Amazon’s “Business Methods” patentable in Canada

October 15, 2010

When  America’s largest online retailer, Amazon.com applied in 1998 for a Canadian patent of its online shopping “method and system”, Canada’s Commissioner of Patents eventually rejected the application on the grounds that it didn’t comply with the definition of “invention” as found in s. 2 of Canada’s Patent Act, although she did acknowledge that the “business method” was “novel” and “non-obvious.”

Amazon consequently appealed to the Federal Court of Canada, and last Thursday, Mr. Justice Michael Phelan quashed the Commissioner’s decision, ruling that “business methods” are indeed patentable. Upon review, the Court concluded that a “business method” is patentable subject matter, and a patent can issue in appropriate circumstances.

The Court also found that the Commissioner relied too heavily on foreign decisions, particularly those which use different definitions for “invention” than that found in s. 2 of the Canadian legislation. The Court concluded that foreign decisions led the Commissioner to find that business methods are excluded from Canada’s statute, when in fact no such exclusion exists, as Judge Phelan explained:

The absolute lack of authority in Canada for a “business method exclusion” and the questionable interpretation of legal authorities in support of the Commissioner’s approach to assessing subject matters underline the policy driven nature of her decision. It appears as if this was a “test case” by which to assess this policy, rather than an application of the law to the patent at issue.

Although clearly not determinative of this decision, the Court notes that this invention has been found to be patentable subject matter in several other jurisdictions, including in the United States and in Europe. In the latter, despite an explicit exclusion for “business methods”, the claims were not found to be such.

The implications derived from this decision are far reaching, specially those regarding the realms of Internet and software development. Among other business methods that claim to be new methods of doing business are the likes of e-commerce and Customer Relationship Management software.

Traditionally, business methods have been either in the public domain or protected under trade secret law. Today, however, information technology offers possibilities of applying new business models, using information technology as a tool for processing and transmitting various data and for communication. The Internet has provided new prospects of doing business on-line. Due to high economic stakes put on those new business methods and the expansion of e-commerce in our society, the debate on the opportunity of patenting business methods has continued at both the national and international levels.

Amazon’s system, which it calls “Method And System For Placing A Purchase Order Via A Communication Network”, allows for personal data to be stored after an initial purchase. Online shoppers can then make subsequent purchases without re-entering their information.Amazon describes the patent as:

A method and system for placing an order to purchase an item via the Internet. The order is placed by a purchaser at a client system and received by a server system. The server system receives purchaser information including identification of the purchaser, payment information, and shipment information from the client system. The server system then assigns a client identifier to the client system and associates the assigned client identifier with the received purchaser information. The server system sends to the client system the assigned client identifier and an HTML document identifying the item and including an order button. The client system receives and stores the assigned client identifier and receives and displays the HTML document. In response to the selection of the order button, the client system sends to the server system a request to purchase the identified item. The server system receives the request and combines the purchaser information associated with the client identifier of the client system to generate an order to purchase the item in accordance with the billing and shipment information whereby the purchaser effects the ordering of the product by selection of the order button.

Since Amazon filed its first U.S. patent, other big names in the Internet industry such as Apple’s iTunes and Victoria’s Secret adopted similar one-click shopping systems.

Michael Geist, Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, said the final outcome of the case, which could still be taken to a higher court for another round of appeals, will have a lasting effect on the business and innovation landscape in Canada.

More Information:

Upon review, the Court concludes that a “business method” is patentable subject matter, and a patent can issue in appropriate circumstances.