Do abstract ideas become patentable subject matter when implemented by a computer?

By J. Duffy, N. Raffoul, A. Brion

On June 19, 2014, the Supreme Court of the United States decided the matter of Alice Corp. v. CLS Bank International. This case determined the validity of Alice’s patent claims, which pertained to a computer-implemented scheme for mitigating “settlement risk” by using a third-party intermediary.

The Court essentially rehashed a two step framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patentable applications of those concepts.  In the first step, the Court likened the Alice claims directed to an “intermediated settlement” to those in the Court’s Bilski decision that dealt with “risk hedging”.  In doing so, the Court found that Alice’s claims concerned an abstract idea.  In the second step, the Supreme Court found that the computer functions in the claims were “well-understood, routine, conventional activities previously known to the industry” and that each step did no more than require a generic computer to perform generic computer functions. The Court additionally found that viewing these separate components as “an ordered combination” of steps did not change the results of the analysis. Therefore, the Court decided the claims were invalid.

While this case will undoubtedly receive a lot of coverage in the world of patents, it is hardly a surprising one.  Alice merely reflects the recent trajectory of US patent law regarding computer-implemented business methods:  when confronted with questionable claims to a computer implemented business method, it is safer to have something more than the business method for patentability.

On a practical note, the case highlights the need to make sure that the invention (especially the invention covered in the claims!) is something more than using a computer to implement a known business method.  Interestingly enough, the outcome of this case should be familiar to Canadians, as it articulates a well-established Canadian principle for patenting software: merely using a computer is not enough to transform the unpatentable into the patentable.

For the full decision: http://www.supremecourt.gov/opinions/13pdf/13-298_7lh8.pdf

 

 

FEDERAL COURT OF APPEAL RELEASES AMAZON.COM DECISION

The Federal Court of Appeal (FCA) largely approved Justice Phelan’s reasons in the lower court.  “I agree that no Canadian jurisprudence determines conclusively that a business method cannot be patentable subject matter.”  However, the FCA critized Justice Phelan’s “practical embodiment or practical application” test.

The FCA allowed Amazon.com’s appeal from the Commission and requires the Commissioner to re-examine the patent application on an expedited basis in accordance with its reasons.

Since its release on Friday, this decision has been criticized because the FCA appears to have abdicated its responsibility to decide the law on the case before it.  Instead, the FCA has passed that responsibility onto the Commissioner to formulate a decision without any clear guidance on the law.

Please follow the link for a copy of the decision: 2011-11 Amazon.com Federal Court of Appeal Decision

 

 

 

 

 

 

Canadian Federal Court decides that business methods are patentable subject matter in Canada

AMAZON.COM, INC. (Appellant)

and

THE ATTORNEY GENERAL OF CANADA, and
THE COMMISSIONER OF PATENTS (Respondents)

Yesterday, the Federal Court of Canada finally ruled on an appeal of a decision by the Commissioner of Patents to deny the Appellant’s patent for a “business method”, having found that it was not patentable subject matter under s. 2 of the Patent Act.

The Federal Court concluded that a “business method” can be patented in appropriate circumstances.

As long as a claim is not directed to an abstract idea or scheme, but rather has a practical application or embodiment, then it may be patentable.

Background:

Amazon.com is seeking a patent for an invention entitled, “Method And System For Placing A Purchase Order Via A Communication Network”.  The application was filed on September 11, 1998, and claimed priority from two U.S. patents.

The Federal Court stated that “[t]he claimed invention further enables internet shopping. The customer visits a website, enters address and payment information and is given an identifier stored in a ‘cookie’ in their computer. A ‘server’ (a computer system operating a commercial website) is able to recognize the ‘client’ (customer computer with the identifying cookie) and recall the purchasing information which is now stored in the vendor’s computer system. The customer can thus purchase an item with a ‘single click’ – the order is made without the need to ‘check out’ or enter any more information.”

Decisions and Reasoning:

The Federal Court held that the Commissioner of Patents’ rejection of Amazon.com’s patent application on the basis of non-patentable subject matter was not supported by Canadian law.   Rather, the Federal Court affirmed that the test to determine whether an art or “business method” is patentable is as set out by Progressive Games:

(i)            it must not be a disembodied idea but have a method of practical application;

(ii)          it must be a new and inventive method of applying skill and knowledge; and

(iii)         it must have a commercially useful result.

The Federal Court took a broad interpretation of “a method of practical application” saying that Amazon.com’s claims are patentable because the “‘physical effect’, transformation or change of character resides in the customer manipulating their computer and creating an order. It matters not that the ‘goods’ ordered are not physically changed.” This reasoning is generally in agreement with that of the U.S. Supreme Court in Bilski which held that a business method may be patentable as long as it is not an abstract idea, law of nature, or natural phenomena.

According to the Federal Court, we must not “restrict the patentability of practical applications which might, in light of today’s technology, consist of a slightly less conventional ‘change in character’ or effect [than] through a machine such as a computer”.  The Federal Court held that there is not a statutory exclusion for business methods in Canada: “[To] implement a business method exception would be a ‘radical departure’ from the current regime requiring parliamentary intervention”.

In addition, the Federal Court rejected the Commissioner’s “novel and unnecessary requirement for patentability” that what has been added to human knowledge must be technological in nature.  “There is no reference to such a test in the Canadian jurisprudence (or none was advanced in this Court). It was not within the Commissioner’s jurisdiction to introduce one.” “Technology is in such a state of flux that to attempt to define it would serve to defeat the flexibility which is so crucial to the Act.”

Please note that the decision has been appealed.

Please do not hesitate to contact the author should you have any further questions regarding this decision.

U.S. Supreme Court Decides Bilski; Rules That Business Method Patents Survive

The US Supreme Court on June 28, 2010, decided the long-awaited Bilski case, affirming the Federal  Circuit’s judgment. (Bilski v. Kappos, U.S., No. 08-964, 6/28/10).

The US Court ruled that business methods are eligible subject matter under US patent law but declined to accept the US Federal Circuit’s machine-transformation test as the exclusive test for the Section 101 determination.

To summarize, the US Supreme Court decision has the following implications :

a) business methods are patentable subject matter;

b) software is patentable subject matter; and

c) the Federal Circuit’s “machine-or-transformation” test is not the definitive.

While this decision means that it will likely be less difficult to procure software patents, we strongly recommended having claims in your patent application that cover computer systems and/or servers if you have a software aspect to your invention.

Most of the Supreme Court’s opinion (16 pages) is supported by 5 votes, and other parts are supported by only 4 votes.

The following language is supported by a majority of the US Supreme Court:

“Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.

“And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street, 149 F. 3d, at 1373; AT&T Corp., 172 F. 3d, at 1357. It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method pat-ents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.”

To read the full opinion, click here:

http://www.supremecourt.gov/opinions/09pdf/08-964.pdf

Please do not hesitate to contact us should you have any questions about the Bilski decision.