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Canadian Patent Law 2020: A Year in Review

Authored byY. Artemis Lai

2020 was an unusual year by all accounts. In this article we take a look back at developments in Canadian patent law in the past year, including the Government of Canada’s and the Canadian Patent Office’s response to COVID-19, the Canadian Patent Office’s new guidelines for patentable subject matter and some notable judgements from the Federal Court and the Federal Court of Appeal.

Table of Contents

COVID-19 Emergency Response Act

As a result of the COVID-19 outbreak, the Government of Canada enacted the COVID-19 Emergency Response Act, which received Royal Assent on March 25, 2020. Of significance for Canadian patent law, the Emergency Response Act amended the Patent Act to add a new section 19.4.

New section 19.4 requires the Commissioner of Patents to, on the application of the Minister of Health, authorize the Government of Canada and any person specified in the application to make, construct, use and sell a patented invention to the extent necessary to respond to a public health emergency described in the application. The patentee is entitled to remuneration in an amount that the Commissioner considers adequate in the circumstances, taking into account the economic value of the authorization and the extent of the making, constructing, using and selling of the patented invention. Such authorizations can have a term of no more than one year after grant, and no such authorizations are to be made after September 30, 2020.

No authorizations under section 19.4 appear to have been made before the September 30, 2020 deadline.

For more information on the Emergency Response Act, refer to our previous article here.

COVID-19 Designated Days

Also as a result of the COVID-19 outbreak, the Commissioner designated the period between March 16, 2020 to August 28, 2020 (inclusively) under section 78(2) of the Patent Act as designated days, effectively suspending most Canadian Patent Office deadlines. The first business day after this continuous period of designated days was August 31, 2020.

The Canadian Patent Office recently released a new Practice Notice to clarify handling of deadlines which fell within the period of designated days. Notably:

  • the original filing date of applications will be used to determine subsequent maintenance fees due dates, not August 31, 2020; and
  • all applications and patents with a date of deemed abandonment or deemed expiry which fell within the period of designated days now have August 31, 2020 as the date of deemed abandonment or deemed expiry.

United States-Mexico-Canada Agreement (USMCA) ratified

The new trade agreement between Canada, the United States and Mexico (the Canadian government refers to the trade agreement as the Canada-United States-Mexico Agreement (CUSMA), rather than the USMCA) came into force on July 1, 2020 via the Canada-United States-Mexico Agreement Implementation Act which itself received royal assent on March 13, 2020.

The USMCA affects intellectual property rights in Canada, including patent rights. For greater detail on its effects, refer to our previous article here.

One significant change for Canadian patent law will be patent term adjustment to compensate for unreasonable delays during examination of an application caused by the Canadian Patent Office. Unreasonable delay may be found if a Canadian patent issues:

  • more than five years from the date of filing of the application in the territory; or
  • more than three years after a request for examination of the application has been made.

As noted above, the CUSMA Implementation Act brought the USMCA into force on July 1, 2020. The CUSMA Implementation Act itself included amendments to the Copyright Act, the Trademarks Act and the Food and Drug Act, but did not include any amendments to the Patent Act. Accordingly, patent term adjustment is not yet available in Canada. Canada has a 4.5-year transition period from July 1, 2020 to implement this obligation.

Canadian Patent Office’s “problem-solution” approach for determining patentable subject matter rejected by the Federal Court and the Canadian Patent Office’s subsequent new guidelines

In Yves Choueifaty v Attorney General of Canada,  2020 FC 837 [Choueifaty], the Federal Court rejected the Canadian Patent Office’s previous “problem-solution approach” for determining patentable subject matter. The Federal Court specifically held that this previous approach disregarded the intention of the inventor contrary to purposive claims construction required by the Supreme Court of Canada in its decisions in Free World Trust v Électro Santé Inc, 2000 SCC 66 [Free World Trust] and Whirlpool Corp v Camco Inc, 2000 SCC 67 [Whirlpool].

For more information on the Choueifaty decision and the Canadian Patent Office’s previous “problem-solution approach”, refer to our previous article here.

The Commissioner opted not to appeal Choueifaty. Instead, the Canadian Patent Office released new guidelines on patentable subject matter and provided a set of examples demonstrating the application of the new guidelines to computer-implemented inventions, medical diagnostic methods and medical uses on November 3, 2020.

The new guidelines outline a three-step process for determining patentable subject matter:

  1. Identify “essential elements” of a claim using purposive construction in accordance with the principles set out in Free World Trust and Whirlpool.
  2. Determine an “actual invention” of the claim, where this “actual invention” “may consist of […] a combination of elements that cooperate together to provide a solution to a problem”. Of particular significance, the “actual invention” does not necessarily include every element identified to be essential at step (1) above. This distinction between the “essential elements” of a claim and the “actual invention” of a claim does not appear to have firm basis in Canadian case law.
  3. Determine if the “actual invention” of the claim has physical existence or discernible physical effect or change. The requirement for discernible physical effect or change may be narrower than the test under Canadian case law.

For more information on the Canadian Patent Office’s new guidelines, refer to our previous article here.

The patent which was the subject of the Choueifaty decision (Canadian patent application no. 2635393) was subsequently allowed in Commissioner’s Decision #1556, 2021 CACP 3 on January 11, 2021 when examined using the new guidelines. The Commissioner found that the claimed algorithm permitted certain asset optimization to be performed with less computer processing power and greater computing speed when compared to previous optimization algorithms. The Commissioner thus held that, as the claimed algorithm improves the functioning of the computer used to run it, the computer and the algorithm together form a single “actual invention” which has physicality and solves a problem related to the manual or productive arts.

Contours of section 53.1 (admission of prosecution history in evidence) further delineated

Traditionally, statements made during prosecution of Canadian patent applications or related foreign patent applications were not admissible as evidence in actions involving the eventually issued Canadian patent. Such statements were considered “extrinsic evidence”. However, amendments to the Patent Act that came into force on December 13, 2018 included a new section 53.1 which allows written communications between an applicant or patentee and “the Commissioner, an officer or employee of the Patent Office or a member of a re-examination Board” during the prosecution of a Canadian patent application to be admitted as evidence during any action or proceeding respecting a patent issuing therefrom, but only to rebut representations made by the patentee with respect to claims construction.

Section 53.1 was explored by Federal Court in a number of decisions in 2020:

  • In Bauer Hockey Ltd v Sport Maska Inc (CCM Hockey), 2020 FC 624 [Bauer], the Federal Court characterized section 53.1 as being directed to the “mischief” that a patentee was previously allowed to argue a claim construction that attempts to recapture ground conceded during prosecution to avoid prior art. The Federal Court also clarified that section 53.1 is not directed to estoppel per se (as in the United States), but rather introduces another factor to be considered during claims construction. As such, there is no need to identify a particular representation and rebuttal every time a reference is made to the prosecution history. The Bauer decision is currently under appeal.
  • In Allergan Inc v Sandoz Canada Inc, 2020 FC 1189 [Allergan], an exclusive Canadian licensee (Allergan) brought an infringement action against a generic drug manufacturer (Sandoz) with respect to a Canadian patent. Sandoz sought to introduce submissions made during prosecution of the Canadian patent by the owner of the patent (Kissei Pharmaceutical Co. Ltd.) as evidence pursuant to section 53.1. The Federal Court found that section 53.1 cannot be used to rebut representation as to claims construction made by licensees based on communications made by a patentee during patent prosecution. In coming to this finding, the Federal Court found that the plain and ordinary meaning of the word “patentee” does not include a licensee, and also considered legislative history, where a proposal to change wording of “the patentee” to “the patentee or person claiming under the patentee” was not accepted. These were clear indication of Parliament’s intent to limit the scope of section 53.1 to representations made by patentees only.

    Accordingly, in Allergan, the Federal Court held that section 53.1 cannot be invoked in the proceeding because Allergan is not a “patentee”.
  • Hinton v Jempak, 2020 FC 644 [Hinton] involved an infringement action of Canadian patent nos. 2276428 and 2337069. The defendant (Jempak) sought to introduce foreign prosecution history of related United States patent no. 6787514 as evidence. The Federal Court found the foreign prosecution history inadmissible because section 53.1 required the communication to be between the applicant or patentee and “the Commissioner, an officer or employee of the Patent Office or a member of a re-examination board” and cannot be broadened as to allow foreign prosecution history.

    Hinton can be contrasted with Canmar Foods Ltd v TA Foods Ltd, 2019 FC 1233 [Canmar] where the foreign prosecution history of related United States patent application no. 11/576,405 was admitted as evidence in a proceeding involving Canadian patent no. 2582376. In Canmar, the Federal Court found that the foreign prosecution history was incorporated into the Canadian prosecution history by reference because the patentee referred to the related United States application in submissions to the Canadian Patent Office during prosecution of the Canadian patent. The Federal Court of Appeal recently reversed the Federal Court on this point in Canmar Foods Ltd. v TA Foods Ltd., 2021 FCA 7. The Federal Court of Appeal held that that the patentee’s vague reference to “a related United States application” in the submissions was insufficient to incorporate the foreign prosecution history by reference, noting that to “incorporate material by reference, the host document must identify with detailed particularity what specific material it incorporates and clearly indicate where that material is found in the various documents.” The Federal Court of Appeal refrained from commenting on whether, if the patentee had identified the related United States application with the required “detailed particularity” for incorporation by reference, the foreign prosecution history would have been admissible under section 53.1.
  • Janssen v Teva, 2020 FC 593 [Janssen] involved an infringement action pursuant to the Patented Medicines (Notice of Compliance) Regulations with respect to a Canadian patent. Evidence of the patentee’s (Janssen) submissions to the Canadian Patent Office during prosecution of the Canadian patent was admissible to rebut the patentee’s position on claims construction in the action.

Federal Court can adjudicate contractual disputes which arise in patent matters and provide statutorily granted remedies

Section 52 of the Patent Act provides the Federal Court with the “jurisdiction…to order that any entry in the records of the patent office relating to the title of a patent be varied or expunged”. However, in Lawther v 424470 BC Ltd (1995), 60 CPR (3d) 510 (FCTD) [Lawther], the Federal Court declined jurisdiction to hear questions relating solely to patent ownership on the basis that the court had no jurisdiction to entertain disputes which are solely a matter of contract. Since Lawther, patent ownership disputes have been litigated in provincial superior courts, with the Federal Court then endorsing the final decision from the provincial superior court and ordering the Canadian Patent Office to change the title of the patent.

However, the Federal Court of Appeal in Salt Canada Inc v Baker, 2020 FCA 127 unanimously overturned the Lawther precedent. The Federal Court of Appeal held that:

  • Section 52 of the Patent Act provided the Federal Court with the express jurisdiction to vary or expunge any entry in the records of the Patent Office relating to the title to a patent. This is a judicial power to determine issues of title to a patent, rather than a mere administrative power to rubberstamp a legal state of affairs adjudicated elsewhere. In this respect, this jurisdiction is expressly granted to the Federal Court (a judicial body) and not the Patent Office (an administrative body). Additionally, the fact that agreements and other commercial instruments need to be construed and interpreted as part of the exercise of this jurisdiction does not eliminate the jurisdiction. In this respect, the Supreme Court of Canada in  Kellogg Co v Kellogg, [1941] SCR 242 held that the Federal Court can interpret contracts between private citizens “as long as it is done under a sphere of valid federal jurisdiction vested in the Federal Court”.
  • However, parties still cannot assert a contractual claim in the Federal Court against another private party to obtain a general damages remedy. The Federal Court only has the jurisdiction to provide remedies which granted by statute. The remedy of correcting records in the Patent Office to recognize one’s title to a patent under section 52 of the Patent Act is such a statutorily granted remedy.

Federal Court weighs in on “reasonably inferable”

Under section 38.2 of the Patent Act, Canadian patent applications “may not be amended to add matter that cannot reasonably be inferred from the specification or drawings” as originally filed. There is sparse case law on what constitutes “reasonably inferable” subject matter. In Western Oilfield Equipment Rentals Ltd v M-I LLC, 2019 FC 1606 [Western Oilfield], the issue of reasonably inferable was raised. The Federal Court did not enunciate a general test but noted that in the circumstance of that case, it was a matter of logic, not fact, as to whether certain claim amendments were reasonably inferable from the application as originally filed.

In Western Oilfield, the Federal Court held that all the elements which were added to the patent in several amendments were reasonably inferable from the originally filed patent application. The Federal Court also considered a variety of other issues relating to infringement, induced infringement (discussed in greater detail below) and validity.

Induced infringement test clarified

The test for inducing a third-party (the direct infringer) to infringe a patent by an inducer is well-established in Canadian law and requires application of the following three-prong test:

  1. The act of infringement must have been completed by the direct infringer;
  2. The completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place; and
  3. The influence must knowingly be exercised by the inducer, that is, the inducer knows that this influence will result in the completion of the act of infringement.

The Federal Court explored the above tripartite test in late 2019 and 2020:

  • In Janssen, the issue of whether induced infringement occurred turned on step (2) above. The Federal Court affirmed that the patentee is required to demonstrate that, but for the influence of the inducer, the direct infringement would not have taken place. This “but for” test is more stringent than “encouragement to infringe”, “subtle reference” to the infringing use, or “attempting to induce others to infringe” which have been variously used by the courts in the past.

    In Janssen, the claims required a specific dosing regimen. The plaintiff (Janssen) alleged that a product monograph of the defendant (Teva), which included the specific claimed dosing regimen as a recommendation, induced physicians to infringe Janssen’s patent. The Federal Court accepted expert evidence that prescription practices of physicians do not involve consulting generic product monographs when they are sufficiently familiar with prescribing the brand product. The Federal Court was thus not satisfied that Teva’s product monograph influenced physicians to the point that, without it, direct infringement would not occur.
  • Most induced infringement decisions turn on step (2) above (as in Janssen). However, in Western Oilfield, a key issue unusually revolved around step (3) above. The Federal Court affirmed that the patentee is required to demonstrate that the inducer knows that the influence the inducer wields will cause the third-party to carry out the acts that amount to infringement; not that the inducer knows that the acts of the third-party will actually amount to infringement. In other words, the alleged inducer simply has to know what acts the third-party is likely to do in response to its influence, and it is up to the courts to determine whether those acts are infringing. This test was affirmed by the Federal Court of Appeal in Hospira Healthcare v Kennedy Trust, 2020 FCA 30 [Hospira] (see below).

    In Western Oilfield, the Federal Court found that the inducer (Western Oilfield) knew what third parties (drilling companies) would do in response to written instructions which were given to them about how to operate and maintain a particular vacuum system, and thus these written instructions induced infringement of certain method claims.

Federal Court of Appeal affirms principles in an account of profits and upholds largest dollar award for patent infringement

In Nova Chemicals Corporation v Dow Chemicals Company, 2020 FCA 141 [Dow Chemical] the Federal Court of Appeal upheld the Federal Court’s judgment awarding the plaintiff (Dow Chemical) approximately $650 million as a result of the defendant’s (Nova) infringement, upholding the largest reported monetary award by a Canadian court for patent infringement. This Federal Court of Appeal decision addressed some basic principles regarding the accounting of profits remedy. Notable holdings included:

  • The Federal Court of Appeal reaffirmed that, in conducting an accounting of profits:

(a) Only actual profits, meaning actual revenues minus actual costs, are disgorged. Hypotheticals as to “what could, should or would have” been done by the infringer are not relevant to the determination of actual profits.

(b) Only profits that have resulted from the patent infringement are disgorged, requiring a causal connection between the profits to be disgorged and the patent infringement. This requires the court to assess infringing elements and non-infringing elements within a particular product and to consider the infringer's profit had the infringer used the best non-infringing alternative as a substitute for the infringing product, if such a non-infringing alternative was available.

  • Absent some exceptional or compelling circumstance or persuasive expert evidence, the full cost accounting method should be available to an infringer. Under the full cost accounting method, the infringer is permitted to deduct an appropriate allocation of fixed overhead costs that supported the production of the infringing products (as contrasted with the incremental cost accounting method in which only costs that increased as a result of the infringement are deductible).

For more information on Dow Chemical, see our previous article here.

Federal Court of Appeal comments on a number of different issues in REMICADE appeal

In Hospira, the Federal Court of Appeal released a decision remitting for reconsideration to the trial judge certain issues relating to the validity of Canadian patent no. 2261630 (a new use patent for Janssen’s REMICADE). This Federal Court of Appeal decision touched on a wide variety of issues, including claims construction, infringement, induced infringement, method of medical treatment, anticipation, obviousness, double patenting and sufficiency of disclosure.

For more information on Hospira, see our previous article here.

Continuing trend of granting summary judgment in patent proceedings

Historically, the Federal Court has seldom granted summary judgment in patent proceedings. However, this historical reluctance appears to be reversing in 2020, with summary judgment being granted in three different patent cases:

  1. In ViiV Healthcare Company v Gilead Sciences Canada Inc,2020 FC 486 [ViiV], the Federal Court granted the defendant’s (Gilead) motion for summary trial on patent infringement. The Federal Court noted that summary trials are not required to determine every issue in a case. The issues before the court involved construction of one claim element and then determining whether infringement existed based on that construction. The facts necessary for a finding of non-infringement was sufficiently before the court.

    For more information on ViiV, see our previous article here.
  2. In Hinton, the Federal Court granted summary judgment dismissing Hinton’s patent infringement action. Similar to ViiV above, the issues before the court involved preliminary claims construction and then determining whether infringement existed based on that construction. With respect to the latter issue, the Federal Court found that Jempak established the facts necessary for a finding of non-infringement and that Hinton failed to adduce sufficient evidence showing that there is a genuine issue for trial on infringement.
  3. In Flatwork Technologies LLC v Brierley, 2020 FC 997 [Flatwork], the Federal Court granted summary judgment by the plaintiff (Flatwork) in respect of its patent impeachment action. The Federal Court noted that there was no need to assess the credibility of parties’ expert witnesses and that there was no disagreement between the experts on the underlying facts.

For more information on Flatwork and this recent trend of summary judgments in patent cases, see our previous article here.

On the other side, the Federal Court declined to proceed via summary trial in Farmobile LLC v Farmers Edge Inc, 2020 FC 688 because the timing requirement was engaged (time and place for trial have already been requested). The Federal Court declined to exercise its discretion to dispense with the timing requirement.

For more information on the notable developments and decisions discussed, please reach out to a member of our patents team.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.