Amazon fights for patent on 'one-click' Web shopping

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It may be hard, as more holiday shopping is done online each year, to remember what it was like in 1998, when buying something without rubbing shoulders at a mall was relatively new.

That was the year Amazon.com Inc. applied for a Canadian patent on its so-called "one-click" e-commerce system, which has since become a fixture of modern life.

The process – which the company had also patented in the United States – allows registered users to buy something with a single click of a mouse. Amazon's system recognizes the customer's identity and automatically recalls their address and credit-card information to complete the sale.

In Canada, that technology has been at the centre of a 13-year legal fight – over whether what is known as a "business method," as opposed to a physical invention or machine, can be patented.

It's a debate that goes to the heart of the future of patent law in the 21st century, when more and more innovation involves the virtual world of computer software instead of nuts-and-bolts physical machines. Intellectual property experts say the case is one of the most important in this area since the Supreme Court of Canada ruled against the patenting of higher life forms in its so-called Harvard Mouse decision in 2002.

If it were to become too difficult to get patents for business methods in Canada, innovation could suffer, some argue. Others say allowing patents for such abstract concepts will only invite frivolous patents, spawn more litigation, and actually stifle innovation.

Amazon's epic patent battle shows no signs of ending soon. Indeed, some lawyers say it could go all the way to the Supreme Court of Canada. Late last month, the Federal Court of Appeal overturned an October 2010 Federal Court ruling that had allowed Amazon's one-click patent, kicking the matter back to the Commissioner of Patents for reconsideration. But the court also said that nothing in Canadian law disallows the patenting of business methods.

The country's banks and insurance companies, which have obvious interests in how patent rules apply to things like online banking, made submissions as intervenors in the federal appeal case.

One of Amazon's lawyers on the case, Steven Garland of Smart & Biggar LLP, declined comment, as did a spokeswoman for the company. Industry Canada, the federal ministry responsible for the patent system, said officials were reviewing the ruling.

"The Commissioner of Patents at the Canadian Intellectual Property Office is analyzing the Federal Court of Appeal's reasons to determine their impact on Patent Office practice, and is consulting with the Department of Justice," spokeswoman Stéfanie Power said in an e-mail, adding that patent examiners will be given "new practice guidelines" based on the ruling.

Generally, patent laws in Canada and the U.S. do not allow the patenting of mathematical formulas, or anything that could be described as only a scheme or a plan. In simple terms, to be patentable, a business method must usually have some sort of physical, practical application. (It must also be "novel," and cannot be "obvious.") Still, business methods have previously been patented in both countries.

It's this question of a physical component that Canada's Commissioner of Patents must now reconsider to determine whether Amazon's application has enough to qualify as a patent.

Amazon's "one-click" patents have been controversial elsewhere, too, and subject to challenges. Last year, after the U.S. Patent and Trademark Office re-examined key portions of the original patent, Amazon amended it to restrict its scope to websites that use a "shopping cart" model.

In 2002, Amazon settled litigation with Barnes & Noble, after Amazon sued the U.S. bookseller over its use of a similar online system. The patent has also faced fights in Europe and New Zealand.

Other business-method patents have also been at the centre of legal battles in the United States. Just last year, the U.S. Supreme Court rejected a request for a patent on a mathematical model meant to help commodity traders hedge weather risks.

Scott Jolliffe, a veteran intellectual property litigator and the chairman and chief executive officer of Gowling Lafleur Henderson LLP, said there are a large number of proposed patents involving similar computer-based business methods waiting to see how the Amazon decision will go. An approval could encourage others to come forward, he said.

The debate is a key one in the evolution of patent law in the Internet age, he said, adding that the case would be a good one for the Supreme Court to take up, if it comes to that.

"In many ways, we've become a virtual society in many respects, in terms of what we do, and how we do it," Mr. Jolliffe said. "And it's methods like this that are the embodiment of that change. Rather than going somewhere physically, or mailing something physically, we're now living in this virtual world."