What the Choueifaty Decision Means for Software Patents in Canada

On August 21, 2020, in Choueifaty v. Canada (Attorney General), 2020 FC 837,¹ the Federal Court held that the Canadian Intellectual Property Office (CIPO) erred in determining the essential elements of the claimed invention by using the “problem-solution” approach.

The application in question, Canadian Application No. 2635393, entitled “Method and Systems for Providing an Anti-Benchmark Portfolio” relates to selecting and managing a portfolio of securities with maximum diversification. The inventor and owner of the application is Yves Choueifaty,² President and Chief Investment Officer of TOBAM Investment Management, a Paris-based company with $6.7 billion (USD) in assets under management.

Representative claim 1 reads as follows:

          A computer-implemented method for providing an anti-benchmark portfolio, the method comprising:
         acquiring, using a computer system, data regarding a first group of securities in a first portfolio, wherein the computer system comprises a computer processor and memory coupled to said processor; identifying, using a computer system, a second group of securities to be included in a second portfolio based on said data and on risk characteristics of said second group of securities; and
         providing, using a computer system, the individual weightings for each of the securities in said second portfolio according to one or more portfolio optimization procedures that maximizes the anti-benchmark ratio for the second portfolio wherein the anti-benchmark ratio is represented by the quotient of:
        a numerator comprising an inner product of a row vector of holdings in said second portfolio and a column vector of a risk characteristic of return associated with said holdings in said second portfolio; and
        a denominator comprising the square root of a scalar formed by an inner product of said row vector of said holdings in said second portfolio and a product of a covariance matrix and a column vector of said holdings of said second portfolio.

This claim is clearly related to financial services technology, and over the past few years, CIPO has wasted little time in disposing of such claims as being directed to non-patentable subject matter. Predictably, the claims in CA2635393 were rejected under Section 2 of the Patent Act on the basis that the claims were directed to “a scheme of rules involving mere calculations” for weighing securities. The rejection echoed the all too familiar language: “computers are generally used for computations, and the fact that the description does not refer to any specific problem with the computer or any challenges associated with the computer implementation of the solution, our view is that the person skilled in the art would understand that the specification is not directed to any computer problem nor directed to a problem associated with implementing the steps of claim 1 for defining an anti-benchmark portfolio”.³

Rather than focusing on the Section 2 subject matter rejection, Choueifaty chose to get to the root of the problem: the “problem-solution” approach to claim construction, which the CIPO examiner used to conclude that a computer was not an essential element of the claims. Rather than follow a purposive approach to claim construction, as outlined in Freeworld⁴ or Whirlpool,⁵ CIPO examiners have been instructed to follow this “problem and solution” approach outlined in Practice Notice PN2013-03 pertaining to computer-implemented inventions.⁶ This approach provides that after identifying the problem to be addressed by the inventor and the solution put forth in the patent application, the essential elements of a claim are those that are necessary to achieve the disclosed solution to an identified problem.

In Choueifaty, the Court reminded CIPO of the correct test for essentiality:

… in order “to establish that a claim element is non-essential, it must show both (i) that on a purposive construction of the words of the claim it was clearly not intended to be essential, and (ii) that at the date of publication of the patent, the skilled addressees would have appreciated that a particular element could be substituted without affecting the working of the invention” [emphasis in original]. The problem-solution approach to claims construction focuses only on the second aspect above, it fails to respond, as taught in Whirlpool, to the issue of the inventor’s intention. Regarding the inventor’s intention, para 51 of Whirlpool states: “The words chosen by the inventor will be read in the sense the inventor is presumed to have intended, and in a way that is sympathetic to accomplishment of the inventor's purpose expressed or implicit in the text of the claims.”⁷

Takeaways

As CIPO is likely to appeal this decision, or at least update its Practice Notices in light of Choueifaty, applicants with computer-implemented inventions that have been rejected for non-statutory subject matter should consider maintaining their applications in good standing, responding to any outstanding Office Actions for applications that were destined for the abandonment bin, and prolonging prosecution where possible. Applicants should also consider reinstating recently abandoned applications, or appealing recent unfavourable Patent Appeal Board (PAB) decisions. Given that claims directed to diagnostic methods and dosage regimes have also been on the receiving end of CIPO’s controversial problem and solution analysis, applicants in these fields should also follow the aforementioned advice.