“With new features like excess claim fees, continued examination fees, and conditional notices of allowance, the Patent Rules amendments bring significant changes to patent prosecution in Canada.”
Responding to the patent term adjustment obligation under the Canada-United States-Mexico Agreement (CUSMA) and to “streamline the patent examination process”, the Canadian government has registered major changes to the Canadian Patent Rules. The amendments will come into effect on October 3, 2022, and include notable modifications to the patent application examination process, such as establishing excess claim fees for over 20 claims, fees for continuing examination beyond three office actions, and offering conditional notice of allowance.
Major Amendments to Patent Rules
Request for Continued Examination Beyond Initial Examination Reports
An applicant wishing to continue examination beyond three examination reports (office actions) will be required to file a Request for Continued Examination (RCE) and pay a fee of $816 (CAD). RCE fee for small entities will be $408 (CAD). Post filing an RCE, the applicant can receive up to two additional examination reports. If a patent is not granted within the additional reports, the applicant would be required to file a new RCE which would offer another two examination reports. Examination can be continued by filing subsequent RCEs. An application would be deemed as abandoned if no RCE is filed within four months from the date of the last report that concluded the examination.
Excess Claim Fee Beyond 20 Claims
Applications including more than 20 claims will require an additional fee of $100 for each excess claim over the first 20 claims. The additional fee is reduced to $40 for small entities. The excess claim fee will apply at two stages: (1) When the examination is requested for an application exceeding 20 claims; (2) When the final fee is paid on patent grant if the number of claims increased beyond 20 at any time during prosecution. A multiple dependent claim would nevertheless count as a single claim for fee calculations.
Conditional Notice of Allowance
Once an application is close to allowance, barring minor formality issues, the patent office may issue a Conditional Notice of Allowance. This allows the applicant to address the defects and pay the final fee to receive a patent grant; the previous procedure required a response to an examiner’s report for each defect, however minor.
New PCT Sequence Listing Standards
The Patent Rules were amended to comply with the new Patent Cooperation Treaty sequence listing standards introduced in the WIPO Standard ST.26.
Other Minor Amendments
As applicants are required to pay fees in compliance with the Canadian Patent Rules and Service Fees Act (SFA), the patent office recognized the increased risk of incorrect fee payments. The amendments introduce an extension of time for applicants who have paid incorrect fees due to erroneous information to correct the error without losing patent rights. Additionally, applicants now have the flexibility to correct minor translation errors in applications before allowance.
Rationale and Expected Impact
A Regulatory Impact Analysis Statement (RIAS) (Impact Statement) published by the Canadian government in July 2021 described the rationale behind amendments to the Patent Rules. The Impact Statement expressed concern about the inability of the Canadian patent office to conclude the examination of patent applications within a reasonable time frame. In 2020-21, the average turnaround time for the grant of a patent in Canada after requesting an examination stood at 31 months. Before the current amendments, there were no limits to the number of examination reports that the patent office might be required to issue before a patent grant or abandonment. Moreover, all patent applications were subject to the same examination fee, irrespective of the number of claims and examination resources consumed by the patent office.
Jurisdictions like the United States, Australia and the United Kingdom have established time limits for patent prosecution or limits on the number of examination reports that an applicant may respond to, thereby ensuring a speedy conclusion of prosecution. Similarly, excess claim fees are administered in recognizable patent jurisdictions such as Europe, Japan, the United States, India, and China.
The Impact Statement pointed out that Canadian patent applications include on average a higher number of claims compared to other jurisdictions, leading to inefficient examination and “applicants… exploiting flexibilities in the Canadian system”. The Impact Statement added that the lack of an effective prosecution mechanism that culminates within a reasonable duration increases the risk for patent pendency, consuming significant patent office resources.
The Impact Statement explained the government’s reasoning behind excess claim fees and continued examination requirements to address the above challenges. The amendments are aimed at discouraging applications with an unnecessarily large number of claims, ensuring faster disposal, and encouraging short prosecutions. Overall, the government expects the amendments to reduce application sizes and improve patent quality. By introducing a fee for continued examination, the applicants are nudged to expedite the examination process. Moreover, the Impact Statement described prolonged examination of patent applications as anachronistic with the patent term adjustment obligation under CUSMA. Canada became a signatory to CUSMA in 2018. The agreement requires Canada to, among other commitments, establish a patent term adjustment to extend the term of a patent by accounting for the unreasonable prosecution delays.
Additionally, the amendments also include changes to the sequence listing requirements for biotechnology patent applications under the new WIPO standard for international applications. The WIPO Standard ST.26 applies to international applications filed on or after July 1, 2022, and lays down new frameworks for patent applications including nucleotide and/or amino acid sequences. Previous standard ST.25 was last updated in 2009 and was insufficient in presenting advanced sequence types, such as branched sequences and D-amino acids. ST.26 follows an XML filing format to improve searching capabilities and allows applicants to include advanced sequence types within the patent applications.
On the monetary cost-benefit side, the Canadian Government noted that estimated additional costs on applicants and patentees from the new excess claims and RCE fees shall amount to $55.1 million (CAD) for 2021-2031. In the bargain, the benefit accrued by the Canadian patent office mostly from fee collection is estimated at $63.8 million (CAD), which would be used to supplement costs for examining patent applications and implementing the amendments. With the patent office working on a cost-recovery basis, the increased revenue will support the office’s operations and its production capacity.
While the Patent Rules amendments would reduce patent examination timelines, stakeholders have expressed concerns that the changes may be disproportionate to the expected goals. During the consultations, IP law firms conveyed that current prosecution timelines are on average less than 36 months, which is a reasonable timeframe and falls within CUSMA’s targets. Further, experts blamed structural issues in the Canadian patent regime as major reasons for delays in prosecution, which should rather be the target of reform. The issues highlighted include the doctrine against double patenting and ambiguous subject matter eligibility standards, especially for computer-implemented inventions.
The government acknowledged the current prosecution timelines as reasonable but opined that the amendments would also aim at optimizing outlier applications that significantly exceed the average timelines. Also, the government responded to the perceived structural issues as falling within the legislative purview and suggested exploring regulatory and operational alternatives to improve examination efficiency.
Regarding the excess claims fee, stakeholders offered mixed opinions, with some IP law firms highlighting that Canada being the third or fourth preference for patent applicants, increasing patent filing and prosecution costs might dissuade applicants from filing applications in Canada. In contrast, some stakeholders viewed changes to be reasonable and comparable to other jurisdictions such as the United Kingdom and Australia.
AIPPI Canada, an IP advocacy and reforms organization, in its comments raised concerns about the “harsh” double patenting regime in Canada working in tandem with the amendments. AIPPI Canada suggests that without addressing the double patenting regime, the amendments may be detrimental to applicants, especially domestic applicants who have not prosecuted applications in foreign jurisdictions to discern the optimal set of 20 claims.
With new features like excess claim fees, continued examination fees, and conditional notices of allowance, the Patent Rules amendments bring significant changes to patent prosecution in Canada. Whether the amendments would result in a reduction of examination timelines and patent pendency, or would it discourage applicants from filing applications in Canada remains to be seen. However, most stakeholders suggested addressing underlying issues in the Canadian patent regime, such as double patenting and subject matter eligibility, as the focus of the reform.
Considering the coming-into-effect date, patent applications that have a request for examination filed before October 3, 2022, will be prosecuted under the previous system and can avoid paying the fee for extended examinations and excess claims. A similar advantage may be available to PCT applications entering the national phase in Canada that request an examination earlier than October 3, 2022.
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