Business Method Patents: Where Do We Stand? – Adrian C. O’Donnell, Patent Specialist

Patents have been traditionally granted for tangible inventions. In other words, they can be held in your hand or touched. Business methods are an intangible process and as such Business Method Patents (BMPs) essentially allow an idea, without an actual physical manifestation, to be patented. BMPs have a controversial history in both Canada and the United States. Detractors have used this intangibility to argue that they do not attach to a tangible item, but are instead a mere abstract idea or process and should not be allowable under patent law as they do not meet the definition of statutory subject matter in the Patent Acts. Supporters have voiced concern about the implications to start-up businesses, the software and IT industries, and the impact on the North American and global economies.

Over the years, the Courts have ruled valid patents that push the boundaries of the definitions of statutory subject matter. The Courts establishing that a patent is valid, or should be granted, if the right tests are met. The question has therefore been what the right tests are for BMPs.

In late 2010, the Canadian Federal Court overturned previous rulings by the Commissioner of Patents that had rejected Amazon’s efforts to obtain a BMP for their “one-click” online ordering process. “One-click” allows users to make online purchases with a single click of the mouse, the payment information having already been entered by the user and stored in cookies on the user’s computer. The result is that users do not need to enter billing and shipping information every time a purchase is made; the information is entered once and future purchases require only one click to complete the check-out process. However, there is no tangible result as the steps of the process are carried out in software.

In the United States, the litmus test for BMPs to date has been Bilski as the fight moved from the Patent Office to the Courts, and ultimately the Supreme Court. In the Canadian ruling on Amazon the reasoning and final decision closely follow that of Bilski. In Bilski, the Supreme Court maintained that an abstract idea per se is not patentable; so a business method must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing.

In Amazon, it was held that the appropriate test to identify a BMP is: 1) there must be a practical application; 2) it must be a method of applying skill and knowledge and; 3) it must have a commercially useful result. The Federal Court determined that Amazon’s “one-click” ordering met these criteria and was a tangible new business method, not simply a scheme or abstract idea, as it was put into action through the use of cookies, computers, the Internet and the customer’s own action. Hence, the Federal Court ruled that the process was tied to a particular machine.

As such, business methods are patentable provided that they contain the appropriate specification and claim language to meet the tests established by the US and Canadian Courts. As ever, we will keep watching as the Amazon decision has been appealed and other BMP cases in progress may adjust and refine the guidelines on the tests for BMPs.

This article first appeared in the January 2011 edition of the Perlaw Reporter.