Canada develops its National Intellectual Property Strategy
David Schwartz, with contributions from Walter Chan, analyses recent developments in Canadian IP law, including the impact of the implementation of international treaties and free-trade agreements and the country’s IP Strategy
The government of Canada began the process of modernising its intellectual property laws several years ago, following a 2013 House of Commons report recommending that Canada take steps to harmonise its IP regime with several international treaties.
In its 2017 budget, the government of Canada further announced that it would develop a national IP Strategy designed to help Canadian companies and innovators better understand, protect and leverage intellectual property. This was followed in the 2018 budget with a commitment to invest $85.3 million towards initiatives supporting IP Strategy over five years.
In this article, we provide an overview of the IP Strategy, and explain where it fits in the broader context of numerous recent changes aligning Canadian IP laws with the rest of the world.
Ongoing global harmonisation efforts
By the end of this year, Canada will have implemented five international treaties administered by WIPO, a process which began in January 2014:
The Hague Agreement – permitting industrial design owners to obtain protection for industrial designs in a number of member countries by filing a single international application directly with the International Bureau.
The Madrid Protocol – permitting trademark owners to protect their marks in multiple countries, in part by enabling applicants to file a single international application and designate those member countries in which the applicants seek protection for their marks.
The Singapore Treaty – harmonising several formal procedures in respect of trademark applications and registrations.
The Nice Agreement – providing a comprehensive classification system for goods and services for use in registering trademarks, simplifying the application process among member countries.
The Patent Law Treaty – harmonising several formal procedures in respect of national and regional patent applications and patents, aiming to make such procedures more user-friendly.
Specifically, Canada acceded to the Hague Agreement on July 16 2018, with related amendments to the Canadian Industrial Design Act and the Industrial Design Rules coming into force on November 5 2018. On March 17 2019, Canada acceded to the Madrid Protocol, the Singapore Treaty and the Nice Agreement, with related amendments to the Canadian Trademarks Act and the Trademarks Rules having come into force on June 17 2019. Finally, Canada ratified the Patent Law Treaty on July 30 2019, and related amendments to the Canadian Patent Act and the Patent Rules will come into force on October 30 2019.
Changes related to free trade agreements
In this period, Canada also negotiated various international free trade agreements in which it made commitments to introduce certain IP provisions.
Canada-European Union Comprehensive Economic and Trade Agreement (CETA)
Amendments to the Patent Act and associated regulations came into force on September 21 2017, giving effect to Canada's obligations under CETA. There are significant changes, particularly with respect to pharmaceutical patent law.
Certificates of Supplementary Protection (CSPs) were introduced, providing for restoration of patent term to account for marketing delays resulting from time required to obtain regulatory approval.
The CETA changes also comprehensively alter the regime that has governed pharmaceutical patent litigation in Canada for nearly 25 years. The summary proceedings previously in place, in which an innovator seeks an order from the Federal Court, enjoining the minister of health from issuing marketing authorisation to a second person, were replaced by a full right of action, with accompanying procedural guarantees and discovery obligations. The new regime is intended to provide equivalent and effective rights of appeal to all litigants (the previous summary proceedings were moot once marketing authorisation was issued), and to end the practice of dual litigation, where a full patent infringement action followed summary proceedings.
Canada-United States-Mexico Agreement (CUSMA)
On September 30 2018, Canada reached a new free-trade agreement with Mexico and the United States, which, if ratified, will replace the North America Free Trade Agreement (NAFTA).
Significant changes to Canadian IP law that would be required if CUSMA is ratified include:
increasing the data protection term for biologics from eight years to 10 years;
increasing the copyright term from life of the author plus 50 years to life of the author plus 70 years; and
introducing a patent term adjustment procedure to compensate for patent office delay in issuing a patent.
Other legislative changes
On June 24 2016, amendments to the Patent Act and Trademarks Act came into force, establishing privilege in communications between Canadian patent and trademark agents and their clients.
A communication is privileged if:
It is between a Canadian patent or trademark agent and their client.
It is intended to be confidential.
It is made for the purpose of seeking or giving advice with respect to any matter relating to the protection of an invention, trademark, geographic indication, or certain related rights.
Communications between a foreign patent or trademark agent and their client are also privileged if they would have been privileged under the above conditions had they been made with a Canadian agent.
This statutory privilege applies to communications made before June 24 2016, provided they remained confidential at that date. However, it does not apply in respect of an action or proceeding commenced before June 24 2016.
The National Intellectual Property Strategy
The IP Strategy was launched by the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development, on April 26 2018, as a series of measures to help innovative entrepreneurs secure and leverage IP. It has three main components:
strengthening IP awareness, education and advice;
providing IP strategic tools for Canadian businesses; and
amending IP legislation to improve transparency and prevent misuse of IP rights.
IP awareness, education and advice
The IP awareness, education and advice component of the IP Strategy comprises:
CIPO learning resources – CIPO will expand IP education and awareness initiatives;
IP awareness and use survey – Statistics Canada will conduct a survey to identify how Canadians understand and use IP;
Indigenous IP – A grant programme has been launched, supporting Indigenous people's IP awareness and capacity building, and participation in discussions relating to traditional knowledge and cultural expressions;
IP legal clinics – Grants have been awarded to law schools to establish or improve IP legal clinics; and
Federal employee training – Training for federal employees who deal with IP governance will be supported.
The strategic tools component of the IP Strategy comprises:
Patent Collective – $30 million is to be invested over four years in a Patent Collective Pilot Program to assist small and medium-sized enterprises;
IP and standards-setting strategy – The Standards Council of Canada will work with innovative Canadian companies to leverage their IP during the standards-setting process; and
IP marketplace – "ExploreIP" enables businesses to discover IP held by public sector institutions to facilitate licensing agreements.
The Budget Implementation Act 2018, No. 2 introduced changes to IP laws and the Copyright Board's legislative framework to better encourage innovation, attract investment, and support an efficient and fair economy in response to Budget 2018 commitments. Many but not all of its provisions are currently in force.
Governance (College of Patent and Trademark Agents)
Portions of the College of Patent Agents and Trademark Agents Act were enacted on December 13 2018, establishing for the first time a distinct regulatory body governing the practice of the patent and trademark agent professions in the public interest.
Protection of agent privilege
The Privacy Act and the Access to Information Act were amended effective December 13 2018 to ensure that agent privilege is treated no differently from solicitor-client privilege and prevent the disclosure of privileged intellectual property information.
Copyright Board reform
Amendments to the Copyright Act came into force on April 1 2019 to improve the timeliness and clarity of the proceedings and decision-making processes of the Copyright Board. Among other things, the amendments:
collapse the regimes for most collective societies into a single set of rules and requirements;
remove the requirement for performing rights collectives to file tariffs in order to collect royalties, allowing them to optionally license music through direct negotiation; and
establish new timelines with earlier filing dates and longer effective periods for tariffs, together with procedural amendments to streamline the certification process.
Notice and notice
On December 13 2018, the notice and notice regime in the Copyright Act was amended to prohibit notices containing an offer to settle and a demand for payment or personal information.
The following amendments to the Patent Act came into force on December 13 2018, implementing aspects of the IP Strategy.
New Section 76.2 provides 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.
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 concerning:
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.
Role of prosecution history in 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 concerning 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
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; and
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.
These provisions apply in respect of any action or proceeding that had not been finally disposed of as of December 13 2018.
New Section 55.3 of the Patent Act enacts an exception from infringement for experimental use of patented technologies, providing that an act committed for the purpose of experimentation relating to the subject matter of a patent is not an infringement of the patent.
Regulations may be established in the future, concerning
factors that the court may consider, must consider or is not permitted to consider in determining whether an act is, or is not, 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 experimental use exception from infringement also extends to infringement of a CSP issued for a patent. The new provisions apply in respect of any action or proceeding that has not been finally disposed of as of December 13 2018.
Canadian courts have previously held that it is not an infringement to make or use a patented invention by way of experiment or testing only, without the intention to commercialise.
Prior user rights
Section 56 of the Patent Act concerning rights of prior users of patented technologies has been amended.
Amended Section 56 applies to an action or proceeding in respect of a patent issued on the basis of an application whose filing date is on or after October 1 1989 and that is commenced on or after October 29 2018.
The changes occurring over a six-year period are collectively very substantial. The concurrent implementation of many international IP treaties advances Canada’s reputation as a secure and stable market for innovation.
Unlike the predecessor provision, which limited prior user rights to the right to "use and sell to others the specific article, machine, manufacture or composition of matter patented and so purchased, constructed or acquired" before the claim date (i.e. the priority date for a particular claim), the revised provision protects acts "that would otherwise constitute an infringement" if the act had been completed before the claim date, or if "serious and effective preparations to commit such an act" were made before the claim date.
Having prior user rights apply to "an act that would otherwise constitute infringement" rather than a "specific article, machine, manufacture or composition of matter" is significant, as it appears to clarify that prior user rights can be invoked for processes.
A "good faith" requirement and provisions providing that prior users cannot invoke the defence if they acquire the knowledge required to carry out the infringing act, directly or indirectly, from the patentee and know that the patentee is the source of the knowledge, have been added.
The new provisions also address the rights of purchasers of an article from a prior user, providing purchasers the rights to use and sell the article, and extending the exemption to the use of "an article that is substantially the same as the one used, for that use." There are also exemptions for the use of a service or a service that is substantially the same as one previously used.
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). 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.
IP licences in bankruptcy
Currently, in restructuring, IP licensees in good standing can continue to use the IP if the debtor disclaims the licence. Amendments to the Bankruptcy and Insolvency Act and Companies' Creditors Arrangement Act will extend this right to liquidation proceedings, and will come into force on November 1 2019.
Bad faith registration
To prevent the abusive use of the trademark regime, such as applying for registration with the sole intention of seeking remuneration from the legitimate owner of the trademark, new grounds of opposition and invalidity for bad faith registration were created and came into force on June 17 2019 and December 13 2018 respectively. Further, an amendment was introduced to require use to enforce a trademark within the first three years after registration, but no date has been set for this amendment to come into force.
Opposition procedure reform
To improve the efficiency and effectiveness of registration proceedings, the registrar would be authorised to award costs for abusive practices during proceedings. Additional evidence would also no longer be automatically admitted on appeal of the Registrar's decisions, a change that would be balanced with the ability for parties to obtain confidentiality orders when they file commercially sensitive evidence before the Opposition Board. No date has been set for these amendments to come into force.
To prevent official marks that are owned by entities that no longer exist or are not public authorities from creating obstacles to trademark registration, the Registrar would be empowered to withdraw them from the database. No date has been set for these amendments to come into force.
Other transparency provisions
Other amendments would be made to the Trademarks Act to clarify references to filing dates, ensure that trademark renewal fees appropriately correspond to the new system, allow registrants to pay only the renewal fee applicable for the class of goods or services registered, and clarify the scope of the content of divisional applications after advertisement. These amendments are all now in force.
Against the backdrop of historically gradual evolution of Canadian IP laws, the above changes occurring over a six-year period are collectively very substantial. The concurrent implementation of many international IP treaties advances Canada's reputation as a secure and stable market for innovation. Ratification of trade agreements will bring about stronger IP protection across a range of disciplines. However, it will be years before the full effect of these rapid changes will be seen. In particular, the amendments to the Patent Act driven by the National IP Strategy introduce new concepts into Canadian patent law, and are at present sketched only in broad terms.
David is a partner at Smart & Biggar and a highly respected IP leader with over 25 years of experience in patent law. Named Ottawa’s “Lawyer of the Year” in Biotechnology Law multiple times and recognized annually as one of “The Best Lawyers in Canada” under Biotechnology Law, David has become the trusted go-to legal counsel to biotechnology, pharmaceutical and chemistry clients. In his patent prosecution practice, David advises clients on regulatory matters relating to the Patented Medicines (Notice of Compliance) Regulations and listing patents with Health Canada, data protection under the Food and Drug Regulations and matters concerning the Patented Medicine Prices Review Board. He past President of the Intellectual Property Institute of Canada (IPIC) and is well-known as a leader in the IP industry, committed to enhancing the profession.
Walter Chan is a trainee in Smart & Biggar’s Ottawa office. In addition to recently completing his Juris Doctor from the University of Toronto, Walter also holds a PhD in Chemistry from Stanford University under the supervision of Professor Barry M Trost. Walter obtained his BSc in biological chemistry from the University of Toronto.