Overview
Introduced as part of the 2019 amendments implementing the Patent Law Treaty, para. 73(3)(b) of the Patent Act provides that a patent application deemed abandoned for a missed deadline cannot be reinstated unless "the Commissioner determines that the failure [to meet the deadline] occurred in spite of the due care required by the circumstances having been taken". In a recent decision, Matco Tools, 2025 FC 118, the Federal Court (per Justice Zinn) considered the proper framework for evaluating "due care" in accordance with para. 73(3)(b).
Justice Zinn found that the Commissioner of Patents ("Commissioner") erred in concluding that the patent applicant had not exercised due care in the circumstances, and remitted the matter for redetermination. As set out in further detail below, Justice Zinn's two-part framework for assessing due care should provide greater clarity to patent owners and the Canadian Patent Office ("CIPO").
Facts
This decision involved Canadian Patent Application No. 3,086,194 ("CA 194"), owned by Matco Tools Corporation ("Matco"). Matco retained a third party, Dennemeyer, to handle the payment of maintenance fees for its patent cases. In the process of migrating Matco's patent data to Dennemeyer's annuity management system, the particulars for CA 194 were not imported and the application was not successfully migrated. Although Dennemeyer provided Matco with a discrepancy report, the error relating to CA 194 was not resolved and a maintenance fee for this case was ultimately missed.
After the initial deadline had passed, CIPO sent a late-fee notice to the Canadian prosecuting agent, advising of the grace period to pay the missed maintenance fee with payment of a late fee. Despite having been relieved of responsibility for maintenance fees, the Canadian prosecuting agent still forwarded the late-fee notice to U.S. counsel. However, under similar instructions to take no action with respect to maintenance fees, U.S. counsel did not forward the late-fee notice to Matco. By the time Matco became aware of the missed maintenance fee for CA 194, the grace period had passed and the application was deemed abandoned.
In detailed submissions to CIPO, Matco requested reinstatement of CA 194, arguing that it had exercised due care with respect to its handling of the missed maintenance fee. However, in two responding communications to the patent applicant, the Commissioner maintained that Matco had not exercised due care in respect of the outstanding maintenance fee and declined to grant reinstatement of CA 194.
In his decision, the Commissioner held that the initial error in the migration of data to the annuity agent's system was not relevant to the analysis of due care because it did not foreclose Matco's ability to take corrective action during the subsequent grace period. The Commissioner further held that due care had not been exercised because the deemed abandonment could have been avoided if the Canadian prosecuting agent and/or U.S. counsel had forwarded the late-fee notice to Matco for corrective action.
Commissioner's Decision Unreasonable
In considering CIPO's refusal to reinstate CA 194, Justice Zinn applied the "reasonableness" standard of review under Vavilov. Despite this deferential standard, Justice Zinn held that the Commissioner's decision was unreasonable for lacking "justification, transparency and intelligibility" in two respects.
First, the Commissioner unreasonably held that the data-migration error was not relevant. The Court observed that "but for" this error, the outstanding maintenance fee for CA 194 would have been paid. Therefore, the data-migration error was the root cause or "proximate cause" of the failure to pay the maintenance fee and a key consideration in determining whether due care had been exercised.
Second, in determining that the standard of due care had not been satisfied, the Commissioner unreasonably focused on U.S. counsel's failure to forward the late-fee notice to Matco. As Justice Zinn noted, it is within the Commissioner's purview to consider the conduct of all parties in the chain of events when assessing due care. However, the Commissioner took an "unbalanced" approach by disregarding the data-migration error and by focusing instead on the conduct of U.S. counsel.
The Court was particularly concerned that the Commissioner's due care analysis failed to account for the fact that U.S. counsel had been specifically instructed by Matco not to handle maintenance fees, and, therefore, was not an "authorized" agent or party in the circumstances. Justice Zinn reviewed the mandates of Canadian and U.S. counsel and found that their respective actions were appropriate in light of their respective instructions.
Justice Zinn set aside the Commissioner's decision, to be redetermined by a new person if possible. Justice Zinn also ordered that Matco be given the opportunity to provide further submissions in light of the decision.
Two-Part Framework for Assessing Due Care
Justice Zinn set out a two-part framework for the Commissioner to apply when determining whether due care was properly exercised in a case of deemed abandonment. He suggested in his reasons that this framework is more logical and balanced than CIPO's previous approach.
- Proximate Cause
According to Justice Zinn, the first step in the due care assessment should consider the proximate cause of the events that led to deemed abandonment of the application and any due care taken to avoid it. The first line of inquiry is to ask: "What caused the failure that led to the deemed abandonment (e.g., the failure to pay a fee or take an action by the prescribed deadline)?"
Once the proximate cause of the deemed abandonment has been identified, the next step is to ask: "Was due care taken by either or both the patent applicant and its authorized representative to avoid the proximate cause?" As part of this inquiry, the Commissioner should consider whether the patent applicant took all measures to avoid the failure that a reasonably prudent applicant would have taken, given the particular set of circumstances, and that the failure nevertheless occurred despite those measures.1
Regarding the abandonment of CA 194, Justice Zinn noted that relevant due care considerations would include: (a) whether Dennemeyer's data-migration alert concerning the failed import of CA 194 was sufficiently clear; (b) whether there were any follow-up communications from Dennemeyer to Matco; and (c) whether Matco in reviewing the alert understood that the data-migration error was "a singular, isolated oversight within an otherwise robust system". The Commissioner's decision did not address any of these considerations.
If the Commissioner concludes that due care was exercised to avoid the proximate cause, the inquiry ends and the application should proceed to reinstatement. If that conclusion cannot be reached from the first part of the inquiry, then it may be appropriate to proceed to the second stage of the inquiry. The availability of the second stage may depend on the type of failure that led to the deemed abandonment.
- Subsequent Corrective Action
At this stage of the inquiry, the Commissioner should consider whether due care was subsequently taken to ameliorate the effect of the proximate cause before the application was deemed abandoned. If the patent applicant or its authorized agent exercised due care after the proximate cause had occurred, reinstatement may still be justified.
Key Takeaways
As Justice Zinn's decision clarifies, a robust due care inquiry should consider both the initial error and any subsequent failures on the part of the patent applicant or its authorized representative. Given this standard, patent applicants should ensure that their due care submissions include a detailed account of the entire chain of events relating to the deemed abandonment, from the earliest root cause (proximate cause) to the final opportunity for correction.
In addition, it will be important for due care submissions to clearly establish the respective mandates of each actor or authorized agent in the chain of events. In particular, it will be critical to: (a) note where the patent applicant has bifurcated its representation by retaining a third party to pay maintenance fees; (b) highlight any explicit instructions limiting legal counsel's mandate; (c) set out whether the Canadian prosecuting agent is able or permitted to communicate with the patent applicant directly; and (d) outline each authorized agent's knowledge or understanding of the proximate cause of the failure that led to the deemed abandonment.
Finally, the facts of this case expose the potential risks associated with retention of third-party payment companies to handle Canadian maintenance fees. With the 2019 legislative changes to reinstatement practice, the management of patent deadlines has become more complex and there are greater implications associated with missed deadlines. Moreover, with the new rules permitting anyone to pay maintenance fees for pending Canadian patent applications, the risks of error in mass-migrating data to the dockets of third-party payors, and the possibility of missed information due to bifurcated communications from different authorized agents (prosecuting agents and third-party payors), cannot be overlooked. Accordingly, patent applicants who outsource annuity payments to third parties may be more likely to encounter the reinstatement pitfalls revealed in Matco Tools, and any attendant expenses required for their resolution, than those who opt for a single party to manage all Canadian patent deadlines.
The Attorney General filed a notice of appeal (A-42-25) of this decision on February 3, 2025.
Footnote
1 Referencing Taillefer v Canada (Attorney General), 2024 FC 259. This decision was recently affirmed by the Federal Court of Appeal (2025 FCA 28).
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