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17 June 2019
The Budget Implementation Act 2 has brought about several changes to the Patent Act that affect the scope of protection available under Canadian patents, including a revision of Section 56, which concerns the rights of prior users of patented technologies.
Prior user rights are a defence to patent infringement. They provide fairness by allowing an inventor who independently develops an invention that is subsequently made the subject matter of a patent to continue using the invention.(1)
Prior user rights are closely linked to the requirement for novelty. As a patent application would usually be anticipated if a prior user had made the invention available to the public, prior user rights are most likely to arise in situations where an invention is protected as a trade secret.
Canadian patent law has long recognised prior user rights.(2) However, the scope of such rights has not always been clear. For example, the Canadian courts have reached differing conclusions regarding:
Nevertheless, courts have articulated the following principles:
The revised provision, which came into force on 13 December 2018 and is similar to Section 64 of the UK Patents Act 1977, will apply to an action or proceeding in respect of a patent that is issued on the basis of an application which has a filing date on or after 1 October 1989 and that is commenced on or after 29 October 2018 (Sections 203 and 208 of the Budget Implementation Act 2 2018).
Unlike the earlier 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 (ie, 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" had been 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.
It is unclear whether prior users will have the ability to transform (eg, reformulate an active pharmaceutical ingredient as a tablet) or sell articles produced prior to the relevant date after the relevant date if they have not done so in the past – acts which were previously protected. This may depend on how the courts construe "serious and effective preparations to commit such an act".
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 (Sections 56(5) and (8)). While 'good faith' is not defined, prior jurisprudence has limited lack of good faith to breach of confidence or secrecy between the parties.(9)
The new provisions also address the rights of purchasers of an article from a prior user. Section 56(3) provides purchasers the rights to use and sell the article, while Section 56(6) extends the exemption to the use of "an article that is substantially the same as the one used, for that use". Thus, the article used need not be identical to the original article but the use must be the same. The extension to include articles that are "substantially the same" as the patented article has been a subject of concern, with the Intellectual Property Institute of Canada calling for it to be further defined or eliminated.(10)
New Sections 56(4) and 56(9) introduce exemptions for the use of a service or a service that is substantially the same as one previously used, respectively. As 'service' is not a defined term and has not been used in predecessor provisions, it is unclear how it will be interpreted.
Several sections explicitly addressing the rights of transferees of a business or a part of a business have also been added. Specifically, Sections 56(2), 56(7) and 56(10) provide that a transferee of a business or a part of a business may acquire the prior user rights of the transferor. Notably, permitted activities are not limited to the same locations or sites as the original prior use, as is the case in the corresponding US provision.(11)
As many of the amendments to Section 56 will require judicial interpretation, the true scope of prior user rights under the revised provision may be unknown for some time.
For further information on this topic please contact David Schwartz or Michael Sgro at Smart & Biggar/Fetherstonhaugh by telephone (+1 613 232 2486) or email (firstname.lastname@example.org or email@example.com). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
(1) Libbey-Owens-Ford Glass Co v Ford Motor Co, (1969) 57 CPR 155 at 185-189 (Ex Ct) aff'd 1970 SCR 833 (SCC); see also Aleksey Khamin, "America Invents Act's Prior User Defense: Lessons from Global Patent Regimes and Legislative History" (2015), 15:2 Pittsburgh Journal of Technology Law & Policy 132 at 142 and 147.
(3) Teledyne Industries Inc v Lido Industrial Products Ltd (1981) 57 CPR (2d) 29 at 54 (FCA), leave to appeal to SCC ref'd (1981), 59 CPR (2d) 183; Merck & Co v Apotex Inc, 2006 FCA 323 at Paragraphs 7182, leave to appeal to SCC ref'd (2006) SCCA 507.
(4) Merck & Co v Novopharm Ltd (1998), 82 CPR (3d) 457 at 463 (FCTD); Merck, supra note 3 at Paragraphs 77-78; Merck & Co v Apotex Inc (1995) 60 CPR (3d) 356 at 369 (FCA), leave to appeal to SCC ref'd (1995) 63 CPR (3d) v.
(6) Procter & Gamble v Bristol Meyers (1979) 39 CPR (2d) 145 at 167-168 (FCTD), aff'd (1979) 42 CPR (2d) 33 (FCA), leave to appeal to SCC ref'd (1979) 42 CPR (2d) 33n; Beecham Canada v Procter & Gamble (1982) 61 CPR (2d) 1 at 23-24 (FCA), leave to appeal to SCC ref'd (1982) 63 CPR (2d) 260.
(8) Libbey-Owens-Ford, supra note 1 at 182; Victor Sporting Goods v Harold Wilson Company, (1904) 7 OLR 570 (ONCA), aff'd 1904 CarswellOnt 786 (SCC); Stephenson v Babiy Motors Ltd (1978) 40 CPR (2d) 187 at 191 (BCSC); Merck & Co v Apotex Inc (1994) 59 CPR (3d) 133 at 160-162 (FCTD), rev'd on other grounds (1995) 60 CPR (3d) 356 (FCA).
(10) Pages 6 to 10 are available here.
(11) For further information please see 35 USC 273(e)(1)(C)).
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