Intellectual Property Considerations in Mergers and Acquisitions

Intellectual Property may be part of a company that is acquired or with which another company merges. The Intellectual Property can take the form of Trademarks, Patents, Designs, Trade Secrets, Copyrights, Plant Breeder’s Rights, Integrated Circuits, etc. 

Unfortunately, in merger and acquisition transactions, the Intellectual Property due diligence is often overlooked and the intellectual property is typically “thrown in with the deal”. This can be an unfortunate situation, since the real value of the intellectual property may never be realized. If analyzed, the intellectual property may be a source of income in terms of licensing fees, fees generated from sale of the assets, fees associated with assignments, trade of intellectual property for other intellectual property and monetary consideration. If the due diligence concerning the intellectual property is done prior to closure of the transaction, there is a distinctive vantage that can be realized; assuming the intellectual property is in good standing and there are no encumbrances (see below), the result could be a value-add proposition for the transaction which can also provide the concomitant advantage of expediting the transaction, increasing the transaction price among other attractive benefits. 

As a further advantage, there may be an opportunity for a joint venture with another company to better position the purchasing company in a specific industry. 

RISKS COMPONENTS TO BE CONSIDERED: 

On other side of the coin, the intellectual property may be a detriment. It may be that some of the intellectual property infringes the rights of others or that licensing fees are owed to licensees or that licensees are owed fees that in turn are owed to the target company. Further still, there may be real or imminent litigation involving the intellectual property. 

THE IMPORTANCE OF DUE DILIGENCES: 

In any event, a due diligence should be conducted concerning the intellectual property. Although the prospect of conducting a due diligence may seem daunting, the procedure is extremely useful and can yield very profitable results for the purchaser. In general overview, there are a few simple procedures which, if observed, can go a long way to benefit the purchaser of the target company. 

One should initially determine if the company being acquired properly owns or has the adequate license(s) in place to use to the technology. Second, a review of all agreements into which the target company has entered is required. This will ascertain whether the company’s licenses are of sufficient breath to cover future use and/or modifications of the technology and ownership indications for improvements. The issue of infringement should also be addressed. The company being acquired should fully disclose potential infringement issues to the purchasing entity whether they have been resolved or are pending. 

The existence of any royalty obligations of the target company should also be analyzed in the form of licensing fees, lump sum payments, emissions, etc. as well as duration of payment and any conditions related thereto. 

Finally, a further important consideration to bear in mind is employee requirements regarding intellectual property issues. It should be confirmed that all contractors/employees have signed agreements vesting the intellectual property to the target company. It is an important aspect and avoids competition issues as well as having to try to track down employees that may have been terminated or moved on after the transaction has been completed. 

CONCLUSION: 

It should be borne in mind that this is a general overview of the considerations involved in intellectual property assets in the merger and acquisition environment. There are tax consequences to be also considered as well as a series of other nuances that require professional assistance. Should you require any additional information regarding the protection of intellectual property rights in the case of mergers and acquisitions, you are invited to contact the undersigned. 

Paul Sharpe is a Registered Patent Agent in our Intellectual Property Group and can be reached at 613.567.0762 or psharpe@mbm.com.

I Have a Patent, Now What?

The Problem 

Your concept may be novel and your invention may be exactly what everybody needs. However, unless you get your patented idea from the drawing board into your customer's hands, the chances of it reaping profits could be scarce. Here's an overview of your options for getting your invention made and out the door.

Many small inventors develop something new and then unrealistically expect that a path will be beaten to his or her door by big companies. They go to the expense of researching the area of their technology, preparing intellectual property rights, filing the rights and eventually issuing them without any real focus on what they really want from the protection they obtain.

Many inventors get to this point and then indicate that they do not know what to do going forward. This is a common theme and what they do not realize is that they are very capable of executing an effective strategy to commercialize or monetize their inventions. The patience, planning and skill that were involved in the steps to secure the intellectual property are transferrable to the commercialization/ monetization phase. The other problem that is always prevalent is a lack of funding to further advance the project. For many inventors this has the perception of being insurmountable and frequently results in the project coming to a standstill or being entirely abandoned.

In reality, the pursuit of commercialization/monetization of an invention is similar to any other business. A plan must be prepared and followed diligently with constant adaptation to changing factors.

A general game plan involves a series of steps including:

1. Define the market to which the technology relates. What is the size? What amount of revenue is generated? How many competitive products are in the market space?

2. Delineate the advantages attributable to the product or process relative to existing players. Is there a cost, ease of use, manufacturing, efficiency, etc. advantage?

3. Research which companies are most likely to entertain new developments for introduction into their existing product lines. This can be easily ascertained by internet research as well as through the use of intellectual property professionals.

4. Approach government funding agencies, technology innovation centers, bankers inter alia to source funds for eventual marketing and manufacturing of the invention.. There are a number of such agencies and the Canadian government has a large number of incentives available.

5. Prepare marketing materials to present the concept to other interested parties. Many of the previous steps material will also result in a loose business plan which can be perfected with additional help from an experienced person. The business plan is an important part of the process as it will demonstrate the economic feasibility to the target audience and illustrate that thought and preparation has gone into the project.

These initial steps will position an inventor for success. Other alternatives for monetization include listing the intellectual property in an auction for sale when direct involvement in the “business” of the invention is not desired by the inventor.

Finally, the technology may be licensed to another party. In this scenario, the innovator collects a licensing fee for certain activity undertaken by the party holding the license.

In conclusion, the road to commercialization/monetization requires perseverance and a disciplined approach exemplified by Mr. Bell and Mr. Edison.

By Paul Sharpe

Are Isolated Human Genes Patentable In Canada?

As detailed in a previous blog, the U.S. Supreme Court found that “[a] naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring.”  The question of the patentability of human genes has also been considered recently by other jurisdictions.  For example, in Australia, isolated genetic material was recently confirmed as patentable subject matter (Cancer Voices Australia v Myriad Genetics Inc [2013] FCA 65).

While the patentability of isolated human genes has not been considered by the Canadian courts, given the controversial nature of this area of patent law, it is not unreasonable to predict that this issue may be brought before the Canadian courts in the future.  Particularly, in light of the fact, that a number of Canadian groups have publicly opposed these types of patents in Canada.  Accordingly, the question to be asked is “Are isolated human genes patentable subject matter in Canada?” 

What is patentable subject matter in Canada is set forth in Section 2 of the Patent Act which recites:

““invention” means any 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”

The only prohibition with respect to patentable subject matter in the Patent Act is set forth in Section 27(3) of Patent Act which states “No patent shall be granted for any mere scientific principle or abstract theorem.” There is no prohibition in the Canadian Patent Act relating to laws of nature nor is there any type of moral exclusion with regard to patentable subject matter in Canada. 

Accordingly, when considering patentable subject matter in Canada, one must determine whether the subject matter in question is a mere scientific principle or abstract theorem and therefore specifically excluded by Section 27(3).  If this is not the case, then it is necessary to determine if the subject matter in question falls within at least one of the categories set forth in Section 2.  For example, the Supreme Court of Canada previously found that higher life forms (i.e. mouse) did not fall within one of categories set forth in Section 2 of the Patent Act  and therefore was not patentable subject matter.

Isolated human genes clearly are not simply a mere scientific principle or abstract theorem and therefore do not fall under the Section 27(3) exclusion.  Furthermore, isolated human genes are compositions of matter and therefore fall within at least one of the categories, composition of matter, set forth in Section 2.  Accordingly, isolated human genes are patentable subject matter in Canada.   The Canadian Intellectual Property Office clearly also regards isolated human genes as patentable given the numerous Canadian patents that have been issued with claims directed to isolated DNA generally and isolated genomic DNA in particular.  In fact, Myriad Genetics Inc does have Canadian patents relating to the human genes, BRCA1 and BRCA2, and methods of genetic testing relating to these genes.

Nevertheless, given that there are no excess claim fees in Canada, there is no reason not to include claims specifically directed to cDNA, which is clearly not naturally occurring, in addition to generic isolated DNA / nucleic acid claims.  We strongly recommend you consult with a Canadian patent agent to discuss your options with respect to your claim options in Canada. 


By: Kay Palmer

US Supreme Court rules that isolated human genes are not patentable

http://www.supremecourt.gov/opinions/12pdf/12-398_8njq.pdf

In a ruling that is sure to send reverberations around the world of intellectual property law, the US Supreme Court unanimously ruled that isolated human genes are not patentable.

More specifically, the Court found that the BRCA1 gene was not patentable subject matter in the very recent decision of Association for Molecular Pathology v. Myriad Genetics, Inc.

This ruling is remarkably timely, as public awareness of this aspect of patent law has never been higher. Hollywood film star Angelina Jolie recently announced that she underwent a double mastectomy in response to the results of a DNA test that identified her as having a mutation in her BRCA1 gene - which indicates an increased susceptibility for developing breast cancer. Public debate is heated with respect to the patenting of human genes.  The BRCA1 gene had been patented by Myriad Genetics, a company based out of Utah. Myriad provides BRCA1 screening test at a cost of approximately $3000, which raises access to medicine issues. Can an average woman afford Myriad’s BRCA1 test?

In coming to its unanimous decision, the US Supreme court noted that although Myriad found an important and useful gene, it was also undisputed that Myriad did not alter the gene in any way. As such, Justice Thomas wrote that "separating that gene from its surrounding genetic material is not an act of invention."

It is important to note that the Supreme Court distinguished the patentability of complimentary DNA molecules (“cDNA”) in determining that “cDNA retains the naturally occurring exons of DNA, but it is distinct from the DNA from which it was derived," and accordingly, "cDNA is not a 'product of nature' and is patent eligible under §101." §101 of the Patent Act defines the eligible subject matter for a patent in the US.

Moreover, the Supreme Court explicitly noted that it was not ruling on the patentability of methods or applications of knowledge involving the BRCA1 and BRCA2 genes. Rather, the Court found that it was "merely hold[ing] that genes and the information they encode are not patent eligible under §101 simply because they have been isolated from the surrounding genetic material."

Check back with MBM’s blog for analysis and updates regarding this exciting and  landmark ruling and the Canadian context with respect to human gene patenting.

By: Adam Tracey

Supreme Court Revises Decision on Teva v. Pfizer

Originally featured on June 6, 2013 in an MBM Newsflash

The Supreme Court of Canada has made a decision on Pfizer’s motion regarding the Court’s earlier decision in Teva Canada Ltd. v. Pfizer Canada Inc. (2012 SCC 60). In Teva v. Pfizer, Pfizer sought an order prohibiting the Minister of Health from issuing a Notice of Compliance to Teva for its generic version of Viagra under the Patented Medicines (Notice of Compliance) Regulations.

The Supreme Court issued its decision in the case in November 2012, pronouncing that the Pfizer patent for Viagra was “invalid” and “void”. After the decision, Pfizer brought a motion for either a re-hearing or a modification of the Supreme Court decision. Pfizer argued that the Supreme Court’s decision exceeded its jurisdiction in the matter, that the case had been brought in the context of the PM(NOC) Regulations wherein the purpose of the proceeding was not determining the validity of the patent. Pfizer asked the Court to vary its invalidity decision with respect to the Viagra patent, and to limit itself to the remedy available under the PM(NOC) Regulations, i.e. dismiss the application for an order prohibiting Teva from obtaining a Notice of Compliance.

On June 4, 2013, the Supreme Court issued its decision on Pfizer’s motion. The Court has modified its earlier order in Teva v. Pfizer by removing the statements that the patent is invalid and void, and replacing them with statements to the effect that Teva has established its allegations under the PM(NOC) Regulations that Pfizer’s patent for Viagra is not valid. The Court also amended its earlier decision by specifying in the first paragraph the application brought by Pfizer (i.e. an application under PM(NOC) Regulations for an order prohibiting the Minister of Health from issuing a Notice of Compliance to Teva), and by adding to the last paragraph that the Supreme Court dismisses that application.

The implications of this modification of the Supreme Court’s earlier decision will become fully clear in the future. One notable outcome of this decision is that the Supreme Court of Canada has demonstrated it is not above reconsidering and modifying its own decisions.

By Nazanin Ghaissarnia 

Anti-Monopoly Laws In China

The Anti-Monopoly laws (AML) in China have been put in place to promote the “public interest” and constitute the equivalent of anti-trust laws in the US representing a step forward in unifying Chinese laws with the international laws. AML can be divided to three categories(1) : First is the merger category, which requires companies whose transactions exceed a certain threshold to inform the Chinese government of these transactions in order to receive clearance. The second category is focuses on monopoly agreements, prohibiting agreements from containing certain clauses that restrict competition, such as clauses directed to price fixing, technology restrictions and limiting production.  The third category pertains to the abuse of dominant market position, which prohibits businesses that have dominant position in the market to abuse this position in controlling the market.(2)
 
The AML are implemented through special government agency called “Anti-monopoly Enforcement Authorities” (AMEA) which decide when and how to enforce these decisions(3).

From a practical perspective, the law has been used more as a tool for organizing government activities, rather than as a method of balancing the interest of citizens and the state(4).  Before AML, anti-trust competition laws were in place, which prohibited tied selling, price fixing and bid rigging, but failed to address other anticompetitive activities like creating monopolies(5).  As a result AML is filling the gap that existed before.

Article 55 of AML contains provisions that speak specifically about Intellectual Property. This Article provides that “this law is not applicable to the undertaking which use Intellectual Property rights according to the laws and administrative regulation relevant to Intellectual Property, but it is applicable to the undertakings which “abuses IP” and “eliminate or restrict market competition”(6).  This provision provides a safe environment for IP owners as long as they are within their legitimate rights and applies when the abuse of Intellectual Property occurs. However, the term “abuse” has not been defined.  Some commentators find the existence of Article 55 equal to “patent misuse” provision under the US law, which does not allow a patent holder from “seeking to leverage its lawful monopoly IP rights to extend them beyond the proper scope of the patent”(7).

Commentators find three major issues with this Article(8). First, the relationship between the prohibitions and Article 55: Is this Article merely designed to further clarify the AML or does it create a prohibition? Some critics believe that this article prohibits companies that are abusing the market dominant position and it has been put in place to help the non-dominant companies carry out business as well. If this provision is interpreted widely, then it will include all dominant and non-dominant companies. For example, Microsoft argues that it does not have a dominant market share in China, as a result of the high amount of piracy. However, this position may be considered irrelevant if the provision is broadly interpreted. So far there has not been any case with regards to this matter.

The second issue is that Article 55 may prevent entities from price discrimination and discrimination in IP licensing. This means when it comes to licensing, an entity has to treat all third parties the same and favorably - if licensing is compulsory this can disincentivize innovation.

The third issue is the potential impact of Article 55 on patent infringement issues. Local companies may bring Article 55, to accuse the patent holder of monopolizing the market and preventing competition. Local companies then can ask for an investigation from the government with this regard. This will make it more difficult for foreign companies to enforce their IP rights in China. A law firm in China submitted a case to AMEA against Microsoft and suggested using AMEA to initiate an anti-monopoly investigation against Microsoft and further accusing Microsoft of abusing this alleged market monopoly.

Some of the defences used when facing an anti-monopoly charge are the ‘non-dominant position’ defence or the ‘defence of new development’. There are some approved exemptions to AML where the monopoly agreement are beneficial to: (1) improve technology or research and develop new products; (2) upgrade product quality, reduce costs, improve efficiency, unify product specifications and standards, or realize division of work based on specialization; (3) improve operational efficiency and enhance competitiveness of small and medium sized entities; or (4) serve the public welfare, by conserving energy, protecting the environment, and providing disaster relief (9).  These provisions are designed to encourage foreign investment in China. Microsoft has set up the China research & development group and is planning to invest $1 billion on this research and development center. 

AML in China has been created in an effort to keep China more in tune with the other countries; however it has also created a degree of ambiguity. Going forward, legal observers will be following the developments in Chinese jurisprudence to further clarify this legislation, giving foreign companies a sense of just how AML is going to be applied in Chinese courts.

By: Asrin Jawaheri
   
References:               

(1)Hannah C. L. Ha, “China’s Anti-Monopoly Law” online: www.mayerbrown.com

(2) Ibid
(3) Thomas Brook, China’s Anti-Monopoly law: History, Application and Enforcement, (2011) 16 Appeal review of current law and law reform 31-48 
(4) Ibid
(5) Ibid
(6) Dr. Yuun Tian, “The impact of the Chinese Anti-Monopoly Law on IP Commercialization Technology-Driven Companies and Future Regulators” (2010) Duke Law & Technology Reviews
(7) Ibid
(8) Ibid
(9) Ibid  

Concrete Protection

It is always interesting how things change and how technologies from completely different fields can be integrated together to create something that is new and makes someone say “Wow, that is really cool!” Even in fields of technology where one would not always think that patent protection is possible, there are always ideas that may be worthy of patent protection.

For example, in areas of construction and concrete, there are always new ideas that may result in methods or products that are patentable. And one always has to remember, that even if the idea relating to a new technique or material is conceived by someone else, new uses for a known technology should also be considered for potential protection.

As an example, there has been work done in the concrete field that relates to light transmissive concrete, which is also known as translucent concrete. The first image that is conjured when one speaks concrete is typically not of a “translucent” type of material. A Hungarian architect developed this type of light transmissive concrete in 2001, by adding optical fibres into a concrete mixture. As is readily known optical fibres are virtually a lossless way of transmitting light along their length by way of total internal reflection. As such, this architect has created a material that no longer impedes the transmission of light but effectively aids in light transmission through a once light impermeable material. The fibres are typically embedded within the concrete running parallel to each other thereby enabling the transfer of the light between the two surfaces of the concrete connected by these fibres. This combination of technologies from diverse fields may be considered a first instance of patentable technology.

A second instance of patentable technology may be the method of fabrication of this type of product. For example, originally the optical fibres where individually placed into the concrete during casting, thus making the fabrication of this product time consuming and quite costly. A newer technique for the fabrication of this product includes the use of a woven fabric or mesh of fibre optical filaments, which can be placed in layers in the concrete during the casting process. The use of the mesh configuration can aid in the alignment of the fibres thereby potentially enhancing and accelerating the fabrication process.

A further instance of patentable technology, can result from intended uses of the product. Continuing with the light transmissive concrete example, there was an exhibit of this material at the National Building Museum, which resulted in many people considering potential applications. An example application was demonstrated in Stockholm, wherein this translucent concrete was fabricated into a sidewalk, thereby enabling the illumination of the sidewalk at night. Several other applications that are in the safety realm have also been envisioned, for example, its use in fire escapes during power failures, illumination within subways stations or even the illumination of speed bumps or parking barriers.

So basically the long and the short of it is, regardless of the field of technology, when a new idea surfaces, there is always the potential that the resulting technology is patentable. Accordingly, it is advisable to seek the advice of a registered patent agent during development of new technologies or products.

By Stuart Bristowe

New Examination Practice Respecting Computer-Implemented Inventions

In March 2013, the Canadian Intellectual Property Office (CIPO) issued new practice guidelines regarding both purposive construction and computer-implemented inventions. This note explores the practice notice relating to computer-implemented inventions (hereinafter "the guidelines"), and in particular when claims to computer-implemented inventions are considered to be statutory subject-matter, in the sense that they are a type of invention which is eligible to be patented, as outlined in Sections 2 and 27(8) of the Patent Act.

Purposive construction is the accepted practice used by the Courts in interpreting patent claims. It essentially asks, from the point of view of a person skilled in the art on the date of publication of the patent application: "What was the patent applicant trying to claim?" Purposive construction is based on the words of the claim, interpreted in light of the entire specification. An important part of purposive construction involves identifying which, if any, elements of the claim are non-essential. In particular, an element is non-essential if the language of the claim makes it clear that the element is indeed not essential, or if the person skilled in the art would have known of a substitute to the element that would perform substantially the same function in substantially the same way to obtain substantially the same result.

The guidelines begin by establishing that certain practices outlined in Chapter 16 (Computer Implemented Inventions) of the Manual of Patent Office Practice (MOPOP) are no longer in use. This includes practices relating to the concept of "statutory contribution," and the requirement that a claim must be a "technological solution to a technological problem" or lie within a "field of technology." This is not surprising, as such practices have never been widely accepted and indeed were struck down by the Federal Court of Appeal in Canada (Attorney General) v. Amazon.com, Inc., 2011 FCA 328. We also note that such practices are not confined to Chapter 16 of MOPOP, but also appear for example in Chapter 12 (Utility and Subject Matter) and Chapter 13 (Examination of Applications).

A major theme of the guidelines is summed up on page 2, which states that "where a computer is found to be an essential element of a construed claim the claimed subject-matter will generally be statutory." This appears to be a consequence of the more general principle, also set forth on page 2, that “[if] it is determined that the essential elements of a construed claim are limited to matter excluded from the definition of invention, … the claim is not compliant with Section 2 of the Patent Act.” Provided examples of statutory elements are those elements which either have physical existence or manifest a discernible effect or change in something physical. Moreover, the guidelines state that mere ideas, schemes, plans, or sets of rules are not statutory elements, although it is arguable that Canadian law does not specifically contain such an exclusion.

In an attempt to clarify the discussion, the guidelines identify two types of invention: those that solve a "computer problem" (e.g. a problem with the operation of a computer) and those that do not solve a computer problem, but rather use a computer to implement a solution to another problem. Although this distinction is somewhat artificial, the remainder of this note will focus on whether claims solving "non-computer problems" are statutory subject-matter.

The last page of the guidelines attempts to address this concern, by first reiterating that claims to "non-computer problems" will be evaluated based on whether they include a statutory essential element. That is, "where it appears that the computer cannot be varied or substituted in a claim without making a difference in the way the invention works, or that the computer is required to resolve a practical problem, the computer may be considered an essential element of the claim.” Taken along with the guidance on Page 2 of the guidelines (see above), this points toward the conclusion that such a claim will generally be statutory. But the guidelines also caution that this requires careful consideration, as in some cases a computer may simply be added to a claim as a convenience or afterthought. (Or, to read between the lines, the Examiner should be on the lookout for non-statutory subject-matter in disguise). The example is given that if "the solution to a given problem is to perform certain calculations according to a specific equation, the use of a computer to perform the calculations may expedite the mathematical manipulations without having a material effect on the operation of the equation itself." Thus, if the equation can also be solved by pen and paper, then the computer may not be an essential element and the claim may be considered non-statutory as a result.

We note that this is a very specific example of an allegedly non-statutory claim, most probably inspired by the Federal Court of Appeal decision, in Schlumberger Canada Ltd. v. Commissioner of Patents [1982] 1 F.C. 845 (C.A), which upheld that the use of a computer does not serve to convert a (non-statutory) mental process into a statutory “invention.” In particular, the example, as well as the Schlumberger case itself, relates to solving an "equation" by a computer. However, one might observe more generally that computers, by their very nature (at least in their current incarnation), do nothing more than execute a long series of simple steps that could readily be duplicated using pen and paper.

This prompts the question: Does computerized execution of code count, in general, as solving an equation? On the one hand, the Federal Court of Appeal decision in the Amazon.com case explicitly equated a computer algorithm with a mathematical formula, at Paragraph 63:

It is arguable that the patent claims in issue in this case could fail on the same reasoning, depending upon whether a purposive construction of the claims in issue leads to the conclusion that Schlumberger cannot be distinguished because the only inventive aspect of the claimed invention is the algorithm – a mathematical formula – that is programmed into the computer to cause it to take the necessary steps to accomplish a one-click online purchase. On the other hand, it is also arguable that a purposive construction of the claims may lead to the conclusion that Schlumberger is distinguishable because a new one-click method of completing an online purchase is not the whole invention but only one of a number of essential elements in a novel combination. In my view, the task of purposive construction of the claims in this case should be undertaken anew by the Commissioner, with a mind open to the possibility that a novel business method may be an essential element of a valid patent claim. 

On the other hand, it is arguable that executing low-level computer code to support certain types of fundamental computer functions, such as retrieving data from input devices or memory, manipulating the data, and writing the results to output devices or memory, is fundamentally different from executing high-level computer code in order to perform abstract calculations or other computations in support of an external purpose.

The guidelines have only recently been released. However, there are some indications as to how the new practice will be adopted. The first indication stems from the Federal Court of Appeal Amazon.com decision itself (insofar as it can be presumed that the guidelines were drafted in accordance with the principles handed down by the Court). Paragraphs 62 and 63 of the decision highlight that the Schlumberger decision is still valid, and therefore a patent application may still fail for lack of statutory subject-matter if the only novel or inventive aspect of a claim is an algorithm or a mathematical formula that is programmed into the computer to cause it to take the necessary steps in accomplishing its stated function. The Amazon.com decision also states (again at Paragraph 63) that, on the other hand, purposive construction of the claims may lead to the conclusion that a new method performed by a computer is not the whole invention but only one of a number of essential elements in a novel combination. In this case the Commissioner was directed to undertake purposive construction of the claims anew, “with a mind open to the possibility that a novel business method may be an essential element of a valid patent claim.” Most notably, the Commissioner subsequently and promptly allowed the application, suggesting that the claim held other essential elements that were statutory, perhaps the claimed “client system” and “server system,” which are computers.

Other indications can be found in the Commissioner's Decisions in regards to patent applications that are reviewed by the Patent Appeal Board, decisions which are published by CIPO and are readily available. In particular, Commissioner's Decision Number 1332, dated October 29, 2012, addresses the question of statutory subject-matter in view of the Federal Court of Appeals Amazon.com decision. The claimed invention relates to a system for updating navigation systems installed in vehicles, comprising a number of computer elements programmed to distribute and receive updated navigation data, and a method relating to the operation of such a system. In analyzing whether the claims are statutory subject-matter, the Commissioner’s decision again quotes Paragraphs 62 and 63 of the Amazon.com decision, and concludes that the system and method claims of the patent at issue comprise “a number of elements in a novel combination.” The claims are described having elements that comprise technical features and physical steps sequenced to achieve a practical result. The decision further holds that “the computer limitations of the elements are essential, i.e. they cannot be omitted, or substituted for mental means, without having a material effect on the operation of the invention. The claims are therefore considered to be statutory.”

The above two cases deal with computers which are programmed to interact with each other in order to provide a specific service. As such, it would be difficult to substitute another means, such as pen and paper, for the computer components without changing the way in which the inventions work. In such cases, and presumably in other cases as well, the current climate seems to be generally favorable to computer-implemented inventions.

A final note: The guidelines fail to follow a further, well-accepted principle of purposive construction, articulated in the seminal Supreme Court Decision in Free World Trust v. Electro Santé, that, if the inventor expressly intends that a particular element is essential, this intention shall be taken into account. In view of this, it may be useful to clearly state, in the specification, that, for example, “the computer component is intended by the inventor to be an essential element of the claimed invention,” or otherwise establish that the computer component cannot be substituted without having a material effect on how the invention works.

By Michael Maskery