Registration of Licence Agreements under the Patent Act: The Saga of a Barbecue

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REGISTRATIONOFLICENCEAGREEMENTSUNDERTHEPATENTACT:
THESAGAOFABARBECUE

PanagiotaKoutsogiannis*
LEGERROBICRICHARD,Lawyers
ROBIC,Patent&TrademarkAgents
55St-Jacques,Montreal(Quebec)CanadaH2Y3X2
Tel.(514)987-6242-Fax(514)845-7874
E-mail:marion@robic.com–WebSite:www.robic.ca

ArecentjudgementrenderedbytheQuebecSuperiorCourt(3288731CanadaInc.
vs.LesPoinçonsdeWaterlooInc.No.460-05-000290-960)andupheldbythe
QuebecCourtofAppeal(No.500-09-006534-986)onFebruary26,2001hasseveral
implicationsonlicenceagreementsinCanada.

Theplaintiff,3288731CanadaInc.wasseekingapermanentinjunctionagainstthe
defendant,LesPoinçonsdeWaterlooInc.,whichwouldorderthemto(i)cease,the
manufactureandcommercialisationofbarbecuegrillsbearingthetrade-marksBo-
Ox,Ecogrill,Kwik-GrillandKookairandothersimilartrade-marks,(ii)recallthose
alreadydeliveredtoretailersand(iii)ceasethesaleofandproceedwiththe
destructionofthoseheldinstock.Theinjunctionwassoughtonthebasisthatthe
defendantheldnorightsinthebarbecuedevices(“chambreàcombustion”)thatit
usedinmanufacturingthebarbecuegrillswhichitcommercialised.

Initsdefence,thedefendantinvokedtheagreemententeredintobetweenthe
defendantandBo-OxSystemsCorporation(“Bo-Ox”)onSeptember21,1989(the
“Agreement”),wherebyBo-Oxgrantedthedefendantanexclusiverightto
manufactureandassembletheKwik-Grillbarbecueusingthebarbecuedevicesin
question.Bo-Oxwastheexclusivelicenseeofthepatentsforbarbecuedevices
held,atthetime,byPatenventorInternationalCorporation.

PursuanttotheAgreement,thedefendanthadtherighttocontinue,such
manufactureuntilDecember31,1998.Howeverin1996,theownerofthepatent
rightsassignedthepatentinquestiontotheplaintiff.Theplaintiffinformedthe
defendantthatithadacquiredthepatentforthebarbecuedevicesusedinthe
manufactureofthebarbecuegrillsandimmediatelydemandedthatthedefendant
ceaseitsactivitiesrelatingtothebarbecuegrillsinquestion,failingwhichplaintiff
wouldhavetoinstitutelegalproceedingsagainstthedefendant.Thedefendant
disregardedsuchnoticeandcontinuedmanufacturingthebarbecuegrillsonthe
basisthatithadavalidrighttodosoupuntiltheexpirationofthetermofits
AgreementwithBo-Ox.Theseactionsoriginatedtheproceedingswhichledtothe
presentjudgement.

©LEGERROBICRICHARD,1999-2002.*LawyerwiththelawfirmLEGERROBICRICHARD,g.p.andwiththepatentand
trademarkagencyfirmROBIC,g.p.

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TheplaintiffarguedthatanyagreementbetweenBo-Oxandthedefendantcouldnot
beopposabletotheplaintiffsinceithadnotbeenregisteredinaccordancewith
sections50and51ofthePatentActofCanada(R.S.C.1985,c.P-4)(the”Patent
Act”).Section50(2)ofthePatentActprovidesthat”everyassignmentofapatent,
andeverygrantandconveyanceofanyexclusiverighttomakeanduseandtogrant
tootherstherighttomakeandusetheinventionpatented,withinandthroughout
Canadaoranypartthereof,shallberegisteredinthePatentOfficeinthemanner
determinedbytheCommissioner”.Inaddition,section51ofthePatentActcreatesa
sanctionforfailuretoregisteranassignment.Thisprovisioncouldoperatetodeprive
anearlierassigneeofitstitleintheeventthatasubsequentassigneeregistersits
interestfirst.Theassignmentoftheearlierassigneewouldtherebyberenderedvoid
vis-à-visasubsequentassigneewhohasregisteredfirst.

JusticeDaigleexaminedtheAgreementandconcludedthattheexclusiverightto
executeandexploittheinventiongrantedtothedefendantbyBo-Oxconstituteda
partialassignmentoftheinterestoftheholderofsuchrights.TheSuperiorCourt
judgeconcludedthat,asanassignment,theAgreementfellintothecategoryof
rightsthatrequiredregistrationinaccordancewithsection50(2)ofthePatentAct.
Furthermore,inaccordancewithsection51ofthePatentActlackofregistration
renderedtheAgreementvoidagainsttheplaintiff,subsequentassigneeoftherights
providedbytheAgreement.Hereachedthisconclusionnotwithstandingthefactthat
theplaintiffhadknowledgeoftheexistenceoftheAgreementbetweenBo-Oxand
thedefendantpriortoacquiringtherightsinthepatent.Itwouldthereforeappearthat
ifthelicenceisnotregistered,noticeofsuchpre-existinglicenceisnotafactortobe
consideredwhendecidingwhethertherightofthepriorlicenseewouldbe
enforceableagainstasubsequentassignee.

Thedefendantwasthereforeorderedtoceasethemanufactureandsaleofthe
barbecuegrillsatissue.JusticeDaigledidhoweverspecifythat,hadtheAgreement
infactbeenregistered,theplaintiffwouldhavehadtorespecttherightsgrantedto
thedefendanttherein.

Itwouldbereasonabletobelievethatthereasonwhyregistrationisrequiredunder
thePatentActisinordertocreateconstructivenoticeforsubsequentassigneesof
patentrights.Inotherwords,ifalicenceorassignmentisregistered,thenthe
subsequentassigneewouldbedeemedtohaveknowledgeofpriorexistingrights.
Howeverinthisparticularcase,theexistenceofactualnotice(asopposedto
deemednotice)wasnotsomethingthattheSuperiorCourtjudgetookinto
consideration.Couldthisleadustotheconclusionthatdeemedknowledgethrough
registrationismoreimportantthanactualknowledge.Thiswouldappeartobetruein
thepresentjudgement.

Theunderlyingprincipletorememberwhenreadingthiscaseisthattheplaintiffwas
athirdpartytotheAgreementandwithoutregistrationofthedefendant’srights,was
notboundbyitsterms.Itappearsthatalicence,beingapersonalrightgrantedby
thelicensortothelicensee,createsapersonalobligationbindingonlysuchtwo

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parties.Asubsequentassigneeorlicenseecannotbeboundbythetermsofsuch
agreement.Thisisinaccordancewitharticle1440oftheQuebecCivilCodewhereby
anagreementbetweentwopartiesisnotopposabletoathirdpartyunlessthere
existssomespecificprovisioninthelawthatwouldallowoneoftheco-contractorsto
renderitsrightsopposabletothirdparties(i.e.:registrationofrightsinaccordance
withsection50and51ofthePatentAct.).

Thisjudgementraisesseveralquestionsandleavesmanyunansweredregardingthe
requirementtoregisterlicenceagreementsinCanada.Section50(2)statesthatan
assignmentand”everygrantandconveyanceofanyexclusiveright”mustbe
registeredatthePatentOfficeandimpliesthatanexclusivelicencewouldfallunder
thecategoryofrightsthatwouldrequireregistration.However,althoughthesanction
providedinsection51encompassesthefailuretoregister”anassignmentreferredto
insection49or50″,itdoesnotspecificallyprovideasanctionforthefailureto
registera”grantandconveyanceofanyexclusiveright”.Itisthereforeunclear
whetherornotanunregisteredexclusivelicencewouldhavethesamefateasan
unregisteredassignment.Notwithstandingthisfact,thejudgeinthecaseathand
concludedthattheexclusiverightgrantedtothedefendantrequiredregistrationand
appliedthesanctionofsection51.

JusticeDaigle,inarrivingathisdecision,assimilatedtheexclusivelicenceheldby
LesPoinçonsdeWaterlooInc.toapartialassignment.Itwouldbeinterestingto
knowwhetherjusticeDaiglecametothisconclusionduetotheparticular
circumstancesofthisexclusivelicenceorwhetherintheopinionofJusticeDaigle
section51encompassesexclusivelicenceseventhoughnotexpresslystated.

Anotherissueunresolvedbythiscaseishowanon-exclusivelicenseecanensure
thatitsrightsareupheldagainstasubsequentassignee?Sections50and51ofthe
PatentActdonotaddressnon-exclusiverightsconveyedorgrantedfortheuseofa
patent.Itwouldthereforeappearthat,underthePatentAct,anon-exclusive
licenseeisnotobligatedtoregisteritsrights.Evenifitweretoregister,section51
doesnotseemtoprovideanon-exclusivelicenseewiththerighttomakesuch
licenceopposabletoasubsequentassignee.

Inconclusion,thelackofjurisprudenceandunclearlegislationonthismattermakeit
difficulttoprovidedefiniteanswerstotheseandotherquestions.Thisjudgement
confirmsthatexistinglegislationisinadequateinattemptingtodefinetherightsof
assigneesorexclusiveandespeciallynon-exclusivelicensees.Thisdecisiondoes
howeverexpresstheimportanceofregisteringassignmentsandexclusivelicence
agreementsinordertoavoidlosingsuchrightstoasubsequentassignee.