IP monitor: Proposed amendments to the Patent Rules: improving patent pendency by increasing fees

The Government of Canada has proposed a series of amendments to the Patent Rules intended to keep Canada compliant with its obligations under the Canada-United States-Mexico Agreement (CUSMA) and the Patent Cooperation Treaty (PCT). As part of the proposal, the Canada Gazette published a Regulatory Impact Analysis Statement (the impact statement) on July 3, 2021, summarizing the changes and their anticipated impact. The amendments include a number of fee increases that some applicants may be unable to avoid. Interested persons have a short window in which to make representations concerning the proposed amendments.

Selected proposed amendments

Reducing Patent Pendency

As part of implementing Canada’s Patent Term Adjustment obligations under CUSMA, the Government of Canada is proposing regulatory amendments to the Patent Rules to reduce unreasonable delays in issuing a patent. 

The proposed amendments are intended to provide the Canadian Intellectual Property Office (CIPO) means to reliably influence the duration of examination. Patent Term Adjustments will be implemented by January 1, 2025, but these adjustments can apply to any application filed on or after December 1, 2020. Despite the average patent pendency complying with CUSMA standards, CIPO fears that some applicants may delay examination to receive Patent Term Adjustment compensation. 

The impact statement identified the number of claims and the number of examination reports issued in prosecution as factors that tend to prolong patent prosecution. Changes directed to reducing patent pendency include:

Request for Continued Examination

In the current system, applicants may receive an unrestricted number of examination reports from CIPO. The examiner can terminate prosecution by issuing a Final Action, though these are rare. 

In the proposed system, applicants will have to file a Request for Continued Examination (RCE) and pay a prescribed fee (the proposed standard fee is $816, which is halved for small entities) for examination lasting more than three examination reports. After filing an RCE, applicants are then entitled to receive up to an additional two examination reports or a Notice of Allowance (whichever comes first). RCEs would also replace the current mechanism that enables applicants to withdraw an application from allowance and return it to examination (thereby increasing the cost of this step). Failure to timely file an RCE would result in deemed abandonment of the application.

These proposed amendments would bring Canada closer to US practice where RCEs delineate the examination process. These amendments do not provide the option to appeal the examiner’s action that necessitates the RCE as is provided in the US, where the precipitating action is a Final Action.

Excess Claim Fees

In the current system, applicants are free to include as many claims as they see fit. An application only attracts additional fees for excess claims to the extent that those claims result in pages in excess of 100 pages when paying the final fee.

In the proposed system, applicants would pay an excess claim fee for claims in excess of 20 claims (the proposed standard fee is $100 per excess claim, which is halved for small entities). This fee would be applied at two points in the application process. As currently proposed, applicants would initially pay an excess claim fee for any claims in excess of 20 claims at the time of the Request for Examination. Secondly, applicants would pay a further excess claim fee upon paying their final fee, for claims in excess of the greater of: (i) 20 allowed claims, and (ii) the sum of 20 claims plus the number of excess claims for which a fee was paid at the time of the Request for Examination. In other words, applicants that paid for excess claims at the Request for Examination stage would only need to pay for claims in excess of those excess claims when paying the final fee. However, applicants that reduced the number of excess claims in the application would not be entitled to a refund.

These changes would again bring Canada’s system closer to the system in the US where excess claim fees are already utilized. However, in the US, applicants can reliably file divisional applications (risky in Canada without a prior rejection for lack of unity of invention) and continuation applications (not provided in Canada) to keep their claim numbers low.

Conditional Notice of Allowance

The amendments also introduce a Conditional Notice of Allowance. These discretionary notices would inform applicants that their application is in condition for allowance, but certain minor defects in the application must be addressed. This would enable applicants to address the defects and pay the final fee to proceed to grant rather than go through another round of examination.

Sequence Listing Standards

Proposed changes replace the definition of “PCT sequence listing standard” with a reference to Standard 26 (ST.26), the PCT sequence listing standard recently adopted by the World Intellectual Property Office. Amendments to the translation requirements will ensure that at least one of the languages in the sequence listing is in English or French.

Miscellaneous Amendments

The proposed amendments also include extension of time mechanisms for incorrect fee payments resulting from erroneous information provided by CIPO, waivers for extensions of time to respond to examination reports when there are significant delays in delivery of communications from the Patent Office, the ability to correct errors in the translation of certain documents provided to CIPO, as well as housekeeping amendments.

Comments on the proposed amendments

Many of the proposed changes will result in a system more similar to the US procedurally, but there are fundamental differences between the US and Canadian systems, which are not accounted for in the proposed amendments; in our view, the failure to account for these differences means the proposed system may fail to provide the necessary mechanisms for Canadian applicants to obtain patent protection commensurate with other jurisdictions.

Importantly, average patent pendency in Canada is already lower than the standard applied by CUSMA  so, in our view, necessity of the relevant rules and their impact on applicants should be carefully considered. The impact statement evidences a concern with applicants gaming the system to obtain a Patent Term Adjustment, however, CUSMA article 20.44 can exclude delays attributable to the applicant and it has always been within the power of CIPO to terminate examination via the mechanism of a Final Action. Arguably, CUSMA compliance is being used as a pretense for these amendments, which will cost an estimated $55.1 million to be assumed mainly by applicants and result in a surplus of $8.7 million, mainly for CIPO, when the average patent pendency already complies with CUSMA.

Though patent pendency is motivating many of the amendments, the measures proposed do not address important issues that delay examination in the Patent Office:

Applicants cannot initiate an appeal without a Final Action

Unlike in the US, an applicant cannot drive a case to appeal and the proposed amendments do not change this. In the US, Final Actions are routinely issued as the second or third examination report. On receipt of the Final Action, applicants in the US can choose to initiate an appeal or continue examination by filing an RCE. In Canada, the proposed amendments will require applicants to file an RCE after a certain number of examination reports, but none of these examination reports are necessarily a Final Action. Therefore applicants in Canada cannot choose to initiate an appeal instead of filing the RCE. This will keep applicants in patent pendency at their own expense, where they have reached an impasse with their examiner, until the examiner chooses to issue a Final Action (which, based on current practice, is not often). Applicants should be mindful that a Final Action in Canada cannot be extended by an RCE as it can in the US.

Problematic double patenting laws make divisional applications unreliable

In Canada, a divisional application can be susceptible to anticipatory and obviousness-type double patenting rejections, even without an extension of term. Canada offers no special mechanism to applicants to cure double patenting rejections (e.g., a terminal disclaimer). If an examiner rejects an application for lack of unity of invention, then claims divided out based on that rejection are insulated from a double patenting attack, but voluntarily filed divisional applications are not.  The risk of a divisional application being denied its divisional status or being susceptible to an invalidity attack drives applicants to include many claims in their initial application. The lack of a voluntary divisional or continuation practice further motivates Canadian applicants to keep cases pending to ensure that all claims of potential interest can be pursued in Canada. This issue is further compounded by a fairly restrictive reissue practice.

Permitting applicants to reliably file divisional applications would enable applicants to limit claims in an initial application and seek additional claims in subsequent divisional applications. Solutions that reduce the legal risks associated with filing divisional applications or explicitly endorse unity of invention rejections from international examination, could more directly address excess claims. CIPO acknowledges the difficulty presented by the double patenting law in Canada in the impact statement, but asserts it is unable to deal with these issues within the scope of this regulatory process. Though this is an understandable statement for CIPO to make, pursuing an indirect solution shows a clear prioritization of procedure over ensuring that applicants are able to obtain protection commensurate with that available in other jurisdictions.

Closing remarks

It will be interesting to see if these amendments reduce the administrative burden on the CIPO and reduce patent pendency. Applicants should carefully consider the number of claims included in their applications when making a Request for Examination. It may be advisable to include strategic claims in the initial application to secure a rejection for lack of unity of invention before voluntarily amending an application with a full contingent of dependent claims.

Interested persons may make representations to Virginie Ethier concerning the proposed amendments before August 3, 2021. All such representations must cite the Canada Gazette, Part I, and the date of publication of the impact statement (July 3, 2021), and be addressed to Virginie Ethier, Assistant Commissioner and Director General, Patent Branch, Canadian Intellectual Property Office, Department of Industry, Place du Portage, Phase 1, 50 Victoria Street, Room 807A, Gatineau, Quebec K1A 0C9 (tel.: 819 997 2949; email: ic.cipo-consultations-opic.ic@canada.ca).