On April 19, 2021, Canada tabled its first Budget in two years. The budget titled A Recovery Plan for Jobs, Growth, and Resilience is clearly responding to the economic impacts of the pandemic on many sectors across the country. The Budget includes new IP related programs, the details of which are to be worked out over the next several months as the government seeks to create action plans to implement the strategy.
The following is a brief summary of the IP related programs that were announced in Budget 2021.
IMMEDIATE EXPENSING OF IP
Allow immediate expensing of up to $1.5 million of eligible investments by Canadian-controlled private corporations made on or after Budget Day and before 2024. Eligible investments will cover over 60 per cent of capital investments typically made by Canadian-controlled private corporations.
This incentive targets short- and medium-term capital investments that can accelerate our recovery. This includes investments in a broad range of assets, including, helping to further incentivize businesses to transition to a more productive, knowledge-intensive economy and will include digital assets and intellectual property.
These larger deductions will help businesses—particularly small and medium sized businesses—by making it more attractive to invest in assets that drive growth. Larger deductions will also free up capital that businesses can use to create more good middle class jobs.
SUPPORT USE OF IP BY SMALL BUSINESSES
To make sure small business and independent entrepreneurs can access the capital they need to recover, innovate, and grow in the long-term Budget 2021 proposes to improve the Canada Small Business Financing Program through amendments to the Canada Small Business Financing Act and its regulations. These proposed amendments are projected to increase annual financing by $560 million, supporting approximately 2,900 additional small businesses. They include:
- expanding loan class eligibility to include lending against intellectual property and start-up assets and expenses
- increasing the maximum loan amount from $350,000 to $500,000 and extending the loan coverage period from 10 to 15 years for equipment and leasehold improvements.
- Expanding borrower eligibility to include non-profit and charitable social enterprises.
- Introducing a new line of credit product to help with liquidity and cover short-term working capital needs.
PROMOTING CANADIAN IP SERVICES
To further support Canadian innovators, start-ups, and technology-intensive businesses, Budge 2021 proposes
- Spending $90 million, over two years, starting in 2022-23, to create ElevateIP, a program to help accelerators and incubators provide start-ups with access to expert intellectual property services.
- Spending $75 million over three years, starting in 2021-22, for the National Research Council’s Industrial Research Assistance Program to provide high-growth client firms with access to expert intellectual property services.
These direct investments will be complemented by a Strategic Intellectual Property Program Review that will be launched by the Government. It is intended as a broad assessment of intellectual property provisions in Canada’s innovation and science programming, from basic research to near-commercial projects. This work will make sure Canada and Canadians fully benefit from innovations and intellectual property.
Moffat & Co. will stay involved in the process and continue to keep you updated on the developments. Please contact us should you have questions or want to learn more.
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“No challenge” clauses called into question in Canada –
Ontario Superior Court finds such clauses are not in the public interest, and should not be enforced
An interlocutory decision from the Ontario Superior Court could have far-reaching implications for IP licensing and the settlement of IP disputes in Canada.
Earlier this year, the Ontario Superior Court declined to issue an interlocutory injunction in Loops, LLC v. Maxill Inc., 2020 ONSC 971. The Court’s reasons for doing so could have a substantial impact in the area of “no challenge” clauses, contractual clauses often included in IP license agreements and in settlements of IP disputes.
“No challenge” clauses purport to bind one party to an agreement not to challenge the validity of the other party’s intellectual property rights. The clauses appear routinely in IP license agreements, (preventing the licensee from challenging the validity of the rights they are licensing), trademark co-existence agreements (preventing each party from challenging the validity of the other’s trademark registrations), and in many other contexts within the IP world. These clauses have received judicial consideration in other jurisdictions, particularly the United States, but to date the issue of whether “no challenge” clauses are enforceable has not been considered by the courts in Canada.
The history between the parties in this case is long, and rather complex. The parties, who are both in the business of toothbrushes, had previously settled a patent infringement dispute between them. As part of that settlement, Maxill agreed to a “no challenge” clause, namely, that it would not directly or indirectly assist any person in attacking the validity of Loops’ patents for the relevant invention, in any country.
After finalizing the agreement, Maxill set out to “design around” Loops’ patent, and released a new toothbrush product that it believed did not infringe. Loops disagreed, and commenced an action to enforce its settlement agreement with Maxill before the Ontario Superior Court. Loops also sued Maxill in the United States for infringement of its equivalent patent in that country.
In response to the US infringement action, Maxill denied that it infringes Loops’ US patent, and denied the patent’s validity. Importantly, Maxill did not seek an order cancelling Loops’ patent because of the alleged invalidity. It simply denied that it was infringing Loops’ patent, and denied that the patent was valid in any event. However, since Maxill had agreed to a “no challenge” clause in its settlement agreement with Loops, Loops sought an injunction from the Ontario Superior Court to prevent Maxill from denying the patent’s validity before the American courts.
The Court declined to issue the injunction for several reasons. The most significant of these was the Court’s finding that the “no challenge” clause in the Loops / Maxill settlement agreement is not reasonable in the public interest, and is not enforceable. The Court found that, to preclude a defence to patent infringement for the personal gain, profit or protection of one party to an agreement would run counter to the proper administration of justice, regardless of the consent of the other party to that agreement. In contracts that contain “no challenge” clauses, the price paid by one party is access to a potentially valid legal position that has potential to affect the public at large, since the patent claims can be enforced against any infringer so long as they are deemed valid. The Court found that this price was simply too high if public trust and confidence in the administration of justice are to be maintained.
Accordingly, the Court’s view appears to be that “no challenge” clauses should not be enforceable as a matter of law. This is a significant development in Canadian contract law, as no Canadian court had previously found such provisions to be unenforceable, and in practice, IP-related agreements such as settlements and licenses routinely include such clauses.
It is significant that Maxill only asserted invalidity as a “shield”, in defence of an infringement action, and not as a “sword”, seeking an order that the patent be cancelled. It means that the door may still be open for “no challenge” clauses that prohibit the use of validity challenges as a “sword”.
But for the moment, the view of Ontario’s primary trial court is clear. Contractual provisions limiting a party’s ability to assert invalidity as a defence to IP infringement are not in the public interest, and should not be enforceable.
Written by Jaimie M. Bordman
Changes to Late National Phase Entry
When filing a National Phase of a PCT application in Canada, you need to be aware of the following changes to the Patent Regulations for late entry:
- If the International Filing Date is before October 30, 2019, the deadline for national entry is 30 months from the earliest priority date – or 42 months from the earliest priority date with payment of a $200 late entry fee (no change from current practice).
- If the International Filing Date is after October 30, 2019, the deadline is still 30 months from the earliest priority date. However, there are new restrictions for late entry after the 30-month deadline and up to 42 months from the earliest priority date. The applicant must now:
- explicitly request reinstatement of rights
- provide a statement that the reason for failure to enter the national phase by the 30-month deadline was unintentional
- pay the $200 late fee
Our understanding is that the Canadian Patent Office will not require anything more than a statement that the failure to meet the 30-month deadline was unintentional – that is – no detailed reasons will be required. Nevertheless, we recommend that if you have clients that wish to enter the national phase in Canada, you inform them that the 42-month late entry deadline should NOT be relied on or used to purposely extend the 30-month deadline.
Restoration of Priority
With the changes that came into effect on October 30, 2019 applicants may now restore the right of priority within 2 months of the filing date in Canada. However, if the right of priority is restored during the International Phase, it will not be deemed restored in Canada unless the international filing date is on or after October 30, 2019.
Canadian Patent Law – Adjusting to New Practice.
Janice G. Kelland explains recent developments in Canadian Patent Law.
The 30th of October 2019 was a red-letter day for Canadian patent law. Amendments made to the Canadian Patent Act in 2014 and 2015, and the completely re-drafted Canadian Patent Rules registered in July 2019, came into force on that day, bringing substantial change to Canadian patent practice …
You can download the article by clicking HERE. Janice’s article has been published on pages 16-18 of The Patent Lawyer Annual 2020. The full publication can be accessed at this LINK.