Canada’s Federal Court rejects CIPO’s problem-solution claim construction approach to assessing the patentability of subject-matter

In the recent decision Choueifaty v. AG, 2020 FC 837, Canada’s Federal Court rejected the problem-solution approach to patent claim construction that has been used by the Canadian Intellectual Property Office (“CIPO”) for assessing whether claimed subject-matter meets the definition of invention, i.e., whether the claimed subject-matter is patentable. The Court found that CIPO’s approach, which has often resulted in the computer being considered not a part of the invention, has improperly ignored the patentee’s intention as to which elements of a claim are essential. The Court in so doing has potentially opened the door to making it easier to patent computer-implemented inventions in Canada.

How did we get here: the Amazon ‘One Click’ decision and CIPO’s practice in its wake

You might wonder how we got to this point, namely the Federal Court rejecting a rather fundamental aspect of how CIPO construes claims to assess whether the claimed subject-matter is patentable. Let’s perhaps look at some background.

Canada’s Patent Act in section 2 defines ‘Invention’ (the patentable subject-matter) as ”any new and useful art, process, machine, manufacture or composition of matter”. Section 27(8) adds that “[n]o patent shall be granted for any mere scientific principle or abstract theorem.”

In 2011, the Federal Court of Appeal released the Amazon ‘One Click’ decision (Canada v. Amazon.com, Inc., 2011 FCA 328), which, at time, appeared to open the door to the patenting in Canada of computer-implemented business methods. The FCA in Amazon held that the identification of the invention could not be determined on a literal meaning of the patent claims, or on a determination of the substance of the invention (i.e., what has been added to the human knowledge). Rather, the FCA held that the identification of the actual invention must be grounded in a purposive construction to identify the essential elements of the patent claims in accordance with the Supreme Court’s guidance in the Free World Trust and Whirlpool decisions. As you may recall, the key to purposive construction as set out by the Supreme Court is the identification of the particular words or phrases in the claims that describe what the inventor considered to be essential.

Furthermore, according to Amazon, whether the subject-matter as defined by essential elements is patentable was to be measured against a three-part test, namely that (i) it must not be a disembodied idea but have a method of practical application, and here, a physicality element must be present (ii) it must be a new and inventive method of applying skill and knowledge, and (iii) it must have a commercially useful result.

In 2013, in an attempt to apply Amazon, in a series of examination practice guidance documents (here, here, and here) CIPO set out changes to its subject-matter examination practice: CIPO’s approach was to be based on the essential elements of a claim as determined by a purposive construction, which would be done

through the eyes of the skilled person, against the background of the relevant common general knowledge,

having identified the problem and solution provided by the invention,

in the context of the specification as a whole, keeping in mind what the inventor actually invented or claims to have invented, and, per Amazon, alive to the possibility that a patent claim may be expressed in language that is deliberately or inadvertently deceptive, recognizing that what appears on its face to be a claim for an ‘art’ or a ‘process’ may, on proper construction, be a claim for a mathematical formula and therefore unpatentable, and

to determine which elements of the claim solve the identified problem in order to identify the essential elements, understanding that not every element that has a material effect on the operation of a given embodiment is necessarily essential for the operation of the invention, and further that some elements of a claim merely define the context or the environment of a specific working embodiment, but do not actually change the nature of the solution to the problem.

Now, to anyone familiar with the Supreme Court decisions in Free World Trust and Whirlpool, this approach does not exactly follow the approach to claim construction that was set out in those cases. However, CIPO appeared to justify any differences in the two approaches by distinguishing between the role of the courts (i.e., dealing with questions of validity and infringement based on claims that have been fixed as a result of a negotiation between the Patent Office and the applicant) and the role of the Patent Office (i.e., determining in the course of examination the proper scope of the monopoly and working with claims that may change from those initially proposed by the applicant). Why that distinction mattered was not really made clear, but that was CIPO’s position.

In addition, in regard to computer-implemented inventions in particular, CIPO adopted an approach of determining whether the problem was a “computer problem” (i.e., a problem with the operation of a computer), or not a “computer problem” (i.e., a problem whose solution may be implemented by using a computer), and whether a computer was an essential element of the invention, or merely there for convenience or even as an “afterthought”. Where the problem was a “computer problem”, or where a computer was an essential element, the subject-matter of the claim would normally be considered statutory, i.e., it would fall under the definition of ‘invention’ and therefore be patentable. However, where the essential elements of a claim were limited to subject-matter excluded from the definition of invention (e.g., the fine arts, mere ideas, schemes or rules), the subject-matter would not be statutory. All these changes eventually made their way to the Canadian Manual of Patent Office Practice (“MOPOP”).

Where we were just now: examples of CIPO’s recent practice concerning computer-implemented inventions

So how has all this played out in practice? Let’s look at some recent decisions of CIPO’s Patent Appeal Board (the “PAB”) in the months prior to Choueifaty concerning applications for computer-implemented inventions rejected for a lack of subject-matter. These decisions are listed with links at the end of this post. (As a side note, the PAB considers application after final rejections and advises the Commissioner of Patents on whether or not to allow the application. Technically, the ultimate decision on whether to allow the application is that of the Commissioner.)

The subject matter of patent applications in these above-mentioned PAB decisions pertained to technologies such as methods to determine parameters associated with the Polymerase Chain Reaction, wager games over networked gaming machines, computer-aided rebate processing, trading party matching, processing of information obtained during well drilling to produce a more accurate representation of the surrounding formation, pricing of financial instruments, and processing of financial transactions.

In each case, the PAB agreed with the Examiner that the application should be rejected for a lack of patentable subject-matter, with the analysis in each case generally proceeding as follows. Applying CIPO’s purposive construction approach, including the problem-solution approach, the PAB found that the subject-matter as defined by essential elements was directed to abstract rules, or a series of calculations and mathematical formulae akin to scientific principles or abstract theorems, and as such was outside of the definition of patentable subject matter.

In each case the PAB considered the computer elements to be non-essential, even thought the applications may have described and claimed each method as being carried out by a computer: the PAB explained that the methods could be implemented manually by using human agents, the computer was used for general purpose calculation and data processing tasks, the computer was needed for the convenience and expedited data processing (which was not enough to make it essential), the claimed subject-matter was not directed to any challenges in the operation or implementation of a computer, or a computer was only a part of the operational context of the invention, etc. The PAB repeatedly cautioned, relying on Amazon, that purposive construction could not be determined solely on the basis of a literal reading of the patent claims, and that patent claims may be expressed in language that is deliberately or inadvertently deceptive.

In a number of these cases the applicants protested that the claim construction exercise carried out by CIPO did not accord with Canadian law, but these arguments were not successful.

And finally, the Choueifaty decision

This brings me to the recent Choueifaty case, which was an appeal from another decision of the Commissioner of Patents refusing the applicant’s patent application on the basis of a lack of statutory subject-matter. The application claimed a “computer implementation of a new method for selecting and weighing investing portfolio assets that minimizes risk without impacting returns”.

The PAB in the case took its usual approach: to construe the claims, it used the problem-solution approach: the PAB identified the problem as a “portfolio engineering and inventing problem to reduce volatility … in comparison to the market”, the solution as “the construction of an anti-benchmark portfolio, wherein the weighting of each security [was done according to a specified approach]”, and found that the essential elements were directed to a scheme or rules involving mere calculations for weighing securities. The PAB found no discernible physical effect to satisfy the subject-matter requirement, concluding that “[w]hen a claim’s essential elements are only the rules and steps of an abstract algorithm, however, that claim is non-statutory”.

The key question before the Federal Court was whether CIPO, in adopting the problem-solution approach, applied the wrong tests when construing the claims. The applicant argued that the established test for determining the essential elements of a claim is that set out by Supreme Court in Free World Trust and Whirlpool, and that that test asks whether a particular element was intended by the inventor to be essential, and whether that element could be substituted or removed without materially affecting function, which was not the analysis carried out by the Examiner and the PAB in the case.

The Crown, on the other hand, argued that CIPO’s approach was consistent with Free World Trust and Whirlpool, but at the same time, Patent Examiners, in construing the claims for the purpose of determining patentable subject-matter, were not engaged in the type of exercise that a court is engaged in when determining whether a patent is valid or infringed. As you may recall, this was the same distinction that CIPO made when implementing changes in the wake of Amazon.

The Court sided with the applicant, and upon a reviewing the MOPOP found that the Commissioner did not intend to, nor directed Patent Examiners to follow the teachings in Free World Trust and Whirlpool. The Court found that while the MOPOP states that claims must be purposively construed in accordance with Free World Trust and Whirlpool, it also, in a footnote, distinguishes the approach to purposive construction set out in those cases from that used by Patent Examiners for reasons mentioned above, briefly, that the role of Patent Examiners differs from that of the courts.

Support for this distinction apparently came from an earlier case (Genencor), however, the Court found that Genencor was no longer good law, and citing Amazon, found that the roles of the Commissioner and the courts are indeed similar, namely the determination of the issues of validity. Finally, the Court found that using the problem-solution approach to claims construction is akin to using the “substance of the invention” approach which was discredited by the Supreme Court in Free World Trust, and furthermore, that it fails to address the patentee’s intention, as is required by the Supreme Court in Free World Trust and Whirlpool.

In the end, the Court set aside the Commissioner’s decision and sent the case back for redetermination in accordance with its reasons.

Implications of Choueifaty

The Choueifaty decision if applied by CIPO should make it more challenging for Canadian Patent Examiners to conclude that claims pertaining to computer-implemented inventions do not include computers among their essential elements, and as such, it should make it easier for applicants to obtain patents for computer-implemented inventions in Canada. However, it remains to be seen whether CIPO will appeal the Choueifaty decision, or what changes, if any, it will implement to its practice following the decision.

In the meantime, applicants are encouraged to bring the Choueifaty decision to the attention of the Examiners when faced with the subject-matter rejections, and to follow closely future developments with this case.