Publications

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.

Ahead of the 2021 holiday season, as children dream about the toys that Santa Claus will bring them, let’s take a look back at a landmark decision that reviews what is copyrightable under the Copyright Act. As visual artist Claude Bouchard (“Bouchard”) learned from the outcome of her legal action against Ikea Canada (“Ikea”),1 the Copyright Act2 does not protect the ideas, styles or methods developed and used by artists to create their works, even if their work is exhibited in museums and marketed internationally. From 1994 to 2005, Bouchard sold in a Montreal’s Unicef store soft toys that she designed based on children’s drawings. In September 2014, Ikea held a drawing competition for children and made 10 soft toys from the winning entries, marketed as part of the “Sogoskatt” collection. A portion of the profits were donated to UNICEF. Originally, Bouchard was seeking a monetary award against UNICEF and Ikea for copying her toys, alleging that they had used, in particular, her idea, her original style and her methods. In 2018, the Superior Court ruled on the case for the first time, dismissing the legal action against UNICEF based on the privileges and immunities of the United Nations.3 UNICEF’s immunity from suits is in this case absolute since Bouchard’s legal action is directly related to the organization’s mission.4 In January 2021, Justice Patrick Buchholz of the Superior Court put an end to the dispute between Bouchard and Ikea, dismissing the legal action for infringement of Bouchard’s works based on the Copyright Act as being ill-founded, destined to fail and unreasonable, thus opening the door to its dismissal for abuse of process.5 Why was Bouchard’s infringement action ill-founded? The Court first examined the arguments put forward by Ikea to the effect that two essential elements giving rise to the infringement action6 could not be demonstrated by Bouchard: There is no evidence that Ikea had access to Bouchard’s work.7 There is no evidence that Ikea reproduced a substantial part of the plaintiff’s work. Therefore, Ikea argues that there was no infringement of the copyright of Bouchard, who was seeking a monopoly on an idea, style or method, which is not protected under the Copyright Act8 Lack of access to Bouchard’s works The Court did not accept Ikea’s first argument that there was a lack of access to Bouchard’s works. It ascertained that the proceedings were at a too preliminary stage to make a determination.9 The Honourable Justice Buchholz pointed out that section 51 of the Code of Civil Procedure is not [our translation] “a free pass to bypass the judicial process and prematurely set aside otherwise allowable claims” when the evidence is still incomplete.10 The Court also noted the seriousness of the links between Ikea and UNICEF, which may have made access to Bouchard’s works possible and likely.11 In this context, only a hearing on the merits could have clarified the question of access to Bouchard’s works by making it possible to test, more precisely, the credibility of the witnesses at trial.12 Lack of reproduction of a substantial part of the work Bouchard alleged that the toys designed by Ikea incorporate eight essential features of her soft toy concept, namely [our translation]: Round eyes cut from non-fraying fabrics and sewn around the edges; Thinly cut linear mouths sewn into non-fraying fabrics; iii. Polyester fibre stuffing; iv. The toy is proportionate to the size of children’s hands; v. Soft toy faithful to the child’s drawing; vi. Child’s name and age on the tag; vii. Everything is solid (head, body, legs, and tail), in the same plane and stuffed; viii.  Use of textiles, plush, and the original colours of the drawings.”13 However, the Court accepted Ikea’s second argument that Ikea’s soft toys did not reproduce a substantial part of Bouchard’s work. Since Bouchard’s works and Ikea’s works did not share a resemblance, this means that a substantial part of the works was not reproduced.14 How to determine if a “substantial part” of a work has been reproduced? Under the Copyright Act, copyright, “in relation to a work, means the sole right to produce or reproduce the work or any substantial part thereof”.15 The Supreme Court defined “substantial part” of the work in the Cinar decision,16 stating that it is a flexible notion to be interpreted based on the facts. The assessment is holistic and qualitative in nature. The criteria to be used by the courts to determine whether there has been a reproduction of a “substantial part” of a work are as follows: The originality of the work, which must be protected under the Copyright Act;17 The part “represents a substantial portion of the author’s skill and judgment”;18 The nature of the two works as a whole, without looking at isolated passages;19 “[T]he cumulative effect of the features copied from the work”.20 Although there are some similarities between the Bouchard and Ikea soft toys, the soft toys are completely different and do not look the same because they are designed from the drawings of different children. Bouchard even admitted that [our translation] “a toy made from a unique child’s drawing is in itself a unique toy”.21 Can the Copyright Act protect an idea, a concept or a body of work? Bouchard instead claimed that Ikea illegally reproduced her idea, concept, style or methods.22 She ultimately argued that Ikea did not copy a specific work, but instead copied her “work” in a broader sense.23 Bouchard’s arguments highlight issues that often come up in the court system and demonstrate a misunderstanding of what is protected by copyright. Copyright of an idea, concept, style or method In 2004, the Supreme Court pointed out that copyright protects the expression of ideas in a work and not the ideas themselves.24 Justice Buchholz rightly pointed out that an artist can be inspired by another artist without infringing the rights protected by the Copyright Act. He noted, for example, that if styles were protected, Monet could not have painted in the Impressionist style.25 The Court also noted that the soft toys made by Bouchard correspond to a generic style dictated by safety standards for the manufacture and sale of toys.26 Thus, the Copyright Act does not offer any protection for ideas, concepts, styles or manufacturing methods and techniques. Copyright of an artistic legacy, corpus, or collection The Court specified that the Copyright Act does not protect a body of work or an artistic legacy, but rather each individual work.27 Bouchard c. Ikea Canada, 2021 QCCS 1376. R.S.C. 1985, c. C-42. Bouchard c. Ikea Canada, 2018 QCCS 2690. Idem, para. 24–25. Section 51, Code of Civil Procedure, CQLR c. C-25.01. Section 2, “infringing”, Copyright Act. Bouchard c. Ikea Canada, supra, note 1, para. 16–17. Idem, para. 15. Idem, para. 34. Idem, para. 28. Idem, para. 37–39. Idem, para. 40. Idem, para. 49. Idem, para. 55. Section 3, Copyright Act. Cinar Corporation v. Robinson, 2013 SCC 73, para. 26, 35–36. Idem, para. 26. Idem. Idem, para. 35. Idem, para. 36. Bouchard c. Ikea Canada, supra, note 1, para. 53. Idem, para. 56. Idem, para. 69. CCH Canadian Ltd. v. Law Society of Upper Canada, 2004 SCC 13, para. 8. Idem, para. 67. Toys Regulations, SOR/2011-17, adopted under the Canada Consumer Product Safety Act, S.C. 2010, c. 21, s. 29, 31–32. Bouchard c. Ikea Canada, supra, note 1, para. 69–71.

Do you have the right to copy source code written and developed by someone else? The answer to this question depends on the situation; however, even in the context of open innovation, intellectual property rights will be the starting point for any analysis required to obtain such an answer. In the software industry, open-source licences allow anyone to access the source code of corresponding software, free of charge and with few restrictions. The goal is generally to promote the improvement of this code by encouraging as many people as possible to use it. Linus Torval, the programmer of the Linux kernel (certainly one of the most well-known open-source projects) recently stated that without the open-source approach, his project would probably not have survived.1 However, this approach has legal consequences: Vizio was recently hit with a lawsuit alleging non-compliance with an open-sourceGPL licence used in the SmartCast OS software embedded in some of its televisions. It is being sued by Software Freedom Conservancy (“SFC”), an American non-profit promoting and defending open-source licences. As part of its lawsuit, SFC alleges, among other things, that Vizio was required to distribute the SmartCast OS source code under the above-mentioned open-source GPLlicence, which Vizio failed to do, thereby depriving consumers of their rights2. In Canadian law, section 3 of the Copyright Act3 gives the author the exclusive right to produce or reproduce all or any substantial part of an original work. This principle has been adopted by all signatories of the 1886 Berne Convention, i.e., almost every country in the world. A licence agreement, which may inter alia confer the right to reproduce the work of another person, can take different forms. It also establishes the extent of the rights conferred and the terms and conditions of any permitted use. However, not all open-source licences are equivalent. Many allow creators to attach various conditions to the right to use the code that has been made available. Under these licences, anyone may use the work or software, but subject to the following constraints, depending on the type of licence in effect: Obligation to display: An open-source licence may require disclosure of certain information in the software or in the source code itself, such as the following: The author’s name or pseudonym, or even maintaining the anonymity of the author, depending on their wishes, and/or a citation of the title of the work or software; The user licence of the redistributed open-source work or software; A modification note for each modified file; and A warranty disclaimer. Contribution obligations: Some licences require the sharing of any modifications made to the open-source code, with said modifications being under the same licence conditions. In some cases, this obligation extends to any software that incorporates the open-source code. In other words, code derived from open-source material can itself become open-source. This obligation to contribute can generally be categorized as follows: Any redistribution must be done under the original licence, making the result open-source as well; Any redistribution of the code, modified or not, must be done under the original licence, but other code may be associated or added without being subject to the open-source licence; or Any redistribution is done without any sharing constraints. Ban on commercialization: Some licences prohibit any use for commercial purposes. Apache v2 Level of obligation to contribute upon redistributionAny redistribution of the software, modified or not, or with added components, must be done under the terms of the original licence. Mandatory elements to display Licence of the redistributed open-source software Identification of any changes made to the code Copyright notice Warranty disclaimer Commercial use permittedYes BSD Level of obligation to contribute upon redistributionAny redistribution of the software can be done without any obligation to share. Mandatory elements to display Copyright notice Warranty disclaimer Commercial use permittedYes CC BY-NC 4.0 Level of obligation to contribute upon redistributionAny redistribution of the software can be done without any obligation to share. Mandatory elements to display Licence of the redistributed open-source software Identification of any changes made to the code Copyright notice Warranty disclaimer Commercial use permittedNo CC0 1.0 Level of obligation to contribute upon redistributionAny redistribution of the software can be done without any obligation to share. Mandatory elements to display Licence of the redistributed open-source software Commercial use permittedYes GPLv3 Level of obligation to contribute upon redistributionAny redistribution of the software, modified or not, or with added components, must be done under the terms of the original licence Mandatory elements to display Licence of the redistributed open-source software Identification of any changes made to the code Copyright notice Warranty disclaimer Commercial use permittedYes, but sub-licensing is not allowed LGPLv3 Level of obligation to contribute upon redistributionAny redistribution of the software, modified or not, must be done under the terms of the original licence. New components can be added, but not integrated, under other non-open-source licences Mandatory elements to display Licence of the redistributed open-source software Identification of any changes made to the code Copyright notice Warranty disclaimer Commercial use permittedYes MIT Level of obligation to contribute upon redistributionAny redistribution of the software can be done without any obligation to share. Mandatory elements to display Licence of the redistributed open-source software Copyright notice Warranty disclaimer Commercial use permittedYes It is important to make programming teams aware of the issues that can arise when using modules governed by what are known as “viral licences” (such as the CC BY-NC 4.0 licence) in the design of commercial software. Such software could lose significant value if such modules are incorporated, making it difficult or even impossible to commercialize said software. In the context of open innovation where developers want to share their code, in particular to encourage collaboration, it is important to understand the scope of these different licences. The choice of the appropriate licence must be made based on the project’s objectives. Also, keep in mind that it is not always possible to change the licence used for the distribution of the code once said distribution has commenced. That means the choice of licence can have long-term consequences for any project. David Cassel, Linus Torvalds on Community, Rust and Linux's Longevity, The NewStack, Oct. 1, 2021, online: https://thenewstack.io. See the SFC press release: https://sfconservancy.org/copyleft-compliance/vizio.html. RSC 1985, c. C-42.

In Canada, as elsewhere in the world, intellectual property owners have made numerous attempts to control their distribution channels through trademark law, copyright law, or exclusive contracts, without much success. However, in a recent decision (Costco Wholesale Canada Ltd. c. Simms Sigal & Co. Ltd.,1 hereinafter referred to as “Costco”), the Court of Appeal of Quebec found that Costco Wholesale Canada Ltd. had committed the fault of contractual interference in a situation involving the grey market, also known as “grey marketing.” This decision calls into question a long series of decisions on the legality of the grey market and the principle of free competition, which is well established in Quebec law.2 The grey market is defined as follows: Goods that are imported contrary to the wishes of the copyright holder or an authorized importer in a specific territory. It refers to goods which, as a general rule, are legitimately marketed in the foreign market, but whose presence in the local market is clouded by allegations of infringement. For this reason it is referred to as the ‘grey market’ in contrast to the black market, in which copyright is infringed, and the white market, where there is no copyright infringement.1 The Court of Appeal for Ontario recently confirmed that grey marketing is a legal way of buying genuine branded products abroad and reselling them in competition with a local distributor of the foreign manufacturer.3 In Costco, Simms Sigal & Co. Ltd. (“Simms”) imported and distributed high-end clothing to retailers in Canada. In 2006, Simms entered into an exclusive distribution agreement with Rock & Republic Enterprise Inc. (“R & R”) for the distribution of R & R’s denim line, ready-to-wear clothing, and accessories. R & R jeans were not only high-end; they were also in high demand, selling for between $250 and $325 a pair. In November 2009, Costco Wholesale Canada Ltd. (“Costco”) was approached by a distributor who offered to sell it R & R jeans at a very low price. The evidence shows that R & R knew that those jeans would end up in the Canadian market— R & R would sell to a first distributor who would then sell to a second distributor, who would in turn sell to Costco. Thus, Costco bought R & R jeans through two intermediaries and offered them to its customers for $98.99. Simms sent a formal notice to Costco demanding that it cease selling the R & R jeans, alleging that it was the exclusive distributor and that the jeans Costco was selling were counterfeit. After checking with its distributor, Costco received a letter from R & R confirming that the jeans were genuine products. Costco’s distributor added that R & R “are already dealing with the mad distributor” and asked Costco to “please [not] release this letter to the distributor”.4 With this letter in hand, Costco answered Simms that the jeans were genuine products acquired on the grey market, and that it was entitled to sell them in Canada. In July 2010, Simms sent a second formal notice to Costco, reiterating that it had exclusive distribution rights to R & R jeans in Canada. Simms then instituted proceedings against R & R and Costco, but R & R filed for bankruptcy. At trial, the Superior Court judge held Costco liable for damage caused to Simms as of November 2009, when it had received the first formal notice.5 According to the judge, Costco chose to ignore the existence of the exclusive distribution agreement between Simms and R & R, adopting a position of wilful blindness, whereas it should have inferred, based on its distributor’s behaviour, that an exclusive distribution agreement did indeed exist and that R & R was breaching it. Costco was ordered to pay the sum of $361,005.44 in damages to Simms. Costco was also ordered to pay exemplary punitive damages of $500,000.00 as a result of the gravity of its fault of contractual interference and the effect on Simms’ reputation on the Canadian market. The Court of Appeal of Quebec upheld the Superior Court’s decision and held Costco liable. Contractual interference and the notion of fault In Quebec civil law, under the principle of relativity of contracts, contractual obligations and undertakings may bind only the contracting parties. The fault of contractual interference is an exception to this principle. In the 1975 decision Trudel v. Clairol,6 which dealt with a form of grey market, the Supreme Court of Canada defined the fault of contractual interference as “an act of dishonesty to be associated knowingly with a breach of contract.”7 Simply put, to justify granting remedy for contractual interference, a plaintiff must show: “The existence of a contract and valid contractual obligations that the third party allegedly contravened”;8 “The constituent elements of the fault of a third party,” which are: “the third party’s knowledge of the contractual rights; incitement to or participation in the breach of the contractual obligations; and bad faith or disregard for the interests of others.”9 In Costco, the Court of Appeal specified that “receipt of a copy of the contract by the third party or even that the exclusivity clause was read by the third party”10 is not required to find that the third party committed a fault, and that the analysis of the third party’s knowledge of the contract is contextual.11 In this regard, the Court of Appeal confirmed that the formal notice of November 2009 was not ambiguous, given that Simms’ assertion that it was the exclusive distributor of R & R products was “clear and require[d] no interpretation”.12 It added that Costco’s conduct was not that of a normally prudent and diligent person, and that it had adopted a position of wilful blindness by continuing to sell R & R jeans even though R & R’s letter concerning its rights was not signed and predated the request for confirmation. In the Court of Appeal’s opinion, these facts combined with the formal notice should have been sufficient to conclude that there was indeed a breach of contract.13 Although the Court of Appeal concluded that the trial judge did not impose an additional burden on Costco to inform itself,14 the introduction of the notion of “wilful blindness” makes the situation highly subjective. The Superior Court judge wrote: [186] Costco relies on the fact that they were dealing with a trusted intermediary. Costco has filed no evidence that it was ever advised that, in fact, R & R had “resolved promptly” the matter with Simms. Accordingly, there was no reason for Costco to believe it could ignore the cease and desist letters. [187] Costco allowed itself to limit its focus to the issue of authenticity of the Product despite being put on notice by Simms that the up-front issue with Simms was the EDA (Exclusive Distribution Agreement). If Costco was not prepared to deal directly with Simms to resolve the issue, it needed to have the issue of the EDA asked and answered by R & R. Costco failed to do either. [188] […] Ms. Janek on behalf of Costco was at fault in not seeking: (a) some confirmation emanating from R & R that they knew the goods were being sold in Canada by Costco and (b) that there was no Simms EDA that would prevent such sales. […] 15 [Our emphasis] The Court of Appeal appears to agree with the trial judge’s reasoning. Echoing the Superior Court’s analysis quoted above, the Court explained: [61] Not only did Costco not obtain the confirmations demanded by Ms. Janek, it also chose to ignore information it received indicating that Simms was the exclusive Canadian distributor of R & R products [...].16 Even though no duty to inquire exists, Costco was criticized for having settled for questionable answers to its request for confirmation from the distributor and R & R that the goods were genuine and that they could be sold in Canada.   Would the ruling have been different if Costco had only asked R & R to confirm that the goods in question were genuine, while also asking its distributor whether it was bound by a contractual obligation not to sell in Canada?  If the answer is yes, the Court of Appeal’s conclusions make little sense. If, as the Court of Appeal stated, Costco had no duty to inquire, its mistake was to have inquired to R & R directly about Costo’s right to sell the jeans in Canada and it actually would have been preferable for it to ask as few questions as possible.  If a minimal duty to inquire had indeed existed, what should Costco have done? The Superior Court judge concluded on the basis of facts proven at trial that Costco should have obtained a letter signed by the owner of the trademarks in question confirming or denying Simms’ exclusive rights. The Court of Appeal appears to agree, adding that: [66] There is no question here of ambiguity or interpretation regarding Simms’ exclusivity that would have prevented Costco from understanding its scope or extent, but only of Costco’s knowledge of its existence.17 Thus, the Costco decision seems to create a duty to inquire that must be fulfilled to avoid a fault of contractual interference. However, the scope of this duty remains vague. Free competition and the grey market If such duty to inquire is interpreted broadly, it would be possible for an intellectual property right holder to arrange its distribution network in such a way as to make it difficult for a third party to claim ignorance of contractual restrictions with respect to exclusivity in a given territory. At trial, Costco alleged that the R & R jeans that it was selling at a low price had been legitimately acquired on the grey market and that it was entitled to sell them. With respect to the grey market, in Consumers Distributing Co. v. Seiko18 the Supreme Court explained that “[t]he concepts of restraint of trade and free competition [...] would be battered because of an implied recognition of a right of an individual marketing a product to entail and control the sale of identical personal property, however legitimately acquired, of another person.”19 In the present case, the Superior Court determined that Costco could not exonerate itself by alleging its right to purchase and resell grey market goods, as the contract between R & R and Simms was a juridical fact that was opposable to Costco.20 Did the particular facts of this case affect both the outcomes in Superior Court and the Court of Appeal? Certainly, but given that a contract is a juridical fact that is opposable to third parties; that such third parties have a form of duty to inquire about such juridical facts; and that one cannot be wilfully blind, the combination of these decisions seems to give greater weight to honouring contracts than to the principle of free competition.21 Is this a particularity of Quebec civil law (as opposed to common law)? How far does the duty to inquire go following the receipt of a formal notice? What degree of ambiguity is required for a party to claim that it has no knowledge of contractual obligations? The Canadian Courts will likely have to shed more light on the various legal shades of grey in the coming years. 2020 QCCA 1331. Free competition is a well-established principle in civil law. In Excelsior (L’), compagnie d’assurance-vie c. Mutuelle du Canada (La), compagnie d’assurance vie, the Court of Appeal recognized free competition as [TRANSLATION] “a fundamental principle to the organization of economic activities [...] subject to its legislative or regulatory framework.” Thus, competition is unique in that it can voluntarily cause harm to others without constituting a fault. Competition is only considered a fault if it is illicit or unfair; that is, if dishonest practices are used. Excelsior (L’), compagnie d’assurance-vie c. Mutuelle du Canada (La), compagnie d’assurance vie, [1992] R.J.Q. 2666 (C.A.), p. 30. Mars Canada Inc. v. Bemco Cash & Carry Inc., 2016 ONSC 7201, para. 7; conf. 2018 ONCA 239. Costco Wholesale Canada Ltd. c. Simms Sigal & Co. Ltd., supra note 1, para. 18. Simms Sigal & Co. Ltd. c. Costco Wholesale Canada Ltd., 2017 QCCS 5058. [1975] 2 SCR 236. Id., p. 241. Costco Wholesale Canada Ltd. c. Simms Sigal & Co. Ltd., supra note 1, para. 51. Id. para. 50. Costco Wholesale Canada Ltd. c. Simms Sigal & Co. Ltd., supra note 1, para. 57. Id. Id. para. 58. Id. para. 64; Simms Sigal & Co. Ltd. c. Costco Wholesale Canada Ltd., supra, note 6, para. 181 to 183. Costco Wholesale Canada Ltd. c. Simms Sigal & Co. Ltd., supra note 1, para. 64. Simms Sigal & Co. Ltd. c. Costco Wholesale Canada Ltd., supra note 6, para. 186–188. Costco Wholesale Canada Ltd. c. Simms Sigal & Co. Ltd., supra note 1, para. 61. Costco Wholesale Canada Ltd. c. Simms Sigal & Co. Ltd., supra note 1, para. 66. 1984 1 SCC 583. Id., p. 584. Simms Sigal & Co. Ltd. c. Costco Wholesale Canada Ltd., supra note 6, para. 94 and 214. Excelsior (L’), compagnie d’assurance-vie c. Mutuelle du Canada (La), compagnie d’assurance vie, [1992] R.J.Q. 2666 (C.A.), p. 30.

In Yves Choueifaty v. Attorney General of Canada1, the Federal Court of Canada has issued a significant decision concerning the assessment of patent-eligible subject matter, including the approach to be used for such assessment during the examination of Canadian patent applications. Historical perspective In keeping in step with advances in technology, the Canadian Courts have assessed and established certain principles in assessing patent-eligible subject matter. A key decision in this regard related to the patentability of Amazon.com’s “one-click” method for online purchasing. In the Amazon decision2, the Federal Court of Appeal in particular established that the assessment of patent-eligible subject matter requires a “purposive construction” of the claims, utilizing the criteria and approach long established by the Supreme Court3, and notably requiring the assessment as to whether or not a claim element is essential. As summarized by the Federal Court, two questions in particular are to be asked in this regard: Would it be obvious to a skilled reader that varying a particular element would not effect the way the invention works? If modifying or substituting the element changes the way the invention works, then that element is essential. Is it the intention of the inventor, considering the express language of the claim, or inferred from it, that the element was intended to be essential? If so, then it is an essential element. Importantly, the Supreme Court established that such an assessment should not be based on what is considered to be the “substance of the invention.” Subsequent to the Amazon decision, the Canadian Intellectual Property Office (CIPO) established examination guidelines to assess the patent-eligibility of subject matter in various technology areas. Such guidelines in particular followed a problem-solution approach to determine whether an element is essential and in turn the patent eligibility of a claim. Background The Choueifaty case concerns Canadian Patent Application No. 2,635,393 entitled “Method and Systems for Provision of an Anti-Benchmark Portfolio”, claiming a computer-implemented method for providing an anti-benchmark portfolio. Briefly, the method entails acquiring and processing data regarding securities in a portfolio via particular steps and calculations to generate an anti-benchmark portfolio, the various steps being carried out using a computer. During examination and appeal proceedings at CIPO, the assessment of patentable subject matter was performed via the problem-solution approach set forth in the examination guidelines relating to computer-implemented inventions. Using this approach, it was determined that the solution and in turn the essential elements of the claims were “directed to a scheme or rules involving mere calculations”, and that using a computer was not an essential element of the claims. The claims were thus rejected by CIPO on the basis that: When a claim’s essential elements are only the rules and steps of an abstract algorithm, however, that claim is non-statutory. The Court’s decision On appeal to the Federal Court, it was determined that CIPO did not apply the proper test, noting that the problem-solution approach of CIPO’s examination guidelines not only did not follow the purposive construction test of the Supreme Court, but further is an approach that the Supreme Court established should not be used: The Appellant submits, and I agree, that using the problem-solution approach to claims construction is akin to using the “substance of the invention” approach discredited by the Supreme Court of Canada ... Notably, the Court noted that CIPO’s approach failed to consider the second factor noted above, concerning the inventor’s intention, which is contrary to the test established by the Supreme Court. The Court thus allowed the appeal and set aside CIPO’s decision to reject the application, requesting that CIPO undertake a fresh assessment of this issue in accordance with the Court’s reasons. Future considerations This decision brings much needed clarity to the assessment of patentable subject matter in Canada and is a welcome development for patent applicants in a variety of technology areas. The Court’s clear instructions to use the criteria of purposive construction established by the Supreme Court will assist in the analyses of various issues of patentability during patent examination. It will be interesting to see how CIPO will proceed in light of the decision, in respect of its fresh assessment as directed by the Court and also the possibility of pursuing an appeal. Stay tuned and please do not hesitate to contact a professional of our Patents team for more information!   2020 FC 837. Canada (Attorney General) v. Amazon.com, Inc., 2011 FCA 328. Free World Trust v. Électro Santé Inc., 2000 SCC 66; Whirlpool Corp. v. Camco Inc., 2000 SCC 67

Since 1995, the Federal Court of Canada has refused to hear questions relating solely to patent ownership. In Lawther v. 424470 B.C. Ltd.1 the Federal Court declined jurisdiction, stating that “[t]his Court has no jurisdiction to entertain a dispute which is solely a matter of contract”, thereby deeming that such a dispute fell within the jurisdiction of the provincial superior courts of each province (hereinafter a “Provincial Court”). In Quebec, the provincial superior court is the Superior Court of Québec. Therefore, in patent ownership disputes, the inventor, or the person to whom the patent had been assigned, had to seek relief for these contractual issues in Provincial Court (typically, these issues would pertain to an assignment, an employment contract, an option to purchase, etc.). The Federal Court would then have to endorse the decision and ultimately order the Patent Office to change the name of the patent owner. At a time where the proportionality of proceedings in relation to the nature of disputes is a hot-button issue,2 the Federal Court’s adherence to this 20th century decision, which was the norm until recently, could leave a bitter taste in one’s mouth. However, in Salt Canada Inc. v. Baker, 2020 FCA 127, in a unanimous decision rendered on July 28, 2020, the Federal Court of Appeal overturned a Federal Court decision that followed this precedent, thereby closing the door on a long-standing jurisprudential trend. Justice Stratas, in his reasons, relies on section 52 of the Patent Act, stating that “the Federal Court has jurisdiction, on the application of the Commissioner or of any person interested, to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.”  For Justice Stratas, the fact that even the Commissioner of Patents must refer any question of title to the Federal Court is important and demonstrates that Parliament intended to assign a judicial function, and not merely an administrative function, to the Federal Court. The Federal Court is a statutory court, such that it must derive its jurisdiction from a statute, unlike provincial superior courts, which are courts of original and general jurisdiction. There appears to have been a debate before the Court of Appeal on the enabling statutory provisions.  The respondent argued that the Federal Court’s jurisdiction in intellectual property matters is derived from section 20 of the Federal Courts Act: Industrial property, exclusive jurisdiction 20 (1) The Federal Court has exclusive original jurisdiction, between subject and subject, as well as otherwise, (…) (b) in all cases in which it is sought to impeach or annul any patent of invention or any certificate of supplementary protection issued under the Patent Act, or to have any entry in any register of copyrights, trademarks, industrial designs or topographies referred to in paragraph (a) made, expunged, varied or rectified. Industrial property, concurrent jurisdiction (2) The Federal Court has concurrent jurisdiction in all cases, other than those mentioned in subsection (1), in which a remedy is sought under the authority of an Act of Parliament or at law or in equity respecting any patent of invention, certificate of supplementary protection issued under the Patent Act, copyright, trademark, industrial design or topography referred to in paragraph (1)(a). Considering the title “Industrial property, (…) jurisdiction,” and the fact that the issue here is a question of jurisdiction, the following statement by Justice Stratas may seem surprising: “Arguably, it has no relevance whatsoever. This matter does not arise and has nothing to do with section 20 of the Federal Courts Act.” According to Justice Stratas, because the Patent Act is a federal statute, the Federal Court has jurisdiction by virtue of the combination of section 52 of the Patent Act and section 26 of the Federal Courts Act, which provides that the Federal Court has jurisdiction over any matter in respect of which jurisdiction has been conferred by an Act of Parliament. Justice Stratas goes on to review a series of decisions in which the Federal Court has agreed to interpret various contracts and legal documents as part of its jurisdiction in relation to various federal statutes, including federal tax laws, maritime law, and intellectual property disputes. Ultimately, Justice Stratas dismisses the respondent’s argument that the interpretation of contracts falls within the exclusive jurisdiction of the Provincial Courts. Finally, relying on a 1941 Supreme Court decision,3 Justice Stratas, at paragraph 24 of his decision, states the following: The rule in Kellogg is simple: the Exchequer Court (and now the Federal Court) can interpret contracts between private citizens as long as it is done under a sphere of valid federal jurisdiction vested in the Federal Court.It is true that, absent a specific statutory grant of jurisdiction to the Federal Court, parties cannot assert a contractual claim in the Federal Court against another private party to obtain a damages remedy.But Kellogg tells us that where such a grant is present, parties can claim a remedy even if their entitlement turns on a matter of interpretation of an agreement or other instrument—for example, the remedy of correcting the records in the Patent Office to recognize one’s title to a patent under section 52 of the Patent Act. Note that the Federal Court has jurisdiction only to amend the Register or to deal with matters relating to the Patent Act, such as patent infringement issues. It appears from this judgment that all other matters nevertheless remain matters of common law or civil law and fall within the jurisdiction of the Provincial Courts. In some cases, it may be advantageous to institute proceedings before the Federal Court rather than a Provincial Court such as the Superior Court of Québec. Among other things, the sums that a litigant can claim for reimbursing their attorney fees, if successful, are much higher in Federal Court than in some Provincial Courts. In addition, the time required to obtain a judgment is often shorter in Federal Court; furthermore, seeking relief in Federal Court makes it possible to avoid having to seek relief before both Federal and Provincial Courts4 in order to register rights with the Patent Office. On the other hand, if the issue doesn’t involve a strictly Canadian patent, but also corresponding patents in other jurisdictions (the United States, Europe, etc.) it is preferable to obtain a judgment before a competent Provincial Court in order to inter alia determine the full ownership of a patent family, obtain an injunction against a defendant to transfer titles, or have a judgment confirmed in each relevant jurisdiction. Conversely, the jurisdiction of the Federal Court is limited to the Canadian Patent Register and does not extend to other jurisdictions. It may also be preferable to institute proceedings in a provincial superior court if the goal is to claim damages for breach of contract or seek other remedies that fall under civil or common law. Regardless, the Salt Canada Inc. v. Baker decision provides a new strategic alternative for lawyers, meaning they now have more options to tailor procedures to the specific needs of litigants in patent ownership disputes.   Lawther v. 424470 B.C. Ltd., (1995) 95 F.T.R. 81 (TD) Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 SCR 87 Kellogg Company v. Kellogg, [1941] SCR 242 Although it could be argued that a provincial superior court has jurisdiction to order a patent title entry to be changed, on reading sections 20 and 26 of the Federal Courts Act and sections 41 and 52 of the Patent Act.