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02 April 2001
As a result of an anticipated amendment to Canada's Patent Act, certain patents based on applications filed before October 1 1989 that have not yet expired may benefit from up to an additional three years of patent protection. This amendment (introduced as Senate Bill S-17) is intended to bring the term of patent protection in line with Canada's obligations under the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS agreement).
The TRIPS agreement became applicable in Canada on January 1 1996. In relation to the term of patent protection, Article 33 of the agreement provides that "[t]he term of protection available shall not end before the expiration of a period of 20 years counted from the filing date".
Canada passed legislation to amend its Patent Act on November 17 1987 to comply with the TRIPS agreement. However, the change to its patent term only applied to patents based on applications filed after October 1 1989, which is when the amendments became effective. The patent term for applications filed before that date is governed by Section 45 of the Patent Act (RSC 1985 c P-4), as follows:
Subject to Section 46, the term limited for the duration of every patent issued under this act on the basis of an application filed before October 1 1989 is 17 years from the date on which the patent is issued.
Thus, patents applied for prior to October 1 1989 are only entitled to a 17-year term of protection from the date of issuance. For most patents, the prosecution period (ie, the period between the filing of the application and the issuance of the patent) is greater than three years. For those patents, a term of 17 years from the date of issue would exceed a term of 20 years from the date of filing. However, for patents that are issued within three years of their filing date, the total term would be less than 20 years from filing. The question at issue was therefore whether this complied with Canada's TRIPS agreement obligations.
The United States initiated a WTO dispute settlement case against Canada to force it to extend the 20-year patent monopoly to patents derived from applications filed before October 1 1989. On September 22 1999 the WTO established a panel to review the US complaint. The final panel report was released on May 5 2000 and found that Canada was not fulfilling its TRIPS obligations with respect to the length of the term of patent protection. Canada filed an appeal with the WTO appellate body, but the earlier panel ruling in favour of the United States was upheld. This decision was adopted by the dispute settlement body of the WTO on October 12 2000.
Canada subsequently indicated that it would implement the recommendations and rulings of the dispute settlement body within a "reasonable period of time". In a joint letter dated January 10 2001 Canada and the United States notified the WTO that they had agreed that the duration of a "reasonable period of time" should be determined through binding arbitration. The results of the arbitration were released on February 28 2001. They state that the reasonable period of time within which Canada must implement the recommendations of the dispute settlement body is 10 months from the date of adoption of the panel and appellate body reports by the dispute settlement body (ie, the reasonable period of time will expire on August 12 2001). By that date, it will be necessary for Canada's Patent Act to conform with the TRIPS agreement, granting a minimum term of 20 years from the date a patent application is filed.
Bill S-17 was introduced in the Senate in order to amend the Patent Act so as to comply with the WTO ruling. It passed first reading on February 20 2001 and provides for a new Section 45 that will read:
"(1) Subject to Section 46, where an application for a patent is filed under this act before October 1 1989, the term limited for the duration of the patent is 17 years from the date on which the patent is issued.
(2) Where the term limited for the duration of a patent referred to in subsection (1) had not expired before the day on which this section came into force, the term is 17 years from the date on which the patent is issued or 20 years from the filing date, whichever term expires later." (Section 46 relates to the requirement of paying maintenance fees.)
To illustrate the effect that this amendment will have when enacted, consider the following example. A patent application was filed on August 13 1984 and issued on January 20 1985. Pursuant to the existing Section 45, the patent will expire 17 years after the date of issue (ie, on January 20 2002). However, under the new Section 45, it would expire on whichever is the later: 17 years after the date of issue (January 20 2002) or 20 years after the date of filing (August 12 2004). This would extend the term of patent protection by about 18 months and would have a significant impact on all patents to which the amendment applies. According to representations made by Canada before the WTO, there were approximately 53,500 term-deficient patents that could have been extended if Bill S-17 had been proclaimed in force on January 1 2001.
If Bill S-17 becomes law in its present form, the patent term extension caused by it will only affect patents filed between the date 20 years before Bill S-17 becomes law and October 1 1989, and which were issued within three years of filing. For those patents that have their term extended, there will be important repercussions. Patent owners and licensors should be aware of the potential benefits they might reap from this extension. They should examine their patent portfolios to determine whether their patents may be extended by Bill S-17, and should consider how any licences relating to those patents will be affected.
Conversely, licensees should be reviewing their licence agreements to determine whether they will be required to pay royalties for an extended period of time. Manufacturers, wholesalers, retailers and end-users who are planning to manufacture, use or sell products that are subject to third-party patents on the basis that those patents are about to expire will need to be especially vigilant in determining the correct expiry dates of the relevant patents.
There is also the issue of patents that have expired since January 1 1996, but which would have been entitled to an extension of their term had Canada correctly fulfilled its TRIPS obligations. It may be argued by the owners of such patents that if the government fails to make Bill S-17 fully retroactive to January 1 1996, it could be liable for the losses sustained by patentees whose patents prematurely expired.
There will also be situations where third parties have legitimately undertaken activities on the basis that certain patents have expired. If the legislation is made retroactive, causes of action for infringement will be created where none previously existed. Although liability for patent infringement does not depend on knowledge of the patent rights that are infringed, it is possible that in the unusual situation that would arise from the retroactive reinstatement of the patent term, acts in good faith without notice might be argued as a defence or otherwise to limit a claim. For this reason, it might be prudent to provide notice to third parties using inventions based on expired (or soon-to-be-expired) term-deficient patents that any rights revived by Bill S-17 will be enforced.
For further information on this topic please contact Keith Bird at Lang Michener by telephone (+1 416 307 4205) or by fax (+1 416 365 1719) or by e-mail (email@example.com).
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