Archived — Government of Canada's Legislative Response to Recent Federal Court Decisions

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OTTAWA, August 8, 2003 — The Government of Canada today announced its intention to amend the Patent Act to clarify the payment of certain patent fees. These amendments are in response to recent decisions of the Federal Court Trial Division and the Federal Court of Appeal.

These amendments will foster confidence in the Canadian patent system and ensure that the patent regime in Canada remains responsive and user-friendly. A strong patent system encourages innovation and helps create a positive investment climate.

The Patent Act and Patent Rules require that patent applicants and patentees pay fees, including annual maintenance fees, in order for their applications and patents to remain valid for the duration of their 20-year terms of protection. Historically, the fees paid by patent applicants and patentees varied according to the entity size — either large or small entity. Small entity provisions, introduced in 1985, were intended to encourage small businesses (50 or fewer employees) and universities to use the patent system. As the entity changed size, so could the required fee.

A recent Federal Court decision has ruled that entity size is determined once, when the patent regime is first engaged. The court decisions have also curtailed the practice of flexibility exercised by the Canadian Intellectual Property Office as it pertains to minor corrections to incorrectly paid patent fees. As a consequence, patent applicants and patent holders may now find themselves in the situation of having underpaid a fee and having no recourse to correct these minor payment errors. The government is concerned about the uncertainty this brings to the Canadian patent system and is committed to ensuring that the patent rights of those patent holders who may be affected by this technicality will not be jeopardized.

The proposed amendments to the Patent Act will provide a mechanism for the retroactive correction of past fee payments in situations where a fee was incorrectly paid at the lower small entity fee level instead of the higher large entity fee level. Regulatory changes will also be forthcoming to provide greater clarity to the patent payment regime on a forward-looking basis. Together, these measures will ensure that the Canadian patent system functions as it was intended. The amendments will be proposed following the Canadian Intellectual Property Office's consultations with clients and stakeholders on the nature of these technical amendments.

For more information, please contact:

Media Relations:
Canadian Intellectual Property Office
613-997-0882

Selena Beattie
Office of Allan Rock
Minister of Industry
613-995-9001


BACKGROUNDER

Legislative Response to Recent Federal Court Decisions

Canadian Intellectual Property Office

The Patent Office is part of the Canadian Intellectual Property Office, an agency of Industry Canada. It is responsible for administering a number of intellectual property statutes, including the Patent Act, under which inventions are patented. The Canadian Intellectual Property Office receives and examines patent applications and grants patents. It maintains a Canadian Patents Database, which can be accessed online, and houses a public search room where Canadian and foreign patent documents can be researched. The Canadian Intellectual Property Office also publishes and disseminates patent information.

Patents

Patents are granted on inventions. An invention is any art, process, machine, manufacture or composition of matter that is new, useful and non-obvious. Patents are also granted for new, useful and non-obvious improvements to existing patented inventions.

A patent gives a patentee the right to exclude others from making, using or selling an invention for a period of 20 years from the date the application for the patent was filed. However, many inventions, whether patented or not, are subject to regulatory approval before they can be used or commercialized. Inventions relating to health, agriculture, the environment and public safety are included in this group.

The contents of patent applications and patents are publicly available 18 months after the first filing. Since inventions must be fully described in patent applications, patent documents are a rich source of technological information, and a vital resource for businesses, researchers and others who need to keep up with developments in their respective fields.

Fee Payments

The Patent Act and Patent Rules require that patentees and applicants pay fees, including annual maintenance fees, in order for their patents and applications to remain valid for the duration of their 20-year terms of protection. Similar to that of some of our key trading partners, Canada's patent regime has small entity provisions governing the payment of certain fees, including maintenance fees. Patentees and applicants who meet the regulatory definition of "small entity" (universities, or firms with 50 or fewer employees, which have not engaged in any contractual or legal obligation to transfer or license any right to the invention) pay half the fee required of large entities. The small entity provision, introduced in 1985, is intended to encourage small businesses and universities to use the Canadian patent system. The Canadian Intellectual Property Office does not question nor audit declarations of small entity status.

In the past, the Canadian Intellectual Property Office has exercised flexibility in dealing with situations where a patent applicant or patentee sought to "top up" a maintenance fee payment because they had incorrectly paid the required fee. For example, this occurred if a patent holder changed its entity status during the term of a patent or discovered later that it had filed as a small entity when in fact it did not meet the definition of a small entity. In these instances, the Canadian Intellectual Property Office would allow the company to pay the difference in fees, without penalty, even though several years might have passed since its change in status.

On August 13, 2001, the Federal Court—Trial Division in the case of Dutch Industries Ltd. v. The Commissioner of Patents, Barton No-Till Disk Inc. and Flexi-Coil Ltd. ("Dutch Industries") ruled that this flexibility was not authorized by law. The effect of the decision is that, if the full amount of the required fee is not paid within the legally prescribed period for doing so, it is as if the fee was not paid at all. The result of the decision, therefore, is that the patent or application may be considered invalid if challenged in court.

The decision of the Federal Court was appealed to the Federal Court of Appeal. On March 7, 2003, the Federal Court of Appeal confirmed that "top-up" payments were not allowed by law and also ruled that the entity status was established upon first engagement with the patent regime.

The Federal Court of Appeal decision could affect thousands of pending patent applications and patents in which the applicants or patentees either erroneously declared their entity size upon filing, or incorrectly paid a required fee due to their entity status changing. Specifically, this will affect those patent applicants and patentees who changed their status from large entity to small entity, and have made payments using the small entity scale. Under strict interpretation of the Patent Act and Rules, underpayment of a fee could result in an invalid patent or application if challenged in court.

The proposed changes include retroactive amendments to the Patent Act to provide a mechanism for the retroactive correction of past fee payments in situations where a fee was incorrectly paid at the small entity fee level instead of the large entity fee level. This action is required to protect patent applicants and patentees who, through no fault of their own, may lose patent protection for their inventions. Regulatory changes will also be forthcoming to provide greater clarity to the patent payment regime on a forward-looking basis. The Canadian Intellectual Property Office will consult with clients and stakeholders on the nature of these technical amendments.