Some Basic Concepts of Canadian Patent Law

Author: Paul Nagourney

What is a Patent?

A patent is a negative right. What this means is that it gives you (the patentee) the right to exclude others from practicing your invention. A patent in itself does not give you the right to practice your invention. Think about it in other terms. A patent is a limited (by time; in Canada 20 years, by space; a Canadian patent only is effective in Canada) monopoly given by society (ie the State) to inventors in exchange for inventors teaching the public how to perform the invention. Why would the State offer such a monopoly? Does this not contradict the principle that monopolies are detrimental to society? The inventor often goes to great lengths to develop and perfect the invention. When the invention is completed the inventor has the option of keeping the invention a secret. This is called a trade secret. When inventors keep inventions secret society does not learn from their ideas and therefore is at a loss. There is a famous example of 2-brothers who developed obstetric forceps for pulling out babies born the wrong way. These brothers became infamous because thousands of babies could have been saved in the 1800s using their method, but because they kept it secret, only the richest persons could benefit from their inventions. It is this type of example that the patent system was developed to stop from occurring.

Patent History

The patent system as it is now developed in the 1600s in England under a law called “The Statute of Monopolies”. Before this law, Royalty had the custom of granting monopolies on certain industries to “friends of the family”. Under pressure from Parliament, the Statute of Monopolies made all monopolies illegal, except those granted, for fourteen years, to inventors who made “any manner of new manufacture”. This vague definition was purposely chosen to include new things that were to be invented that the drafters of the law could not have foreseen at the time. Since that time many modifications have been made to patent law, however the basic principle still remains the same: The State will reward inventors for their contributions by providing this limited Monopoly.

Patents as mini-laws

Patents have also been seen by some as a type of statute (statute means a law). This is supported by the fact that every issued patent does create a new “set of rules” if you will, that prohibit society for doing certain things. The similarity of patents to laws is seen in that when patents go to court, the wording in the patent is to be read, according to some authorities, as one would read and interpret a law.

Patents as property

The patent is a negative right, but it is also a type of property. In fact, the property right of a patent holder is sometimes deemed more legally important than the property right of “real” property. An example of how strongly “intellectual property” is taken by the Courts was recently observed in the Supreme Court Case of Schmiester v Monsanto. Schmister was a farmer who by some misfortune had genetically modified, patented crops blow over to his field from a Monsanto farm. When Monsanto realized this, they sued him for infringing on their patent by growing the crop. Even though Schmiester’s lawyers argued that the crop was growing on Schmiester’s property, the Court stated that the patent rights in this case supercede the land property rights. The crop and/or profits made from its sale had to be turned over to Monsanto.

This idea of patents being intellectual property brings with it some interesting implications. For example, patents, like other types of property can be sold, or more interestingly, can be divided up and “lend-out” for a period of time. When a patent is sold from the inventor to another interested party, in such a manner that complete ownership of the patent is transferred, then the patent is said to be “assigned”. In the other case, when a patent is divided up and/or lent out, it is said to be “licensed”. More specifically, the patent owner is usually called the “licensor” and the party that acquires the license is called the “licensee”. Alternatively, when an inventor licenses the invention to someone, the licensor is said to be “out-licensing” the patent, whereas the person acquiring the license is said to be “in-licensing” the patent. The license is a special type of permission that the licensee receives to be allowed to use the invention. When I said earlier that the invention can be divided up during licensing, I meant that a license can be for using part of the invention described in the patent. Alternatively, the license can have time restrictions, territorial restrictions (ie certain parts of the country in which the patent is valid), or restrictions on what products to use with the license. In the last example there has been litigation with the charge that forcing a licensee to use the invention with other non-patented products could be extending the patent monopoly into the area of conventional monopolies which are illegal. Other ways in which patent holders can use licenses in a semi-questionable way is to include as part of the licensing contract a provision that states improvements on the invention made by the licensee will be property of the licensor. This is questionable because it goes against the spirit of the patent. The grant of a patent is supposed to foster innovation and ingenuity. If the licensee knows that any of his improvements will become property of the licensor, then the licensee will not strive to make improvements on the invention. Licenses are not a main topic of this book, but I will relate an interesting little story. Licenses can also be used for other types of intellectual property besides patents. For example, distribution contracts are like licenses but no intellectual property is involved, only the right to distribute (usually exclusively) a product/service for a certain territory or time period. I personally know of one individual who came across a very interesting method of treating a morbid disease. The individual learned of the treatment method (which was not patentable) and went to a clinic off-shore and licensed it to the clinic. The individual was not an inventor, nor a doctor practicing the treatment, but a very enterprising businessman. In the end, the doctors at the off-shore clinic paid the individual millions of dollars, even though no patents or inventions were involved. I guess this is why licensing is a very lucrative area!

Requirements for Patents

Getting back to patents, the idea that the State provides a monopoly to the inventor is appealing but what does the State expect? What exactly constitutes an invention? As quoted by others, the Old Testament states “nothing under the sun is new”. What therefore can be considered new? To answer this, we need to dive into the Law. In Canada, the grant of a patent is administered by the Patent Act, which details the law. Accompanying the Patent Act is the Patent Rules, which deal in a more practical manner with the laws described in the Act. Another important document is the Canadian Manual of Patent Office Practice, which describes in detail how patent applications are dealt with in Canada. All three of these documents can be obtained for free from the internet website of the Canadian Intellectual Property Office. A quick note, when you are looking at these documents be careful to read only the current version, because the Patent Act has undergone several revisions both in 1989 and 1996. If your application is after 1996, then the previous revisions are of no interest to you. In the current Act, near the very beginning, at Section 2, are described the definitions of words that are used throughout. The definition of an invention is “any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture, or composition of matter”. The other qualification for an invention to be patentable is that it must not be obvious to “one skilled in the art” when the patent is filed (Section 28.3).

These sections of the Law tell us that patentable inventions must pass four criteria: 1) Novelty, 2) Non-obviousness, 3) Utility, and 4) Patentable subject matter. Let us investigate these requirements.

Novelty Requirement

Novelty means that the invention is something new. Something that no one in the whole world as ever made before. This is interesting in a way. The patent only gives you protection for your idea in Canada, but the requirement for novelty is world-wide. This is the high standard that the inventor’s invention must meet to obtain the monopoly from the State. In litigation, a patent can be demonstrated to be non-novel by finding in one previous publication, the idea of the inventor described. The catch is that the idea has to be in only one publication, not by putting together several publications. Additionally, novelty can also be destroyed by an communication of the invention to the public, including verbally. There is a loop-hole for this in Canada, the loop-hole is that if the inventor told another person the invention, and the other person published it less than one-year before the patent was filed by the inventor, than the inventor’s patent is valid. This means that in Canada there is a 1-year grace period during which the inventor could have made a public disclosure and the novelty would not have been lost. However, if an inventor signs a confidentiality agreement 2-years before applying for the patent with someone else, and then that someone else goes and tells the invention to the public, than, despite the confidentiality agreement, the invention is no longer novel and the patent is lost. The only remedy that the non-disclosure agreement provides is that the patentee can sue the person who broke the non-disclosure agreement. Usually the amount gained from litigating someone who broke the non-disclosure agreement is a lot less than the value of the patent.

Non-obviousness requirement

Non-obviousness as a requirement for patentability was recognized by Canadian jurisprudence since the beginning of the Twentieth Century, however this was codified in the 1996 amendment of the Patent Act. Essentially, the issue that this qualification deals with is that just because something is new, doesn’t mean that it is worthy of being called an invention. However, it is not so simple. The question is “is the invention in question obvious to whom?” And of course the other issue is that after something is already invented it looks a lot more obvious than it did before it was invented. Usually, the Courts have held that obviousness is directed to “one skilled in the art”. By art is meant the field in which the invention relates to (ie. medicine, breadmaking machines, etc). The standard of non-obviousness, is also called the “test of non-obviousness”. The people skilled in the art to whom the question of obviousness pertains can not be inventive, but have to be what judge Lord Reid called “skilled technicians”. These are not to be seen as limited people. When determining whether an invention is obvious or non-obvious we need to think of the “skilled technician” as one having at her fingertips the common-knowledge information pertaining to the specific field. In a British case, the lawyer Sir Stafford Cripps, devised a test for non-obviousness that bears his name, in which he asked rhetorically:

“Was it obvious to any skilled chemist in the state of chemical knowledge existing at the date of the patent that he could manufacture valuable therapeutic agents by making the higher resocinols by the use of the condensation and reduction processes described. If the answer is “No” then the patent is valid, if “Yes” then the patent is invalid”
Of course we don’t care about making resocinols, but the point he was trying to make, in this 1928 case was whether the patent that he was litigating was obvious or not to a person “skilled in the are”. This “Cripps Test” was further refined in Canadian Patent law by Mr Justice Hugesson in the case Beloit Canada v Valmet Oy where he defined the “skilled technician”:

“The test for obviousness is not to ask what competent inventors did or would have done to solve the problem. Inventors are by definition inventive. The classical touchstone for obviousness is the technician skilled in the art but having no scintilla of inventiveness or imagination; a paragon of deduction and dexterity, wholly devoid of intuition; a triumph of the left hemisphere over the right. The question to be asked is whether this mythical creature (the man in the Clapham omnibus of patent law) would, in the light of the state of the art and of common general knowledge as at the claimed date of invention, have come directly and without difficulty to the solution taught by the patent.”

Two more additional points about non-obviousness:1) In order to demonstrate that something is obvious it is acceptable to put together several published items that were available to the skilled technician in order to demonstrate that the invention was obvious. 2) Commercial success of the invention can be a secondary consideration supporting that the invention was non-obvious. This defense is dangerous since the opposition may say that the success was only the result of marketing strategy.

Utility requirement

Of course the invention must be useful if the State will provide the inventor with monopoly rights. There are cases in Canadian Law were an invention was totally useless and therefore was not given a patent. A good example of this is the patent application of Mr X for a device called “Death Ray”. Mr X (I don’t know why the records don’t show his name, maybe you my reader could ask your lawyer/Patent Agent this!) filed an application for using a laser beam to ionize the air so as to transmit an electrical charge through the ionized air to kill people. Mr X however did not provide a working model of his invention, nor did the Patent Examiner and Commissioner believe that his invention would deliver the promised result. Mr X appealed the rejection of his patent application to the Federal Court of Appeal which agreed with the Commissioner and refused to grant a patent.

There are other, more practical issues of utility that are considered in Canadian Case Law. One is the trial of Noranda Mines v Mineral Separations. Noranda Mines patented a process for purifying minerals during mining. However in the patent they claimed a whole family of chemicals was useful for the purposes of the patent. In reality, while some members of the chemical family where indeed useful, others were useless. Since the patent didn’t describe specifically what chemicals of the family are to be used, the patent was invalidated. A contrasting example to this is the case of Burton Parsons v Hewlett Packard in which Burton Parsons made a similarly broad claim for a variety of compounds to be used for placing electrodes to skin. Burton Parsons, however, did not get their patent invalidated. Although within the claim fell compounds that were not useful for placing on skin, the claim had restricted itself by stating at the beginning that the chemical chosen had to be “compatible with normal skin”. This saved the Burton Parsons Patent.

Patentable subject matter

As we said in the beginning, an invention must be:

“any new and useful art, process, machine, manufacture or composition of matter, or any new and useful improvement in any art, process, machine, manufacture, or composition of matter”.

Although this definition is very broad, there is a limitation that is also written in the Patent Act that states in Section 27 (8):

“No patent shall be granted for any mere scientific principle or abstract theorem”
Therefore at present patents for computer programs are not theoretically allowable in Canada. However, several such patents have been issued. The key is that if a patent uses a computer program to interface with a physical object, then it is usually allowed. This is in stark contrast to the United States where patents on computer programs have been allowed since the historical decision allowing such patents in State Street v Signature Financial. Canada only has 1 case in which software was the subject matter. In Schulmberger v Canada, the Commissioner refused the patent, and the Court supported this refusal since the task that the patent was trying to cover could have been also performed by a human.

In terms of biotechnology, Canada has recently (December 2002) decided at the Supreme Court Level that higher life forms such as the Harvard Oncomouse (a mouse genetically engineered with a predisposition to cancer) are not patentable subject matter. This is different than other countries such as Japan, USA, and Europe which have allowed such patents. In Canada, products of microorganisms, the microorganisms themselves, and mammalian cells growing in tissue culture are patentable.