In a recent Federal Court of Canada decision, Matco Tools Corporation v. Attorney General of Canada, clarification was provided regarding the application of the due care standard under Section 46(5) of the Patent Act due to missed maintenance fee payments. This article examines the implications of the Court's ruling on the interpretation and application of the due care analysis under Canadian patent law.
Background:
'Due care' is applied by the Canadian Intellectual Property Office as the standard for determining whether to grant requests for reinstatement of abandoned or expired Canadian patent applications. Such abandonment can be a result of failure to pay maintenance fees or failure to file a request for examination. Due care is generally evaluated as per the following two-part test:
- Whether the applicant took all measures that a reasonably prudent applicant would have taken given the particular circumstances to avoid the failure.
- Whether, despite taking those measures, the failure nevertheless occurred.
Matco Tools Corporation ("Matco") is an American professional tool distribution franchise. Matco filed a Patent Cooperation Treaty (PCT) application and entered the Canadian national phase on June 17, 2020. Upon entering the national phase, the Canadian application was subject to Canadian maintenance fees. Matco managed its patent portfolio through a structured system involving three entities: a Canadian patent agent responsible solely for prosecution, a U.S. law firm that provided legal counsel but did not handle maintenance fees, and a specialized third-party provider designated for handling fee payments.
Matco originally used a first specialized third-party provider but later transitioned to a second specialized third-party provider to handle its maintenance fees. During the transition, a technical error and a procedural lapse led to the non-payment of the required maintenance fee. The use of multiple entities for patent portfolio management likely contributed to the non-payment. Particularly, due to the limitations imposed on each of the three entities, and due to the lack of direct communication between them.
Matco, through its Canadian agent, filed a request for reinstatement of the patent application with a detailed explanation of the facts surrounding the failure to pay the maintenance fee. The Commissioner refused to reinstate the patent application, citing a failure to meet the "due care standard," leading to the appeal to the Federal Court to review the Commissioner's decision.
Federal Court Decision and Analysis:
The Federal Court sided with Matco, finding that the Commissioner had erred by applying an inadequate and narrow interpretation of the two-stage due care analysis. The Court indicated that the Commissioner should first inquire what caused the failure to pay the requisite fee (i.e., what is the initial root error?). Once the proximate cause is determined, the next inquiry is to determine whether due care was taken by either or both the Applicant and its representative to avoid the proximate cause. If the Commissioner finds that due care was taken to avoid it, then the application is to be reinstated.
The Court further indicated that if the Commissioner finds that due care was not taken to avoid the proximate cause, the Commissioner should determine whether due care was taken afterward to ameliorate the effect of the proximate cause prior to the abandonment. If the Applicant or its agent exercised due care at that later juncture, reinstatement may still be justified.
From the Federal Court's decision, it can be ascertained that:
- The Commissioner must identify the root cause of the issue, rather than solely focusing on the applicant's failure to respond to the notice. A comprehensive due care analysis should assess the entire sequence of events, from the initial error to the final opportunity for correction.
- The Commissioner should look at the responsibilities and authority of each party. In this case, the Commissioner overlooked the hierarchy of authority and the specific limitations placed on each of the three entities managing Matco's patent portfolio. Additionally, the Commissioner failed to account for the fact that the Canadian patent agent was appointed by U.S. counsel, not Matco directly, thereby restricting the agent's scope of authority. Similarly, the U.S. counsel had no authority to pay or manage matters related to the maintenance fees.
- The Court emphasized that the due care analysis must be conducted in a balanced manner. The commissioner should consider both the proximate cause of the failure to pay the maintenance fee and whether the applicant or its representatives exercised due care to prevent that failure. A proper evaluation of these factors is essential to ensure a thorough and accurate due care analysis.
Conclusion:
The Federal Court rejected a narrow view of due care, and instead introduced a broader "proximate cause" analysis that examines the entire sequence of events leading to the missed fee payment and examines the actions of all parties involved in the maintenance of the patent, not just those of the Applicant. By focusing on root causes and systemic issues, rather than just the final notice of abandonment, the Court significantly expanded the scope of what is considered under the "due care" analysis; requiring a more comprehensive and stringent evaluation of an applicant's actions and systems in place to maintain their patents.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
