In a February 4, 2016 decision, Apotex Inc v Pfizer Inc (“Apotex”), 2016 FC 136, the Federal Court found that an erroneous underpayment of a “final fee” to issue a patent did not invalidate the issued patent. In so doing, the Court distinguished between substantive breaches of the statute that go to the heart of the patent and administrative breaches of the statute in dealings with the Canadian Intellectual Property Office (CIPO).
Once a patent application is deemed to comply with the Patent Act and the Patent Rules, CIPO issues a notice of allowance which requires the applicant to pay a final fee for issuance of the patent. The Rules currently outline two tiers of fees, one for “small entities” and a higher fee for entities other than small entities, i.e., “large entities”. If the final fee is not paid within six (6) months of the notice of allowance, the application is “deemed abandoned” under s. 73(1)(f) of the Act.
In Apotex, the Federal Court considered whether an erroneous final fee payment could invalidate a subsequently issued patent. Pfizer is the current owner of Canadian Patent No. 1,339,132 (the ‘132 patent) which was issued on July 29, 1997 and is directed to latanaprost, a drug used for the treatment of glaucoma and marketed in Canada as XALATAN. The final fee was erroneously paid based on small entity status and the Court found that no “top-up” fee for large entity was ever paid.
Apotex brought a motion for partial summary judgment, alleging that the final fee was not paid in full, that Pfizer failed to correct this issue within the prescribed time period and that, since this final fee was a prerequisite for valid issuance, the ‘132 patent was invalid.
Does the failure to submit the proper final fee payment invalidate an issued patent?
To answer this question of law, the Court addressed two conflicting lines of jurisprudence. In the Dutch Industries Ltd v Canada (“Dutch Industries”), 2001 FCT 879, aff’d 2003 FCA 121, line of cases, the Federal Court and the Federal Court of Appeal found that the Commissioner lacked the statutory authority to accept top-up payments for maintenance fees after the six-month deadline where a large entity applicant erroneously paid maintenance fees as a small entity. Under the Dutch Industries rationale, any error in the determination of small entity status, “could lead to the loss of all rights under the patent application and any resulting patent, unless the error is discovered and corrected within the statutory time limits for late fee payments”.
Apotex relied on the Dutch Industries line of cases to argue that Pfizer had lost all its rights under the patent application and the resulting ‘132 patent when it failed to pay the full final fee required for the patent to issue.
The Court rejected Apotex’s argument. The Court pointed out that the Dutch Industries line of cases only applied to patent applications and that the distinction between the status of a patent application and the status of an issued patent was a well-established principle in the jurisprudence. The Court followed the holding of the Federal Court of Appeal in Corlac Inc v Weatherford Canada Inc, 2011 FCA 228 (“Weatherford”) which held that non-compliance with s. 73(1)(a) of the Act during prosecution of a patent application did not invalidate a subsequently issued patent. The Court further noted that any contradiction between Weatherford and the Dutch Industries line of cases should be resolved in favor of the more recent Weatherford decision.
Apotex argued that Weatherford should not be followed since Weatherford dealt with s. 73(1)(a) of the Act and was concerned with whether there had been a failure to respond in good faith to a request by an Examiner, but did not relate to the non-payment of the prescribed fees under s. 73(1)(f) of the Act. Apotex added that the Patent Act in force at the time of filing of the ‘132 patent was concerned with a patent application being “forfeited” rather than “deemed to be abandoned” if the final fee was not paid.
The Court rejected Apotex’s arguments and held that the various subsections in s. 73(1) of the Act were not so different so as not to carry over the teachings from Weatherford from s. 73(1)(a) to 73(1)(f) of the Act. The Court also found that there was no meaningful distinction between the concepts of “forfeiture” under the pre-1996 Patent Act and “deemed abandonment” under the current Act.
More generally, the Court held that there was a fundamental difference between substantive breaches of the statute that go to the heart of the patent bargain and administrative breaches of the statute in dealings with CIPO. The various grounds of invalidity of issued patents go to the heart of the patent bargain between the inventor and the state and constitute substantive breaches which can invalidate issued patents. Administrative breaches such as regarding payment of fees on the other hand can only be fatal to patent applications and cannot invalidate an issued patent.
The Court ultimately concluded that the ‘132 patent was not invalid for failure to pay the correct final fee and the motion for summary judgment was granted in favor of Pfizer.
Apotex has appealed the decision to the Federal Court of Appeal.