Post-Bilski Patent Prosecution IP Osgoode March 13, 2009 Bob Nakano McCarthy Tétrault LLP

2 Bilski’s patent relates to a hedging algorithm: A method for managing the consumption risk costs of a commodity (e.g. coal) sold by a commodity provider (“intermediary”) at a fixed price comprising of the steps of: (a)initiating transactions between the intermediary and consumers of coal (e.g. power companies), where the consumers purchase the coal at a fixed rate based upon historical averages, where the fixed rate corresponds to a risk position of the consumer; (b) identifying market participants (e.g. coal mining companies) for coal having a counter-risk position to the power companies; and (c) initiating a series of transactions between the intermediary and the coal mining companies at a second fixed rate such that the transactions balance the risk position of the consumer transactions.

3 Main Issue before the Court Was the claim directed to a fundamental principle or mental process? -Michel, Chief Judge, p. 7 Section 101 of the U.S. Patent Code “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title”

4 Bilski does NOT: Exclude software patents from the scope of Section Michel decision, p. 21

5 Bilski does: Impose a “machine or transformation” requirement on a process claim for Section 101.

6 “Machine” Test: “We leave to future cases the elaboration of precise contours of machine implementation, as well as the answers to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine.” -Michel decision, p. 24

7 “Transformation” Test, item I: “A claimed process is patent-eligible if it transforms an article to a different state or thing. This transformation must be central to the purpose of the claimed process.” -Michel decision, p. 24

8 “Transformation” Test, item II: “[T]ransformations or manipulations simply of public or legal obligations or relationships, business risks, or other such abstractions cannot meet the [transformation] test because they are not physical objects or substances, and they are not representative of physical objects or substances.” -Michel decision, p. 28

9 U.S. Patent Office’s current position on process claims: 1.The method/process must either: (1) be tied to a particular machine or apparatus, or (2) transform a particular article to a different state or thing. 2.A mere field-of-use limitation is not sufficient to make an otherwise ineligible method claim patent- eligible. The machine or transformation must impose meaningful limits on the claim’s scope. 3.Reciting a specific machine or particular transformation of a specific article in an insignificant step, such as data gathering or outputting, is not sufficient. -U.S. Patent Office Memorandum Jan. 7, 2009

10 Next Steps in Bilski Bilski has filed a leave to appeal to the U.S. Supreme Court on two grounds: 1. Must a “process” be tied to a particular machine or apparatus, or transform a particular article into a different state or thing? 2. Does the “machine-or-transformation” test for patent eligibility contradict Congress’s intent that patents protect “method[s] of doing or conducting business” as per 35 U.S.C. 273? Amicus briefs in support of the leave have been filed. Patent Office reply and Amicus briefs objecting to the leave are due in April.

11 Business method patents in Canada Section 2 of the Canadian Patent Act: “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. Subsection 27(3): “No patent shall issue for... any mere scientific principle or abstract theorem.”

12 Business method patents in Canada Canadian Patent Office Manual of Patent Office Practice: ●Chapter “Business methods” The expression "business methods" refers to a broad category of subject matter which often relates to financial, marketing and other commercial activities. These methods are not automatically excluded from patentability, since there is no authority in the Patent Act or Rules or in the jurisprudence to sanction or preclude patentability based on their inclusion in this category. Patentability is established from criteria provided by the Patent Act and Rules and from jurisprudence as for other inventions. Business methods are frequently implemented using computers. ●Chapter 16, “Computer Implemented Inventions”

13 Impact of Bilski on Patent Procurement Prosecution of pending U.S. applications - claim scope Re-examination requests for issued patents Re-issue requests for issued patents