When is the Appropriate Moment for a Patent Applicant to Claim Small Entity Status According to the Patent Rules ?

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WHENISTHEAPPROPRIATEMOMENTFORAPATENTAPPLICANTTOCLAIMSMALL
ENTITYSTATUSACCORDINGTOTHEPATENTRULES?

NathalieJodoinandPhilippeLaporte*
LEGERROBICRICHARD
,L.L.P.
Lawyers,PatentandTrademarkAgents
CentreCDPCapital
1001Square-Victoria–BlocE–8thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242–Fax(514)8457874
www.robic.ca–info@robic.com

ItisnotuncommonthatapersonwhofilesapatentapplicationinCanada
claimssmallentitystatusaccordingtothePatentRules(hereaftercalledthe
“Rules“)andsubsequentlylosesthebenefitofthatstatus.Beforetherulingofthe
TrialDivisionoftheFederalCourtinthecaseofDutchIndustriesLtd.v.Canada
(CommissionerofPatents),[2002]1F.C.325,(2001)209F.T.R.260,(2001)14C.P.R.
(4
th)499,anapplicantwasnotriskingalotifitclaimedsmallentitystatusonthe
filingdatebecauseitwasalwayspossibletoretroactivelycorrecttheerrorof
havingpaidthefeesassociatedwithsmallentitystatusinsteadoflargeentity
fees.ItwasthepracticeoftheCommissionerofPatentstoallowsuch
deficienciestobecuredbytop-uppayments.Itapparentlydidnotmatter
whensuchtop-uppaymentsweremade,evenifitwasafterthedeadlinesset
forthintheRules.Confirmingthispractice,theDeputyDirectorofthePatent
Branchexpressedhimselfinthefollowingwordsinanaffidavitfiledbeforethe
FederalCourtintheDutchIndustriescase:

“ItisandhasbeenthenormalpracticeofthePatentOfficetoaccept
suchpaymentinthesecircumstances,andthepaymentofthese
additionalmonieswereacceptedinthisparticularinstanceaswell.”
EverythingcollapsedwhentheFederalCourt,inthisverycase,quashedthe
Commissioner’sdecisiontoacceptthesetop-uppaymentsaftertheexpiration
ofthereinstatementdatespecifiedintheRules.TheCourtalsodeclaredthatthe
patentaswellasthependingapplicationforapatent,forwhichBartonNo-till
DiskInc.hadpaidthefeesinaccordancewiththelargeentityscaleforthelast
sixyears,weredeemedabandonedasaresultofthefailuretopaythe
prescribedmaintenancefees.Withthisdecision,DutchIndustrieswasableto



















































©CIPS,2003.*OfLEGERROBICRICHARD,L.L.P.,amultidisciplinaryfirmoflawyers,andpatentand
trademarkagents.PublishedintheSpring2003issue(Vol.7,No.2)issueofourNewsletter.
Publication068.053E.

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repelaninfringementactioninstitutedbyBartonNo-TellDiskInc.andFlexi-Coil
Ltd.
AccordingtotheCourt,therelevantsectionsofthePatentAct(hereaftercalled
the“Act”)clearlydefinetherulestofollowinrespectoftheamountofthe
maintenancefeespayableandtheapplicabletimelimits.Accordingtothe
FederalCourt,therewasabsolutelynodoubtthattheapplicabletimelimits
weretoberespectedandthatParliamenthadexpresslyconsideredthe
possibilityofanerrorinthepaymentofmaintenancefeesbyprescribingaone-
yearreinstatementperiod.IntheopinionoftheCourt,suchexplicitrequirements
precludedanexerciseofdiscretionbytheCommissionerwhichwouldhavethe
effectofallowinglessthantheappropriateamounttobepaidandaffording
theopportunitytoperfecttherequiredpaymentbeyondthepermitted
reinstatementperiod.ConsequentlytheCourtquashedthedecisionofthe
Commissioner.TheCourtdidnotaccepttherespondent’sargumentsthatit
wouldbemanifestlyunfairfortheCourttostopthepractice.TheCourtgave
effecttowhatwasconcludedtobetheplainmeaningoftheActandfurther
citedtheManualofPatentOfficePractice(section20.02.13),whichprovides
thatthetimelimitsforthepaymentofmaintenancefeesarenotextendable.
ConsequentlythedecisionoftheCommissionerofPatentsmadeonMarch29,
2002wasquashedandthematterwassentbacktotheCommissionerforre-
evaluationinaccordancewiththereasoningoftheFederalCourt.
WhilstputtinganendtotheCommissionersformerpracticeofacceptingtop-up
paymentsaftertheexpirationofthereinstatementdatespecifiedintheRules,
therulingoftheTrialDivisionoftheFederalCourtrenderedthevalidityofseveral
existingpatentsuncertain.Thepatentsofthoseapplicantswhoimproperly
claimedsmallentitystatusinthepastcouldpotentiallybeinvalidasaresultof
thisruling.Itthereforebecamemoreriskytoclaimsmallentitystatusasthelikely
consequenceoftheFederalCourt’srulingwasthatnopatentapplicantor
patentholderwoulddarepayanyfeeonthesmallentityscalebecauseany
errorinthedeterminationofsmallentitystatuscouldleadtothelossofallrights
underthepatentapplicationandanyresultingpatent,unlesstheerrorwas
discoveredandcorrectedwithinthestatutorytimelimitforlatefeepayments.
ByaunanimousjudgementdeliveredonMarch7,2003,thethreejudgepanelof
theFederalCourtofAppealreversed,inpart,thedecisionoftheTrialDivision
withanunexpectedinterpretationofthelegislativeprovisionsrelatingtosmall
entityfeepayments.Theappealwasalsosupportedbyanintervenor,the
IntellectualPropertyInstituteofCanada(IPIC),whichwasconcernedthatthe
decisionatthetriallevelcouldhavepotentiallyinvalidatedmanypatentswhere
retroactivepaymentstocorrecttheentitystatusfromsmallentitytolargeentity
hadbeenmadeinthepast.

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Withaliteralinterpretationoftherelevantprovisions,theFederalCourtof
AppealdeterminedthatthereisnothingintheActortheRulesthatexpressly
dealswiththeconsequenceoftheunderpaymentofamaintenancefee,noris
thereanyprovisionthatexplicitlyauthorisestheCommissionertodetermine
whetherornottoacceptatop-uptoamaintenancefeeafterthedateupon
whichthefeeisdue.TheCourtalsoconfirmedthattheCommissionerdoesnot
havethejurisdictiontoextendthedeadlineforthepaymentofmaintenance
feesandtoallowforpaymentafterthedeadlinesetoutintheRules.This
necessarilyimpliesthattheCommissionerlackstheauthoritytopermita
deficientmaintenancefeetobetopped-upafterthedateuponwhichthefee
isdue.
TheFederalCourtofAppealdidnot,however,affirmtheTrialDivisions
judgementinitsentirety.Sharlow,J.speakingforthecourt,didnotacceptthe
underlyingpremiseoftheTrialDivisionsjudgement,whichwasthatthestatusof
apersonasasmallentitymaychangefromtimetotime.Sharlow,J.interpreted
therelevantstatutoryprovisionstomeanthatapersonwhomeetsthedefinition
ofsmallentitywhenapplyingforapatentretainsthatstatusaslongasthe
applicationispending,andaslongasthepatentremainsineffect.TheCourt
alsonotedthatthereisnostatutoryrequirementforthestatusofapersonasa
smallentityorlargeentitytobereconsideredatanyothertime,atleastin
relationtomaintenancefees.
Underliningthecomplexityandlackofprecisionofthedefinitionofsmallentity
containedintheRules,theCourtstateditsbeliefthatnomatterhowcarefula
patentapplicantisinmakingthefactualdeterminationofwhetheritisasmall
entityoralargeentity,therewillalwaysbetheriskofamistake.Whenasmall
entityincorrectlyconcludesthatitisalargeentity,therepercussionswillnotbe
sogreat.However,ifalargeentityweretoincorrectlyconcludethatitisasmall
entity,theconsequencecouldbecatastrophiciftheerrorisnotdiscoveredin
timetotakecorrectiveaction.TheCourtalsofoundthatthedefinitionofsmall
entityisincompleteasitdoesnotstipulatetheprecisemomentatwhichto
makethatfactualdetermination.
AfterconsiderationofthedifferentpossibilitiespresentedtotheCourt,Sharlow,J.
cametotheconclusionthatthefactualdeterminationofthestatusofan
applicantmustbemadeonlyonce,atthemomentwhenthepatentregimeis
firstengaged(which,inmostcases,wouldbethedateuponwhichthe
applicationforapatentissubmitted).Generally,thiswillbeonthefilingdate.
Thisstatusdoesnothavetoberevisedeverytimemaintenancefeesmustbe
paidbyanapplicant.PursuanttotheFederalCourtofAppealsinterpretation,
thepatentapplicantorapatenteecouldloserightsinapatentorapatent
applicationifiterroneouslyclaimssmallentitystatusandpaysthefeesin
connectiontherewith.Theriskassociatedwithmakinganincorrect

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determination,however,wouldonlypresentitselfonce,andwouldnotarise
everytimemaintenancefeesarepayable.Sharlow,J.expressedherselfinthe
followingwords:

“Inmyview,therelevantstatutoryprovisionsshouldbeinterpretedinsuch
awaythatapersonwhomeetsthedefinitionof«smallentity»whenthe
patentregimeisfirstengaged(generallywhensubmittingapatent
application)maintainsthatstatusinrelationtothatpatentapplication
andanyresultingpatentthroughoutitsterm.”

TheCourtdidnotrulewithrespecttotheCommissioner’sauthoritytoinvestigate
anyapplicantwhoclaimssmallentitystatus.
TheCourtdidnotdelineatewhatismeantbythemoment«thepatentregimeis
firstengaged».IfthefilingdateofaregularpatentapplicationinCanadaisnot
veryproblematic,theruleapplicabletoaPCTapplicationenteringintothe
NationalPhaseseemsmoreambiguous.Onastrictapplicationoftherelevant
provisionsoftheActconcerningthedeterminationofthefilingdateforaPCT
applicationandtheprovisionsoftheRules(PartII)thatspecificallyaddressPCT
applications,itappearsthattheinternationalfilingdateisthemomentwhenthe
factualdeterminationofthestatusoftheapplicantshouldbemade.Moreover,
theManualofPatentOfficePracticeexpresslystatesthat«theeffectivefiling
dateofanationalphaseapplicationistheinternationalfilingdate,andnotthe
dateonwhichthePCTapplicationentersthenationalphaseinCanada.»
TherulingoftheFederalCourtofAppealclarifiesthefactthatthestatusofan
applicantforapatentorapatenteehastobedeterminedonlyoncewhenthe
patentregimeisfirstengaged.Thisrulewillapplytopendingapplicationsfor
patents,toexistingpatents,aswellastofutureapplicationsforapatent.Thus,
accordingtothisdecision,anapplicantthatqualifiesasasmallentityatthe
initiationoftheapplicationwillretainthisstatusthroughoutthepatenttermand,
iftheapplicantremainstheownerofthepatentorthepatentapplication,it
maycontinuetopaythefeesasifitwereasmallentity.
Itisneverthelessrecommendedthatsincethequestionofassignmentorchange
inownershiphasnotyetbeenaddressed,whenthepatentorpatent
applicationistransferred,thestatusofthenewownershouldbedetermined
andtheappropriatefeesbepaid.
Wesuggestthat,inallcaseswherethereisuncertainty,aprudentapproach
shouldbeadoptedbypayingthemaintenancefeespursuanttothelargeentity
scaleinordertoavoidputtingatriskanyrightissuedfromapatentorapatent
application.Infollowingsuchanapproach,onemustbeawareofthefactitwill
notbepossibletoclaimsmallentitystatusafterwardssincetheCourtconfirmed

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thattheCommissionercannotremedyafatalerrorofthistypeaftertheone
yeargraceperiodprovided.
TheFederalCourtofAppealalsoconfirmedthatthereisnomeanstocorrecta
situationinwhichanapplicanthasimproperlyclaimedsmallentitystatusatthe
timeoffilingofapatentapplicationorapatentoverayearago.Thedecisionof
theFederalCourtofAppealrendersuncertainthevalidityoftheseapplications
orpatents.
AnapplicationforleavetoappealtotheSupremeCourtofCanadahaving
beensubmittedbyDutchIndustriesonMay5,2003,itremainstobeseen
whetherthenationshighestcourtwillbeofthesameopinion,ifitagreestohear
thecase.

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