Introduction

The Budget Implementation Act 2018 (Statutes of Canada 2018, Chapter 27) received royal assent on 13 December 2018. This is wide-ranging legislation implementing various provisions of the federal budget introduced in Parliament in February 2018 (for further details please see "New Bill C-86 introduces many more changes to IP laws").

Effective immediately the following important changes to the Patent Act have been made, affecting the scope of protection that is available under Canadian patents:

  • Licensing commitments on standard-essential patents now bind subsequent patent owners.
  • Prosecution histories are now admissible in evidence to construe patent claims.
  • An experimental use exception to infringement has been codified.
  • The scope of prior user rights has been expanded.
  • Regulation-making authority concerning the requirements for cease and desist letters has been established.

Patent Act amendments

The amendments to the Patent Act are particularly notable as they appear to have been taken at Parliament's own initiative and are not mandated for compliance with an IP treaty such as the Patent Law Treaty or a trade agreement such as the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) – both of which have been the basis for other recent changes to Canadian patent law.

Standard-essential patents The Patent Act's new Section 52.1 provides that a licensing commitment, in respect of a standard-essential patent that binds the patentee, also binds any subsequent patentee (eg, an assignee of the patent).

This provision extends to the certificates of supplementary protection (CSPs) that have been issued in respect of patents to account for delays in the pharmaceutical regulatory approval process. It seems unlikely that a pharmaceutical patent eligible for a CSP would be a standard-essential patent, as standards setting activity usually occurs in the computer and telecommunications field.

Nevertheless, the scope of what constitutes a licensing commitment or a standard-essential patent remains to be set by regulation.

This provision applies in respect of any action or proceeding that had not been finally disposed of as of 13 December 2018.

Prosecution history may be relevant to claim construction The Patent Act has been amended to establish that the prosecution history of a Canadian patent may be relevant to claim construction. The act's new Section 53.1 provides in part that in any action or proceeding respecting a patent, a written communication or any part of such a communication, may be admitted into evidence to rebut any representation made by the patentee in the action or proceeding as to the construction of a claim in the patent if as follows:

  • It is prepared in respect of:
    • the prosecution of the application for the patent;
    • a disclaimer made in respect of the patent; or
    • a request for re-examination or a re-examination proceeding, in respect of the patent.
  • It is between:
    • the applicant for the patent or the patentee; and
    • the commissioner, an officer or employee of the patent office or a member of a re-examination board.

These provisions also apply to divisional applications filed after the relevant written communication was made in the parent application, to reissued patents and applications to reissue patents and to CSPs.

Notably, Section 53.1 refers to written communications between the applicant and the patent office, rather than the written communications only from the applicant to the patent office. Thus, it appears that this provision might permit a written communication from the patent office to the applicant (eg, an examiner's report) to be admitted into evidence to rebut a representation made by the patentee with respect to claim construction.

These provisions apply in respect of any action or proceeding that had not been finally disposed of as of 13 December 2018.

Experimental use The Canadian courts have historically recognised a limited exception from infringement for non-commercial, experimental use of a patented invention. The act's new Section 55.3(1) provides that "[a]n act committed for the purpose of experimentation relating to the subject-matter of a patent is not an infringement of the patent". This provision extends also to infringement of a CSP.

The drafters recognised that determining what constitutes experimental use is an involved matter, as authority is established under the act to make regulations respecting:

  • factors that a court may consider, must consider or is not permitted to consider in determining whether an act is committed for the purpose of experimentation relating to the subject-matter of a patent; and
  • circumstances in which an act is or is not committed for the purpose of experimentation relating to the subject-matter of a patent.

The new experimental use provisions apply in respect of any action or proceeding that had not been finally disposed of as of 13 December 2018.

Prior user rights Section 56 of the Patent Act, concerning prior user rights, has been amended. Previously, this section provided that a person who purchased, constructed or acquired the subject matter defined by a claim of a patent before the priority date, had the right to "use and sell to others the specific article, machine, manufacture or composition of matter patented and so purchased, constructed or acquired" without liability to the patentee.

The scope of prior user rights has been expanded. Under the amended Section 56 a person will not be deemed to have infringed a patent or a CSP on a patent if:

  • before the priority date, they committed an act in good faith that would otherwise constitute an infringement of the patent or made serious and effective preparations to commit such an act; and
  • they subsequently committed the same act on or after the priority date.

Specific provisions are established to deal with business transfers, use or sale of articles obtained directly or indirectly from a person benefiting from an exception from infringement, and articles and services that are substantially the same as exempted articles and services.

Generally, under these provisions, the exemptions from infringement do not apply when a person used the invention or prepared to before the priority date, which was possible only because that person obtained knowledge of the claimed invention, directly or indirectly, from the applicant who they knew was the source of the knowledge.

The revised prior user provisions apply in respect only of an action or proceeding that was commenced on or after 29 October 2018.

Written demands Newly added to the Patent Act is Section 76.2, providing a regulation-making authority for the establishment of requirements for written demands relating to patents (ie, cease and desist letters).

Written demands received by a person in Canada, relating to an invention patented in Canada or elsewhere or protected by a CSP or its equivalent, must comply with the prescribed requirements.

Notably, these provisions appear to apply to any cease and desist letter, provided that the recipient is in Canada. It does not matter that:

  • it is a foreign patent;
  • the alleged infringement occurs elsewhere; or
  • the complainant is in another country.

For example, a German patentee writing to a Canadian company, complaining of infringement of a German patent on German soil, could fall within the scope of these provisions, unless such an interpretation will be excluded by regulations yet to be made.

A person receiving a written demand that does not comply with the prescribed requirements, or a person who is aggrieved as a result of the receipt by another person of such a written demand, may seek relief in the Federal Court. Such relief may include:

  • recovery of damages;
  • an injunction;
  • a declaration; or
  • an award of costs.

Regulations setting out the prescribed requirements will be needed before these provisions can be operative. The regulation-making authority under these new provisions extends to regulations respecting:

  • what constitutes a written demand or aggrievement;
  • the requirements with which a written demand must comply;
  • the factors that the Federal Court may consider, must consider or is not permitted to consider in granting a remedy; and
  • the circumstances in which someone who issues a non-compliant written demand is not found liable in the Federal Court.

Comment

The full affect of these changes are unlikely to be known for years. Many important details remain to be set by regulation or are subject to further clarification or refinement by regulation. Further, some of the issues are inherently complex, including the role of prosecution history in claim construction, the scope of prior user rights and the experimental use exception from infringement, and will require interpretation by the Canadian courts.

For further information on this topic please contact David Schwartz at Smart & Biggar/Fetherstonhaugh by telephone (+1 613 232 2486) or email (deschwartz@smart-biggar.ca). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.

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