The Budget Implementation Act, 2018, No. 2, Statutes of Canada 2018, c.27, received Royal Assent on December 13, 2018. As discussed in our earlier article, this is wide-ranging legislation implementing various provisions of the federal budget introduced in Parliament in February of this year.
Effective immediately the following important changes to the Patent Act have been made, affecting the scope of protection 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
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 intellectual property 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.
1) Standard-essential patents
New section 52.1 of the Patent Act provides that a licensing commitment in respect of a standard-essential patent that binds the patentee, also binds any subsequent patentee (e.g. an assignee of the patent).
This provision extends to certificates of supplementary protection (CSPs) that have been issued in respect of patents to account for delays is 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 fields.
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 December 13, 2018.
2) 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. New section 53.1 of the Act 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
(a) it is prepared in respect of:
(i) the prosecution of the application for the patent,
(ii) a disclaimer made in respect of the patent, or
(iii) a request for re-examination, or a re-examination proceeding, in respect of the patent; and
(b) it is between
(i) the applicant for the patent or the patentee; and
(ii) 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 only to written communications from the applicant to the Patent Office. Thus, it appears that this provision might permit a written communications from the Patent Office to the applicant (e.g. 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 December 13, 2018.
3) Experimental use
The Canadian courts have historically recognized a limited exception from infringement for non-commercial, experimental use of a patented invention. New section 55.3(1) of the Act 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 recognized that determining what constitutes experimental use is an involved matter, as authority is established under the Act to make regulations respecting:
(a) factors 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
(b) 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 December 13, 2018.
4) Prior user rights
Section 56 of the Patent Act, concerning prior use 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. Broadly, under amended section 56, if, before the priority date, a person, in good faith, committed an act that would otherwise constitute an infringement of the patent, or made serious and effective preparations to commit such an act, it is not an infringement of the patent or a CSP on the patent if the person commits 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, the exemptions from infringement under these provisions do not apply in circumstances where a person used the invention or made preparations to do so before the priority date and this was only possible because that person obtained knowledge of the claimed invention, directly or indirectly, from the applicant, and they knew that the applicant was the source of the knowledge.
The revised prior user provisions apply only in respect of an action or proceeding commenced on or after October 29, 2018.
5) 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 (i.e. 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 the recipient is in Canada. It does not matter that the patent is a foreign patent, that the alleged infringement occurs elsewhere or that 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 “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:
(a) what constitutes a “written demand” or “aggrievement”
(b) the requirements with which a written demand must comply
(c) the factors that the Federal Court may consider, must consider, or is not permitted to consider in granting a remedy
(d) the circumstances in which someone who issues a non-compliant written demand is not be found liable in the Federal Court
The full impact of these changes likely will not be known for years. Many important details remain to be set by regulation, or are subject to further clarification or refinement by regulation. Moreover, 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 requirement interpretation by the Canadian courts.