Software patent eligibility in Canada: IP year in review

Two recent Patent Appeal Board decisions issued on behalf of the commissioner of patents in 2016 reflect the challenges in obtaining some types of software patents in Canada, especially claims to business methods and the like. Similar challenges are arising in the United States, which, since the decision in Alice Corp. v. CLS Bank International, has made it more difficult to gain patent protection on certain software-related inventions.

The PAB decision issued in July 2016, PAB 1407, concerned Canadian application No. 2798566, entitled “Identified Customer Reporting,” which related to a mechanism for adjusting customer transaction data to remove biases so as to improve the accuracy of the output of unique customers. The main issue was whether the claims defined statutory subject matter as required by s. 2 of the Patent Act.

The PAB decided that they did not, finding the steps that defined the calculations to improve the business data to be abstract. The PAB held that the invention did not define any essential elements having physical existence or that manifested a discernible effect or change. The board reasoned that using a computing device to process an algorithm or perform a set of calculations did not mean the computer was essential to the proposed solution.

The PAB decision issued in August 2016, PAB 1408, concerned Canadian application No. 2163768 (“the ’768 application”), entitled “Methods and Apparatus Relating to the Formulation and Trading of Risk Management Contracts.” The ’768 application is the counterpart to US patent 5970479 owned by Alice Corp., which was invalidated by the United States Supreme Court’s seminal decision in Alice Corp. v. CLS Bank International (as cited above).

The claims of the ’768 application were directed toward a risk management method and apparatus that enabled users to construct insurance contract orders for third parties, contingent on the occurrence of specified future events, to reduce their exposure to these specified risks.

Similar to PAB 1407, the issue was whether the computer element recited in the claims was an essential element of the invention and, therefore, whether the claims were permissible subject matter under the Patent Act.

According to the examiner, the claims were directed to subject matter that lay outside the definition of “invention.” The examiner further asserted that while the computerized features were material to the operation of the invention, they were not essential to the solution of enabling the formulation of multi-party risk management contracts.

The PAB agreed with the examiner and refused the ’768 application, concluding that merely including a computer in a claim may not be sufficient to make a claim patentable subject matter. The PAB further held that the specification did not indicate that computers were essential to the invention, and as such, the computer was nothing more than the operating environment in which the contract formation takes place.

It appears that the commissioner of patents in Canada continues to create barriers in obtaining patent protection for certain software-related patents. In the interim, there are a number of steps applicants may wish to take to best position their patent applications.

As the commissioner will look to the specification to interpret the claims, applicants should consider drafting specifications and claims in a manner that describes a technical solution to a technical problem in addition to presenting the manner in which the invention is an improvement over the prior art. An applicant may also consider highlighting particular deficiencies in conventional systems to show the advantage presented by the inventor’s solution.

Any business methods or business advantages should not be described or claimed in isolation. Rather, applicants seeking to protect computer-implemented inventions may wish to draft their specifications to clearly indicate how the software and computer components form a novel combination to achieve the technical solution.

Finally, applicants may consider drafting claims to focus on an improvement to the functionality of the computer itself, and not on generic computer tasks for which a computer is used in its ordinary capacity.

Stacy Rush, Giselle Chin and Andrew Kaikai are associates at Ridout & Maybee LLP.