Canada Patent Law Changes Are Bad News for Patent Owners

By Steve Brachmann
January 31, 2019

“If we look at these changes collectively, you would have to conclude that they limit or constrain the scope of protection under Canadian patents to some extent.”

The effects of changes made to Canada’s patent law at the end of 2018 won’t be fully clear for some time, but Canadian patent owners and those looking to expand patent strategies into Canada may want to take heed.

On December 13, 2018, the Governor General of Canada gave royal assent to pass Bill C-86, known as the Budget Implementation Act, into law. The legislation makes several changes to Canadian patent law relating to how patent and trademark infringement cases are litigated in Canadian courts and prescribes new licensing requirements for patent and trademark agents operating in Canada. The amendments to the Canadian Patent Act are laid out in Part 4, Division 7, Subdivision A of the budget law.

Standard-Essential Patents

With respect to standard-essential patents (SEPs), licensing commitments that bind the patentee now bind any subsequent owner to whom the SEP may later be assigned. This provision also extends to SEPs set out in certificates of supplementary protection (CSP), which are filed with the Canadian federal government to authorize the sale of pharmaceutical formulations within the country.

Claim Construction and Prosecution History

Actions or proceedings involving a patent may also involve the use of written communication made with the Canadian Intellectual Property Office (CIPO) during the prosecution of that patent. Such communication is now admissible as evidence to rebut claim construction representations made by the patentee during the course of the action or proceeding. Written communication that may be admissible as evidence in such circumstances includes communication between a patent applicant and CIPO employees that is prepared in respect of the prosecution of a patent application, a disclaimer made on a patent, or a request for re-examination or re-examination proceeding of a patent. This also includes written communication submitted during the prosecution of divisional applications and reissue patents.

Exceptions to Infringement

Another change under the new law involves acts committed for the purpose of experimentation relating to a patent’s subject matter. Such acts are now not considered to be patent infringement. The recent budget act also authorizes the Governor in Council to make regulations regarding factors that a court may consider, must consider, or cannot consider in determining whether an act of experimentation was made; and circumstances in which an act is or is not committed for experimentation.

Exceptions to acts of patent infringement based on prior user rights are also codified in the Canadian budget bill. The bill amends the Patent Act so that acts that would have been infringing but were committed in good faith before the claim date of a patent claim, are now not an infringement of the patent if the same act is committed after the claim date. This includes any serious and effective preparations made to commit such an act. If the prior use act, or the preparations for that act, are made in the course of business and the business is subsequently transferred, the prior use rights are also transferred away from the original actor and over to the transferee.

The new bill language also sets out exceptions to acts of patent infringement involving either the use or sale of a patented article or service if the article was acquired, or the service was provided, at a time when it wouldn’t infringe either the patent or a CSP. However, both the prior use exceptions and the exceptions for articles sold in good faith prior to a claim date do not apply in situations where the person committing the act or making preparations thereof could only do so because of knowledge which they had acquired from the applicant applying for the patent covering the article or service.

Demand Letters

The last major change involves written demands regarding acts of infringement. Any written demand received by a party in Canada involving a patent issued in Canada or in another country must comply with requirements that the Governor in Council is authorized to prescribe. If a person receives a demand letter that doesn’t comply with those requirements, that person is authorized to bring a proceeding in the Federal Court and the Court can grant relief that it deems appropriate, including recovery of damages, punitive damages, injunctions, declarations or awards of cost. For a corporation that sends a non-complying written demand and doesn’t remedy those defects when they are notified of them, officers and directors of the corporation can be made liable for sending the demand letter. The Governor in Council is also authorized to determine regulations respecting what constitutes a written demand or aggrievement; factors that the Federal Court may consider, must consider and cannot consider in granting relief for non-complying written demands; and regulations respecting circumstances in which a defendant isn’t found to be liable in a Court proceeding.

Reaction

David Schwartz, Partner in the Ottawa office of Smith & Biggar/Fetherstonhaugh, offered some perspective on the likely effects of the amendments. “If we look at these changes collectively, you would have to conclude that they limit or constrain the scope of protection under Canadian patents to some extent,” he said. Other changes could be coming that would broaden the scope of protection, such as the patent term adjustment for office delay which would be codified if Canada ratifies the United States-Mexico-Canada Agreement (USMCA). However, the amendments made under the Budget Implementation Act don’t appear to be favorable to patentees per se, according to Schwartz.

Although the act has been passed into law, certain terms, such as “licensing commitment” or “SEP” have yet to be set by regulation, noted Schwartz. The doctrine regarding use of prosecution history as evidence to rebut claim constructions hasn’t been as well developed in Canada as in the United States, and Schwartz said that he would hesitate to call it a clear counterpart to the U.S. doctrine of file wrapper estoppel. Further, the wording of the provision indicates that communication is admissible in evidence if it is “between” the patent applicant and the office instead of “from” the patent applicant to the office. This could be significant, as it might indicate that office actions can be used as evidence, rather than just assertions made by the patentee.

Schwartz also noted that the new legislation regarding written demands was interesting, as Canada hasn’t seen the phenomenon of high levels of litigation from non-practicing entities (NPEs) that the U.S. has. Further, the wording regarding written demands sent to Canadian recipients based on foreign patents or infringing acts occurring in foreign countries poses an interesting jurisdictional issue, said Schwartz. “For example, what if a German company wrote to a Canadian entity about infringement of a German patent which was occurring in Germany?” Schwartz asked. “What real basis does a Canadian court have to say about infringement that’s going on in Germany? Maybe that gets tightened up in the regulations, but it does seem to cross jurisdictional boundaries the way that it’s written.”

A Bright Spot: Continuing Ed for Agents

Although many of the changes to Canada’s Patent Act aren’t ones for which the legal profession was strongly advocating, Schwartz said that he was very pleased to see that the budget legislation also provided for the establishment of a College for Patent Agents and Trade-mark Agents. Such a college dealing with continuing education, discipline and other aspects beyond taking registration examinations and paying fees has been sought by Canada’s legal profession for two decades, Schwartz said. “I think that everyone involved is very appreciative that the government heard the concerns of the profession and helped make this come to fruition. Having the College is a big step forward for those of us practicing in the field.”

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The Author

Steve Brachmann

Steve Brachmann is a freelance journalist located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He writes about technology and innovation. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients and is available for research projects and freelance work.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

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  1. yuri February 1, 2019 8:05 pm

    Seems that Infringements Lobby got better deal than in US. Total reverse of patent law protecting now the infringer. They just opened can full of worms. What about novel solution in form of Russia based skilled “negotiator” with some non obvious arguments. I am sure will be cheaper and more effective than army of lawyers.

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