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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

`