Software and Business Method Patents - How to Improve Your Chances?

By David Fraser, January 5, 2021

Some of the most valuable inventions are software implemented methods. Many software methods are business method patents designed to make business more efficient. These include Artificial Intelligence (AI) / machine learning applications and Financial Technology (Fintech) applications.

Software patents, historically, were not considered patentable. This is because mathematical algorithms (scientific principles and abstract theorems) are generally not patentable in Canada and computer programs were seen as simply an implementation of mathematical algorithms and formulas. As the patent office historically stated, if an invention did not have a physical existence or manifest a discernible physical effect or change, you could not patent it.

This changed in 2010 with the granting of the Amazon 1-click patent. Subsequently, the Canadian Intellectual Property Office (CIPO) updated their Examination practice guidance to say that given a purposive claim construction, if a computer (to execute the software) was found to be an essential element, the combination of the computer and the software, being a tangible device, could be patented.

Purposive claim construction was defined by the Supreme Court of Canada in 2000 and a two-part test was developed to determine if a claim element was essential or non-essential. A claim element is essential if:

• Modifying or substituting the claim element would change the way the invention works
• The inventor intended that the claim element be essential

If a claim element is essential, the patent Examiner must consider it. If a claim element is non-essential, a patent Examiner may ignore it.

Unfortunately, the guidance from CIPO only cited the first part of the test and omitted the second. This meant that many computer-implemented claims were rejected because the Examiner would determine that the computer was non-essential, ignore it, and be left with only the computer algorithm. The remaining algorithm would then be found to be an abstract theorem and be rejected.

This changed at the end of 2020 when the Federal Court ruled that CIPO’s guidance goes against the Supreme Court’s two-part test. Recently, CIPO has issued new guidance so that the full two-part test for determining essential and non-essential claim elements will be used.

This is great news for inventors and companies innovating in the field of software, financial, and business methods. No longer can the patent office so easily ignore the physical aspects of your inventions and reject your patents.

To ensure that your software inventions can be patented there are several steps you can take:

1. Make sure that there are physical elements in your claims that are essential elements. There must be an essential physical aspect of your invention. Your patent professionals can help you with this.

2. Your invention should provide a technical solution to a technical problem. It is best that your invention produces a physical effect or change.

3. If your invention improves the operation or efficiency of the computer itself, this should be highlighted.

4. Describe the physical environment in which the software operates. Don’t just describe the mathematical algorithm; include the computers, the network, servers, and the external world in which it operates.

5. If your system obtains data from external sensors or uses the results to control something in the real world, include these details.

If you have a software invention that you are considering patenting, please feel free to reach out to MBM for a free consultation.

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