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In Canadian patent law, only “inventions” are patentable. Under the Patent Act, only certain categories of things may be considered and defined as inventions. Therefore, if a patent discloses an item that fulfills the requirements of novelty, non-obviousness and utility, it may nonetheless be found invalid on the grounds that it does not fall within one of the statutory categories of “invention”. Since the Patent Act, the categories of patentable subject matter have been defined and interpreted by Canadian courts.

Definition and Categories of Invention
Section 2 of the Patent Act defines “invention” as:

"[A]ny new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture or composition of matter."

Each of the five categories of inventions has been further defined by the Canadian Intellectual Property Office and the Federal courts.

Art
Shell Oil v. Canada (Commissioner of Patents) defined the term “art” broadly as the application of knowledge to effect a desired result. A narrower interpretation of the term was offered by Lawson v. Canada (Commissioner of Patents):

"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."

Process
A process is the application of a method to a material or materials. The process may be patentable even if the process does not produce a patentable product.

Machine
The Canadian Intellectual Property Office’s Manual of Patent Office Practice has defined a machine as the mechanical embodiment of any function or mode of operation designed to accomplish a particular effect.

Manufacture
Manufacture implies a product made by hand, by machine, industrially, by mass production and so forth, by changing the character or condition of material objects. Harvard College v. Canada (Commissioner of Patents), as discussed below, has held that higher life forms, such as genetically altered mice, do not fall within the meaning of manufacture.

Composition of Matter
“Composition of matter” is defined as a combination of ingredients or substances – a solid, gas, or fluid – as a chemical union or a physical mixture. This definition has been taken to include enzymes, reproducible modified genes, and the cells that carry them. However, Harvard College v. Canada (Commissioner of Patents) has drawn a distinction between lower and higher life forms (see below). Where an invention is a combination of elements, the elements must produce something that is more than a mere sum of their individual effects. In other words, if each element functions independently and there is no common result, there is no inventive composition.

Improvements
Most inventions are not pioneering inventions in a new field or industry, but are rather improvements to existing arts, processes, machines, manufacturers and compositions of matter. It has been held that a newfound medical use for a known and patented pharmaceutical compound may qualify as an improvement in an art. The elimination of an element from a previously patented composition which results in a new and useful improvement may also be patentable.

Scientific Principles and Abstract Theorems
Section 27(8) of the Patent Act provides:

"No patent shall be granted for any mere scientific principle or abstract theorem."

This is the only section within the Patent Act that explicitly excludes certain subject matter from patents. Practical applications of scientific principles and abstract theorems, however, are not excluded from patentability. Therefore, while Newton’s law of universal gravitation may not be patentable, a patent may be granted for the practical application of the theory, such as an improved gravity pump.

Higher Life Forms: Harvard and Schmeiser
In Harvard College v. Canada (Commissioner of Patents), Harvard researchers appealed the Commissioner of Patent’s rejection of their patent application for genetically altered mice that possess an oncogene, termed oncomice, as well as the process by which the oncomice were created. The Supreme Court of Canada, by a narrow 5 to 4 majority, found that the Patent Act, specifically the categories of “manufacture” and “composition of matter” did not cover higher life forms:

"Owing to the fact that the patenting of higher life forms is a highly contentious and complex matter that raises serious practical, ethical and environmental concerns that the Act does not contemplate, I conclude that the Commissioner was correct to reject the patent application. This is a policy issue that raises questions of great significance and importance and that would appear to require a dramatic expansion of the traditional patent regime. Absent explicit legislative direction, the Court should not order the Commissioner to grant a patent on a higher life form."

Two years later, in Monsanto Canada Inc. v. Schmeiser, an equally narrow majority of the Supreme Court found that a farmer, by knowingly growing a crop containing genetically-modified genes and cells that was not purchased, had infringed Monsanto’s patent. Schemiser, the farmer, argued that, per Harvard College v. Canada (Commissioner of Patents), higher life forms, such as plants, do not constitute patentable subject matter in Canada, even though Monsanto’s patent was only directed to the modified gene and the cells containing the gene. This argument was rejected by a majority of the Court, which found that “[w]hether or not patent protection for the gene and the cell extends to activities involving the plant is not relevant to the patent’s validity”, and since Monsanto did not claim a patent for a genetically-modified plant per se, its claim of the gene and the cell was considered patentable subject matter.

The distinction drawn in Harvard between higher and lower life forms has been criticized as one that is difficult to draw and has no logical basis. However, after Monsanto Canada Inc. v. Schmeiser, this distinction may not even matter anymore because even though, per Harvard College v. Canada (Commissioner of Patents), higher life forms such as plants or animals are not patentable, Monsanto Canada Inc. v. Schmeiser has nonetheless given patent protection to these higher life forms by allowing protection for the modified genes and cells that compose the plant or animal.

Business Methods: Amazon's One-Click Shopping Patent
In 1998, Amazon.com filed a patent application for a “Method and System For Placing A Purchase Order Via A Communication Network”. This invention allowed customers shopping online to make purchases with one-click buying, which circumvents the process of entering address and billing information in the traditional shopping cart mode of online shopping.

Commissioner of Patents
In 2009, the Commissioner of Patents made several findings in its rejection of Amazon.com’s patent application. First, it noted that both the form and substance of the claim must be evaluated. Form refers to the text of the claim and understanding the claim based on the text alone. Substance connotes the nature of the invention in question and what it adds to human knowledge. The Commissioner noted that the substance of the invention, defined by its new and inventive features, must fall within one of the statutory categories of invention found within section 2 of the Patent Act.

Applying this approach to the facts, the Commissioner found that, although Amazon.com’s claim, on the fact of its text, was directed towards a “machine”, a patentable subject matter, the Commissioner found that the substance of all its claims were directed to streamlining the process of sales and reaping benefits flowing from it, and therefore constituted a “business method”. In Monsanto Canada Inc. v. Schmeiser, Justice Arbour, in dissent, had listed a number of examples where courts had excluded subject matter from patentability, including “business systems and methods”. The Commissioner relied on Justice Arbour’s observation to find that business methods had no historical basis of patentability in Canada, and were therefore per se unpatentable. However, it is to be noted that no definition of “business method” was supplied by the Commissioner.

In considering whether business methods could fall under the statutory category of an “art”, the Commissioner found that all five statutory categories of invention were technological in nature. It concluded that an “art” that is not technological cannot be a statutory subject matter. The Commissioner dismissed that the Amazon.com’s invention provided any technological benefits and advances because Amazon.com’s decision to proceede with one-click shopping with business in nature and yielded only a “convenience advantage”.

Amazon.com proceeded to commence an appeal of the Commissioner’s decision at the Federal Court of Canada in 2010.

Federal Court of Canada
At the Federal Court, Justice Phelan decisively quashed the Commissioner’s decision. First, the Court found that the “form and substance” formulation and analysis of Amazon.com’s claims departed from the approach articulated by the Supreme Court of Canada in Free World Trust v. Électro Santé Inc. and Whirlpool Corp. v. Camco Inc., which stated that the identification of the invention must be done through a purposive construction of its claims. Second, the Court found that the “technological” requirement was too restrictive in the test for an “art”. The Court could find nothing in Canadian jurisprudence which would support such a requirement. Third, Justice Phelan concluded that there was no “tradition” for the categorical exclusion of “business methods” from patentability in Canada. Instead, the Court states that business methods were to be assessed pursuant to the five categories found within section 2 of the Patent Act.

The Court then went onto consider the claims and find that a purposive construction of Amazon.com’s claims disclosed a “machine”, a patentable subject matter under section 2 of the Patent Act, which implemented something more than just a “mathematical formula”. Given this characterization of Amazon.com’s claims and its rejection of the Commissioner’s decision, the Court sent the case back to the Commissioner with the direction that the claims constitute patentable subject matter.

The Commissioner of Patents then appealed the decision to the Federal Court of Appeal, which released its decision in late 2011.

Federal Court of Appeal
The Federal Court of Appeal essentially agreed with the three criticisms the Federal Court offered for the Commissioner’s decision. The Court, however, also added that “it does not necessarily follow…that a business method that is not itself patentable subject matter because it is an abstract idea becomes patentable subject matter merely because it has a practical embodiment or a practical application. In my view, this cannot be a distinguishing test, because it is axiomatic that a business method always has or is intended to have a practical application.” Thus, the Court of Appeal did not affirm Justice Phelan's finding that Amazon.com's claims constituted patentable subject matter. Instead, it noted that Amazon.com's claim may still fail if, per Schlumberger Canada Ltd. v. Commissioner of Patents, the only novel aspect of the claimed invention was the business method and the business method was interpreted as a “mere scientific principle or abstract theorem”, which cannot be the subject matter of an invention according to section 27(8) of the Patent Act, mentioned above.

Despite agreeing with most of the substance of the Federal Court’s judgement, Justice of Appeal Sharlow, writing for the Federal Court of Appeal, found that it was inappropriate for Justice Phelan to pursue his own purposive construction of the claims advanced by Amazon.com. Purposive construction must be executed with a foundation of knowledge about the relevant art. Justice Phelan did not have expert evidence before the Federal Court from persons skilled in the art, and therefore it would have been more appropriate for the Commissioner to re-examine the claims, given the expertise of the Patent Office. Accordingly, the Federal Court of Appeal remanded the application to the Commissioner for expedited reconsideration.

It has been suggested that the case may be appealed to the Supreme Court of Canada.