Amazon appeal may shape future of software patents in Canada

If you’ve ever shopped online, chances are you’ll be familiar with the "1-Click" ordering system made famous by Amazon.com. Briefly, Amazon’s 1-Click system enables users to quickly buy items without using a shopping cart, and without engaging in a checkout process. In one form, it works by storing user account information at the merchant’s server and a "cookie" at the user’s browser that identifies the user. When ready to make a purchase, the user simply clicks a single button, the browser sends the order information along with the cookie, and the merchant’s server handles the rest to fulfill the order.

Beginning in 1997, Amazon filed patent applications on elements of this system in a number of countries worldwide, including the U.S. and Canada. One U.S. patent was issued in 1999, and several others have issued since. Amazon’s U.S. patent for the 1-Click system touched off a firestorm of debate concerning software and business method patents when it first appeared.

This class of patents saw significant growth during and after the dot-com era, and in the wake of a landmark court decision in the U.S., which established that patentable subject matter could exist if an invention simply produced "a useful, concrete and tangible result."

In contrast, Amazon’s Canadian patent application quietly made its way through an unusually lengthy examination process over ten years until being finally refused by the Commissioner of Patents in 2009 after hearings before the Canadian Patent Appeal Board. The Commissioner’s reasons for the refusal were detailed, and laid out a wholly novel approach to patentable subject matter in Canada. Amazon appealed to the Federal Court, on the grounds that the Commissioner lacked the jurisdiction to shape law and policy in this manner and that, in any event, the 1-Click patent application was directed to patentable subject matter.

The Federal Court agreed with Amazon and reversed the Commissioner’s decision. In doing so, the Court criticized virtually every aspect of the reasons for refusing the 1-Click application, including the Commissioner’s formulation of a "form and substance" analysis, the introduction of a "technological" requirement, and the overly restrictive definition of patentable "art." The Court also firmly affirmed that "there is not, nor has there ever been, a statutory exclusion for business methods in Canada."

The Patent Office has now appealed this latest decision to the Federal Court of Appeal. In written submissions, it continues to argue for a two-part test when assessing patentable subject matter. In particular, the Patent Office calls for what it now terms a "framing" analysis – that is, the claim construction approach used when assessing patent validity and infringement – and an "actual invention" analysis. The latter analysis, according to the Patent Office, is essential to determine whether what has actually been invented justifies the grant of a patent monopoly. Somewhat counter intuitively, the Patent Office is arguing that the essential elements of an invention may differ in both analyses.

Amazon’s written submissions point out that the two-part "framing" and "actual invention" analysis advanced by the Patent Office bears a striking resemblance to the "form and substance" analysis that was so firmly rebuffed in the previous decision of the lower Federal Court. Amazon maintains that the Federal Court’s approach – drawn from two recent, landmark Supreme Court cases – is correct. That is, there should be only one analysis – known as purposive construction – used in all stages of assessing a claimed invention.

Interestingly, the Patent Office appears to have abandoned its earlier contention that business methods are not patentable per se. However, it continues to take the position that an "art" or "process" as defined by the Patent Act requires a physical act (or series of acts) that causes a change in character or condition of a physical object.

Many outside observers have been keenly following the proceedings in this case. Not content to sit on the sidelines, the Canadian Life and Health Insurance Association and the Canadian Bankers Association have recently been granted leave to intervene in the appeal. Both organizations are concerned that the outcome of the Amazon decision would allow for the patenting of ideas and mental steps, such as the processes found in the insurance and finance sectors.

Finally, in a bit of interesting timing, the Commissioner of Patents was recently replaced. The outgoing Commissioner, Mary Carman, had presided over the original refusal of Amazon’s 1-Click patent application and subsequent court challenges to date. Observers have noted that the incoming Commissioner has an information technology background, leading to some speculation that we can expect a shift in Patent Office policy with respect to patentable subject matter. Only time will tell.

In the meantime, the current appeal continues, with oral arguments scheduled for June 21 in Toronto. A decision is not likely until late 2011.

Paul Horbal ( phorbal@bereskinparr.com) is an associate lawyer with Bereskin & Parr LLP and a registered Canadian patent agent. He can be reached at (416) 957-1664. This article is intended to provide general information and should not be considered legal advice.