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Law Times • February 9/16, 2009 NEW An online resource tool 1.800.263.3269 Bestcase earlug.indd 1 3/26/08 11:52:01 AM Focus On INTELLECTUAL PROPERTY/TRADEMARK LAW Bilski doesn't eliminate controversy over BMPs North American practitioners and judges. What is clear, however, is that Canadian Questions still surround patentability T BY JULIUS MELNITZER For Law Times he law relating to the patentability of business method patents has al- ways been a problematic area for law and practice has never approached the excesses seen in the United States, where it's been open season on BMPs since the U.S. Federal Court of Appeals' (the nation's top patent court) landmark 1998 decision in State Street Bank & Trust Co. v. Signature Fi- nancial Group Inc. (State Street) upheld pat- ents for a software-implemented invention and method of doing business, namely a data processing system for mutual funds. The following year, the same court rein- forced State Street with its ruling in AT&T Corp. v. Excel Communication Inc. "Since State Street and AT&T, the fl ood- gates of business methods patenting opened from a combination of the U.S. Patent [and Trademark] Offi ce's willingness to issue these patents and their eventual enforcement by U.S. courts," says Brian Gray of Ogilvy Renault LLP's Toronto offi ce. "There had been no considered debate by legislators and policymakers and no legislation by the U.S. Congress that it would be appropriate to extend patent rights to these methods." According to Gray and many other observers, the extensive protection for BMPs produced confusion, litigation, and an extension of patent protection to cover unconventional areas such as giving legal and investment advice, drafting legal documents, methods for storing and trans- mitting information, and other intangible processes lacking a tangible structure or a physical result. Patents even became avail- able for methods of meditation, dating, and physical sports movements. "There are some very absurd examples of such patents, including patents is- sued for exercising a cat or swinging on a swing," Gray says. In Canada, however, no court has defi ned or specifi cally upheld a business method pat- ent. This, however, hasn't stopped the Cana- dian Intellectual Property Offi ce — guided by various "negative" criteria derived from the general body of patent jurisprudence found in CIPO's Manual of Patent Of- fi ce Practice — from issuing patents for software and software- related business meth- od inventions. "But the Canadian approach has always been a little more con- servative than the U.S. approach," says Neil Henderson of Borden Ladner Gervais LLP's Toronto offi ce. The gap, however, has contracted con- siderably with the Oc- tober 2008 decision of the U.S. Federal Court of Appeals in re Bilski, which nar- rowed the types of 'There are some very absurd examples of such patents, including patents issued for exercising a cat or swing- ing on a swing,' says Brian Gray. business methods that can be patented. "The court ruled that a process is eli- gible for patent protection only if it is tied to a particular machine or apparatus or if it transforms a particular article into a dif- ferent state or thing," says Steven Henry of Boston-based Wolf Greenfi eld & Sacks P.C., who represented Signature, the suc- cessful party in State Street. "However, the court rejected Bernard Bilski's patent claim for a process for hedging risk in commodi- ties because it didn't meet either standard." Henry says that while Bilski means there will be fewer successful BMP applications, there won't necessarily be a major reduc- tion after the dust settles and after some initial upheaval. "The vast majority of business-method patent claims are computer implemented or perform some transformation of data in- side a computer, and the data represents a real world physical quantity such as money or numbers of articles in inventory," he says. "Under a reasonable reading of Bilski, most such claims should continue to be patentable, although those of a more abstract nature — like transactions between two or more parties that don't re- quire IT support or involve anything tan- gible — will not." Still, Bilski will not eliminate the contro- versy over BMPs, as the court left open many questions. "Will the recita- tion of a general pur- pose computer with a programmed process be deemed suffi cient to tie a process to a particular machine or apparatus, and what types of transforma- tion will be considered to have transformed a particular article into a different state or thing, are just two of the open questions," Henry says. "We won't get the answers until we see how the Federal Cir- cuit court applies Bilski in subsequent cases. "Initially, however, the U.S. Patent and Trademark Offi ce is treating the decision as giving it a broad basis to answer these ques- tions in a way that allows it to reject method claims and even apparatus claims, something the chief judge who authored the opinion has said was not intended. Until the Federal Circuit has a chance to issue clarifying deci- sions, patent applicants and patent owners will therefore have new challenges." At the very least, Bilski's more conserva- tive approach to patentability should ease some of the headaches created by the surge of BMP applications in the last decade. The huge increase in the number of fi lings in the U.S. stretched the Patent Offi ce's resources and concerns arose about the quality of ex- aminations. Critics also complained that BMP protection had not produced any evi- dence of a boost in innovation. "Huge windfalls accrued to those who rushed to patent known BMPs for which there was no adequately documented prior art because of the lack of any formal system for keeping track of such art," Gray says. In Canada, BMPs have also been mak- ing headway, albeit more slowly. "We've seen a gradual progression where the Patent Appeal Board has demonstrat- ed a much greater acceptance of patenting business methods," says Chris Van Barr of Gowling Lafl eur Henderson LLP. Currently, CIPO is re-evaluating its BMP guidance. "There's no question that the excesses that preceded Bilski in the U.S., and the retrench- ment that the case represents, will have some effect on CIPO's thinking," Gray says. "Just how closely CIPO will follow the reason- ing in Bilski is hard to say because CIPO's interpretation must conform to existing Ca- nadian law — of which there isn't much." The wording of Canada's Patent Act re- garding what is patentable, however, is simi- lar to the wording found in U.S. legislation. "It boils down to whether you take an expansive approach or a strict construc- tionist approach," Gray says. "Bilski will be interesting to Canadians because it takes a similar conservative bent to pat- entability as did the Supreme Court of Canada in Harvard Mouse." In Harvard Mouse, the high court noted that Parliament chose not to include plant breeding — well established when the Pat- ent Act was passed — in the defi nition of "invention." Because Parliament had not included it expressly, the court concluded that the Patent Act did not embrace it. "Just as patenting higher life forms would involve a radical departure from the tradi- tional patent regime, the patenting of busi- ness methods would also involve a radical departure and a highly contentious matter that raises a number of extremely complex is- sues," Gray says. "Based on this, the Supreme Court directed that there must be a clear and unequivocal direction from Parliament to create new patentable subject matter where such new subject matter is a radical departure from the traditional patent regime." Meanwhile, Canada's fi nancial ser- vices industry, which has recently been See Bilski, page 11 PAGE 9 way to attract attention? Looking for an easier it's easy. www.lawtimesnews.com JobsInLaw_sailing ban5x.indd 1 9/11/08 1:48:39 PM

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