Canada: Prior User Rights Under The Recently Amended Canadian Patent Act

Last Updated: June 5 2019
Article by David Schwartz and Michael Sgro

The Budget Implementation Act, 2018, No. 2 brought about several changes to the Patent Act that affect the scope of protection available under Canadian patents, including revision of section 56, concerning rights of prior users of patented technologies.

What are Prior User Rights?

Prior user rights are a defence to patent infringement.  They have been described as providing fairness by allowing an inventor who independently develops an invention that is subsequently made the subject matter of a patent to continue using the invention.1

Prior user rights are closely linked with the requirement for novelty.  As a patent application would usually be anticipated if a prior user had made the invention available to the public, prior user rights are most likely to arise in a situation where an invention is protected as a trade secret.

Prior User Rights in Canada

Canadian patent law has long recognized prior user rights.2  However, the scope of such rights has not always been clear.  For example, Canadian courts have reached differing conclusions regarding whether prior user rights are available for patented processes, and whether prior user rights provisions should be narrowly or liberally interpreted.

Nevertheless, courts have articulated several principles: 

  • A patented product must exist at the relevant date3 (the relevant date depends on the “prior user rights” provision applicable)
  • The form of patented products may be changed after the relevant date4  
  • An apparatus acquired before the relevant date can continue to be used in a method that infringes a patent containing claims for an apparatus and a method5
  • Prior user rights are only available to direct infringers6
  • Prior user rights render conduct non-infringing7    
  • Equitable principles may preclude a party from relying on the defence8

Revised Section 56

The revised provision, which came into force on December 13, 2018 and bears some similarities to section 64 of UK Patents Act 1977, will apply to an action or proceeding in respect of a patent issued on the basis of an application whose filing date is on or after October 1, 1989 and that is commenced on or after October 29, 2018 (Budget Implementation Act, 2018, No. 2, s. 203 and s. 208).

Unlike the predecessor provision, which limited prior user rights to the right to “use and sell to others the specific article, machine, manufacture or composition of matter patented and so purchased, constructed or acquired” before the claim date (i.e. the priority date for a particular claim), the revised provision protects acts “that would otherwise constitute an infringement” if the act had been completed before the claim date, or if “serious and effective preparations to commit such an act” were made before the claim date.   

Having prior user rights apply to “an act that would otherwise constitute infringement” rather than a “specific article, machine, manufacture or composition of matter” is significant, as it appears to clarify that prior user rights can be invoked for processes.

It is unclear if prior users will have the ability to transform (e.g. reformulate an active pharmaceutical ingredient as a tablet) or sell articles produced prior to the relevant date after the relevant date if they have not done so in the past, acts previously protected.  This may depend on how courts construe “serious and effective preparations to commit such an act.”  While Japanese courts have adopted a broad interpretation of a similar provision, courts in the UK have interpreted the provision “effective and serious preparations to do such an act” narrowly.9

A “good faith” requirement and provisions providing that prior users cannot invoke the defence if they acquire the knowledge required to carry out the infringing act, directly or indirectly, from the patentee and know that the patentee is the source of the knowledge (ss. 56(5) and (8)), have been added.  While “good faith” is not defined, prior jurisprudence has limited lack of good faith to breach of confidence or secrecy between the parties (see cases cited in note 8).  

The new provisions also address the rights of purchasers of an article from a prior user.  Subsection 56(3) provides purchasers the rights to use and sell the article, and subsection 56(6) extends the exemption to the use of “an article that is substantially the same as the one used, for that use.”  Thus, the article used need not be identical to the original article, but the use must be the same.  The extension to include articles that are “substantially the same” as the patented article has been a subject of concern, with the Intellectual Property Institute of Canada calling for it to be further defined or eliminated (see pages 6-10).

New subsections 56(4) and 56(9) introduce exemptions for the use of a service or a service that is substantially the same as one previously used, respectively.  As “service” is not a defined term and has not been used in predecessor provisions, it is not clear how it will be interpreted.

Several sections explicitly addressing the rights of transferees of a business or a part of a business have also been added.  Specifically, ss. 56(2), (7) and (10) provide that a transferee of a business or a part of a business may acquire the prior user rights of the transferor.  Notably, permitted activities are not limited to the same locations or sites as the original prior use, as is the case in the corresponding US provision (see 35 U.S.C. 273(e)(1)(C)).

Outlook

As many of the amendments to section 56 will require judicial interpretation, the true scope of prior user rights under the revised provision may not be known for some time.      

Footnotes

1 Libbey-Owens-Ford Glass Co. v Ford Motor Co. (1969), 57 CPR 155 at 185-189 (Ex Ct) [Libbey-Owens-Ford], aff’d [1970] SCR 833 (SCC); see, also: Aleksey Khamin, “America Invents Act’s Prior User Defense: Lessons from Global Patent Regimes and Legislative History” (2015), 15:2 Pittsburgh Journal of Technology Law & Policy 132 at 142 and 147 [Khamin].

2 Gregor Binkley, “Prior User Rights and the Canadian Patent Act” (2001), 18 CIPR 207.

3 Teledyne Industries Inc. v Lido Industrial Products Ltd. (1981), 57 CPR (2d) 29 at 54 (FCA), leave to appeal to SCC ref’d (1981), 59 CPR (2d) 183; Merck & Co. v Apotex Inc., 2006 FCA 323 at para 71-82 [Merck], leave to appeal to SCC ref’d, [2006] SCCA No 507.

4 Merck & Co. v Novopharm Ltd. (1998), 82 CPR (3d) 457 at 463 (FCTD); Merck, supra note 3 at paras 77-78; Merck & Co. v Apotex Inc. (1995), 60 CPR (3d) 356 at 369 (FCA), leave to appeal to SCC ref’d (1995), 63 CPR (3d) v.

5 Libbey-Owens-Ford Glass Co. v Ford Motor Co., [1970] SCR 833.

6 Procter & Gamble v Bristol Meyers (1979), 39 CPR (2d) 145 at 167-168 (FCTD), aff’d (1979), 42 CPR (2d) 33 (FCA), leave to appeal to SCC ref’d (1979), 42 CPR (2d) 33n; Beecham Canada v Procter & Gamble (1982), 61 CPR (2d) 1 at 23-24 (FCA), leave to appeal to SCC ref’d (1982), 63 CPR (2d) 260.

7 Zeneca Pharma Inc. v Canada (Minister of National Health & Welfare) (1996), 69 CPR (3d) 451 at 453 (FCA), leave to appeal to SCC ref’d, [1996] SCCA No 578.

8 Libbey-Owens-Ford, supra note 1 at 182; Victor Sporting Goods v Harold Wilson Company (1904), 7 OLR 570 (ONCA), aff’d 1904 CarswellOnt 786 (SCC); Stephenson v Babiy Motors Ltd. (1978), 40 CPR (2d) 187 at 191 (BCSC); Merck & Co. v Apotex Inc. (1994), 59 CPR (3d) 133 at 160-162 (FCTD), rev’d on other grounds (1995), 60 CPR (3d) 356 (FCA).

9 Khamin, supra note 1 at 136-141.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

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