The Canadian Federal Court of Appeal has handed down its decision in Barton No-Till v Dutch Industries. At issue was the effect of an applicant's improper payment of reduced government fees as a so-called ‘small entity’.

Barton, the inventor, initially filed a first patent application properly claiming entitlement to small entity status. Later, he transferred rights in this invention. The recipient of the rights, Barton No-Till Inc and Flexi Coil Ltd, did not qualify as a small entity. Thereafter, the inventor filed a second application, continuing to claim small entity status. He also continued to pay small entity maintenance fees for the patent that issued from the first application.

Once the error was recognized, top-up fees were submitted to, and accepted by, the Patent Office for the issued patent and the second application. On these facts, the lower court invalidated the patent and ruled that the second application was irretrievably abandoned, as the proper fees were submitted after the deadline for doing so under the Patent Act and rules.

The Federal Court of Appeal, however, observed that the Patent Act and rules are silent about when entity status must be determined. In view of the grave consequences of improperly paying small entity fees, the Court of Appeal reversed the lower court decision in part, holding as follows:

    "A person who meets the definition of 'small entity' when applying for a patent maintains that status as long as the application is pending, and as long as the patent remains in effect. In my view, there is no statutory requirement for the status of a person as a small or large entity to be redetermined at any other time, at least in relation to maintenance fees."

As the first application was filed at a time when the applicant was entitled to small entity status, the fees for the resulting patent were properly made at a small entity level despite the post-filing grant of rights to a large entity. However, since the inventor was not entitled to small entity status when the second application was filed, the failure to pay fees at a large entity level was fatal to that application.

The Federal Court of Appeal agreed with the lower court that late top-up fees could not correct the error. In fact, the Federal Court of Appeal ordered that the Patent Office return the top-up fees.

In rendering its decision, the Federal Court of Appeal noted that "[t]he definition of 'small entity' is complex" and not precise. The court observed that "[i]t seems that no matter how diligently an applicant for a patent attempts to make these factual determinations" to assess its entitlement to small entity status, "there is some risk of being wrong".

An application has been filed with the Supreme Court of Canada for leave to appeal the decision. The Supreme Court is likely decide whether to hear the appeal before the end of this year.

For further information on this topic please contact Ron Faggetter at Smart & Biggar/Fetherstonhaugh by telephone (+1 416 593 5514) or by fax (+1 416 591 1690) or by email ([email protected]).