Blow to Computer-Implemented Inventions: Canadian Court of Appeal Strikes Down the Subject-Matter Eligibility Test

The Canadian Federal Court of Appeal (FCA), in Attorney General of Canada v. Benjamin Moore & Co. [2023 FCA 168], a 3-0 decision, recently set aside the test on subject matter eligibility of computer-implemented inventions laid down by the Federal Court [2022 FC 923] last year. Acclaimed by patent professionals as a “favorable decision for Canadian applicants who have computer-implemented inventions,” the test had, for the first time, presented a declaratory relief and guidance for examining subject-matter eligibility, particularly for computer-implemented inventions. While the setting aside of the test relays subject matter assessments back to the procedure set by the Commissioner of Patents (Canada), the FCA clarified some key areas associated with the claim construction and patentability analysis.

Federal Court Ruling

The Commissioner of Patents (Canada) had refused two patent applications filed by Benjamin Moore & Co., relating to color selection systems, on a non-patentable subject matter rejection. The Commissioner’s decision was premised on construing the claims, which found essential elements of the claims devoid of any tangible computer components. Benjamin Moore appealed against the Commissioner’s decision to the Federal Court, where the Intellectual Property Institute of Canada (IPIC) also participated as an intervener. Generally aligning with Benjamin Moore’s position, IPIC suggested the court establish a new test assessing subject matter eligibility of computer-implemented inventions. The Federal Court granted the appeal, remitting the applications back to the Commissioner to re-assess using the proper test for determining the essential claim elements. Emphasizing the Supreme Court of Canada precedents in Free World Trust v. Électro Santé Inc., 2000 SCC 66 and Whirlpool Corp. v. Camco Inc., 2000 SCC 67, the Federal Court found conducting novelty analyses while construing essential elements of the claims as erroneous. Further, on IPIC’s submission, the Federal Court had set out the following test for assessing subject matter eligibility for computer-implemented inventions:

1. Purposively construe the claim;
2. Ask whether the construed claim as a whole consists of only a mere scientific principle or abstract theorem, or whether it comprises a practical application that employs a scientific principle or abstract theorem; and

• If the construed claim comprises a practical application, assess the construed claim for the remaining patentability criteria: statutory categories and judicial exclusions, as well as novelty, obviousness, and utility.

The Federal Court had also considered the Canadian Intellectual Property Office’s (CIPO) Practice Notice of 2020 titled “Patentable Subject-Matter under the Patent Act,” (PN2020-04) released in response to Choueifaty v. Canada (Attorney General), 2020 FC 837 (“Choueifaty”). The Practice Notice had diluted the problem-solution approach from subject matter eligibility exercises. However, Benjamin Moore argued that the Commissioner had failed to apply guidance from Choueifaty while construing the claims.

Present Appeal

The Attorney General of Canada appealed to the FCA, mainly arguing against the test set in the Federal Court’s judgment. Benjamin Moore’s motion to dismiss the appeal was rejected by the FCA. Thereafter, IPIC, the Canadian Life and Health Insurance Association Inc. (CLHIA) and the Insurance Bureau of Canada (IBC) were granted leave to intervene before the FCA.

Attorney General’s Submissions

At the appeal, the Attorney General submitted that, to be patent eligible, the claims must be directed to “more than a bare practical application,” contrary to the test set by the Federal Court. Expressing the test as ambiguous and incorrect at law, the Attorney General submitted that upholding the test would make Canada an “international outlier” in assessing the subject matter eligibility of computer-implemented inventions.

Interveners

The interveners CLHIA and IBC contended that Choueifaty was wrongly decided and raised concern about the impact of the test on non-patentability of business methods in Canada.

Analysis

Finding IPIC’s intervention “somewhat surprising,” and the appeal as the “most unusual” for a variety of reasons, the court acknowledged that the determination of the patentability of computer-implemented inventions is a very complex issue, grappled by the highest courts in the United States and Australia, and having sparse discussions in Canadian case law.

The FCA remarked that the Federal Court’s decision did not explain the usefulness of setting a test on subject matter eligibility, especially when the matter primarily related to properly construing the claims under Choueifaty. Questioning the sequence of steps in the test set by the Federal Court, the FCA referred to its previous decision in  Amazon.com, Inc. v. Canada (Attorney General), 2011 FCA 328 (“Amazon”), which held that, after claim construction, the assessment of patentable subject matter, obviousness, novelty, and utility, need not follow any particular order. Also, the FCA noted that it refrained from developing a test in Amazon considering the uniqueness and complexity of facts in play.

In the present appeal, the FCA noted a lack of detailed analysis and consideration of the relevant case law in the Federal Court’s decision, calling the exercise little more than “leapfrogging” the test in the judgment. Moreover, the FCA noted that the test was put forward only by the intervener (IPIC), and not by the parties, including Benjamin Moore, which did not request setting a framework for patent eligibility of computer-implemented inventions. The FCA held that proper legal tests for determining a general declaratory relief based on an intervenor’s suggestion were not applied by the Federal Court. Moreover, the test put forward by the Federal Court did not provide any clarification on the purposive construction exercise.

Commenting on Choueifaty, the FCA acknowledged that the Commissioner had erred in identifying the essential elements of the claims by relying solely on the problem-and-solution approach. However, the FCA was also wary of the contemporary approach of presuming that all claim elements are essential unless established otherwise by the patentee or applicant, as this approach places greater emphasis on the “art of claim drafting” that may be deceptive. Nevertheless, the Court accepted that the approach of “identification of ‘the actual invention’“ as noted in Amazon may be incorrect.

In addition to questioning the test for conducting subject matter analysis before and distinct from the novelty and obviousness assessments, the FCA also objected to how the test prefers looking at exclusions set under subsection 27(8) of the Canadian Patent Act, before even examining whether the subject matter falls within the definition of an “invention” at section 2 of the Act. Overall, the FCA objected to viewing computer-implemented inventions as a separate category of inventions.

On whether subject matter analysis may include an examination of novelty, the FCA referred to the previous decisions in Shell Oil Co. v. Commissioner of Patents, [1982] 2 S.C.R. 536 and Progressive Games, Inc. v. Canada (Commissioner of Patents), 2000 F.C.A 479. Section 2 of the Patent Act defines an invention and its subject matter by stating, “[an] invention means any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement…” The FCA noted that the use of the terms “new and useful” with the statutory categories of invention indicates that novelty may be relevant in determining whether an invention falls within the statutory definition for patent eligibility, contrary to the test set by the Federal Court. The FCA also referred to a recent decision of the High Court of Australia in Aristocrat Technologies Australia Pty Ltd v. Commissioner of Patents [2022] HCA 29, which recognized novelty and ingenuity as relevant to the determination of subject matter eligibility.

Ultimately, the court allowed the appeal and set aside the test laid down by the Federal Court in a 3-0 ruling.

Impact

Clarifying a topic of contention, the FCA noted that novelty and obviousness assessments are relevant when assessing the subject matter eligibility of an invention. However, as the FCA acknowledged that subject matter eligibility of computer-implemented inventions is a complex issue yet to be properly considered by a Canadian court, this appeal was an apposite occasion to cast some light on the area. Especially since the industry and IP policy representatives IPIC, CLHIA, and IBC were intervening to assist the court, requisite and comprehensive inputs on the area were readily available for the court’s consideration. Moreover, the Federal Court had noted the alleged continued misapplication of the statutory guidance by CIPO while assessing subject matter eligibility, therefore warranting a guiding test. In hindsight, perhaps the FCA may have taken a different view had the Federal Court’s decision provided a more substantial rationale for including the test in its decision. The FCA frequently noted a lack of discussion by the Federal Court on the basis for issuing the test. In Amazon, the court had the benefit of a 197-paragraph decision by the Commissioner, and a very detailed analysis by the Federal Court (2010 FC 1011).

Furthermore, since the test was suggested merely by an intervener (IPIC) at Federal Court, and not by a contesting party, the FCA was wary of including the test in the judgment. The outcome of the appeal may have been different had Benjamin Moore sought a particular framework for computer-implemented inventions as a remedy. The decision characterized the appeal as raising “challenging questions” on areas “fraught with complexities.” Importantly, the court questioned how issues of appeal were raised, calling them “most unusual” and not contributing to “expeditious consideration.” In some respects, the court noted that participants merely stated their positions, rather than substantiating them.

The validity problem and solution approach in claim construction also remain unanswered. The FCA observed that the problem and solution paradigm can be used to discern the general scope of claims, however, the approach cannot be the “sole or overarching element” for identifying the essential claim elements. As the Commissioner appears to rely heavily on the problem and solution approach for claim construction in computer-implemented inventions, occasionally disregarding claim elements not part of a “solution”, any clarification from FCA on how to apply the approach would have helped applicants. The FCA reiterated its statement in Schlumberger Canada Ltd. v. Commissioner of Patents, [1982] 1 F.C. 845 (“Schlumberger”) that “to determine whether the application discloses a patentable invention, it is first necessary to determine what, according to the application, has been discovered”. Schlumberger is a brief decision from 1982 often cited in Canadian Examiner’s Reports on rejecting subject matter eligibility of computer-implemented inventions, stating the “actual invention” lacks tangible components. While the FCA called the “actual invention” approach problematic, the continued application of Schlumberger may result in more eligibility rejections for computer-implemented inventions that are technologically advanced and more nuanced compared to the invention discussed in Schlumberger. Finally, the FCA acknowledged that the determination of patentability is a highly fact-specific exercise, and that Schlumberger lies at one end of this spectrum.

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