreme Court decision in Bilski. In March 2009, the Canadian Patent Appeal Board rejected Amazon.com’s Canadian patent application for its one click on-line shopping process. In the Amazon.com case, the Canadian Patent Appeal Board commented negatively on the patentability of business methods in Canada and in doing so citied foreign case law, including the lower Court decision in Bilski, to support the proposition that, in Canada, in order to qualify as patentable subject matter, a patent claim must, in its substance, involve a physical object or comprise an act or series of acts performed by some physical agent upon some physical object to produce in that object some change of either character or condition.

Canadian Patent Appeal Board decisions are binding only upon the participants to the appeal. However, in 2009 and following a public consultation process, the Canadian Patent Office amended Chapter 12 (Subject Matter and Utility) and Chapter 13 (Examination of Applications) of the Canadian Manual of Patent Office Practice (the “MOPOP”), and just a few weeks prior to the US Supreme Court decision in the Bilski case, circulated for public review and comment draft revisions to Chapter 16 of the MOPOP (Computer Implemented Inventions).

While not legislation, the MOPOP serves as a guide for patent examiners, applicants and patent agents in the operational procedures and examination practices applied and followed by the Canadian Patent Office. These recent and proposed MOPOP revisions appear to reflect the Canadian Patent Appeal Board views expressed in the Amazon.com case. One would hope that the US Supreme Court’s decision in the Bilski case, and stakeholder comments about the case, will find their way into the MOPOP public consultation process, as well as subsequent Canadian Patent Appeal Board cases and jurisprudence (including the Canadian Federal Court appeal in the Amazon.com case). However, until that occurs, it appears that Canada and the United States of America, two significant Digital Age trading partners, have adopted different approaches to assessing the scope and breadth of patentable process subject matter.

We will continue to monitor this area and follow up in subsequent articles as developments unfold.