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Choueifaty Patent Application Contains Patentable Subject Matter, Patent Appeal Board Rules

Last year, in the decision of Yves Choueifaty v. Attorney General of Canada, 2020 FC 837  (“Choueifaty”), the Federal Court rejected the “problem and solution” approach to claim construction applied by the Canadian Intellectual Property Office (“CIPO”), and reaffirmed the “purposive construction” approach for determining subject-matter eligibility as set forth by Canadian courts. As a result, the Court directed the Commissioner of Patents (the “Commissioner”) to reassess the patentability of Mr. Choueifaty’s application.

On January 11, 2021, the Commissioner issued a new decision, Choueifaty (Re), 2021 CACP 3, on Canadian Patent Application No. 2,635,393 (the “393 Application”) and found Mr. Choueifaty’s second set of proposed claims 1 to 63 to be directed to patentable subject matter. Choueifaty (Re) provides a glimpse into how the Canadian Intellectual Property Office (“CIPO”) might examine computer-implemented inventions in a post-Choueifaty world.

Applying Purposive Construction to Identify Essential Elements

According to the latest Practice Notice promulgated in the wake of Choueifaty, to determine the subject matter eligibility of a patent application, the Commissioner must first construe the claim. Elements of the claims must be identified as either essential or non-essential. Such characterization is the first step to determining the “actual invention” which defines the scope of protection.

The task of identifying the essential and non-essential elements is also critical for patentability, especially for computer-implemented inventions, because the “actual invention” must have a “physical existence or [manifest] a discernable physical effect or change and [relate] to the manual or productive arts” to be patentable in CIPO’s view.  If the physical aspect of a computer-implemented invention, e.g., the computer-related element, is deemed to be non-essential, then it would be difficult to establish patentability pursuant to the Practice Notice.

This was a key contention in the prosecution of the 393 Application, which relates to a computer-implemented method for selecting and managing investment portfolios. Mr. Choueifaty insisted that the computer-related details of the claims are essential to the implementation of the solution because the claim reflects an improvement in computer technology (specifically, the invention allows for a less computationally intensive and therefore faster method of establishing the composition of the desired investment portfolio).

However, in its previous Commissioner’s Decision No. 1478 (“CD 1478”), the Patent Appeal Board applied the “problem and solution” approach and characterized the problem to be “financial portfolio engineering and investing” and the solution to be “the construction of anti-benchmark portfolio wherein the weighting of each security within the portfolio is calculated according to an anti-benchmark ratio such that the portfolio maximizes diversification to create an efficient portfolio”.  As a result, the Commissioner concluded that a person skilled in the art would understand the computer-related elements to be non-essential, because the solution “works solely through the scheme or rules – the calculation of an equation – for constructing the anti-benchmark portfolio.”

The significance of the Choueifaty decision is that it re-asserted the importance of considering the inventor’s intention as reflected by the claim language in purposively construing the claims. To establish a claim element to be non-essential, it must be shown that both (1) according to the words of the claim, the inventor clearly does not intend the element to be essential and (2) a person skilled in the art would appreciate that the particular element can be substituted without affecting the working of the invention. (para. 39 of Choueifaty).

In Choueifaty (Re), the Patent Appeal Board applied the test as set out by the Federal Court in the Choueifaty decision and found all the claimed elements in the second set of proposed claims of the 393 Application to be essential, because “there is no claim language indicating any of the elements to be optional, preferred embodiments or one of a list of alternatives, nor is there any indication in the record before us that would lead to a determination of any claimed elements being non-essential”.

Determining Whether Computer-implemented Inventions Contain Patentable Subject Matter

In addition to clarifying the correct approach to conducting purposive claim construction, the Choueifaty decision also directed the Commissioner to reconsider the exclusion of the improvement of computer processing as a solution, suggesting that this aspect of the invention requires closer examination.

The mere fact that a computer is identified to be an essential element of a claimed invention does not necessarily mean that the subject-matter defined by the claim is patentable subject-matter. In such a case, according to the Practice Notice, it is necessary to consider whether the computer and the algorithm together form a single actual invention that has physicality and solves a problem related to the manual or productive arts.

In the 393 Application, the proposition is that the claimed methods require significantly less processing power and improve the speed of computation compared to the known methods. Choueifaty’s method essentially involves transforming the problem of finding the maximum of a quasi-concave function into finding the minimum of a convex equation. According to an expert affidavit filed in support of the application, Choueifaty’s approach is shown to be faster by approximately two orders of magnitude (50 to 200 times).

Based on this aspect of processing speed improvement, the Patent Appeal Board concluded that the claimed method can be considered an algorithm that improves the functioning of the computer used to run it, and thus defines a patentable subject matter.

The Board specifically distinguished the claims at issue in Schlumberger Canada Ltd. v. Commissioner of Patents, [1982] 1 FC 845 (CA) at 204-06 (“Schlumberger”) from the claims of the 393 Application because the claimed method in Choueifaty does not merely yield information, but also permits the computer to carry out the portfolio optimization procedures with significantly less processing and greater speed.  The Commissioner of Patents adopted the reasoning of the Board in this reconsideration decision, which will result in allowance of the 393 Application.

Key Takeaways

Choueifaty does not represent the first time that the courts have directed that CIPO’s approach to purposive claim construction is wrong.  Almost a decade ago in Canada (Attorney General) v. Amazon.com Inc., 2011 FCA 328 (“Amazon.com”), the federal courts rejected CIPO’s approach to claim construction and directed that CIPO must examine applications in accordance with the principles of claim construction established by Canadian courts.  That resulted in CIPO’s promulgation of two practice notices, PN2013-02 and PN2013-03 relating to purposive claim construction and the examination of computer-implemented inventions, which were based on the problem-solution analysis that was rejected as incorrect in Choueifaty.  There is thus some concern as to whether CIPO will actually implement a correct approach to conducting purposive claim construction in view of the further guidance provided by the Federal Court in Choueifaty.

The Commissioner’s decision in Choueifaty (Re) sheds light on how CIPO will evaluate patentable subject matter for computer-implemented inventions with the “purposive construction” approach in a post-Choueifaty era. The first step is to purposively construe the claims to identify the essential elements and the second step is to determine whether the “actual invention” contains patentable subject matter.

To meet the physicality requirement set forth in the Practice Notice, an algorithm must be shown to improve the functioning of the computer. Choueifaty (Re) provides an example where reducing processing demand and/or improving the speed of computation can be considered as improving the functioning of the computer.  Indeed, this characterization of the problem in Choueifaty as a “computer problem” would likely have resulted in patentability of the invention even under the previous post-Amazon.com practice guidance if that characterization of the problem had been accepted by the Patent Appeal Board.

However, Choueifaty (Re) also creates some interesting conundrums. If an algorithm relates to a novel use case and is being implemented by a computer for the first time, then by the Commissioner’s reasoning, it may not be patentable because it could be regarded as prescribing certain mathematical formulae be implemented via a computer when there is no computer-implemented prior art to improve upon.  Such an invention may thus not improve the functioning of the computer. Similarly, new algorithms that do not improve on the computing aspect may also face a roadblock. An example would be an AI algorithm that makes better predictions but does so with slower speed. These lingering questions would require future decisions to provide answers and hopefully provide further clarity on how CIPO’s application of its new Practice Notice will differ from the application of the problem-solution approach rejected in Choueifaty.

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