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Viewing cable 03OTTAWA895, CANADIAN PATENTS: MAINTENANCE FEE APPEAL UPHOLDS

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Reference ID Created Released Classification Origin
03OTTAWA895 2003-03-27 15:47 2011-04-28 00:00 UNCLASSIFIED Embassy Ottawa
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 02 OTTAWA 000895 
 
SIPDIS 
 
DEPT FOR EB/TPP/MTA/IPC SWILSON 
DEPT PASS USTR FOR SCHANDLER AND KSHIGATOMI 
USDOC FOR USPTO - URBAN 
 
E.O. 12958: N/A 
TAGS: KIPR ETRD ECON CA
SUBJECT: CANADIAN PATENTS: MAINTENANCE FEE APPEAL UPHOLDS 
PATENT PROTECTION 
 
REF: LAITINEN/CHANDLER EMAILS 
 
1. Summary - A March 2003 Canadian Federal Court decision 
upholds an appeal to protect the patent rights of companies 
that had inadvertently paid incorrect annual maintenance fees 
and attempted to correct the mistake through subsequent 
"top-up" fees.  The judge determined that the appropriate 
annual maintenance fee throughout the life of the patent will 
depend on size of an entity at the time a patent application 
is filed, and does not need to be redetermined each year to 
account for the company's growth. The Canadian Intellectual 
Property Office is reviewing the court decision and is 
expected to publish official guidance within the next couple 
of weeks. This is a victory for U.S. entities that were 
concerned that their Canadian patent rights would be deemed 
irrevocably abandoned due to past adjustments.  End Summary. 
 
 
--GOC REGULATIONS ON MAINTENANCE FEES-- 
 
2.  Under the Canadian Patent Act, a patent applicant or 
patentee must pay prescribed amounts, called maintenance 
fees, on an annual basis in order to keep the application or 
patent in good standing. In order to encourage small 
enterprises and promote innovation, the Patent Act permits 
"small entities" to pay reduced maintenance fees. Although 
the patent rules are complex, generally speaking a small 
entity is defined as an entity that employees 50 or fewer 
employees or that is a university. 
 
3.  The Canadian Intellectual Property Office (CIPO) handles 
the administration and processing of patents and other 
intellectual property, but patent owners bear the onus of 
determining their own entity status, and must accordingly pay 
the appropriate fee to CIPO based on this determination. 
According to the patent rules, failure to pay the appropriate 
maintenance fee results in the patent being deemed abandoned 
at which point the patentee has twelve months to reinstate 
such rights.  Failure to reinstate within the statutory 
period results in the irrevocable loss of the patent rights. 
The regulations are clear and have been consistently applied 
when entities fail to pay any fees within the statutory 
period.  The regulations do not address the situation whereby 
a "large entity" inadvertently determines that it qualifies 
as a "small entity," or grows in size without correspondingly 
adjusting its annual payments. There is no penalty if an 
entity overpays. 
 
4.  It had been the long-standing policy of CIPO to accept 
"top-up" maintenance fee payments from companies to correct 
underpaid submissions.  A patent holder who notified CIPO 
that its entity status had changed from small to large could, 
at any time, correct an originally insufficient payment by 
paying the difference between the small and large entity fees 
for the years that payments had been incorrectly made.  Under 
this practice the payment of a small entity fee when a large 
entity fee was required did not trigger a "deemed 
abandonment" determination of the patent rights. 
 
--2001 JUDICIAL DECISION CHANGES CIPO PRACTICE-- 
 
5.  An August 2001 Federal Court of Canada decision put a 
stop to the practice of allowing "top-up" fees after the 
twelve-month reinstatement period. In the dispute between 
Dutch Industries and Barton No-Till Disk Inc/Flexi-Coil Ltd., 
the judge ruled that CIPO had no jurisdiction to "accept 
corrective payments on account of the failure to pay the 
prescribed maintenance fees within the required time." CIPO 
issued an official notice on September 24, 2001, stating that 
they would "not accept any corrective payments which are 
submitted after a due date." Patent holders who had 
previously made "top-up" payments to correct errors in the 
determination of their entity status risked losing their 
patent rights. Barton and Flexi-coil appealed the decision. 
 
--APPEAL UPHELD: TOPPING-UP NOT NECESSARY-- 
 
6.  On March 7, 2003 a Federal judge upheld the appeal on the 
grounds that the original decision was based on the incorrect 
premise that the size of an entity must be redetermined 
whenever a maintenance fee is due.  She ruled that "a person 
who meets the definition of  small entity, when the patent 
regime is first engaged maintains that status in relation to 
that patent application and any resulting patent throughout 
its term." If a company expands beyond the definition for a 
"small entity" it is still only required to pay maintenance 
fees for its original scale (small entity), and does not need 
to "top-up" to account for its growth. If, however, a company 
inadvertently applies for its original patent application as 
a "small entity" when it is actually large, then it,s patent 
will be deemed to have been abandoned from the beginning. 
Copies of the Court's decision can be found on the web at: 
http://decisions.fct-cf.gc.ca/fct/2003/2003fc al121.html. 
 
7.  CIPO is currently reviewing the appeal decision and 
expects to publish an official notice regarding changes in 
procedure within the next few weeks. CIPO officials told 
Econoff that although they are still digesting the details of 
the ruling, the decision clarifies that the appropriate 
maintenance fee throughout the life of the patent will depend 
on size of an entity at the time a patent application is 
filed, and does not need be redetermined each year to account 
for the companies growth. This is a victory for entities that 
faced the potentially catastrophic consequences of having 
their patent rights deemed "irrevocably abandoned" due to 
past adjustments. 
CELLUCCI