Part I: Fees related to the implementation of the Patent Law Treaty
A) How will implementing the Patent Law Treaty (PLT) impact the Canadian Intellectual Property Office's (CIPO's) patent schedule of fees?
The ability to enforce an intellectual property (IP) right issued in a country essentially ends at its border. Applicants wishing to expand beyond their domestic market and file for a patent in more than one country are faced with a multitude of laws, procedures, fees and forms. These requirements can be especially onerous and discouraging to smaller businesses that may not have the expertise or the resources to deal with multiple IP offices (IPOs).
It is with this situation in mind that the World Intellectual Property Office (WIPO) has fostered the development and implementation of IP treaties that promote the protection of IP across multiple jurisdictions. WIPO is an agency of the United Nations headquartered in Geneva, Switzerland, and of which Canada is a member. It serves as a global forum for IP services, policy, information and collaboration.
In an attempt to facilitate the acquisition of IP rights like patents, WIPO has helped negotiate several treaties that seek to harmonize the administrative practices of IPOs such as CIPO. These treaties also help reduce the administrative burden borne by an applicant by dictating what IPOs can and cannot require from applicants.
Patent Law Treaty (PLT)
Canada is seeking to ratify the PLT, an administrative law treaty which, as explained above, harmonizes the administrative procedures of national patent offices. The PLT addresses issues such as the provision of periods of grace to avoid loss of rights, representation before the IPO, and red-tape reduction. It does not seek to harmonize substantive patent law (for example, what is patentable). Canada signed the PLT in 2001.
The PLT presents clear benefits to Canadian applicants. Specifically, this agreement is especially beneficial to businesses seeking to expand their activities to other countries. Not only will applicants benefit from more flexible administrative requirements, but the harmonization of requirements will also minimize the potential for mistakes on the part of applicants who may be unfamiliar with the rules and procedures of a foreign IPO. The result is a simpler way of filing and access to a modern IP framework for businesses to manage their patents abroad.
By joining the 37 countries that are currently members of the PLT assembly, Canada will be aligning its patent framework with those of its major trading partners. Furthermore, aligning to the PLT will facilitate foreign patent filings into Canada, helping to make Canada a more attractive destination for foreign investments, which will ultimately encourage foreign companies to bring innovations to market more quickly, to the benefit of Canadian consumers.
Changes to Canada's patent regime triggered by the PLT
In order for any country to join the PLT assembly, its legislation and regulations must comply with all of the requirements of the Treaty. For Canada, whose last significant modernization of its patent legislation came into effect in 1989, this requirement provided an opportunity to modernize some elements of the Patent Act (the Act) and Patent Rules, as well as to eliminate requirements that no longer served a purpose in an increasingly globalized marketplace.
Some amendments to the Act were directly dictated by the requirements of the PLT, for example, simplifying the requirements for applicants to obtain a filing date, allowing applicants to perform certain administrative tasks themselves (i.e. without having to pay for the services of an agent) and notifying applicants of a missed deadline. Other changes to the Act were needed to clarify current practice and facilitate the implementation of the PLT following ratification.
While some elements of the PLT are very specific and prescriptive, leaving little to no leeway in how to implement, others allow for IPOs to implement in a way that best fits their legal and market environment. When faced with the opportunity to choose how best to implement certain requirements of the PLT, CIPO kept the following goals in mind:
- efficient service to clients
- harmonized IP practices with those of other major markets
- assured marketplace certainty through well-scoped patent rights and limited periods of uncertainty as to the status of an application or patent
It is important to note that not all of the changes to Canada's patent regime required to align with the PLT will have an effect on CIPO's patent fee structure. This section focuses on proposed new fees detailed below which require a review as dictated by the UFA.
Extension of time limits
Canada's patent regime currently includes the following features:
- A filing fee payment, along with all of the necessary documents, is required at the time of filing the application to secure a filing date.
- A maintenance fee payment is required every year, beginning on the second anniversary date of the filing date to keep a patent application in good standing or patent in force. The amount of the maintenance fee increases over time.
- Applicants are required to request examination of their application within five years of the filing date.
When an application filing fee is not submitted at the same time as documents forming the application, a filing date is not awarded until the fee is received. When applicants fail to pay the maintenance fee or to request examination within the prescribed time limit, the application is immediately deemed abandoned. However, applicants can reinstate their application without any loss of rights by paying a reinstatement fee within 12 months. After 12 months, the application is irrevocably abandoned. A similar scenario applies in the case of a missed maintenance fee payment for a granted patentFootnote 3.
To comply with the PLT, CIPO must:
- notify patent rights holders in cases of missed deadlines for payment of the filing fee or maintenance fee or for requesting examination; and
- provide additional time beyond what is available in the current regime to remedy the situation.
For the filing fee, the PLT requires that IPOs allow the fee to be paid after the filing date of an application without jeopardizing the filing date itself - the earliest possible date from which the exercise of a patent monopoly can begin - if all other requirements are met. When the filing fee is not paid on the filing date, applicants must be notified and provided with up to two months for payment. Eliminating the requirement to pay a filing fee for the purposes of establishing a filing date provides a safety net for applicants who unintentionally omit the filing fee upon filing or submit only a partial payment.
For the maintenance fee, the PLT requires that the time limit for remedying a missed payment be extended by six months from the current time limit. In other words, where applicants currently have 12 months following a maintenance fee's missed due date to rectify the situation and prevent their application from becoming irrevocably abandoned, the new regime will extend that period to 18 months. Each paid maintenance fee will continue to maintain an application or a patent for one year. That is, the new amendment does not extend the period covered by the maintenance fee period but introduces an additional “period of grace” of six months to pay the fee. The provision of additional time is intended to be a safety net for patent applicants and owners who failed to pay the fee before the due date.
Lastly, in a deferred examination regime such as that of Canada, the PLT requires that applicants be notified of their failure to request examination within the prescribed time limit, and be provided with a minimum of an additional two months after notification to comply before their application is deemed abandoned. As with the maintenance fee and the filing fee, this provision serves as a safety net for applicants who did not fulfill all of the requirements for the request for examination within the prescribed time limit.
B) How did CIPO establish the late fees?
Revenue neutrality principle
CIPO funds its operations on a cost-recovery basis whereby applicants are charged fees in return for receiving a service, namely the grant or registration of an IP right. The fees charged for these rights and related services must therefore be sufficient to support CIPO's operations while complying with its mandated role of supporting economic growth and innovation.
While CIPO's existing services and processes will remain mostly unchanged by the implementation of the PLT, the requirement to pay fees for reinstating abandoned applications or lapsed patents will be delayed and three new fees will be added, primarily to incentivize compliance with prescribed time limits. CIPO's current cost of operations is not expected to change significantly. It is for this reason that one of the guiding principles that the organization followed in establishing its new fees was to ensure revenue neutrality by balancing revenues forfeited by the later triggering of reinstatement fees with the revenue generated from new late fees; in other words, CIPO sought to generate no increase or decrease in revenues.
Preservation of safety net benefits and promotion of behaviours that support market certainty
The PLT requires that member countries' patent regimes provide extensions to time limits for the payment of the filing fee, the maintenance fee, and for the request for examination before the corresponding application is deemed abandoned, as a safety net to prevent an inadvertent loss of rights. The resulting delay to the start of the period of abandonment could encourage applicants to rely on the additional periods as the norm rather than the exception. Recognizing that this behaviour would neutralize any safety net benefits, the PLT also contains provisions permitting IPOs to impose penalties (i.e., late fees) on these additional periods.
To limit potential abuses that could result from the extension of the time limits, CIPO is proposing to put in place three new late fees for: (1) the late payment of a filing fee; (2) the late payment of a maintenance fee, and (3) the late request for examination. Implementing these late fees essentially allows patent applicants and owners to “buy” extra time to keep their applications pending and their patents in effect. It is a practice that is consistent with other PLT member countries and Canada's major trading partners.
Fees for the late payment of a filing fee
Under the PLT, while IPOs may still require applicants to pay a filing fee, the filing fee can no longer be a condition for establishing a filing date. That is, an application is considered to have been filed and it is awarded a filing date when CIPO receives the application, even if the filing fee is not submitted at that time.
CIPO is proposing a fee for the late payment of the filing fee to encourage applicants to pay on the filing date. In the absence of a late fee which acts as a financial disincentive, a number of applicants would likely delay payment of their filing fee and would thereby increase the risk of losing their rights if they fail to meet the new deadlines—in effect, neutralizing the safety net aspect of this provision.
Fees for the late payment of a maintenance fee
Currently, if patent applicants fail to pay the maintenance fee by the due date, the application is deemed abandoned. They must pay the maintenance fee and a reinstatement fee within 12 months of the missed payment in order to reinstate their application. After 12 months, the application becomes irrevocably abandoned (see Figure 1, Current Regime). A similar scenario applies to granted patents.
In the new regime, applicants will have 18 months in total, rather than 12 months, before the application is irrevocably abandoned due to a missed maintenance fee payment. CIPO is proposing that applicants pay a late fee for the extra time. Applications will not be deemed abandoned immediately after a failure to pay the maintenance fee by the due date. Instead, patent applicants and owners will have six months following the due date to remedy their failure by paying the maintenance fee and the proposed late fee. After six months, the application is deemed abandoned and they must pay the maintenance fee, late fee and a reinstatement fee in order to reinstate it (seeFigure 1 , Proposed New Regime). Once again, a similar scenario will apply to granted patents.
Figure 1 : Timelines for applications in the current patent regime and in the proposed new regime*
*Similar timelines apply in the case of granted patents
Detailed description of Figure 1
The figure has two bands representing current and proposed new regimes for the late payment of a maintenance fee on an application.
The upper band illustrates the current regime. At the left side of this band there is a green segment -- labelled "Maintenance Fee" -- representing a period of time prior to the due date of a maintenance fee during which an application is considered to be in good standing. The right end of this green segment indicates the maintenance fee due date. To the right of the green segment is an orange segment -- labelled Maintenance Fee + Reinstatement fee -- representing a period of time from 0 to 12 months after the due date of a maintenance fee and during which the application is considered 'abandoned'. A note below this orange segment states "Application is deemed abandoned and can be reinstated". To the right of the orange segment is a red segment -- labelled "Irrevocably abandoned" -- representing a period of time from 12 months after the due date of a maintenance fee to infinity. A note below this red segment states "Application can no longer be reinstated"
The lower band illustrates the proposed new regime. At the left side of this band there is a green segment -- labelled "Maintenance Fee" -- representing a period of time prior to the due date of a maintenance fee during which an application is considered to be in good standing. The right end of this green segment indicates the maintenance fee due date. To the right of the green segment is a yellow segment -- labelled "Maintenance fee + Late fee" -- representing a period of time from 0 to 6 months after the due date of a maintenance fee and during which the application is considered 'late'. To the right of the yellow segment is an orange segment -- labelled "Maintenance Fee + Late fee + Reinstatement fee" -- representing a period of time from 6 to 18 months after the due date of a maintenance fee and during which the application is considered 'abandoned'. A note below this orange segment states "Application is deemed abandoned and can be reinstated". To the right of the orange segment is a red segment -- labelled "Irrevocably abandoned" -- representing a period of time from 18 months after the due date of a maintenance fee to ‘infinity’. A note below this red segment states "Application can no longer be reinstated".
The absence of a late fee, given the extra six months granted, would create an environment where patent applicants and owners have no incentive to pay their maintenance fee in a timely fashion. It is reasonable to expect that most would pay at “due date + 6 months” rather than on or before “due date.” While a maintenance fee is overdue, CIPO does not take action to continue processing the application, as the applicant's intention to prosecute the application becomes uncertain. Delaying the payment of a maintenance fee to “due date + 6 months” could therefore significantly lengthen pendency (the period from filing an application until the patent is issued or the application is irrevocably abandoned), as pending applications could spend up to six months per year in a “late maintenance fee” or idle status. Such a prolonged pendency would, in turn, increase marketplace uncertainty as third parties would endure additional delays waiting for an outcome in respect of the application or patent. In addition, if no fee is imposed for the late payment of a maintenance fee, there would be an impact on CIPO's revenues, as CIPO would be forfeiting the reinstatement fee revenue that it would have otherwise received during the period between “due date” and “due date + 6 months.” Lastly, the absence of a fee for late payment of the maintenance fee would put Canada at odds with its major trading partners.
Fees for the late request for examination
Similar to the case of the maintenance fee, currently, if patent applicants fail to request examination and pay the associated fee within the prescribed time limit, the application is deemed abandoned and they have 12 months to make the request for examination and pay the associated fee together with a reinstatement fee in order to reinstate their application and prevent irrevocable abandonment. In the new regime, applicants are notified of a missed deadline and granted an additional two months to request examination before the application is deemed abandoned, giving 14 months in total to prevent irrevocable abandonment. CIPO is proposing that applicants pay a late fee for that extra time.
If no late fee is imposed for the late submission of a request for examination during the two months following the sending of a notice, the impact on pendency and on CIPO's revenues would be similar to the maintenance fee case, but smaller as there is only one request for examination per application compared to up to 19 maintenance fees over the life of an application/patent. As well, Canada's patent regime would not be aligned with its trading partners that impose late fees.
C) Fee-for-service proposal
The receipt of fees to reinstate abandoned applications is a revenue source for CIPO, generating $200 for each reinstatement. With the new regime, it is expected that CIPO will lose some of the reinstatement fees given that applicants will have the opportunity to rectify a missed deadline for maintenance fee payment or requesting examination before their application becomes abandoned. Late fees, which have been deemed necessary to preserve the safety net benefits afforded by the PLT, can be set in a way that would mitigate the loss in potential revenue without generating an increase. In other words, for this exercise, CIPO's goal was to ensure that the amount that it will receive from the combination of reinstatement fees and new late fees is as close as possible to the amount it currently receives from reinstatement fees in order to maintain revenue neutrality.
For simplicity and consistency, CIPO opted to establish one fee amount for the three late fees (late payment of a filing fee, late payment of a maintenance fee, and late request for examination). To determine the optimal amount for the late fee, CIPO used data from 2012 to determine the impacts of a range of fee amounts in view of different possible applicant behaviours in response to the new late fees. The following assumptions were made:
- Analysis was conducted only on the maintenance fee. As explained in the previous section, it is expected that the imposition of the late fee will have a similar but significantly smaller effect on the request for examination. There is no historical data on applicant behaviour with respect to filing fees since the filing date is currently only awarded when the filing fee is paid.
- In 2012, 64% of applicants/patentees who failed to pay the maintenance fee by the due date paid reinstatement fees (or, in the case of a granted patent an additional fee equivalent to the reinstatement fee) within the first 6 months following the due date. In the new regime, only the late fee would apply during this period, whereas those paying after six months would also be subject to the reinstatement fee. Assuming that the proportion remains the same and the number of reinstatements and late payments under the new regime remain the same as in 2012, a maximum of 36% of applicants/patentees who failed to pay their maintenance fee before the due date would be subject to both the reinstatement fee (or additional fee for granted patents) and the new late fee.
It is anticipated that some applicants/owners will shift from paying between 6 and 12 months after the due date in the current regime to paying within the first 6 months after the due date in the new regime in order to avoid having to pay both the late fee and the reinstatement fee. It is unlikely that more than 35% of applicants/owners would make this shift, as that would result in 99% of applicants/holders rectifying the missed payment within the first 6 months. Considering the full suite of changes affecting the regime (the postponing of abandonment status, third-party rights during periods of uncertainty in the status of an application, and a requirement to demonstrate due care being introduced after a prescribed period), a shift of 10% to 25% in applicants/holders behaviour appears reasonable. Table 1 and Figure 2 illustrate the impact of a range of late fee amounts on CIPO's revenue, considering a range of potential changes in applicant/owner behaviour.
As previously stated, the main objective of the late fee is to preserve the safety net benefits of the new provisions and promote behaviours that support market certainty, while generating no increase or decrease in revenue. As can be seen, a shift in behaviour ranging between 10% (red line) and 25% (green line) would cause the smallest change in revenue with a late fee set between approximately $150 and $175.
| Late fee amount | No change in behaviour ($) | 10% shift ($) | 25% shift ($) | 35% shift ($) |
|---|---|---|---|---|
| $50 | -396,500 | -497,980 | -650,200 | -751,680 |
| $100 | -142,800 | -244,280 | -396,500 | -497,980 |
| $125 | -15,950 | -117,430 | -269,650 | -371,130 |
| $150 | 110,900 | 9,420 | -142,800 | -244,280 |
| $200 | 364,600 | 263,120 | 110,900 | 9,420 |
Table 2 shows the fee proposed for the late payment of filing fee, the late payment of maintenance fee, and the late request for examination.
| New fee | Proposed amount |
|---|---|
| Fee for late payment of filing fee | $150 |
| Fee for late payment of maintenance fee | $150 |
| Fee for late request for examination | $150 |
Impact assessment
The overall changes to the Canadian patent regime are such that the impact of the proposed fee structure on the costs incurred by applicants and patent holders will vary based on applicant/patentee behaviour. For applicants who omit to pay a maintenance fee or request examination before the prescribed time limit but address that omission within the new periods of grace, the cost incurred will be reduced from $200 to $150 since the application will no longer be abandoned during this period and they will pay the new late fee rather than the reinstatement fee For those who address the omission after the new period of grace, once the application has become abandoned, the proposed fee structure will increase the costs incurred from $200 (reinstatement fee) currently to $350 (reinstatement fee plus late fee), thereby incentivizing early correction.
In addition, the proposed changes will introduce new costs for applicants and holders in exchange for allowing them to preserve their patent rights where those would previously have been lost. For a proposed cost of $150, applicants will be allowed to preserve a filing date when they omitted to submit a filing fee on said filing date. For a proposed fee of $350 (late fee plus reinstatement fee), applicants and holders will be allowed to preserve their rights for an additional six months beyond the current period in the case of a missed maintenance fee payment and an additional two months in the case of a failure to request examination before the prescribed time limit.
As outlined above, depending on the particulars of an applicant's or patent holder's situation, the proposed fee structure may cause a decrease or an increase in the costs incurred. In both cases, the proposed fee structure consistently incentivizes the early correction of missed time limits.