Intellectual Property litigation

Artificial intelligence (“AI”) is becoming increasingly sophisticated, and the fact that this human invention can now generate its own inventions opens the door to new ways of conceptualizing the notion of “inventor” in patent law. In a recent ruling, the Supreme Court of the United Kingdom (“UK Supreme Court”) however found that an artificial intelligence system cannot be the author of an invention within the meaning of the applicable regulations under which patents are granted. This position is consistent with that of several courts around the world that have already ruled on the issue. But what of Canada, where the courts have yet to address the matter? In this bulletin, we will take a look at the decisions handed down by the UK Supreme Court and its counterparts in other countries before considering Canada’s position on the issue. In Thaler (Appellant) v Comptroller-General of Patents, Designs and Trade Mark,1 the UK Supreme Court ruled that “an inventor must be a person”. Summary of the decision In 2018, Dr. Stephen Thaler filed patent applications for two inventions described as having been generated by an autonomous AI system. The machine in question, DABUS, was therefore designated as the inventor in the applications. Dr. Thaler claimed that, as the owner of DABUS, he was entitled to file patent applications for inventions generated by his machine. That being so, he alleged that he was not required to name a natural person as the inventor. Both the High Court of Justice and the Court of Appeal dismissed Dr. Thaler’s appeal from the decision of the Intellectual Property Office of the United Kingdom not to proceed with the patent applications, in particular because the designated inventor was not valid under the Patents Act 1977. The UK Supreme Court, the country’s final court of appeal, also dismissed Dr. Thaler’s appeal. In a unanimous decision, it concluded that the law is clear in that “an inventor within the meaning of the 1977 Act must be a natural person, and DABUS is not a person at all, let alone a natural person: it is a machine”.2 Although there was no doubt that DABUS had created the inventions in question, that did not mean that the courts could extend the notion of inventor, as defined by law, to include machines. An ongoing trend The UK Supreme Court is not the first to reject Dr. Thaler’s arguments. The United States,3 the European Union4 and Australia5 have adopted similar positions, concluding that only a natural person can qualify as an inventor within the meaning of the legislation applicable in their respective jurisdictions. The UK ruling is part of the Artificial Inventor Project’s cross-border attempt to ensure that the DABUS machine—and AI in general—is recognized as a generative tool capable of generating patent rights for the benefit of AI system owners. To date, only South Africa has issued a patent to Dr. Thaler, naming DABUS as the inventor.6 This country is the exception that proves the rule. It should however be noted that the Companies and Intellectual Property Commission of South Africa does not review applications on their merits. As such, no reason was given for considering AI as the inventor. More recently, in February of this year, the United States Patent and Trademark Office issued a guidance on AI-assisted inventions. The guidance confirms the judicial position and states in particular that “a natural person must have significantly contributed to each claim in a patent application or patent”.7 What about Canada? In 2020, Dr. Thaler also filed a Canadian patent application for inventions generated by DABUS.8 The Canadian Intellectual Property Office (“CIPO”) issued a notice of non-compliance in 2021, establishing its initial position as follows: Because for this application the inventor is a machine and it does not appear possible for a machine to have rights under Canadian law or to transfer those rights to a human, it does not appear this application is compliant with the Patent Act and Rules.9 However, CIPO specified that it was open to receiving the applicant’s arguments on the issue, as follows: Responsive to the compliance notice, the applicant may attempt to comply by submitting a statement on behalf of the Artificial Intelligence (AI) machine and identify, in said statement, himself as the legal representative of the machine.10 To date, CIPO has issued no notice of abandonment and the application remains active. Its status in Canada is therefore unclear. It will be interesting to see whether Dr. Thaler will try to sway the Canadian courts to rule in his favour after many failed attempts in other jurisdictions around the world, and most recently in the UK Supreme Court. At first glance, the Patent Act11 (the “Act”) does not prevent an AI system from being recognized as the inventor of a patentable invention. In fact, the term “inventor” is not defined in the Act. Furthermore, nowhere is it stated that an applicant must be a “person,” nor is there any indication to that effect in the provisions governing the granting of patents. The Patent Rules12 offer no clarification in that regard either. The requirement implied by the clear use of the term “person” in the wording of the relevant sections of the law is important: It was a key consideration that the UK Supreme Court analyzed in Thaler.   Case law on the subject is still ambiguous. According to the Supreme Court of Canada, given that the inventor is the person who took part in conceiving the invention, the question to ask is “[W]ho is responsible for the inventive concept?”13 That said, however, we note that the conclusion reached was that a legal person—as opposed to a natural person—cannot be considered an inventor.14 The fact is that the Canadian courts have never had to rule on the specific issue of recognizing AI as an inventor, and until such time as the courts render a decision or the government takes a stance on the matter, the issue will remain unresolved. Conclusion Given that Canadian law is not clear on whether AI can be recognized as an inventor, now would be a good time for Canadian authorities to clarify the issue. As the UK Supreme Court has suggested, the place of AI in patent law is a current societal issue, one that the legislator will ultimately have to settle.15 As such, it is only a matter of time before the Act is amended or CIPO issues a directive. Moreover, in addition to having to decide whether AI legally qualifies as an inventor, Canadian authorities will have to determine whether a person can be granted rights to an invention that was actually created by AI. The question as to whether an AI system owner can hold a patent on an invention generated by their machine was raised in Thaler. Once again, unlike the UK’s patent act,16 our Patent Act does not close the door to such a possibility. Canadian legislation contains no comprehensive list of the categories of persons to whom a patent may be granted, for instance. If we were to rewrite the laws governing intellectual property, given that the main purpose such laws is to encourage innovation and creativity, perhaps a better approach would be to allow AI system owners to hold patent rights rather than recognizing the AI as an inventor. Patent rights are granted on the basis of an implicit understanding: A high level of protection is provided in exchange for sufficient disclosure to enable a person skilled in the art to reproduce an invention. This ensures that society benefits from such inventions and that inventors are rewarded. Needless to say, arguing that machines need such an incentive is difficult. Designating AI as an inventor and granting it rights in that respect is therefore at odds with the very purpose of patent protection. That said, an AI system owner who has invested time and energy in designing their system could be justified in claiming such protection for the inventions that it generates. In such a case and given the current state of the law, the legislator would likely have to intervene. Would this proposed change spur innovation in the field of generative AI? We are collectively investing a huge amount of “human” resources in developing increasingly powerful AI systems. Will there come a time when we can no longer consider that human resources were involved in making AI-generated technologies? Should it come to that, giving preference to AI system owners could become counterproductive. In any event, for the time being, a sensible approach would be to emphasize the role that humans play in AI-assisted inventions, making persons the inventors rather than AI. As concerns inventions conceived entirely by an AI system, trade secret protection may be a more suitable solution. The professionals on our intellectual property team are at your disposal to assist you with patent registration and provide you with a clearer understanding of the issues involved. [2023] UKSC 49 [Thaler]. Ibid., para. 56. See the decision of the United States Court of Appeals for the Federal Circuit in Thaler v Vidal, 43 F. 4th 1207 (2022), application for appeal to the Supreme Court of the United States dismissed. See the decision of the Boards of Appeal of the European Patent Office in J 0008/20 (Designation of inventor/DABUS) (2021), request to refer questions to the Enlarged Board of Appeal denied. See the decision of the Full Court of the Federal Court of Australia in Commissioner of Patents v Thaler, [2022] FCAFC 62, application for special leave to appeal to the High Court of Australia denied. ZA 2021/03242. Federal Register: Inventorship Guidance for AI-Assisted Inventions. CA 3137161. Notice from CIPO dated February 11, 2022, in Canadian patent application 3137161. Ibid. R.S.C., 1985, c. P-4. SOR/2019-251. Apotex Inc. v. Wellcome Foundation Ltd., 2002 SCC 77 at paras. 96–97. Sarnoff Corp. v. Canada (Attorney General), 2008 FC 712, para. 9. Thaler, paras. 48–49, 79. Ibid., para. 79.

Can a patent be infringed even if the patented product is not manufactured, assembled, or even used?  Indeed, such infringement is possible. In fact, this is known as the theory of inducement of infringement. Naturally, acts of “inducement” must meet certain conditions before inducement of infringement can be found. The Federal Court of Appeal recently clarified these conditions. Inducing infringement and the applicable test For example, if the patented invention is a solution containing components A, B, and C of a drink where component C is water, it is likely that if components A and B are sold to a consumer and said consumer is told to add a certain amount of water, mix well, and drink, the consumer can be said to have been induced to infringe the patent. To determine whether inducement of infringement has occurred, the courts apply a three-prong test. First, the acts of infringement must have been completed by the direct infringer. In the previous example, this would be the consumer.  There can be no inducement of infringement if there has been no direct infringement. Second, the completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place (for example, by selling the material and providing instructions). Third, influence must be knowingly exercised by the inducer; in other words, the inducer knows that this influence will result in the completion of the acts of infringement. The Federal Court case Returning to the Court of Appeal’s decision: in this case, Janssen had sued Apotex for inducing infringement of a patent.  An important point is that the patent on the drug had expired. However, Janssen claimed that Apotex was inducing physicians to prescribe the drug in combination with a specific inhibitor to treat a rare condition called pulmonary arterial hypertension (PAH). Janssen’s patent covers the combination of the drug and the inhibitor to treat PAH. Apotex would have sold the drug alone, without including the inhibitor or the combination, had Health Canada authorized its drug.1 Nowhere in the product monograph is it suggested that the drug be used in combination with the inhibitor in question. However, the drug was being prescribed to treat PAH. The parties agreed that the first prong of the test had been met, namely that the drug was likely to be prescribed with the inhibitor to treat PAH. It was the second and third prongs that were actually at issue: Could Apotex be inducing infringement even though its product monograph contains no suggestion for use in combination with the inhibitor in question? The Federal Court had concluded that the second and third prongs of the test for inducing infringement had been met. It ruled that the product monograph sufficiently influenced physicians to prescribe the drug in combination with the inhibitor, and that Apotex knew that marketing the drug along with the product monograph would influence physicians to prescribe it with the inhibitor. This reasoning is based primarily on a study cited in the product monograph, which showed that the drug, whether prescribed alone or with the inhibitor, was safe and effective.  The Federal Court of Appeal’s decision The Court of Appeal upheld the Federal Court’s decision, adding that influence need not be explicit. The Court thus affirmed that the absence of explicit instruction and of intention that direct infringement should result does not mean that there is no influence sufficient to satisfy the second prong. Therefore, while explicit instruction and intention may be relevant to assessing influence, they are not required. The Court of Appeal stated that: “Even without explicit reference to combination treatment, the Federal Court was entitled to find that the Apo-Macitentan PM would influence use of macitentan in that way.”2 With respect to the third prong, the Court of Appeal reiterated that the inducer must know that their actions or influence will lead another party to engage in specific activity, but that it is not necessary to prove that the inducer knows that such activity will constitute patent infringement.  The Court of Appeal upheld the conclusion that, in the circumstances, Apotex knew or should have known that the product monograph for its drug would influence physicians to prescribe it in combination with the inhibitor to treat PAH. Conclusion Implicit influence can lead to findings of patent infringement when it can be said that the inducer should have been aware of the consequences of their actions. This decision confirms that Canadian courts have a flexible legal tool to protect inventions. The text is in the conditional tense because the action was brought under the Patented Medicines (Notice of Compliance) Regulations, which establish specific rules regarding litigation in the pharmaceutical industry and prevent Health Canada from authorizing the sale of a generic version of a drug that would infringe certain patents in certain circumstances. Apotex Inc. v. Janssen Inc., 2023 FCA 220 (CanLII), para. 17.

Last Wednesday (July 26), the Federal Court of Appeal (FCA) handed down its highly awaited decision on the patentability of computer-implemented inventions (software patents). In Canada (Attorney General) v. Benjamin Moore & Co. (2023 CAF 168), the FCA rejected the test proposed by the Intellectual Property Institute of Canada (IPIC) in the first instance decision, Benjamin Moore & Co. c. Canada. On the one hand, according to the Court of Appeal, Justice Gagné of the Federal Court should not have included IPIC’s proposed framework in the operative provisions of her ruling because it was not requested in the parties’ application. In addition, in the FCA’s opinion, establishing an analytical framework for software patents would be premature, as many issues have yet to be properly considered by any court in Canada. So, back to square one? Not quite… Review of the facts of the Benjamin Moore case (2022) This FCA decision—the most recent in the Canadian software patent saga—establishes a modicum of order against a highly unusual backdrop. For those of you who have just joined the debate, here is a short summary of the facts. As part of a national initiative, Benjamin Moore applied for two software patents in Canada in 2010.1 The software in question was designed to help users navigate a colour bank based on criteria such as “emotion” and “harmony”. In October 2014, both applications were rejected on the grounds that they dealt with non-patentable subject matter. By applying an analytical framework that the Canadian Intellectual Property Office (CIPO) referred to as a “problem-solution” approach, the CIPO examiner concluded that the inventions in question were akin to applying mathematical formulas to a database. Mathematical formulas, however, are not patentable. In May 2020, the Patent Appeal Board confirmed CIPO’s decision. In November 2020, Benjamin Moore appealed the decision before the Federal Court. In an unusual move, during a hearing on March 30, 2022, the Attorney General immediately acknowledged, in light of the Choueifaty2decision handed down in the interim, that the Commissioner of Patents did not apply the right test and agreed to send the patent applications back for review. In another unusual move, IPIC intervened as a third party on the grounds that the case transcended the parties’ interests because CIPO examiners continued to apply the incorrect software patentability criteria despite repeated criticism by the courts. In so doing, IPIC sought to take the matter further with a view to making the process of granting software patents more predictable, i.e., by setting out the analytical framework that CIPO should apply when examining such cases. In a surprising judgment, Justice Gagné agreed with IPIC’s request: the patent applications were sent back for review based on IPIC’s proposed analytical framework. This declaratory judgment recognized the need for IPIC’s proposed analytical framework. Overnight, this framework became the applicable test for software patents. IPIC’s intervention in Benjamin Moore (2022) or the need to clarify the analytical framework for software patents This was not the first time that IPIC intervened as a third party in a patent case. This type of participation is not always looked on favourably by the courts, particularly with regard to administrative reviews. Moreover, last Friday (July 28), in the case of Taillefer v. Canada,3 Madam Justice McDonald rejected IPIC’s intervention after applying the FCA’s three-step test.4 In her decision, she stated that “to the extent IPIC intends to make submissions on the issue of the proper approach to statutory interpretation, as noted by the Federal Court of Appeal above, such an intervention is inappropriate”. However, a number of patent agents and jurists were delighted in 2022 to see that a more predictable analytical framework had emerged. Clearly, IPIC’s intervention was unusual, but we must revisit the long-running Canadian software patent saga to fully grasp the problem that IPIC was attempting to resolve. It should be noted that the Patent Act remains silent on the topic of software. In it, an invention is defined as “any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture or composition of matter”.5 When software is being patented, we must fall back on a creative description of exactly what is involved, e.g., by describing it as a process or a storage device containing instructions that, once carried out by a computer, produce specific effects. The lack of a proper legislative framework for software leaves a void that the courts must fill by interpreting a law that was last overhauled when Windows 95 was released, along with its 13 floppy disks! In the early 1970s, the Patent and Copyright Office, tasked with examining patent applications, issued a notice for patent professionals explaining that, in its view, software was non-patentable subject matter. However, in the wake of United States v. Waldbaum,6 the Patent Office showed more openness, though it backtracked in 1978 in a bid to harmonize its practices with American and British jurisprudence at the time. In 1981, the Schlumberger case7 became the landmark decision in the area of software patents, with the court ruling that software that relied on the simple execution of a mathematical formula by a computer could not be patented. The Patent Office’s narrow interpretation led to the rejection of large numbers of patent applications. When these cases were appealed, however, most of them were deemed to contain patentable subject matter and were sent back to the examiners for further review. In 1984, CIPO’s directive became more permissive after amendments were made. In 2009, however, the Patent Office rejected an application that had been filed by Amazon, on the grounds that it dealt with non-patentable subject matter. In 2011, the FCA took the Patent Office to task for using a simplified test for evaluating software patents.8 The Patent Office appeared to be applying certain jurisprudence principles too generally, without taking the relevant facts and context into account. Amazon’s patent dealt with the use of cookies to facilitate online purchases without authentication (the famous “one-click” patent). CIPO had difficulty understanding that an invention could be entirely intangible. The patent was finally granted. However, instead of following the FCA’s recommendations, CIPO issued new practice notices in 2012 and 2013 without taking recent jurisprudence into account. The contradictions between the practice notices and the jurisprudence led to unpredictability in the patent review process, during which examiners either adhered to the practice notices or to the jurisprudence. In summer 2020, the Federal Court criticized CIPO in the Choueifaty case,9 explaining that the problem-solution approach described in CIPO’s Manual of Patent Office Practice was not in line with Canadian jurisprudence. In the aftermath of this decision, CIPO modified its practice notices by re-establishing certain principles that had actually been prohibited in the Amazon decision, such as applying principles of section 27(8) of the Patent Act to the notion of an “actual invention”, rather than to “the subject-matter defined by the claim”.10 In short, while the complexity of software grows exponentially, patent law is drawn one decision at a time, while inventors bide their time while grappling with various uncertainties. When IPIC intervened as a third party in the Benjamin Moore case and proposed an analytical framework, the hope was to put an end to 50 years of confusion and unpredictability. Unease in the aftermath of Benjamin Moore (2022) Understandably, this declaratory judgment produced a certain sense of unease among CIPO and the Attorney General, who appealed the matter in fall 2022. Following the Federal Court judgment, CIPO argued that it would be difficult for an examiner to adapt the analytical framework to new situations without risking a contempt of court charge. In addition, since the initial Federal Court application filed by Benjamin Moore was not aimed at obtaining a declaratory judgment, the Attorney General argued that the Court should have adhered to the conclusions sought by Benjamin Moore and the Attorney General. The appeal of the judgment thus focused on whether it was appropriate to issue a declaratory judgment that imposed an analytical framework at the request of a third party. Judicial minimalism — Benjamin Moore (2023) In its 41-page decision handed down on July 26, the FCA reiterated the importance of judicial minimalism while granting the Attorney General’s request to do away with CIPO’s analytical framework. The FCA was unequivocal when it came to including the analytical framework in the mechanism provided for in the lower court ruling: Given the lack of a detailed analysis in the FC Decision, the Federal Court’s statement that the current version of MOPOP (as amended by PN2020-04) was irrelevant, and the lack of consideration of all relevant case law, it appears to me that it did little more than “leapfrog” the test to our Court by including it in its judgment instead of its reasons. This exercise, which is quite different from dealing with an issue that was not necessary to determine the appeal before it in obiter, is inappropriate. It does not involve “judicial courage”, as IPIC argued before the Federal Court.11 The FCA also noted that “interveners cannot seek a remedy that was not sought by the parties themselves”.12 Moreover, it stated that “subject to limited exceptions, unless a request to include a particular framework for all computer-implemented inventions in the judgment is a remedy specifically sought in the notice of appeal, it should normally not be considered”.13 Finally, recognizing that the Federal Court does have the power to render declaratory judgments, the FCA noted that even if an application is duly submitted, the court’s “discretion to grant such relief can only be exercised after considering the four-part test set out by the Supreme Court in Ewert v. Canada, 2018 SCC 30 at paragraph 81”.14 Rejection of IPIC’s analytical framework After concluding that she could have rectified the lower court judgment by applying the four-part test, Justice Gauthier held that IPIC’s proposed framework was not adequate and that too many open questions remained that should be analyzed by the courts before any such analytical framework could be imposed. The decision, however, offered some obiter advice by emphasizing the need for patents to add to the body of human knowledge. In this regard, Justice Gauthier wrote “[The] difficulty often lies in determining where the discovery lies, i.e., what new knowledge has been added to human wisdom” and further on, “If the only new knowledge lies in the method itself, it is the method that must be patentable subject matter.” Now that IPIC’s proposed framework was rejected, practitioners will have to fall back on previous decisions to determine whether software is patentable or not. The challenge posed by software patents To understand why CIPO is reluctant to grant software patents at times, we must bear in mind that patents are an exception to the principle of competition. Section 79(5) of Competition Act15 stipulates that exercising a monopoly obtained via a patent or other intellectual property rights is not an anti-competitive act. This privilege, which is granted to the patent-holder for a 20-year period, is designed to provide compensation for the public disclosure of the invention, with potential benefits for society as a whole. The exchange principle is not a recent development: most patent systems in current use were inspired by England’s Statute of Monopolies adopted in 1623. The odds are, however, that the English in the 17th century had no inkling that software applications would ever come into existence. Historically speaking, patented inventions include a tangible component: a machine, a device, the transformation of raw materials, etc. In contrast, unpatented inventions often have an intangible quality, e.g., abstract ideas, mathematical formulas, esthetic considerations, music, etc. When software applications emerged, sophistry became inevitable! Moreover, the notion of “software” itself is hard to define. Software is more than the code used to put together an application (code is copyright-protected, rather than patent-protected). For example, two programmers following the same requirements and specifications will no doubt end up creating different implementations, compiled to different machine instructions. Once these instructions are executed, however, what could be regarded as the same software will emerge. In some ways, patenting a software is akin to patenting certain aspects of its specifications. When we are interested in a mechanical invention and we describe its fundamental components, we realize that it is made up of parts with specific shapes and sizes attached to each other. In contrast, when we break a software application down into its fundamental components, we find various states, thresholds and conditions, which are often described using abstract concepts and mathematical formulas. Unfortunately, these components are dangerously akin to a type of subject matter formally excluded by the Patent Act. Section 27(8) thereof states that “No patent shall be granted for any mere scientific principle or abstract theorem”. This exclusion is designed to ensure that scientific principles remain universally accessible with a view to fostering research and innovation. Therefore, examiners are duty-bound to reject applications that appropriate scientific principles. Depending on whether an examiner focuses on the overall objective of the software or on its individual components, he or she will conclude that it is patentable or not. The difficulty lies in recognizing that, as a general rule, software is more than a set of mathematical formulas. In other words, a much broader view is needed, i.e., one that looks at the forest as a whole, rather than at the individual trees. That is what the Canadian courts have referred to as “purposive construction”. In the Benjamin Moore case, the FCA described purposive construction as a “difficult exercise even for judges”16 and pointed out that if errors do occur, it is because “CIPO and the Commissioner simply did not properly understand all of the subtleties of this difficult exercise”.17 Striking a more positive note in the same paragraph, the judge offered reassurances that the need to apply this method should no longer be problematic because “[as] noted by the AG, the Commissioner did not appeal the decision in Choueifaty, as it did help clear up some misunderstanding in respect of purposive construction […]”. Whether or not we find that reassuring, we have to acknowledge that IPIC’s intervention might not have been the ideal solution to this problem, particularly when we realize that Benjamin Moore was taken hostage by a debate that transcends the private sphere. No doubt, IPIC’s efforts do deserve recognition. But perhaps we should also be asking ourselves whether allowing the courts to draw up an analytical framework one decision at a time is an effective way of establishing software patent law, especially when such a piecemeal manner of progression undoubtedly comes at the expense of the inventors. https://www.ic.gc.ca/opic-cipo/cpd/eng/patent/2695130/summary.html and https://www.ic.gc.ca/opic-cipo/cpd/eng/patent/2695146/summary.html Choueifaty v. Canada (Attorney General), 2020 CF 837. Taillefer v. Canada (Attorney General), 2023 FC 1033. Right to Life Association of Toronto and Area v. Canada (Employment, Workforce and. Labour), 2022 CAF 67. Patent Act, RSC 1985, c. P-4, sec. 2. In re Waldbaum, 559 F.2d 611, 194 USPQ 465. Schlumberger Canada Ltd. v. The Commissioner of Patents, [1982] 1 CF 845. Amazon.com, Inc. c. Canada (Procureur général), 2011 CAF 328 Choueifaty v. Canada (Attorney General), 2020 CF 837. Amazon.com, Inc. v. Canada (Attorney General), 2011 FCA 328, par. 39. Canada (Attorney General) v. Benjamin Moore & Co., 2023 CAF 168, par. 29. Canada (Attorney General) v. Benjamin Moore & Co., 2023 CAF 168, par. 32, citing Tsleil-Waututh Nation v. Canada (Attorney General), 2017 CAF 174, para. 54-55; Zak v. Canada (Attorney General), 2021 CAF 80, para. 4 Canada (Attorney General) v. Benjamin Moore & Co., 2023 CAF 168, par. 34, citing Pfizer Canada Inc. v. Teva Canada Ltd., 2016 CAF 218, para. 21 to 22; Boubala v. Khwaja, 2023 CF 658, para. 27; Hendrikx v. Canada (Public Safety), 2022 CF 1068, para. 27. Canada (Attorney General) v. Benjamin Moore & Co., 2023 CAF 168, para. 35. Competition Act, RSC 1985, c. C-34. Canada (Attorney General) v. Benjamin Moore & Co., 2023 CAF 168, para. 43. Canada (Attorney General) v. Benjamin Moore & Co., 2023 CAF 168, para. 44.

Prior user rights have long been recognized in Canadian patent law. These rights, which are a defence against patent infringement, are seen as a means of ensuring fairness by allowing a person who has independently manufactured, used or acquired an invention that is subsequently patented to continue using the invention. A revised version of section 56 of the Patent Act, which defines prior user rights and is similar to section 64 of the UK Patents Act, came into force on December 13, 2018. The revised provision applies to an action or proceeding commenced on or after October 29, 2018, involving a patent issued from an application filed on or after October 1, 1989. The pith and substance of prior user rights under the revised provision had never been judicially interpreted until a recent Federal Court decision was handed down in Kobold Corporation v. NCS Multistage Inc. The two corporations involved in the case supply equipment used in the oil and gas industry for hydraulic fracturing. Kobold Corporation (hereinafter Kobold, the plaintiff) alleged that four of NCS Multistage Inc.’s (hereinafter NCS, the defendant) proprietary fracturing tools infringed Canadian Patent No. 2,919,561, and NCS petitioned the Court through a motion for summary judgment to dismiss the infringement action on the basis of prior user rights. In its analysis of section 56 in its current form, the Court considered the English and French versions of the section, legislative history, Canadian jurisprudence on the previous section 56 and the corresponding legislation in the UK. The Court began by pointing out that section 56 of the Patent Act, effective since December 13, 2018, grants broader rights than the former section 56 did, underscoring the three following differences: First, it noted that the previous legislation was limited to granting “a prior user the right to use and sell” a physical product, whereas the current provision “grants a prior user the right to commit an “act” that would have otherwise constituted infringement.” It added that the word “act” must be interpreted in light of section 42 of the Patent Act, which grants exclusive rights to “making, constructing and using the invention and selling it to others to be used,” which includes patented methods. This interpretation may limit the rights of prior users, and the Court gave the example of a prior user who previously manufactured and used a device—they can continue to manufacture and use it, but they cannot rely on a prior use defence under section 56 to begin selling the device, as selling is different from manufacturing or using within the meaning of the Act.   Second, it pointed out that whereas the previous legislation “limited the protection to the sale or use of the [...] physical manifestation of the invention”, section 56 as amended protects the commission of an act “that would have constituted infringement.” Third, it pointed out that the current legislation extends protection to a person who “made serious and effective preparations to commit [...] an act” of infringement prior to the claim date, which was not the case under section 56 in its previous form. The parties had different interpretations of the term “same act” contained in subsection 56(1), particularly as to the degree of similarity required. The Court determined that the word “same” in subsection 56(1) means “identical” with respect to an act, while subsections 56(6) and 56(9) “allow a third party defence of prior use on the less stringent standard of “substantially the same.”” The Court stated that a prior user may “add to or alter” aspects that “do “not [...] infringe the patent”, for example by changing a device’s paint colour, but the prior user may not alter an aspect that relates to the invention’s inventive concept. The Court then set out the factors that must be considered in assessing the defence of prior user rights under subsection 56(1). Verbatim, it stated: First, one must determine whether the acts being performed before and after the claim date are identical [...]. If they are, then there is no need to consider infringement, as subsection 56(1) would always provide a defence to any potential infringement. Second, if the acts are not identical, one must determine whether the acts infringe the patent, and if they do, which claims. If the post-claim acts do not infringe the patent, then there is no “otherwise infringing acts” and therefore no need to rely on subsection 56(1). If the pre-claim acts do not infringe the patent, subsection 56(1) cannot apply. If the post-claim date acts infringe a particular claim of the patent that the pre-claim date acts do not, subsection 56(1) cannot apply. Finally, if the pre- and post-claim date acts are not identical but only infringe the same claims, then one must determine whether the changes relate to the inventive concept of the patent. If they do not, then subsection 56(1) will provide a defence. The Court concluded that a motion for summary judgment is only appropriate in cases where acts committed before and after the claim date are clearly identical, and thus where it is not necessary to “construe the claims [...] or conduct an infringement analysis.” In this case, given that the acts performed by NCS before and after the claim date differed, the Court concluded that a full trial was required to analyze the issue of infringement and the application of subsection 56(1) of the Patent Act.  Conclusion This first detailed analysis of section 56 of the Patent Act as amended in December 2018 has clarified several aspects of a defence against patent infringement based on prior user rights. It will certainly serve as a foundation for future decisions involving this issue. However, the application of subsection 56(1) of the Patent Act was not examined in this motion for summary judgment. We’ll have to wait for a future trial on the issue for more insight on the scope of prior user rights under Canadian law.