Planning ahead: how to protect your business when you’ve licensed-in critical IP and the licensor is going under?

By Claire Palmer, September ^23rd, 2019

Starting November 1, 2019, important changes are coming into force to the Canadian Bankruptcy and Insolvency Act (BIA) and the Canadian Companies’ Creditors Arrangement Act (CCAA) that are directly related to intellectual property. These changes will better protect licensees of intellectual property when the licensor becomes insolvent by allowing a licensee in good standing to continue to use the licensed IP, despite licensor’s financial troubles.

In particular, the changes clarify that a licensee that “continues to perform its obligations under the agreement in relation to the use of the intellectual property” can continue to use the IP, including enforcement of the use exclusivity, during the term of the agreement, even if:

• the IP is sold in a BIA restructuring
• the IP is disclaimed or sold in a BIA liquidation
• the IP is disclaimed or sold in a receivership
• the IP is sold in a CCAA restructuring

As a licensee wishing to continue to take advantage of the licensed IP, it is critical that you continue to meet all obligations in the licensing agreement. 

In order to properly plan ahead, it is our recommendation that a licensing agreement always include contingency arrangements in the event of the licensor’s insolvency. Always have the licensing agreement reviewed by an IP lawyer. These contingency arrangements should specify:

• provisions detailing what licensee’s obligations are in the event that a licensor cannot meet their on-going obligations in the event of insolvency.  For example, if a licensor receives payments for on-going support activities, the licensee should specify in the agreement that these payments will be payable only if licensor is able to complete these on-going support activities.
• provisions detailing who will maintain the IP in good standing in the event that the licensor can no longer continue to financially support the IP.

Having appropriate contingency in place in the event of licensor insolvency will help better protect licensee’s business.

For more information please contact:

Claire Palmer, Senior Patent Agent

T: 613.801.0450

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Amendments to the Canadian Patent Rules: Key Changes & Their Impact on the Patent Practice in Canada

By Poonam Tauh and Suzanne Hof, October 1st, 2019

Canada has revised its patent regime to implement the Patent Law Treaty. The new Patent Rules along with corresponding amendments to the Patent Act are set to come into force on October 30, 2019. Most of the changes are intended to streamline and harmonize administrative procedures and formalities with other international intellectual property offices.              

Below is a summary of the most noteworthy changes that would require significant practice adjustments and preparation by both the applicants and the agents.

With respect to PCT Applications filed on or after October 30, 2019:

1. Elimination of “Late” national phase entry at 42-months as a matter of right

The current practice allows an applicant to enter CA national phase after the 30-month deadline and up to 42 months from the priority date, as a matter of right, by paying a $200 late entry fee.

Under the new Rules, the “late” entry is only possible by submitting a statement to the Canadian Intellectual Property Office (CIPO) that the failure to enter the national phase at the 30-month deadline was “unintentional”, in addition to the required filing fee and a $200 late entry fee for reinstatement of rights. Canadian Intellectual Property Office (CIPO) still reserves the right to accept or reject this statement.

It is therefore advisable going forward to consider the 30-month national phase entry deadline as a non-extendible deadline under the new Rules.

2.Translation required at the time of national phase entry

Submission of the English or French translation for a foreign language patent application is an absolute requirement in order to submit an application in Canada.

3. Filing fee required at the time of national phase entry

Payment of filing fee is an absolute requirement to enter the national phase in Canada, with an exception that if an attempt to make a fee payment at the time of filing is unsuccessful, then the filing fee can be paid within 2 months from the date of the attempted payment.

4. Certified copies of priority documents required at the time of filing

If the certified copies of the priority application were not filed during the international phase, it will be necessary at the time of national phase entry in Canada to submit a copy to CIPO, or refer to a digital library that is accepted by CIPO.

5. Restoration of priority

CIPO will accept the restoration of priority attained at the International Phase. If priority is not restored at the international phase, then the priority may be restored in the Canadian national phase application by filing a request within one month from date of the national phase entry, along with establishing that restoration is required due to an unintentional error.

With respect to Direct Entry Applications based on Paris Convention filed on or after October 30, 2019:

 1. Filing fee and translation NOT required at the time of filing

The payment of the filing fee can be delayed up to 3 months from the date of the Notice issued by CIPO, along with a $150 late fee.

The submission of the English or French translation for a foreign language patent application can be delayed up to 2 months from the date of the Notice issued by CIPO.

2. Certified copies of priority documents are required within 4 months from the filing or 16 months from the earliest priority date

If certified copies of each priority document are not submitted or made available to CIPO from a digital library within the prescribed time, then CIPO will issue a Notice.

Failure to comply with the requirements by the date set by the Notice would result in the priority claim being considered to have been withdrawn.

3. Restoration of priority

Restoration of priority is available if the Canadian application is filed within 14 months of the priority date, and a request for restoration is filed within 2 months from the Canadian filing date, along with the statement that the error was unintentional.

Abandonment and Reinstatement Options

Under current practice, if a Canadian patent application (National Phase or Direct Entry) is deemed abandoned for failure to comply with a due date established for any of the actions described below, the application can be reinstated within 12 months from the date of abandonment by requesting reinstatement, paying a $200 government fee, and taking the action that was required to avoid abandonment.

Under the new Rules, the date of abandonment and reinstatement procedures vary depending upon the cause for abandonment.

For failure to request examination due on or after October 30, 2019

• CIPO will issue a Notice requiring that the request for examination be filed with payment of the exam fee and a $150 late fee within 2 months of the date of the Notice.
• The application can be maintained in good standing by requesting examination and paying the $150 late fee prior to the due date set by the Notice.
• Failure to comply with the requirements set out in the Notice will result in abandonment of the application. Reinstatement can be requested within the 12 month period after the date of abandonment.
• Within 6 months from the original examination deadline, the application can be reinstated, as a matter of right, by requesting examination, paying the $150 late fee and a $200 reinstatement fee.
• After 6 months from the original examination deadline, the application can only be reinstated if the applicant can also establish to the commissioner’s discretion that the deadline was missed despite the “due care” required by the circumstances was taken.

For failure to pay maintenance fee due on or after October 30, 2019 for a pending application or a patent

• CIPO will issue a Notice requiring that the maintenance fee be paid with a $150 late fee by the later of: either 2 months after the date of the Notice or 6 months after the missed deadline.
• The application can be maintained in good standing by paying the maintenance fee and the $150 late fee prior to the due date set by the Notice.
• oFailure to comply with the requirements set out in the Notice will result in abandonment of the application. Reinstatement can be requested with the 12 month period after the date of abandonment.
• After the abandoned date, the application can only be reinstated if the applicant can establish to the commissioner’s discretion that the deadline was missed despite the “due care” required by the circumstances was taken, and by paying the maintenance fee, the $150 late fee and a $200 reinstatement fee.

For failure to respond to an Office Action mailed on or after October 30, 2019

• If a response is not submitted by the due date of 4 months from the date of the requisition (extendible up to 2 months), the application will be deemed abandoned immediately.
• The reinstatement procedure remains unchanged from current practice, and the application can be reinstated within 12 months of the date of the abandonment, as a matter of right, by submitting the outstanding Office Action response, requesting reinstatement and paying a $200 government fee.

For failure to pay final fee in response to a Notice of Allowance mailed on or after October 30, 2019

• If the final fee is not paid by the due date of 4 months from the date of the Notice of Allowance, the application will be deemed abandoned immediately.
• Reinstatement procedure remains unchanged from current practice, and the application can be reinstated within 12 months of the date of the abandonment, as a matter of right, by paying the final fee, requesting reinstatement and paying a $200 government fee.

Third Party Rights

The new rules introduce the notion of third-party rights to use the invention post-grant, if an applicant fails to pay their maintenance fees and/or to request examination within 6-months from the initial due date (and the due date is after October 30, 2019).

These third-party rights limit the liabilities faced by a third party when a patent application is reinstated or a patent is restored 6 months after the initial due date by paying the maintenance fees and/or if the application is reinstated 6 months after the initial due date for requesting examination.

Given the broad language of these new rules, patent owners will need to consider carefully before delaying the payment of maintenance fee outside the initial 6 months window as they may lose the ability to enforce against third parties that commit, or make serious and effective preparation to commit, an “infringing” act, not only during the window of reinstatement/restoration period but also potentially for the life of the patent.

To emphasize and highlight: In our opinion the two changes that depart most significantly from the current practice are:

1.  the elimination of the option for “Late National Phase Entry” at 42 months from the priority date as a matter of right.

2.  the introduction of third-party rights to use a patented invention because of non-compliance with deadlines relating to payment of maintenance fees and/or request for examination.

For more information please contact:

Poonam Tauh, Senior Patent Agent

T: 403.800.9018

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Suzanne Hof, Senior Patent Agent

T: 613.801.0510

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Review of the Last 100 Decisions of the Canadian Commissioner of Patents

By Claire Palmer, Nov ^4th, 2019

The Canadian Commissioner of Patents with the assistance of the Patent Appeal Board (PAB) review patent applications that were rejected by Examiners during prosecution. The PAB is an advisory body that includes a Chair and several senior officials of the Patent Office with previous experience as patent examiners. The members of the PAB have not participated in the prosecution of the application to ensure that the review is impartial.

We have conducted an informal review of the last 100 Commissioner’s decisions to gain insight into what type of rejections are being appealed to the Commissioner of Patents and what an Applicant’s likelihood of success is. The decisions were issued between March 23, 2016 and August 5, 2019.

Out of 100 decisions:

12 of the applications under review ultimately issued to patent.

• 7 of the 12 cases that ultimately issued to patent, the rejections were not considered justified.
• 5 of the 12 cases that ultimately issued to patent required PAB directed amendments.
• Only 1 of the 12 cases that ultimately issued to patent included a subject matter rejection.
• 7 of the 12 cases that ultimately issued to patent included an obviousness rejection.
• 7 of the 12 cases related to biological or chemical fields.

88 of the applications under review ultimately did not issue to patent.

• In almost half of these cases a statutory subject matter rejection was made.
• In 23 of these cases, the only rejection was the statutory subject matter rejection.
• 17 of these 23 cases included rejections relating to the meaning of art.
• 21 of these 23 cases included rejections that the claims were directed to a mere plan.
• 56 of these cases included an obviousness rejection.

Based on our informal review of the last 100 decisions, we believe that Examiner’s decisions to reject applications are generally in-line with the PAB. We further believe the Patent Office will require clarification from the Federal Court with respect to subject matter rejections.

For more information please contact:

Claire Palmer, Senior Patent Agent

T: 613.801.0450

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