Canadian patents: Establishing “due care” after failure to pay a maintenance fee | Smart & Biggar

It has been four years since amendments to the Patent Act and Patent Rules were made, bringing the Patent Law Treaty (PLT) into force in Canada. The most consequential changes have proven to be the handling of missed maintenance fee payments, requiring in some instances a showing of “due care” by the applicant or patentee to excuse a missed maintenance fee payment.

Broadly, two of the “user-friendly” aspects of the PLT are (1) the requirement that anyone may pay a maintenance fee and (2) the requirement that a granting authority provide notice prior to loss of rights. This has resulted in Canada’s maintenance fee system being opened so that entities other than the Canadian agent can pay maintenance fees in more instances, and the Canadian Intellectual Property Office (CIPO) providing notice when a maintenance fee payment has been missed. If a maintenance fee remains unpaid even after notice has been given, the error can only be remedied on a due care basis.

The requirement for a showing of due care in such circumstances may appear reasonable—indeed, the applicant or patentee has been notified that the maintenance fee remains outstanding. But the circumstances in which maintenance fees go unpaid through error are often complex, and CIPO has adopted due care guideline originally created for the PCT restoration of priority regime, which involves much different and usually simpler circumstances that do not reflect the complexity of maintenance fee payment practices.

In this article, we discuss the very high threshold CIPO has set for establishing due care.

Table of Contents

Background

The maintenance fee system before October 30, 2019

Prior to October 30, 2019, only the Canadian patent agent could pay maintenance fees on a pending application. If the applicant used an annuity service, the annuity service had to instruct the Canadian agent to pay the maintenance fee. The requirement that a Canadian agent pay maintenance fees ensured that there was no confusion as to who was responsible for payment or whether payment had been made. 

In contrast, anyone could pay maintenance fees on an issued patent. This difference reflected the reality that patentees often wish to have a single entity responsible for paying maintenance fees for a patent family globally and the role of the Canadian agent who handled prosecution is often reduced post-grant.

If a maintenance fee deadline was missed on a pending application, the application would be abandoned. But the application could be reinstated within 12 months, as of right, by requesting reinstatement, and paying the missed maintenance fee and a reinstatement fee. Similarly, if a maintenance fee deadline was missed on a granted patent, the patentee had 12 months, as of right, to pay the missed maintenance fee and a late fee, before the patent would lapse.

However, CIPO was not required to provide notice that a maintenance fee had not been paid. It was therefore up to the applicant or patentee to recognize the deadline was missed and to determine and track the 12-month reinstatement or late payment deadline.

The maintenance fee system as of October 30, 2019

The Patent Act and Patent Rules were amended effective October 30, 2019 to implement the PLT, which harmonizes and streamlines many formal procedures, making them “more user friendly.1 Indeed, in testimony before Parliament, Industry Canada described the PLT as, inter alia, “applicant-friendly” and providing a “reduced risk of errors and lost rights.”2

A key feature of the PLT is the requirement that CIPO provide notice before rights are lost. In this regard, the amendments introduced a notice regime when certain fees are not timely paid—including maintenance fees. The potential benefit of the notice regime for maintenance fees was expressly addressed before Parliament, with Industry Canada noting:

Eventually, what we want to do with that is to make sure that there are fewer people who miss their [maintenance fee deadline] and eventually be in a situation where the application is irrevocably abandoned and it’s too late to do anything.3

Pursuant to the Act and Rules, as amended, if a maintenance fee is missed, CIPO must send a notice informing the applicant or patentee of the missed deadline (“the late notice”).  

The applicant or patentee then has the greater of (1) two months from the date of the late notice and (2) six months from the original deadline to pay the missed maintenance fee and a late fee. If the necessary fees are not paid, the application is deemed abandoned or the term limited for the duration of the patent is deemed to have expired.

To reverse deemed abandoned of an application or deemed expiry of a patent, the applicant or patentee must, within 12 months of the date of abandonment of an application or within 18 months of the original maintenance fee deadline of a patent, file a request to reverse the deemed abandonment or expiry, and pay the maintenance fee, a late fee, and an additional fee for the request. The applicant or patentee must also provide reasons to satisfy the Commissioner of Patents (the “Commissioner”) that the failure to pay the maintenance fee and late fee occurred in spite of the due care required by the circumstances having been taken.

If the Commissioner intends to refuse a request, CIPO will issue a letter outlining the reasons for intended refusal (an “Intent to Refuse letter”) and provide the applicant or patentee with 30 days to respond.

CIPO’s interpretation of and approach to assessing the due care standard

Overview of CIPO’s guidance

CIPO’s Manual of Patent Office Practice (“MOPOP”) outlines the expected contents of a request to reverse the deemed abandonment or expiry of an application or patent, circumstances that may justify a finding that the due care required by the circumstances was exercised and those that will not, and CIPO’s practice in assessing a request (see, sections 9.04 and 27.03 of MOPOP). 

Additionally, CIPO has maintained a website listing determinations related to due care since early 2022, and published additional observations regarding CIPO’s interpretation of the due care standard and common issues with requests CIPO has handled up August 2023. 

CIPO’s guidance has been consistent in stating that in determining whether a failure occurred in spite of the due care required by the circumstances:

The Commissioner will assess whether the applicant took all measures that a reasonably prudent applicant / patentee would have taken – given the particular set of circumstances related to the failure – to avoid the failure, and despite taking those measures, the failure occurred.  (emphasis added)

The circumstances that CIPO has indicated may justify a finding that the failure occurred in spite of the due care required by the circumstances having been taken are:

• Force Majeure
• Unexpected illness
• Facsimile or software submission failure
• Docketing system error
• Isolated human error by assistant

The circumstances that CIPO has indicated may favour a determination that the due care required by the circumstances was not taken are:

• Lack of financing by the applicant or patentee
• Human error by applicant, patentee, patent agent or other authorized person
• Lack of knowledge by the applicant or patentee
• Absence from the office

CIPO has also clarified that the focus of the Commissioner is “on the actions that were taken after the [late notice] was received” (emphasis added), and stated that all persons that were authorized by the applicant or patentee must take due care to ensure that the relevant action and payment of the late fee are completed by the due date—this includes the Canadian agent of record even where the applicant or patentee has relieved the agent of any duties related to paying maintenance fees.

Significantly, CIPO has highlighted that where an applicant’s or patentee’s response to an Intent to Refuse letter includes reasons that the Commissioner believes are unrelated to the original request, these new reasons may be disregarded.

Observations regarding CIPO’s approach to assessing due care

In the absence of any other “due care” requirement in Canadian patent law, CIPO has turned to WIPO guidance concerning due care in the context of restoration of the right of priority.4

But filing a PCT application involves totally different considerations than paying maintenance fees in the context of the global patent system. Filing a PCT application is a single deadline that all regional and national patent systems and laws, agent procedures, docketing systems, etc. are built around, namely the 12-month Convention period established under Article 4 of the Paris Convention. In contrast, a maintenance fee is just a tax (payable annually or otherwise) to maintain an application pending or keep a patent in force, merely serving as a “deadwood” clearing mechanism, and with formal and timing requirements that vary greatly on a country-by-country basis.5

A PCT application is customarily handled by a patent agent who has been involved throughout the application process. There is seldom doubt as to whether a PCT application will be filed, who will file it, or when. In contrast, not only can there be uncertainty as to whether a maintenance fee will be paid at all, even if the fee is intended to be paid there can be substantial uncertainty as to who will pay it. 

Thus, guidance concerning whether failure to file a PCT application on time can be excused does not contemplate the very different and more complex problems that can (and typically do) arise during the payment of maintenance fees.

Moreover, there are additional safeguards Parliament put in place to protect the public against revival of applications and patents for missed maintenance fee payments that are not mandated by the PLT, namely provisions that allow for the Federal Court to reverse a favourable due care finding by CIPO, and that create a safe harbour for third parties who acted in reliance on the non-payment of maintenance fees.6

What does and does not constitute due care in practice 

As of November 26, 2023, CIPO has listed 234 final due care determinations, and has found that the due care required by the circumstances was exercised in only 30 of the circumstances described.7

Success often hinges on the ability to point to a discrete error/issue and show that the late notice was appropriately handled

Successful requests have predominantly fallen in one or more of three categories:

(1) An isolated human error by an experienced, carefully chosen, well-trained, and well-supervised administrative employee, examples including:

• Incorrectly entering an application or patent number when paying maintenance fees
• Erroneously classifying the maintenance fee as being paid rather than appropriately docketing the late notice and late fee deadline
• Errors arising during when a senior employee used the payment of the maintenance fee and late fee as a training experience for a new employee

(2) A computer, software, or website issue that prevented the fees from being paid, examples including:

• CIPO’s online payment system being down or inaccessible
• An unexpected requirement by CIPO’s online payment system to submit the fees by an alternate payment means

(3) An inability to pay the maintenance fee or late fee that resulted from reasons beyond the control of the applicant or patentee, examples including:

• The patentee’s attempted payment being unknowingly blocked by the credit card company because of suspected fraudulent activity
• The applicant being legally prevented from making decisions related to spending money at the relevant time
• The applicant being incarcerated
• A representative of the patentee having to close a foreign office as a result of war and government sanctions

Significantly, in each of the cases where a human error or computer, software and/or website issue was relied upon, and in most of the cases where a request relied on reasons beyond the control of the applicant or patentee, it was clear from the requests that the applicant or patentee, or a person authorized to act on their behalf, had correctly docketed the deadline in view of the late notice and/or made efforts to take the necessary action in response to receiving the late notice.      

Where the deadline is missed for multiple reasons, considerable evidence may be required

As might be expected, it is rare that the failure to take the necessary action is the result of a single isolated error. Where multiple issues resulted in the deadline being missed, successful requests show diligence at each step of the process and by all the relevant parties, and that reliable systems were in place and appropriate individuals were assigned to handle relevant tasks. 

It is often critical to ensure that the error that ultimately led to the failure to meet the deadline is clearly defined and properly characterized  

Where CIPO classifies the failure as resulting from one of the circumstances that MOPOP states favours a determination that the due care required by the circumstances was not taken, the outcome is consistently negative. Indeed, CIPO has refused numerous requests where the failure to pay the maintenance fee and late fee was attributable to:

• A lack of knowledge related the requirements and deadlines for paying a maintenance fee and late fee   
• A lack of financing 

The more complicated situations are those in which the failure to pay the maintenance fee and late fee can be characterized as falling within the scope of one of the circumstances CIPO has indicated may justify a finding of due care and one of the circumstances CIPO has indicated may justify a finding of due care required by the circumstances was not taken. 

This is perhaps most apparent from the many decisions that rely on COVID-19 as the sole reason or a contributing reason leading to the deemed abandonment or expiry. The arrival of COVID-19 clearly falls within the category of force majeure. Additionally, COVID-19 and restrictions put in place by governments to restrict the spread of COVID-19 had numerous and varied effects on applicants and patentees. Despite the clear force majeure nature of COVID-19, CIPO has routinely taken a very strict approach to assessing whether due care was exercised when COVID-19 was one of the contributing reasons for the failure to pay the maintenance fee and late fee.

CIPO has consistently noted that the occurrence of the pandemic, and even contracting COVID-19 or being prevented from accessing necessary equipment or email inboxes due to lockdowns, are not sufficient to establish due care, with several decisions suggesting that failure to meet the deadline in such circumstances showed a lack of diligence on the part of the applicant or patentee, agent and/or annuity service.

CIPO has also routinely equated the financial strain put on businesses because of COVID-19 to a general lack of financing and planning.8 CIPO’s most recent guidance even states that a “[l]ack of financing due to business disruptions caused by the COVID-19 pandemic does not excuse a failure to pay the maintenance fee and late fee”.

It can therefore be important to establish how a particular set of circumstances was more than, for example, a general lack of financing or diligence on the part of the applicant or patentee.

Lessons from four years of experience with the due care standard 

The guidance provided by CIPO and the growing number of final determinations provides insight for drafting a successful due care submission:

1. “Due care” is a high standard and requires more than establishing that the deadline was unintentionally missed. 
2. The handling of the late notice should be described. Because the late notice is only issued when a maintenance fee is missed, and is interpreted by CIPO as being a notice to the applicant/patentee of the official status of the application/patent, CIPO considers handling of the late notice as crucial to the determination.  
3. Sufficient details allowing CIPO to conclude that due care was exercised in the circumstances should be provided. This can include, for example, evidence establishing that the system relied upon to ensure the necessary action was taken is robust and reliable, or the error that led to the failure was that of an experienced, carefully chosen, well-trained, and well-supervised employee. 
4. Where multiple parties are involved in the failure, their respective roles should be clearly outlined, as should how each party exercised due care.   
5. Where the failure to take the necessary action was the result of more than one error, the error that ultimately led to the failure should be clearly identified and the impact of each error on the sequence of events leading to the failure should be described.
6. A request to reverse an abandonment or deemed expiry should be filed in a timely manner. This will help ensure that there remains time to file a fresh request in the event that CIPO determines that a response to an Intent to Refuse letter raises new reasons that will be disregarded.

Closing Remarks  

The current maintenance fee regime is the result of amendments to the Patent Act and Patent Rules made to bring the applicant and patentee friendly PLT into force in Canada and that had the stated intention of creating a system where fewer applicants and patentees who miss a deadline end up in a situation where an application or patent is irrevocably abandoned.

Despite the purpose of the amendments and the additional safeguards put in place to protect the public where an application or patent has been abandoned or deemed expired, CIPO has adopted a very high threshold for establishing due care, with numerous decisions arguing that the applicant or patentee must show that nothing else could have been done to ensure that the deadline was not missed.

Further complicating matters is CIPO’s reliance on guidance related to establishing that due care was exercised in the context of filing a PCT application—which involves totally different considerations than paying maintenance fees and disregards the complications that can arise when multiple parties are involved in the payment of a fee—and the use of an approach that often granularly assesses each party and act described in a request individually rather than as a single set of circumstances that came about in the context of a system established by the applicant or patentee to ensure maintenance fees would be paid. 

Barring any changes to CIPO’s approach to assessing due care,9 applicants and patentees can expect that any request to reverse the deemed abandonment of an application or deemed expiry of a patent will be heavily scrutinized and will require detailed explanations of the applicant’s or patentee’s system for paying maintenance fees, and possibly the individuals or parties involved in the system. 

References

1. The aim of the PLT is “to harmonize and streamline formal procedures in respect of national and regional patent applications and patents and, thus, to make such procedures more user friendly” (emphasis added). See: Patent Law Treaty (PLT), online: WIPO . 

2. Industry Canada is the Federal Government Ministry that oversees the Patent Office.  Industry Canada’s testimony is found in: Canada, Parliament, Senate, Standing Senate Committee on National Finance,  Proceedings, 41st Parl, 2nd Sess, Issue 20 (5 November 2014).

4. CIPO routinely takes into account considerations that are taken into account by the International Bureau and Receiving Offices of WIPO as described in paragraph 166M of the Receiving Office Guidelines and, while not referred to in MOPOP, considers PCT Working Group Document PCT/WG/5/13 dated April 5, 2012 entitled Restoration of the Right of Priority, and all of paragraphs 166A to 166T of the Receiving Office Guidelines rather than just paragraph 166M.

5. For example, while maintenance fees are payable annually on the 2nd through 19th anniversaries of the filing date in Canada, no maintenance fees whatsoever are payable during the pendency of a US application, and after grant US maintenance fees are not payable annually but rather only 3.5, 7.5, and 11.5 years after the grant date. 

6. The Federal Court may reverse CIPO’s finding where the Court determines either that (a) a material allegation made by the applicant or patentee in requesting reversal of the abandonment or deemed expiry is untrue; or (b) the failure to pay the maintenance fee and late fee did not (in the Court’s assessment) occur in spite of the due care required by the circumstances having been taken. The amendments also introduced exceptions from infringement of a patent (“third party rights”) for otherwise infringing acts commencing when an application was abandoned or a patent was deemed expired for failure to pay a maintenance fee.

7. There are presently 32 positive determinations listed on the website. However, there are two positive determinations included twice.

8. CIPO extended deadlines falling beginning March 16 and ending August 28, 2022 to August 31, 2022, and considers that applicants and patentees were given sufficient time to make alternative arrangements.

9. There is an application for judicial review of one negative determination made by CIPO presently before the Federal Court, Taillefer v. Canada (Attorney General) (Docket No. T-201-23). Any decision will be the first to consider CIPO’s approach to assessing due care.

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