ipatents.ca: Patent Stories

The Federal Courts of Canada have released new SJ rules as advertised in the Courts’ Notice to the profession dated December 17, 2009. The RIAS indicates that one of the major additions is the new summary trial procedure, patterned after the BC rules (similar new rules are coming to Ontario in January - see the changes to Rule 20 as described here by Watson & McGowan).

Highlights of the new Federal Courts Rules include:

• summary judgment motion to be heard by a judge, not a prothonotary
• hearsay evidence not admissible
• a party is generally limited to bringing one SJ motion
• a response to a SJ motion must not speculate but must set out specific facts and adduce the evidence showing that there is a genuine issue for trial
• the SJ motion may proceed even if there is a genuine issue for trial; a summary trial procedure is available in these instances
• SJ motion not available in simplified action under rule 292

Does this rule change suggest that construction of patent claims could be done by way of summary judgment (similar to a US Markman hearing, once attempted by Canadian defendants without success in 2003/2004)?

In two recent cases, arbitrators deciding under the CDRP came to different conclusions. In hasbro.ca, the sole panelist ordered a transfer of the domain name from a cybersquatter to Hasbro Inc. But, in familyhonda.ca, the three-member panel rejected a transfer finding that the complainant car dealership had failed to prove any pre-existing rights in the trade-mark.

The Canadian Trademark Blog reports that Mukmuk the friendly marmot (pictured above) and his friends, the Olympic mascots, now have their names protected by recent amendments to the Olympic and Paralympic Marks Act. On December 24th, the federal cabinet added 38 new marks (4 words and 34 graphic designs) to the list of prohibited marks. Such marks are prohibited them from being used by any person (including businesses) for business purposes until December 31, 2010, unless a specified exception in the Act applies. See the CIPO newsflash for more details.

The new harmonized sales tax (HST) is coming into effect in Ontario and British Columbia on July 1, 2010. A guidance document published on the Canada Revenue Agency website clarifies the transition rules through the use of the following example:

“You sold a patent to manufacture widgets and receive fixed annual royalty payments in respect of the sale. A royalty payment becomes due on June 20, 2010, but it is not paid until July 10, 2010. Since the payment becomes due before July 2010, the GST applies to the royalty payment, even though the payment is made on or after July 1, 2010.”

Does GST/HST really apply to these types of payments? A 2007 CRA bulletin seems to ignore the distinction between a sale and a license and suggests that, from a tax perspective, the question is whether there is a “supply” of IP to Canadian residents (for example):

“Taxable (other than zero-rated) supplies made in Canada are subject to GST at a rate of 6% [author: now 5%], or HST at a rate of 14% [author: now 13%] if they are made in the participating provinces of Nova Scotia, New Brunswick, and Newfoundland and Labrador. A “zero-rated supply” is a taxable supply that is subject to GST/HST at a rate of 0%.”

and

“[S]upplies of intellectual property (such as a patent or trademark) and rights to use such property are zero-rated if they are made to non-registered non-residents.”

Licensors of intellectual property in Ontario and BC should be aware of the HST and the HST transition rules, especially when selling to Canadian residents or certain non-residents where GST/HST may be payable.

As stated by the authors of the CF&P text on Commercial Transactions: Licensing:

“In any event, determining the tax consequences of a licensing agreement’s payment structure is typically a challenging process due to the inherent complexity of domestic taxation legislation and international tax treaties, and will, in many cases, necessitate the retention of expert advice.”

A CIPO news item refers to the publication of the rules in Part II of the Gazette on December 9, 2009. According to the news item, the rule change will achieve a number of ends including:

1. Simplify the definition of the term “description”;
2. Clarify the purpose of section 16(4);
3. Consolidate provisions that address the establishment of a filing date;
4. Clarify the confidentiality period;
5. Amend incorrect reference to a section of the Patent Act regarding the payment of maintenance fees;
6. Update the reference to the definition of “small entity” in Form 3 of Schedule I to the Rules;
7. Clarify Form 3 of Schedule I to the Rules; and
8. Simplify the completion requirements.

Interestingly, the somewhat opaque item number 7 will overhaul the troubled Declaration of Entitlement regime currently in place. It remains to be seen how this new section 37 of the Rules will be applied by CIPO. I think a short-form declaration of entitlement will be quite welcomed by PCT national phase applicants.

Redbrick Pizza’s CDRP complaint was decided in favour of the complainant on November 23, 2009. The panelist hearing the case ordered a transfer of the domain name redbrickpizza.ca to the operator of a chain of pizza restaurants.

The CDRP panelist accepted evidence that the registrant was a serial cybersquatter. The 3-part test (confusing similarity with the complainant’s mark, bad faith registration, and no legitimate interest) was met.

The registrant did not file a response to the complaint. The registrant was using a third-party privacy service (privacy.ca) to shield its contact information. This proved difficult when serving the complaint, but the panelist said:

“The Panel finds that the [arbitration service provider] has used all reasonable efforts to contact the Registrant at its postal and email addresses listed for service. The fact that the Registrant has chosen to use a third party privacy provider to receive and filter notices being sent to these addresses is a choice the Registrant is certainly free to make. However, such a choice does not under the Rules and cannot reasonably impose an additional burden on the BCICAC to look behind this third party provider to ensure that the Registrant has in fact received the Complaint and the subsequent notices sent to it.”

CIPO’s consultation has resulted in very few changes to the new MOPOP chapters 12 and 13. IPIC’s submission, echoed by others, which called for the scrapping of the new “field of technology” requirement, “form and substance” examination and examination for “contribution” was rejected without comment.

In the new Chapter 12 on subject matter, CIPO has arguably put business method patents to death by referencing its own decision in Amazon (now currently under appeal):

• This [non-technological] exclusion applies to many types of commercial interactions, and in some contexts can be descriptively referred to as a “business method” exclusion as was done in Re Application No. 2,246,933 of Amazon.Com.
• All of the foregoing [schemes, plans, rules, and mental processes], consequently, are not by themselves “inventions” within the meaning of
  section 2 of the Patent Act… In Re Application No. 2,246,933 of Amazon.Com, such a conclusion was reached and was expressed by reference to an exclusion from patentability of “business methods”. The term
  “business method” refers in such a context to a scheme or plan for conducting commercial interactions.

In the new Chapter 13 on Examination, CIPO has given the following new guidance:

• Each claim must define a solution to a practical problem and must be supported by the description.
• Identifying which disclosed solution the claim is directed to permits its essential elements to be identified.
• It is important to remember that the analysis to identify the essential elements is performed in view of the common general knowledge of the person skilled in the art but before the matter of the claim is compared to the teachings of the prior art.
• A patentable invention must be a novel, inventive technological solution to a problem in a field of technology, and each claim in an application must be examined to determine whether it defines such subject-matter.
• By “substance” is meant the solution to a particular problem to which, in view of the specification as a whole, the applicant appears to be directing the claim.

In Chapter 13, one addition helpfully clarifies what information should be sent in to Examiners:

Applicants should generally not submit information which is readily available to the examiner (see below). The object of the voluntary submission of prior art is to expedite prosecution by bringing the attention of the examiner to documents that might otherwise not be immediately identified at the outset of examination. Where a document is identified to the Office, the applicant should generally not submit a copy of the document unless they have reason to believe that copies of that document will not be readily available to the examiner.

According to a news item posted on the news page, revised chapters have been issued with a December 2009 effective date. The new chapters include:

• Chapter 12 of the MOPOP on the subject of Subject-Matter and Utility
• Chapter 13 of the MOPOP on the subject of Examination of Applications

It’s not immediately clear how the chapters have been revised in response to the submissions received during the consultation.

The applicant’s appeal memo has been filed. Highlights from the memo include:

“The Commissioner’s decision to reject the ‘933 Application is wrong in law. The Commissioner relies upon inapplicable foreign law, and misstates and misapplies the binding jurisprudence of the Canadian courts on point (including the Supreme Court). In doing so, the Commissioner creates a new legal framework, in an apparent attempt, as a matter of policy, to change the approach of the Patent Office to the issue of patentable subject matter and the definition of “invention”. In the result, the Commissioner has decided that inventions of the kind at hand, and so-called “business methods” (as she characterizes them), will no longer be patentable.”

and

“Perhaps the most extraordinary aspect of the Commissioner’s decision is the per se exclusion for “business methods” which she creates.

The memorandum goes on to criticize the Patent Appeal Board’s narrow definition of “art” and its 2-step approach to claim construction.

Federal Court of Canada Docket No. T-1476-09 (court record).