Software and Business Method Patents – The Latest Developments

Isis E. Caulder of Bereskin & Parr

December 1, 2007

© 2007 Bereskin & Parr Bereskin & Parr 40 King Street West, 40th Floor, Toronto, Ontario, Canada M5H 3Y2 Phone: 416-364-7311 Fax: 416-361-1398 www.bereskinparr.com

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I. The Search for Clarity Many comprehensive papers have been written on this topic from Canadian and international perspectives over the past few years. This paper is intended to build on the existing literature in the field and to provide a summary of software and business method patent law and practice in various jurisdictions as well as to highlight recent and significant developments in Europe and Canada. The United States was the first country to formally recognize the patentability of software inventions as a result of the 1981 United States Supreme Court ruling in Diamond v. Diehr1. In this case, it was proclaimed that computer-related machines and processes were not to be regarded any differently under the patent laws than traditional machines and processes just because a computer program was used to perform the claimed novel apparatus functions or method steps. Later, the Court of Appeals for the Federal Circuit explicitly rejected the judicially-created business method patentability bar in the now famous State Street Bank & Trust Co. v. Signature Financial Group2 decision in 1998. Since then, additional case law has been established in the United States that indicates that relative clarity has been achieved on the question of whether software and business method inventions are patentable subject matter. Understandably, there was an explosion of patent application filings for software and business method related inventions in the United States. The United States Patent and Trademark Office (USPTO) had nearly 10,000 business method application filings in 2006, about seven times as many as in 1998. This was also the case in Europe, where the European Patent Office (EPO) reported in late 2000 that it had about 2,000 pending business method applications, about twice as many as there were in 1998. A study published in 2004 by Wagner, found that 56 percent of 1900 analyzed business-related European patent applications were filed by United States based companies, compared with 23 percent from European applicants. In comparison, United States companies accounted for 25 percent of all general EPO applications. More recently, the United States Patent Office has been granting nearly 1,000 business method patents annually (i.e. inventions falling in class 705) following a significant increase in 2005. However, contrary to the United States position, the European Patent Convention (EPC) and European Patent Office Board of Appeals decisions require software and computer-implemented business method inventions, as any other inventions, to possess "technical character" in order to be considered patentable subject matter. European Patent Office policy statements restate this position. Also, computer programs "as such" are excluded from patentability under Articles 52(2) and 52(3) of the EPC. However, over 30,000 software-related patents have been granted by the European Patent Office in the information technology field (e.g. digital data processing etc.) and in other technology fields (e.g. automative and automated manufacturing etc.) and some issued software patents have business applications. Accordingly, the legal situation in Europe is ambiguous and lacks certainty. Additionally, the conditions for granting such patents are not uniform across Europe resulting in software related inventions being patentable subject matter in

1 Diamond v. Diehr, 450 U.S. 175 (1981) at 185 (U.S.S.C.). 2 State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F.3d 1368 (Fed. Cir. 1998) certiorari to United States Supreme Court denied January 11, 1999.

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some Member States and not in others. In fact, when requested by UK's Court of Appeal in April 2007, the EPO's president Alain Pompidou refused to provide clarification on the EPO's position on software patents explaining that "at the moment there is insufficient legal basis for a referral." In Japan, a software-related invention or software-related method of doing business is considered patentable provided that the information processed by the software is "concretely realized" by using hardware resources. In the "Examination Guidelines for Patent and Utility Models" released by the Japanese Patent Office on May, 2005, a Chapter entitled Computer Software-Related Invention"3 (sic) states that in order to qualify as a statutory invention as prescribed under Japanese Patent Law, the claimed invention must be "a creation of technical ideas utilizing a law of nature". These above-noted principles are based on Japanese case law that has established that in order to be "a highly advanced creation of technical ideas utilizing a law of nature", a claimed invention must be concrete enough to accomplish a certain purpose. It should be noted that current Japanese Patent Office Guidelines assume that all business method inventions that do not use information technology cannot meet the statutory requirements for patentability and thus, all business methods discussed in the Guidelines are assumed to be software-based. In Canada there is a trend in favor of the patentability of software inventions and computer implemented business methods. Specifically, in 2005 the Manual of Patent Office Practice4 (MOPOP) was updated to clarify that computer related subject matter is patentable subject matter if it comprises a series of acts performed by some physical agent upon some physical object producing a change in character or condition and if it produces an essentially economic result relating to trade, industry or commerce. Further, detailed examples of computer related claims of process, machine and manufacture types are provided in chapter 16 of the MOPOP. II. United States – "Useful, Concrete and Tangible Result"

As is well known, in the United States, software and business method inventions are

considered patentable subject matter. The United States was the first country to formally recognize the patentability of software in the 1981 Supreme Court ruling in Diamond v. Diehr5 The invention at issue in Diamond v. Diehr involved a rubber-curing process that was controlled by software. The United States Supreme Court found that since the patent was for rubber curing, and not software per se, it was patentable. The Court made it clear that computer-related machines and processes were not to be regarded any differently under the patent laws than traditional machines and processes just because a computer program was used to perform the claimed novel apparatus functions or method steps. The Court said that an invention incorporating a mathematical algorithm could not be denied a patent solely based on the fact that it contained an algorithm. Instead, it was decided that the invention must be looked at as a whole. However, the Court still maintained that the United States Patent Act did not cover the exceptions of mathematical algorithms or business methods. Later, in 1998, the Federal Court of

3 Chapter 1 of "Part VII – Examination Guidelines for Inventions in Specific Fields" within "Examination Guidelines for Patent and Utility Models", see http://www.jpo.go.jp/quick_e/index_tokkyo.htm. 4 Manual of Patent Office Practice, chapter 16, see http://strategis.ic.gc.ca/sc_mrksv/cipo/patents/mopop/chap16-e.html. 5 Diamond v. Diehr, supra at 185.

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Appeals established that software and business method inventions are also in fact patentable when they produce a "real, concrete, and tangible result"6.

In the famous groundbreaking case, State Street Bank & Trust Co. v. Signature Financial

Group7, the United States Court of Appeals for the Federal Circuit affirmed that "laws of nature, natural phenomena, and abstract ideas" are unpatentable, but only when claimed as abstract ideas where they are not reduced to some practical application. The patent at issue entitled "Data Processing System for Hub and Spoke Financial Services Configuration" allowed mutual fund companies (spokes) to pool assets in an investment portfolio (hub), providing economies of scale with regard to the costs of fund administration and beneficial tax consequences. The pooling aspect allowed groups to consolidate administrative costs while simultaneously utilizing tax benefits linked to partnership. The District Court held that the patent was invalid relying on the Freeman8-Walter9-Abele10 string of cases. This test was developed as a result of these three United States Court of Customs and Patent Appeal cases and is a two-stage test for patentable subject matter. First, the test determines whether the claimed system is a mathematical algorithm. In applying this step, the District Court in State Street was satisfied that the invention itself was designed to solve a mathematical problem, namely allocation of assets, incomes and losses to Hub participants notwithstanding that the patent at issue was found not to claim a mathematical algorithm. The second step under the Freeman-Walter-Abele test is to see whether the system is applied to "physical elements" or "process steps", that is whether the invention physically transforms the subject matter. The District Court held that the output generated by the invention did not result in the physical transformation of data but rather was just a manipulation of recorded numbers. Upon examination of these issues, the United States Court of Appeal for the Federal Circuit rejected the Freeman-Walter-Abele test in favour of two other recent cases, namely Arrhythmia Research Technology Inc. v. Corazonix Corp.11 and In re Alappat12. The Court stated that the proper test consisted of first, determining whether the invention was patentable subject matter under a strict reading of the United States Patent Act and second determining whether the machine method or process produced a "useful, concrete and tangible result". The system described in the patent at issue in State Street was comprised of a computer processor programmed to complete certain steps (i.e. a programmed computer), which satisfied the definition of a "machine". The Court then applied the second step, finding that the invention indeed produced a "useful, concrete and tangible result" when it produced a final share price momentarily fixed for recording and reporting purposes. The Court stated:

The transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because

6 State Street Bank & Trust Co. v. Signature Financial Group Inc., supra at 1373. 7 State Street Bank & Trust Co. v. Signature Financial Group Inc., supra. 8 In re Freedman, 573 F.2d. 1237 (C.C.P.A. 1978). 9 In re Walter, 618 F.2d. 758 (C.C.P.A. 1980). 10 In re Abele, 684 F.2d. 902 (C.C.P.A. 1982). 11 Arrhythmia Research Technology Inc. v. Corazonix Corp. F.2d. 1053 (Fed. Cir. 1992). 12 In re Alappat 33 F.3d. 1526 (Fed. Cir. 1994).

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it produces: a useful, concrete and tangible result" – a final share price momentarily fixed for recording and reporting purposes and even accepted and relied upon by regulatory authorities and in subsequent trades.13

The Court rejected the "business methods" exemption as "ill-conceived" and noted that a claim should not be treated differently because it has a business purpose. The implication of this ruling is that any system that manipulates data into a form that can be relied upon by subsequent users or for other business processes is likely to satisfy the utility requirement of patentable subject matter. Although the patent claims at issue in State Street were found to be directed to a computer-based machine for managing financial services, the analysis adopted in the case applies to any business method, whether or not it involves software. An important case that followed the State Street case, was AT&T v. Excel Communications Inc.14 Excel Communications sought to invalidate AT&T's patent on the basis that it did not claim statutory subject matter. The patent at issue was "Call Message Recording for Telephone Systems" which provided an indicator that allowed for differential billing of subscribers based on the long distance carriers of the party being called. Excel Communications was granted summary judgment on the basis that the AT&T patent claims were directed to a mathematical algorithm. On appeal, the Court noted that the prohibition against patenting algorithms was limited to algorithms in the abstract. While the AT&T patent claims used algebra to create a signal for the system, the algorithm was used to produce a primary interexchange carrier value (PIC) for billing reasons. Since the claimed invention produced a "useful, concrete, tangible result" (i.e. the PIC), the claims were held to be allowable. There have also been several other United States court decisions relating to "business method" patents. One of the more high profile cases was Amazon.com Inc. v. Barnesandnoble.com Inc.15 In this case, Amazon claimed infringement of its patent relating to a method of placing an order in which an order is filled "in response to only a single" action (i.e. a mouse click) and where "the item is ordered without using a shopping cart method". The District Court awarded Amazon a preliminary injunction enjoining Barnesandnoble.com's Internet ordering system which also used "one click ordering". The Court of Appeals for the Federal Circuit set aside this injunction on the basis that Barnesandnoble.com had raised sufficient doubt as to the validity of the patent to preclude the grant of an injunction. Mention was made of various prior art "one click" systems including one developed by CompuServe. It is important to note here that the Court of Appeals was concerned with the validity of the patents based on anticipation and obviousness and not based on subject matter objections. Accordingly, in the United States, relative clarity has been achieved as to whether software and business method inventions can be patented. Since State Street and AT&T v. Excel Communications Inc., there has been an explosion of patent filings for business method related inventions in the United States. Patents have been issued for an online shopping rewards program, referred to as the "ClickReward" (U.S. Patent No. 5,774,870); a process that

13 State Street Bank & Trust Co. v. Signature Financial Group Inc. supra at 1373. 14 AT&T v. Excel Communications Inc. 172 F.3d 1352 (Fed. Cir. 1999). 15 Amazon.com Inc. v. Barnesandnoble.com Inc. 57 USPQ 2d 1747 (CA FC 2001); reversing 53 USPQ 2d 1115 (DC Wash 1999).

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supposedly blocks the auction practices described in the previous patent (U.S. Patent No. 5,845,265); an online auction system by which consumers name the price they are willing to pay and the first willing seller gets the sale, also known as "name your price" or as a "reverse auction" (U.S. Patent No. 5,794,207), and a system that provides financial incentives for citizens to view political messages on the Internet (U.S. Patent No. 5,855,008).

In an effort to prevent a potential flood of litigation resulting from the increase of issued

business method patents, United States Congress enacted the American Inventors Protection Act in late 1999. The American Inventors Protection Act provides a limited defense provision to insulate an accused party from charges of infringing a "method of doing or conducting business." The statute provides a defense to an accused party who "actually reduced the subject matter to practice at least one year before the effective filing date of such patent, and commercially used the subject matter before the effective filing date of such patent." 35 U.S.C. 273 (b) (1). However, the enacted statute left out the definition of a "business method."

In response to criticisms at the time that patent examiners were ill equipped to investigate

whether business methods are novel and non-obvious, on March 29, 2000 the USPTO announced an Action Plan white paper for business method patents to improve the quality of the examination process in technologies related to electronic commerce and business methods. Also, feedback on prior art resources is being gathered and input on expanding non-patent literature (NPL) information collections and databases is being solicited16. To ensure that the appropriate electronically searchable databases are being utilized by Examiners in Class 705, a Federal Register notice was published in June, 2001 listing the current core NPL databases searched by the business method examiners and asking for public comment. The USPTO has also added an additional "layer of review" to business method patent applications and hired technology specialists to aid examiners in the areas of finance, e-commerce, insurance and Internet infrastructure17.

Severe criticism of the United States Patent Office's policy of issuing patents on methods of doing business has also reached the ears of Congress. Two bills, namely the "Business Method Patent Improvement Act of 2000" and the "Business Method Patent Improvement Act of 2001"18 have been introduced in Congress by Representative Boucher19 to determine under what conditions the PTO should be issuing "business method" patents. The "Business Method Patent Improvement Act of 2001" is very similar to the 2000 version but includes several significant changes in response to legitimate criticisms. The 2001 Bill requires the United States Patent Office to publish all business method patent applications after 18 months. In conjunction with the publication provision, it creates opportunities for the public to present prior art or public use information before a business method patent issues. It establishes an administrative “Opposition” process where parties can challenge a granted business method patent in an expeditious, less costly alternative to litigation. The Bill lowers the burden of proof for challenging business method patents, requires an applicant to disclose its prior art search, and finally, creates a

16 http://www.uspto.gov/web/menu/pbmethod/aiplafall02paper.htm. 17 For current information on business method-related patent issues at the USPTO, see the Technology Center 3600's Business Method Website at http://www.uspto.gov/web/menu/pbmethod/. 18 http://www.abanet.org/intelprop/107legis/home.html. 19 http://www.house.gov/berman/bmpia2001_summary.htm.

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rebuttable presumption that a business method invention constituting a non-novel computer implementation of a pre-existing invention is obvious, and thus, not patentable.

On April 19, 2001, the Bill was referred to the House subcommittee on Courts, the

Internet, and Intellectual Property. The Bill entitled "Business Method Patent Improvement Act of 2001" sought to amend title 35 of the United States Code to provide for improvements in the quality of patents on certain inventions. During the House Subcommittee hearing, many expressed the feeling that legislation should not be introduced, since the same existing laws of new and obviousness are also applicable to the business method patents. Since then, Congress has been preoccupied with other issues, and has not enacted or debated on any legislation addressing business method patents.

In Ex Parte Bowman20 in 2001, the Board of Patent Appeals and Interferences supported

an Examiner's non-statutory matter rejection of a patent arguing that the claims were directed solely to abstract ideas having neither a computer nor other technology incorporated therein. Following the unpublished decision, the USPTO had required business method invention to apply, involve, use or advance the technological arts in order to be patentable. In October 2005, however, a majority decision by the USPTO's administrative judges in Ex Parte Lundgren21 overturned this requirement ruling that the technological arts requirement could not be sustained, as no such requirement existed in law.

In response to Ex Parte Lundgren, USPTO patent examiners were issued interim

guidelines to judge the patentability of a business method regardless of whether it is within the traditional arts or not. Patent examiners were instructed that a process for doing business must produce a concrete, useful and tangible result in order to be patentable. For example, a business method invention producing a price for a product is considered to be a concrete, useful and tangible result.

A pending appeal, Ex Parte Bilski22, may yet again see the decision of Ex Parte Lundgren

overturned. At issue in Bilski is a business method application directed at a method of managing risk at a reduced cost. The USPTO has rejected the application as it is not tied to any physical structure and comprises no physical transformation and human beings could implement the invention without any outside aid. At issue is whether the removal of the technical arts requirement in the Lundgren decision implies that a technology requirement is no longer a requirement for patents. As the claims of the Bilski case recite solely non-physical transformations, which are abstract and not embodied in any physical way it is likely that the decision will merely clarify the Ex Parte Lundgren decision and not result in any dramatic movements.

In June of 2007, an update on business methods was presented during the Business

Methods Partnership Meeting at the USPTO23. During the presentation an outline of business method application statistics, department improvements and legal updates were provided. In 20 61 USPQ2d 1665, 1671 (Bd Pat. App. & Inter. 2001) 21 Appeal No. 2003-2088 (BPAI 2005) 22 Appeal No. 2002-2257 (BPAI Sept. 26 2006) 23 Update on Business Methods for the Business Partnership Meeting by Wynn W. Coggins, see http://www.uspto.gov/web/menu/pbmethod/partnership.pps

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particular the USPTO reported that the number of business method applications (i.e. in class 705) have remained relatively steady since 2001 and that pendency to the first office action for business method applications averaged 44 months as of mid-2007. The allowance trends presented seem to be indicative of the jurisprudence at the time. For instance in 2001 and 2002, 45% of the first applications following State Street were allowed. In contrast, in 2004 and 2005, before Ex Parte Lundgren, only 11% of applications were allowed. Finally, in 2006 and 2007, following Ex Parte Lundgren, 20% of applications were allowed. The USPTO notes that the fall and rise of the allowance rates from 2004 to 2007 is partially attributable to the "internet bubble" patent applications having broad claims that were examined during 2004-2005. The USPTO notes that the number of examiners assigned to business method applications has nearly tripled from 77 in 2001 to 197 in 2007 to address the backlog and other issues plaguing the business methods division. Further, plans are in place to double the number of art units to eight and to add 52 more examiners by 2008.

III. The European Union – The Debate Stalls Contrary to the position in the United States, the EPO Board of Appeals have defined a

more limited position with regard to the patentability of computer programs. The European Patent Convention (EPC) and European Patent Office Board of Appeals decisions require software and computer-implemented business method inventions, as any other inventions, to possess a "technical character" in order to be considered patentable. European Patent Office policy statements restate this position.

A. Software and Business Methods Patentability – "Technical Character" Under Article 52(1) of the European Patent Convention (EPC), European patents are

granted for inventions that are susceptible of industrial application, which are new, and which involve an inventive step. Rules 27 and 29 of the European Patent Rules provide that an invention must be of a "technical character" to the extent that it must relate to a technical field, must be concerned with a technical problem and must have technical features. Article 52(2) of the EPC provides a list of subject matter categories that are not regarded as patentable. From the perspective of software and business method patents, the key prohibitions are: (a) discoveries, scientific theories and mathematical methods, and (c) schemes, rules and methods for performing mental acts, playing games or doing business, and programs for computers. However, this should be compared with Article 52(3) of the EPC which provides that an exception to 52(2) only to the extent to which a European patent application or patent relates to subject matter or activities "as such". An EPO press release dated August 18, 2000 noted that this use of the term "as such" should be taken to mean that the mere inclusion of a business method or a computer program within a product or method which is of a technical character does not preclude patentability.

As identified on the European Patent Office's Board of Appeals Website24, the leading

case on the patentability of computer-related inventions is Computer-Related Invention/Vicom25.

24 http://www.european-patent-office.org/legal/case_law/e/I_A_1-1.htm. 25 Computer-Related Invention/Vicom, Decision T 208/84 EPO (OJ 1987, 14).

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In this case, a patent which claimed a method of digitally processing images and related apparatus was at issue. The application included claims to both a method and an apparatus. The Examining Division held that the method claims were either related to a mathematical method and therefore were not patentable subject matter or they did not include a technical feature. After being stripped of patentability for the method claims, the remaining apparatus claims lacked novelty. The Board of Appeals reversed, noting that digital image processing is not an abstract process but a "real world activity" and held that even if the idea underlying an invention may be considered to reside in a mathematical method, a claim directed to a technical process in which the method is used does not seek protection for the mathematical method as such.

Another leading case is Koch & Sterzel26. There, the question was whether an X-ray

apparatus incorporating a data processing unit operating in accordance with a routine was patentable. The Board considered that the claim related neither to a computer program on its own and divorced from any technical application, nor to a computer program in the form of a recording on a data carrier, nor to a known, general purpose computer in combination with a computer program. Rather, the Board found that the routine in accordance with which the X-ray apparatus operated to produce a technical effect, that is, it controlled the X-ray tubes so that by establishing a certain parameter priority, optimum exposure was combined with adequate protection against overloading of the X-ray tubes.

The invention was therefore patentable irrespective of whether or not the X-ray apparatus

without this computer program formed part of the state of the art. The Board held that an invention must be assessed as a whole. If it made use of both technical and non-technical means, the use of non-technical means did not detract from the technical character of the overall teaching. In so holding, the Board therefore regarded it as unnecessary to tally up the technical and non-technical features in a claim in order to decide whether it related to a computer program as such. If the invention defined in the claim used technical means, its patentability was not ruled out by Article 52(2)(c) and 52(3) and it could be protected if it otherwise met the various statutory patentability requirements.

Similar reasoning was adopted in Sohei/General Purpose Managment System27 where the invention allowed for the input of various types of data (e.g. financial and inventory related data) to be inputted in a single file thus avoiding the need to input common data. The claims were initially rejected and subsequently allowed on appeal on the grounds that technical considerations were applied in order to implement the method. The Board noted that the claims were not to a method of doing business as such. Accordingly, it appears that a business method can also be patentable as long as it has a technical character or utilizes technical features. This is of course a generally more achievable requirement for computer-implemented business methods.

Two other significant decisions were the so-called IBM decisions (T 1173/9728 and T

935/9729) rendered by the EPO Board of Appeal in 1998 and 1999.

26 Koch & Sterzel, Decision T 26/86 EPO (OJ 1988, 19). 27 Sohei/General Purpose Managment System, Decision T 769/92 EPO (OJ 1995, 525). 28 IBM/Computer Program Product I, Decision T 38/97 EPO (OJ 1998, 384). 29 IBM/Computer Program Product II, Decision T 935/97 EPO (OJ 1999, 25).

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In the T 1173/97 case, IBM sought a patent for its invention entitled "Asynchronous Resynchronization of a Commit Procedure". As part of its application, IBM made several independent claims to the corresponding method, system and computer program product. The claims to the computer program product were rejected on the basis that they were directed to non-patentable subject matter. On appeal, the EPO Board of Appeals stated that regarding the exclusion of computer programs as such, means that such programs are unpatentable due to the fact that they are abstract creations lacking in technical character. It was discussed that when loaded in a computer, a program causes the computer to exhibit certain behavior, which can be argued to constitute a technical effect, since a computer is a physical and technical apparatus. It then follows that any computer program has a technical character. However, this would render their exclusion under Articles 52(2) and (3) EPC meaningless. The Board of Appeals noted that there are two instances in which a computer program may be found to have a technical character: (i) if the computer program manages an industrial process or the working of a machine or (ii) if it produces "further effects" in the hardware that go beyond the normal physical interactions between the program and the hardware where such further effects have a technical character or cause the software to solve at technical problem. In the T 935/97 case, IBM sought a patent for its invention entitled "Method and System in a Data Processing System Windowing Environment". In this application, IBM included claims directed to a computer program stored on a computer readable storage medium. These claims were rejected on the basis that they concerned subject matter excluded form patentability under Article 52(2)(c) and 52(3) EPC since the subject matter claimed was distinguished from the prior art of computer programs stored on storage mediums only by the information pattern represented by the stored program code. Accordingly, it was stated that the problem solved would merely be how to store the particular computer program on a data carrier, a well-known problem and its solution also well known. The EPO Board of Appeals held that a computer program product may possess a technical character because it has the potential to cause a predetermined further effect, which reveals itself when the program is run on a computer. Accordingly, it was held that a computer program product claim which is worded to clearly indicate all the features of a patentable method (e.g. for operating a computer) is therefore in principle considered to be patentable.

A September 2000 decision (T 931/95) common referred to as Pension Benefit Systems

Partnership was a ground breaking decision for interpreting Article 52(1) and (2). In this case, the Board of Appeal stated that "technical means for a purely non-technical purpose and/or for processing purely non-technical information does not necessarily confer technical character." In this way, the Board found that methods of doing business as such are excluded under Article 52(2)(c). In contrast, the Board favored apparatus claims finding that "a computer system suitably programmed for use in a particular field, even if that is the field of business and economy, has the character of a concrete apparatus in the sense of a physical entity, man-made for a utilitarian purpose and is thus an invention within the meaning of Article 52(1) EPC."

The Pension Benefit Systems Partnership case was largely considered the most relevant

case from the EPO Boards of Appeal regarding business methods until later superseded by the T 641/00 (Comvik, Two identities) and T 258/03 (Hitatchi, Auction Method) decisions.

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The T 641/00 decision issued on September 2002, and is broadly considered a landmark case regarding inventive step and patentable subject matter requirement of business methods and computer-implemented inventions under the EPC. In the case, a patent relating to a digital mobile telephone was, granted then later opposed, revoked on lack of inventive step and appealed. The Board stated in the decision that "An invention consisting of a mixture of technical and non-technical features and having technical character as a whole is to be assessed with respect to the requirement of inventive step by taking account of all those feature which contribute to said technical character whereas features making no such contribution cannot support the presence of inventive step." In this way, the Board found that non-technical features of an invention are interpreted to constrain the objective technical problem, for which the invention proposes a solution as set out in the "problem-solution approach". The decision was later interpreted by a June 2006 decision (T 928/03, "Video game/ KONAMI"), in which the Board held that when treating non-technical aspects as constraints of a technical problem, one must remember the purpose: the approach is both to ensure that non-technical aspects do not support inventiveness and to take into account contributions of every feature of an invention when assessing inventive step.

Method claims we re-embraced in the T 258/03 decision overturning the T 931/95

decision, the Board stating that "a method involving technical means [is] an invention within the meaning of Article 52(1) EPC." The Board asserted, however, that "this does not imply that all methods involving the use of technical means are patentable. They still have to be new, represent a non-obvious technical solution to a technical problem, and be susceptible of industrial application." Removed from this approach was an abandoned "contribution approach", which defined an invention as necessarily advancing the art in a field non excluded from patentability. This approach required consideration of the prior art. The Board however, asserted that "it should be possible to determine whether subject matter is excluded under article 52(2) EPC without any knowledge of the state of the art (including common general knowledge)."

The EPO provided further guidance on the subject of technical matter in a November

2006 decision 30. Specifically, the decision reiterates that under Article 52, the character of a claimed subject matter must include something technical and further that per Article 56, non-technical features may form the basis of a determination of whether an inventive step is present only if they interact with technical features to solve a technical problem.

Since the IBM decisions, the EPO has been granting patents whose claims cover a

computer program product. Before, it was possible to obtain patent protection for inventions involving a computer program but the claims could only relate to a method or a system and not to the computer program product itself.

In view of these judicial developments, it was generally understood that the reference to

the unpatentability of computer programs should be removed from the European Patent Convention (EPC) at the Diplomatic Conference held in Munich in November 2000, regarding revision of the EPC. Despite the clearly-indicated wish of the European Patent Office (EPO) that

30 T 154/04 (Duns Licensing) of 15 November 2006, see http://legal.european-patent-office.org/dg3/pdf/t040154ex1.pdf

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computer programs should be deleted from the list of exclusions in Article 52 EPC, it was finally decided that, because of the lively debate engendered by this proposal, no change should be made and a next directive of the European Commission should be awaited.

B. EU Directive on the Patentability of Computer Implemented Inventions The Proposal for a Directive of the European Parliament and of the Council on the

patentability of computer-implemented inventions (COM(2002) 92–2002/0047) ("Software Directive") was developed in an effort to seek harmonization of national standards for software patentability31. After years of debates, the proposal was turned down in an overwhelming majority vote (684 to 14) in July of 2005.

Background As set out in the accompanying document, "The Need for a Directive and Issues at

Stake"32, it was stated that in respect of the European Patent, there were divergences of interpretation, leading to a lack of legal certainty, particularly in the United Kingdon and Germany where most of the case law on computer-related inventions was developed. National courts were not bound to follow decisions of the European Patent Board of Appeals. While German and the United Kingdom had agreed to follow decisions of the Boards in the IBM cases (i.e. T 1173/97 and T 935/97 discussed above), other European Union member states had not clearly followed suit. It was claimed that the uncertainty associated with such a "patchwork" of laws would affect investment decisions and the free movement of goods within the Internal Market. Also, it was stated that uncertainty would drive up costs at every part of the patenting system, making infringement harder to predict and disputes more likely.

The draft Software Directive provided to parliament was intended to provide a restrictive restatement of the law as it has been applied by the Board of Appeal of the European Patent Office, in order to ensure that patents for computer-related inventions are granted on the same basis everywhere in the European Union and that the national courts deal with contested patents on the basis of uniform principles. Furthermore, once the Software Directive is in place, the Court of Justice will have jurisdiction to given preliminary rulings.

Open source advocates argued that the Software Directive provided computer software

protection that favoured large businesses over small and medium sized enterprises and maintained that software is best protected by other intellectual property rights such as copyright. Open source and free software supporters argued that they didn’t want or need patent protection. Patents, they said, create a legal minefield that only the biggest software firms could navigate successfully, and do not offer any real protection because patent disputes are nearly always won by the party with the biggest legal budget.

31 For further information see http://www.europa.eu.int/comm/internal_market/en/indprop/comp/index.htm. 32 http://www.europarl.eu.int/meetdocs/committees/juri/20020619/471443EN.pdf.

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The main lobby group opposed to the proposed Software Directive was Foundation for a Free Information Infrastructure33 (FFII). FFII argued that evidence from economic studies showed that software patents in fact lead to a decrease in R & D spending and that software patents went against one of their core missions, namely to protect the public against monopolies.

Consequences The decision to reject the proposal effectly means that national laws on computer implemented inventions remain unharmonised. National legistlatures continue to freely enact laws allowing or disallowing patents on computer implemented inventions while national courts enforce such laws. Supporters of the porposed directive included HP, IBM, Microsoft and the EPO. The European Information and Communication Technology Association warned that the rejection compromises thousands of jobs and inventions. On the flip side, opponents to the proposal rejoiced in the decision contending that the proposal would have led to an abused system as in the United States and that while some software patents would be beneficial, the proposal would have generally suppressed legitimate competition and innovation. On February 16, 2005 the European Parliament's Directorate General for Economic and Scientific Policy issued a brief which restated the need to harmonize laws of the member states and said that if they adopted the "current proposal it will create the same broad and ambiguous system that is in place in the USA." The Future

The new head of the European Patent Office Alison Brimelow has called a public meeting to discuss new policies in view of the defeated computer implemented inventions proposal. Alison Brimelow says "The task now is to make sure that the patents that we grant are relevant. What we need is not more patents, but more good patents. This will enable the EPO to remain a confident and copetent organization which can continue to set the global benchmark in patenting." The software patent debate in Europe is not over.

IV. Japan – "Concretely Realized" In Japan, the application of a scientific principle is a prerequisite to patentability. Under Article 2 of the Japanese Patent Act, an invention is defined as "the highly advanced creation of technical ideas by which a law of nature is utilized". The "Implementing Guidelines for Examination of Industrial Applicable Inventions"34, dated February 27, 1997 provide that:

33 http://swpat.ffii.org/. 34 http://www.jpo.go.jp/infoe/sisine.htm.

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(i) natural laws per se, (ii) mere discoveries, (iii) inventions contrary to natural laws, (iv) laws or the like other than natural laws, (v) personal skill, (vi) mere presentation of information, (vii) aesthetic creations, and (viii) those for which it is clearly impossible to solve the problem to be solved by any means presented in the claim,

are all considered to be unpatentable subject matter.

The "Examination Guidelines for Patent and Utility Models" were released by the Japanese Patent Office May, 2005. These Guidelines include a chapter entitled Computer Software-Related Invention"35 (sic). Referring back to Article 2 of the Patent Law Act, these Guidelines state that in order to qualify as a "statutory invention" as prescribed under Japanese Patent Law, the claimed invention must be "a creation of technical ideas utilizing a law of nature".

A particular software-related invention is deemed to be "a creation of technical ideas

utilizing a law of nature" if the information processing by the software is "concretely realized by using hardware resources" (e.g. an arithmetic logic unit such as a CPU, a storage means such as memory, etc.) In other words, when information processing equipment or its operational method particularly suitable for the purpose is constructed by concrete means in which software and hardware resources are cooperatively working so as to include arithmetic operation or manipulation of information depending on the purpose the claimed invention is a considered to be a "creation of technical ideas utilizing a law of nature". These principles are based on Japanese case law that has established that in order to be "a creation of technical ideas utilizing a law of nature", a claimed invention must be concrete enough to accomplish a certain purpose.36 The Guidelines also provide that information processing equipment (i.e. a machine) and an operational method thereof that cooperatively work with the software that satisfies the above-noted requirement, and the computer readable storage medium are also deemed to be "creations of technical ideas utilizing a law of nature".

In contrast to the United States where the scope of patentability for software and business

method inventions has been broadened through evolving case law, in Japan, it has been done by modification of the Japanese Patent Office Examination Guidelines. The Japanese Patent Office Examination Guidelines do not completely rule out the possibility of granting patents for business method inventions that are not in computer form. However, the Guidelines assume that almost all business methods that do not use information technology (i.e. a computer network or computer program) cannot meet the statutory requirement. Currently, pure (i.e. non-computer related) business methods are not considered to be "a creation of technical ideas utilizing a law

35 Chapter 1 of "Part VII – Examination Guidelines for Inventions in Specific Fields" within "Examination Guidelines for Patent and Utility Models", see http://www.jpo.go.jp/quick_e/index_tokkyo.htm. 36 Hei 9 (Gyo Ke) 206 (May 26, 1999).

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of nature" since they do not "use natural laws" and therefore are not considered to be patentable inventions. According to the Japanese Patent Office, the recent rapid development and diffusion of information technology has significantly affected the modes of trading and even the businesses themselves. These business method cases are being dealt with through collection of more wide-ranging data on the business related field and provision of such prior art for use by applicants. Specifically, the Japanese Patent Office notes that their computer software database that was established in October, 1997 now includes hundreds of thousands of documents many of which are business-related.

V. The Canadian Story – Moving Towards Compromise In the midst of international activity in this area, the Canada Patent Office also realized the necessity to provide applicants with clear guidance on the standard for patentability of software and business methods. In 2005, the Canadian Intellectual Property Office (CIPO) amended two key chapters of the Manual of Patent Office Practice (MOPOP). The amended chapters address subject matter requirements and provide guidance for applications concerning computer implemented inventions. These Guidelines appear to be charting a path towards compromise.

A. Background Case Law

Software

The revised Guidelines on "Computer-Implemented Inventions and Business Methods" were eagerly anticipated due to the lack of jurisprudence on the patentability of software in Canada. While there are a handful of Patent Appeal Board decisions that touch on software patentability, the only Canadian court decision on this topic is Schlumberger Canada Ltd. v. Canada (Commissioner of Patents)37. The invention related to a method of seismic prospecting involving the recording and analysis of measurement data. More useful information in readable form was obtained and then exhibited in charts, graphs and tables. The Federal Court in Schlumberger held that the invention was directed to mere calculations and rejected the application as unpatentable:

What the appellant claims as an invention here is merely the discovery that by making certain calculations according to certain formulae, useful information could be extracted from certain measurements. This is not, in my view, an invention within the meaning of s. 2 [of the Canadian Patent Act.]

The Schlumberger test can be distilled down to a few principles. It is noteworthy that

these principles, almost verbatim, were used to define the pre-existing Guidelines on software 37 Schlumberger Canada Ltd. v. Canada (Commissioner of Patents (1981), 56 C.P.R. (2d) 204 (F.C.T.D.).

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patentability in the Manual of Patent Office Practice (MOPOP) in which the patentability of computer programs was unclear and not necessarily consistent. First, in order to ascertain whether the application discloses a patentable invention, it is necessary to determine what has been discovered. Second, the fact that a computer is or should be used to implement a discovery does not change the nature of the discovery. Third, the mere discovery that by making certain calculations according to a certain formulae, useful information could be extracted from certain measurements, is not an invention under section 2 of the Canadian Patent Act. Finally, a mathematical formula must be considered to be a "mere scientific principle or abstract theorem" for purposes of patentability. Since Schlumberger, a number of Patent Appeal Board decisions have addressed the concept of patentability for software. Specifically, the Canadian Patent Appeal Board held in Re Motorola38 that a device for processing an input value to provide a fast and efficient determination of an output inverse trigonometric function value of the input value was patentable subject matter, because the device included at least one piece of hardware (a Read Only Memory (ROM)). Commentators noted that this case seemed to represent a turning point for the Board. The Board found that the method was not patentable subject matter since it was nothing more than steps to solve an algorithm. However, unlike in Schlumberger, the Board noted that "this [ROM] is a specific piece of computer hardware and, as such, this claim is necessarily limited to a specific configuration of at least one physical element". This decision would appear to indicate that a "physical transformation" is not a requirement for a patentable invention. Business Methods In Canada, court and Board decisions indicate that pure business methods are not considered patentable subject matter.39 The principle that a product of professional skill is not patentable subject matter was first expressed in Lawson v. Commissioner of Patents40, where it was decided that an art that belongs to the professional field and is not a manual art or skill is not an invention. The invention at issue was a method of subdividing land. The Court held that a method of describing and laying out parcels of land in a plan of subdivision of a greater tract of land lies in the skill of a solicitor and conveyancer and that of a planning consultant and a surveyor and that it is an art which belongs to the professional field and is not a manual art or skill. Regarding the meaning of the term "art" in the definition of "invention", the Court stated that "an art or operation is an act or series of acts performed by some physical agent upon some physical object and producing in such object some change either of character or of condition".

The Lawson case was referred to by the Supreme Court of Canada in Shell Oil Co. v.

Commissioner41 that related to the patentability of a new use for an old compound and the patentability of new compositions containing this old compound plus a carrier to facilitate the new use. In addressing the meaning of the term "art" in the statutory definition of "invention",

38 Re Motorola (1998), 86 C.P.R. (3d) 71. 39 It is noteworthy that the Canadian equivalent to the State Street application (Canadian Patent Appln. No. 2,072,904) has been abandoned. On the other hand, according to the on-line Canadian Patent Database, the Canadian Amazon cases (Canadian Patent Appln. Nos. 2,263,781 and 2,246,933) are still pending. 40 Lawson v. Commissioner of Patents (1970), 62 C.P.R. 101 (Ex.Ct.). 41 Shell Oil Co. v. Commissioner [1982] 2 S.C.R. 536, 67 C.P.R. (2d) 1 (S.C.C.).

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the Court stated that "art" was "a word of very wide connotation and that it was not to be confined to new processes or products or manufacturing techniques but extended as well to new and innovative methods of applying skill or knowledge provided they produced effects or results commercially useful to the public." The Court referred to the Lawson case and stated that the application in Lawson was rejected not because the associated subject matter was not an "art" within the meaning of the definition in the Act but because it related to professional skills rather than to trade, industry or commerce. The Court in Shell Oil goes on to quote the statement in the Lawson case set out above implying that the Court's broad interpretation of "Art" is qualified by the requirement of "performing in some object some change either of character or of condition".

The Canadian Patent Appeal Board in Re Patent Application No. 564,17542 (Atkins),

applied Schlumberger and Lawson. The application "System for the Operation of a Financial Account", related to a personal financial system incorporating a means of implementing, coordinating, supervising, analyzing and reporting upon investments in an array of asset accounts and credit facilities within a client account. The claimed system performed calculations based on formulae which were developed using the professional skills of financial experts. In the final action, the Examiner rejected the application as being directed to non-patentable subject matter, and stated:

to be patented, the applicant must clearly show how by adding a computer to the system, new and unusual results are achieved that cannot be achieved by manual means. Consequently, if the system can be run manually, and it is also in the domain of traditionally non-patentable subject matter, then even with the computer, it is still unpatentable.

The Board then went on to reject the Applicant's argument that the system could not be run manually because of the complexity of the calculations required to determine the optimal distribution of funds on a continuous basis for a large number of accounts. The Board held that the mere complexity of the calculations performed by the computer did not render the system patentable. The Board also noted that the Applicant did not consider the hardware to be inventive. In doing so, the Board reaffirmed that professional skills are not considered patentable subject matter in Canada. The Federal Court in Progressive Games, Inc. v. Commissioner of Patents43, considered the patentability of an application named "Poker Game" which was a modified version of a five-card stud poker game (a new player called the "house" was added). While a patent for this invention issued in the United States, the Canadian Patent Office rejected the application on the basis that the method claims were not directed to an "art" or a "process" within the meaning of section 2 of the Canadian Patent Act. The Federal Court noted that the definition of "art" included "process" and relied on Shell in his consideration of the definition of "art". The Federal Court provided that the criteria required for patentability of an "art" under section 2 of the current Canadian Patent Act included a process that:

42 Re Patent Application No. 564,175 (1999), 6 C.P.R. 4th 385 (PAB). 43 Progressive Games, Inc. v. Commissioner of Patents (1999), 3 C.P.R. (4th) 517 (F.C.T.D.).

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(i) is not a disembodied idea but is a method of practical application; (ii) is a new and innovative method of applying skill or knowledge; and (iii) has a result or effect that is commercially useful. The Federal Court held that the subject matter of the application met (i) and (iii) as it was

a practical application with commercial utility but that it did not meet the second criteria since the Applicant's changes in the method of playing poker did not result in an innovative method of applying skill or knowledge under section 2 of the Canadian Patent Act (vs. non-obvious under section 28.3 of the Canadian Patent Act). On appeal to the Federal Court of Appeal44, the Board's decision was affirmed and it was stated that "we do not want to be taken as deciding that more substantial changes in the existing game would have change the result". Arguably, this indicates the Court's reluctance to decide the issue of whether game rules per se, may be considered to be patentable subject matter without additional analysis.

Finally, a potentially important case concerning the scope of patentable inventions is

Commissioner of Patents v. Harvard College45 (the "Harvard Mouse" case). Even though the case did not specifically discuss business methods, at the core of the case was the scope of the definition of "invention" of the Canadian Patent Act that is likely to impact the patentability of business methods. The Federal Court of Appeal, in allowing the patentability of the "Harvard Mouse", reviewed United States authorities and relied strongly on the United States Supreme Court's decision in Diamond v. Chakrabarty46 where it was stated that the concept of "invention" should be broadly interpreted and that Congress intended statutory subject matter to include "anything under the sun that is made by man."47 It is noteworthy that the Chakrabarty case was one of the decisions relied upon by the Court in State Street to find business methods patentable under United States law. The majority of the Supreme Court of Canada allowed the appeal and held that the "Harvard Mouse" was not an invention within the definition of the Canadian Patent Act partly on the basis that the statute used an exhaustive definition of "invention" which signaled a clear intention to include certain subject matter as patentable and to exclude other subject matter.

Accordingly, before the most recent MOPOP revisions, the protection available for software and business method inventions in Canada was particularly unclear, although various "negative" criteria was derived from the Schlumberger case and was provided in the previous version of the MOPOP. The Canadian Patent Office in applying these negative criteria was according computer-related inventions a much more limited scope than that available for them in the United States. In fact, the Canadian patentability requirements for computer-implemented inventions was generally considered to be similar to the criteria currently available in Europe. Specifically, the official position of the Canadian Patent Office as provided in the previous version of the MOPOP was that software by itself and mere plans or schemes of doing business did not constitute patentable subject matter. Fortunately, long awaited MOPOP revisions were published in 2005 and significantly enlighten the public of the Canadian Patent Office's position on the patentability of at least software inventions.

44 Progressive Games, Inc. v. Commissioner of Patents (2000), 9 C.P.R. (4th) 479 (F.C.A.). 45 Commissioner of Patents v. Harvard College [2002] SCC 77 (S.C.C.), reversing (2000), 7 C.P.R. (4th) 1 (F.C.A.). 46 Diamond v. Chakrabarty, 447 U.S. 303 (1980 U.S.S.C.). 47 Diamond v. Chakrabarty, supra at 309

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B. MOPOP 2005 Revisions

In 2005, the Canadian Intellectual Property Office amended two key chapters in its Manual of Patent Office Practice (MOPOP). Specifically, Chapters 12 (Utility and Subject Matter) and Chapter 16 (Computer Implemented Inventions) were revised, providing guidelines for claiming computer implemented inventions and addressing the subject matter requirements of patent applications.

The MOPOP revisions apply a two-part test to determine the statutory patentability of an

invention, and most applicably the statutory patentability of an invention relating to software or business method inventions. Specifically, to fall within the statutory definition of patentable subject matter, the MOPOP asserts that the invention must:

1) be an "act or series of acts performed by some physical agent upon some physical object and producing in such object some change either of character or condition"; and 2) produce an "essentially economic result relating to trade, industry or commerce."

In particular, an essentially economic result is considered to exist when the method at issue relates to a method for making a vendible product, operating or using an invention, or making a diagnosis. Amendments to Chapter 16 (Computer Implemented Inventions) provide new examples of claims pertaining to computer implemented inventions, that presently the CPO considers acceptable. Specifically, examples of process (method), system (apparatus) and manufacture claims are provided. Process (Method) Claims Method claims define a series of operations that takes place in a computer when the computer program is run. The claims must describe the steps as carried out by, or on, an inventive combination of hardware and/or software. An example method claim, as provided by the MOPOP revisions, is as follows:

A method of enrolling signature information of an authorized user onto an identification card comprising the steps of: a) collecting samples of a signal at a rate of at least “n” times a frequency component of said signal which is to be preserved, where “n” is an integer greater than four b) digitally filtering said samples representing said signal to remove high frequencies; and c) storing said filtered samples on said card.

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System (Apparatus) Claims A computer program which has been configured with a novel computer program is considered to be a different machine from the same computer when programmed in another way. The actions performed in the computer are directed by the computer program. In this way, claims may be directed towards the apparatus that has installed upon it a novel computer program. An example method claim, as provided by the MOPOP revisions, is as follows:

An apparatus for enrolling signature information signals of an authorized user onto an identification card comprising:

a) means for collecting samples of a signal at a rate of at least “n” times a frequency component of said signal which is to be preserved, where “n” is an integer greater than four;

b) a filter for digitally filtering said samples representing said signal to remove high frequencies;

c) means for storing said filtered samples on said card.

Manufacture Claims Claims defining computer readable memory storing statements and instructions for execution by a data processing system to direct the system to function in a particular manner represents a third category of allowable claims. The claim defines a product which is adapted to cooperate with a data processing system rather than a product which is produced by a data processing system. The MOPOP subdivides manufacture claims into three categories, namely computer programs on record carriers, computer programs on signal mediums and data structures. Computer Programs on Record Carriers In order to distinguish a claim from an abstract theorem, a computer program claim must be directed to a medium embodying the program in a physical form. In this way, the medium carrying the program code imparts to the code the attribute of a product or manufacture under section 2 of the Patent Act. The claim must recite the physical medium storing the computer readable code for execution in a computer. An example method claim, as provided by the MOPOP revisions, is as follows:

A computer readable memory having recorded thereon statements and instructions for execution by a computer to carry out the method of claim 1.

Alternatively, the MOPOP states that a claim may define a computer readable medium for use in configuring a computer where the stored statements and instructions are recited in a code-means-plus-function form as in the following example:

Claim 4. A computer program product, comprising:

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a memory having computer readable code embodied therein, for execution by a CPU, for compressing signature information signals of an authorized user onto an identification card, said code comprising: a) sampling code means for collecting samples of a signal at a rate of at least “n” times a frequency component of said signal which is to be preserved, where “n” is an integer greater than four; b) digital filtering code means for digitally filtering said samples representing said signal to remove high frequencies; and c) storing code means for storing the filtered samples on said card.

The MOPOP warns, however, that a claimed computer readable medium may not carry information that is not encodable and storable in a memory or carrier as shown in the following example:

Claim 5. A computer program for compressing signature information signals of an authorized user onto an identification card comprising: a) sampling code means for collecting samples of a signal at a rate of at least “n” times a frequency component of said signal which is to be preserved, where n is an integer greater than four; b) digital filtering code means for digitally filtering said samples representing said signal to remove high frequencies; and c) storing code means for storing the filtered samples on said card.

Examiners would object to claim 5 above for non-compliance with section 2 of the Patent Act and for being informal under section 27(4) of the Patent Act. Specifically, the above claim is not a manufacture since no storage medium is defined and the claim does not specify that the computer program is computer readable. Computer Programs on Signal Mediums It is also permissible for a computer medium to exist in a transitory state of a propagated signal as illustrated in the following example:

Claim 6. A carrier wave embodying a computer data signal representing sequences of statements and instructions which, when executed by a processor cause the processor to enroll signature information of an authorized user onto an identification card, the statements and instructions comprising the steps of: a) collecting samples of a signal at a rate of at least n times a frequency component of said signal which is to be preserved, where n is an integer greater than four;

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b) digitally filtering said samples representing said signal to remove high frequencies; and c) storing the remaining of the filtered samples on said card.

Data Structures A data structure is a representation of a physical implementation of a data model for organizing and representing information which is used by a computer program. A data structure imposes a physical organization on data according to the attributes of the data as opposed to the content of the data. In the following example, the data that is stored in the table is functional because it contains pointers to the other data within the data structure.

Claim 7. A memory for storing data for access by an application program being executed on a data processing system, comprising:

a data structure stored in said memory, said data structure including information resident in a database used by said application program and including: a) compressed video data stored in said memory having a plurality of frames including a plurality of reference frames, said compressed video data representing video footage in compressed form; and b) a table stored in said memory associating an identifier for each portion of said video footage to be accessed with a pointer corresponding to the closest reference frame to a first frame of the portion of said video footage to be accessed such that said table may subsequently be displayed to allow a user to select one of the identifiers stored in said table using an input device and thereby to access and view the portion of said video footage corresponding to the selected identifier.

While these revised guidelines reveal Canada as a favorable environment for software

patents, business method patents remain clouded in uncertainty. In particular the revised guidelines state:

"These methods are not automatically excluded from patentability, since there is no authority in the Patent Act or Rules or in the Jurisprudence to sanction or preclude patentability based on their inclusion in this category. Patentability is established from criteria provided by the Patent Act and Rules and from Jurisprudence as for other inventions.”

So long as a business method invention comprises an "essentially economic result in

relation to trade, industry or commerce," and are claimed in an appropriate manner, it should be considered patentable subject matter. Significantly, however, pure business method patents that deal with schemes, plans and ideas for doing business or methods of accounting, remain unpatentable subject matter. Consequently, patent applications regarding business method subject matter, should incorporate technological components in a manner similar to computer implemented inventions so that they may be treated as such.

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In January of 2007, two Canadian Patent Appeal Board decisions were issued that appear to endorse examining business method applications favorably in view of the MOPOP provisions. Specifically, in Re Patent Application No. 2,119,921 (January 25, 2007) the board reviewed claims regarding improvements to a computerized stock-trading system. During examination, the Examiner rejected the claims for improper subject matter on the basis that the claims related to the automation of commonplace features, which is not patentable according to Schlumberger. The board reversed the rejection finding that the Examiner had provided obviousness considerations to form the basis of a subject matter objection.

In the second decision, Re Patent Application No 2,298,467 (January 25, 2007), the board

considered claims directed to a system that facilitates communication between host and remote computers for diamond transactions. The Examiner found that the subject matter was unpatentable for claiming a method of doing business involving professional skill. The board reversed finding first that the invention was a machine and not a business method; second that the skill involved in the creation of a complicated system is not a professional skill; and third that a rejection based on the use of professional skill is not proper when a method is not carried out by a human. C. What is Issuing at the Canadian Patent Office?

Of some interest is the growing number of pending patent applications and issued patents in Canada covering computer-implemented business method inventions. Specifically, Canadian Examiners are allowing computer-implemented business method cases with method-type claims within International Patent Classification subgroup IPC G06F 17/60.

A recent search of the Canadian Patent Database48 has revealed that 427 patents have

issued within the IPC G06F 17/60 subgroup to date. Canadian patents have issued for "Sales Point Business Method and Apparatus"49, "Electronic Book Selection and Delivery System Having Purchase and Account Management Features"50, and "In-store Points Redemption System and Method"51.

While, as previously noted, the Canadian equivalent to the State Street application52 has

been abandoned, there is a long list of significant issued patents which includes the Visa patent for "Electronic Billing Statement Presentation System"53, and the PricewaterhouseCoopers patent for "Method for Electronically Recognizing and Parsing Information Contained in a Financial Statement"54.

D. Protecting Computer-Implemented Inventions in Canada

48 http://Patents1.ic.gc.ca/intro-e.html. 49 Canadian Patent No. 2,289,407. 50 Canadian Patent No. 2,458,346. 51 Canadian Patent No. 2,273,971. 52 Canadian Patent Application No. 2,072,904. 53 Canadian Patent Application No. 2,267,951. 54 Canadian Patent Application No. 2,180,087.

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Based on the existing case law and the 2005 Guidelines, there are a number of important points to keep in mind when seeking protection for computer-implemented inventions in Canada. First, the written description must support patentable subject matter. That is, it should be considered whether the invention at issue is merely a generation of data or a computerized exercise of professional skill. If not, then the points of differentiation should be considered and carefully disclosed in the written description. Also, it should be considered whether the invention at issue can be manifested in a system, process and/or device and also whether there are data structure aspects. If so, these particular aspects should be carefully disclosed in the disclosure text and figures. In particular, the 2005 Guidelines explain that it is critical that the hardware, computer program and data be fully described, and that they be described as being integrated into an inventive combination.

When considering claiming strategies for obtaining patent protection for software and business method related invention in Canada it is important to draft process claims, apparatus and system claims and manufacture claims according to the 2005 Guidelines and the examples provided therein. Finally, for business method inventions, given the lack of jurisprudence, it is wise to construct the claims in such a manner that the application may be considered a computer implemented invention (i.e. to “hardwarize” them).

VI. Last Words

Internationally, the criteria for software and business method patentability in various jurisdictions seem to be developing along different paths. The United States, the European Union, Japan and Canada all currently utilize different patentability criteria in respect of software and business method inventions.

As discussed above, the United States Supreme Court's decision in Diamond v.

Chakrabarty55 established that the concept of "invention" should be broadly interpreted and that Congress intended statutory subject matter to include "anything under the sun that is made by man." The Diamond v. Diehr and State Street cases established that software and business method inventions are considered patentable subject matter as long as they produce a "useful, concrete and tangible result". This broad approach to software and business method patentability has not been adopted in Europe, Japan or Canada.

In Europe, software and computer-implemented business method inventions must possess

"technical character" in order to be considered patentable subject matter. While computer-implemented software inventions that possess "technical character" are being patented in Europe, only business method inventions that are computer-based are being patented as a type of

55 Diamond v. Chakrabarty, supra.

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computer-implemented software inventions. With the fall of the Software Directive, the future of software and business method patents in Europe remains clouded in uncertainty. In Japan, a software-related invention or software-related method of doing business is considered patentable subject matter provided that the information processed by the software is "concretely realized" by using hardware resources. Current Japanese Patent Office Guidelines assume that all business method inventions that do not use information technology cannot meet the statutory requirements for patentability. Thus, it is clear that all business methods discussed in the Japanese Patent Office Guidelines are assumed to involve software. In Canada, the revised 2005 MOPOP Guidelines provide clear examples of how to structure software patents for acceptance by the Patent Office. Critically, the hardware, computer program and data must be fully detailed in the description and must be combined into an inventive combination. Due to the lack of jurisprudence and guidance on the patentability of business methods, the most prudent course of action presently is to construct claims such that the application is considered a software patent for which direction has been provided.

As we watch the law in this area unfold, one international indication should be

considered. At the International Association for the Protection of Intellectual Property (AIPPI) Congress held in Melbourne, Australia in March 2001, practitioners and representatives of industry experienced in IP issues from around the world gave consideration to the question of whether business methods should be considered patentable subject matter in view of the United States position56. It is noteworthy that the majority of the AIPPI delegates refused to endorse the expansive scope currently existing in the United States. The adopted resolution included an intent to provide patent protection for business methods as long as the invention defined in the claims has a "technical content". Also, notably, the resolution did not require that the point of novelty or inventive step be associated with the technical content.

By all indications, the search for international clarity and consistency on software and

business method patentability will continue for some time on a jurisdiction by jurisdiction basis. Increasing numbers of software and business method patent application filings will only raise the stakes as countries try to resolve the powerful competing interests of unhindered innovation and incentive providing protection for these important new economy inventions.

56 AIPPI Q158 – see www.aippi.org for more information.