26 November 2011

Amazon Clicks-On in Canada as Appeals Court Keeps 1-Click Alive

The Attorney General of Canada and The Commissioner of Patents v Amazon.com [2011] FCA 328 (24 November 2011)

1-click CanadaThe Canadian Federal Court of Appeal has issued its decision in the dispute between Amazon.com and the Canadian Intellectual Property Office (CIPO) over whether Amazon’s ‘1-click’ ordering system comprises patent-eligible subject matter in Canada.  And, contrary to the position argued by the Commissioner of Patents, the court has held that CIPO should be ‘open to the possibility that a novel business method may be an essential element of a valid patent claim’, i.e. that there is no blanket prohibition of the patenting of ‘business methods’ under the Canadian patent law.

The appeals court has largely upheld the reasoning provided by Justice Phelan in the earlier Federal Court decision overturing the rejection of Amazon’s claims by the Canadian Commissioner of Patents, once again reversing the Commissioner’s original determination. 

However, the court also technically upheld the appeal, finding that Justice Phelan had effectively ordered CIPO to grant a patent to Amazon, by providing a definitive interpretation of the claims in the absence of relevant expert opinion, and without deferral to the greater expertise of the CIPO examiners in technical matters.

The Court of Appeal has therefore remanded the application back to the Commissioner for claim construction and re-examination on a expedited basis in view of the court’s reasons.

This decision appears to show that the Canadian law is quite closely aligned with the Australian position, as set out in the decision of the Full Federal Court (i.e. at the same appellate level) in Grant v Commissioner of Patents [2006] FCAFC 120

It also means that of the three ‘Vancouver Group’ offices (IP Australia, CIPO and the UK IPO) – all of which have coincidentally (or perhaps not) engaged in recent unilateral crack-downs on the patenting of computer-implemented inventions – only IP Australia now remains with its wrist un-slapped by the courts.  In addition to this Canadian decision, the UK IPO has recently been reprimanded for promulgating examination guidelines that were ‘wrong in law’ by the High Court of England and Wales in Re Halliburton Energy Services Inc [2011] EWHC 2508 (Pat) (see Computer-Aided Design Method Held Patentable in UK) and again in Re Protecting Kids the World Over (PKTWO) Ltd [2011] EWHC 2720 (Pat)

BACKGROUND

For a more detailed background to the appeal, see our earlier articles Business Methods Patentable (Again) in Canada and Amazon '1-Click' Heads for the Canadian Federal Court of Appeal.

Briefly, the Canadian Patent Appeal Board had rejected Amazon’s claims by creating a somewhat bizarre process of analysis, involving firstly separating ‘form’ and ‘substance’ of the claims.  This involves identifying the underlying inventive contribution, or what has been added to human knowledge by the inventor, as distinct from what might actually be claimed as the invention.  Then, if the contribution thus identified lies solely within a category of unpatentable subject matter, the the claims are not patentable regardless of their precise form and scope.  Furthermore, the Board found that ‘non-technical’ subject matter, including business methods, is not patentable.

As summarised by the Court of Appeals (at [52]), the Commissioner’s reasons for refusing to grant a patent to Amazon came down to the conclusion that the 1-click purchasing invention failed three ‘tests’ devised by the Board:
  1. it does not add to human knowledge anything that is technical in nature;
  2. it is merely a business method, which is excluded subject matter; and
  3. it does not cause a change in the character or condition of a physical object.

DECISION OF THE COURT OF APPEALS

For the most part, the appeals court approved the reasons of Justice Phelan in the earlier Federal Court decision, quoting a large part of it in full (at paragraph [50]).

The key requirements for subject matter to be patentable, arising from Justice Phelan’s analysis, are that:
  1. it must not be a disembodied idea but have a method of practical application;
  2. it must be a new and inventive method of applying skill and knowledge; and
  3. it must have a commercially useful result.
The Court of Appeal particularly criticised the Commissioner for deriving expansive principles from decisions which are necessarily informed by the specific facts and questions before the courts (at [53]-[54]):

In my respectful view, the Commissioner should be wary of devising or relying on tests of the kind [relied upon in the Board’s decision], even if they are intended only to summarise principles derived from the jurisprudence interpreting some aspect of the statutory definition of ‘invention’. The focus should remain on the principles to be derived from the jurisprudence. Catch phrases, tag words and generalizations can take on a life of their own, diverting attention away from the governing principles.

[The Commissioner must] recognise that each decided case turns on this own facts and arises in the context of the state of knowledge at a particular point in time, with the objective of resolving a particular disagreement between the parties to the litigation.  Such contextual factors necessarily mean that caution should be exercised in developing a principle derived from a specific decided case and extrapolating it to another case.
Assessment based on ‘purposive construction’ of claims
According to the Court of Appeal, a proper assessment of the patentability of the claims must be based on the identification of the ‘actual invention … grounded in a purposive construction of the patent claims.  It cannot be determined solely on the basis of a literal reading … or a determination of the “substance of the invention”….’ (at [43]).

In other words, the invention to be assessed is the one actually defined by the claims, which must be read, as always, through the eyes of the relevant skilled person and taking into account the interpretation that such a person would reach.
No ‘science or technology’ test
The appeals court agreed (at [56]-[58]) with Justice Phelan that it is ‘unclear and confusing’ to assess patentability by asking whether the subject matter is ‘scientific or technological in nature.’  In any event, the court characterised the 1-click purchasing method as a ‘technological solution to a practical problem’, which seems therefore to be ‘technological in nature’.
Business methods not necessarily unpatentable
The court also rejected the proposition (at [59]-[63]) that a ‘business method’ is necessarily excluded subject matter, saying that the Commissioner should have ‘a mind open to the possibility that a novel business method may be an essential element of a valid patent claim’.
‘Physicality’ requirement
Additionally, the court agreed (at [66]) with Justice Phelan that a patentable invention must result in ‘some sort of manifestation or effect or change of character’, in the sense that ‘because a patent cannot be granted for an abstract idea, it is implicit in the definition of “invention” that patentable subject matter must be something with physical existence, or something that manifests a discernible effect or change’.

DISAGREEMENTS WITH THE ORIGINAL JUDGMENT

There are two points on which the Court of Appeal takes issue with the decision of Justice Phelan.

Firstly, while Justice Phelan apparently considered that the ‘physicality’ requirement could be met broadly by any invention having a ‘practical application’, the appeals court has found (at [59]) that the appearance of some practical use is not necessarily sufficient (i.e. this is not the appropriate test).  It is always necessary to return to the fundamental principles and determine whether, on a proper (purposive) construction of the claims, it is directed to something within the statutory categories (of ‘any new and useful art, process, manufacture or composition of matter, or any new and useful improvement’ to these), and is not expressly excluded, i.e. as a ‘mere scientific principle or abstract theorem’.

Secondly, the Court of Appeal considered that Justice Phelan was wrong to provide a definitive construction of Amazon’s claims, but instead should have remanded the application back to CIPO for re-examination, because the court is not in a position to conduct the necessary ‘purposive construction’.  The court stated (at [73]) that:

Anyone who undertakes a purposive construction of a patent must do so on the basis of a foundation of knowledge about the relevant art, and in particular about the state of the relevant art at the relevant time.

During examination in the patent office, this information is available from the applicant’s submissions, and from the technical expertise of the examiners.  Court’s generally rely upon expert evidence for the relevant background, and when this is not available a court’s construction of the claims is necessarily ‘literal’ and not ‘purposive’ (at [74]).

For this reason, the Court of Appeals has remanded the application back to CIPO, for expedited reconsideration.

COMPARISON WITH AUSTRALIAN LAW

There are a number of notable parallels in this Canadian decision with the Australian approach, as set out authoritatively in the decision of the High Court in National Research and Development Corporation v Commissioner of Patents (‘NRDC’) [1959] HCA 67, and the Full Federal Court decisions in CCOM Pty Ltd v Jiejing (‘CCOM’) [1994] FCA 1168 and Grant v Commissioner of Patents (‘Grant’) [2006] FCAFC 120.

For example, the requirement for an invention to be a new and inventive method of applying skill and knowledge, which has a commercially useful result, resonates strongly with the NRDC/CCOM test for a ‘manner of manufacture’ to be ‘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’ (CCOM at [128]).

The rejection by the Canadian Court of Appeal of a ‘science or technology’ test corresponds almost exactly with the words of the Full Federal Court in Grant, which addressed exactly the same question (at [38]):

One thing that stands out from NRDC is the emphasis that their Honours put on the unpredictability of the advances of human ingenuity. What is or is not to be described as science or technology may present difficult questions now, let alone in a future which is as excitingly unpredictable now as it was in 1623 or 1959, if not more so. We think that to erect a requirement that an alleged invention be within the area of science and technology would be to risk the very kind of rigidity which the High Court warned against.

The Canadian court’s ‘physicality’ requirement is also closely aligned with the Grant court’s finding (at [32]) that ‘[a] physical effect in the sense of a concrete effect or phenomenon or manifestation or transformation is required.’

The Australian court in Grant also had very similar things to say (at [26]) about the patentability of ‘business systems’ as a general proposition, i.e. that:

[p]atent 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…

In all, it appears that the criteria for patent-eligibility should now be very similar between Canada and Australia, which is a useful outcome for applicants (and their advisors) with interests in both countries.

This also suggests that IP Australia may wish to study the Canadian decision closely, to determine whether it raises any questions in relation to its current practices for assessing patentability of computer-implemented business methods, particularly with two such cases currently on their way to appeal hearings before the Federal Court of Australia.

CONCLUSION

The Canadian Commissioner of Patents has demonstrated great antipathy to date towards the Amazon 1-click patent application.  Despite the conclusions of the Court of Appeal appearing to favour Amazon, remand of the case back to CIPO, with the door still open to finding a lack of patentability based upon an unfavourable ‘purposive construction’ of the claims, means that Amazon’s battle may not yet be over.

Based upon our own background in electrical and software engineering, we believe that following the court’s approach should result in grant of a patent to Amazon.  We also note that the issue of patent-eligibility of the (somewhat broader) claims of the equivalent Australian application did not seriously arise, even in a contested opposition with substantial expert evidence available (see Telstra Scores Pyrrhic Victory in Amazon ‘1-Click’ Opposition).

We will now have to wait to see whether the Commissioner will choose to reject the application once again, which could lead to a further appeal to the Canadian Federal Court, this time with experts in tow to expound upon the claim construction issues.

Alternatively, if the patent is now granted, it will have taken over 14 years since the filing of the original US priority application for ‘1-click’, on 11 September 1997!

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