Tuesday, July 31, 2012

Speculative Prejudice to Third Parties in Reinstating a Patent

Repligen Corporation v. Canada (Attorney General) 2012 FC 931 Near J

Repligen’s former patent agent transposed two digits of Repligen’s patent 1,341,486, to 1,314,486, when it engaged Computer Patent Annuities to pay maintenance fees on the patent. Consequently, the fees were paid against the “14" patent, which was held by Rolls-Royce. Sometimes the fees would be paid first on behalf of Rolls-Royce, sometimes on behalf of Repligen. The second payor would to be told that fees had already been paid and would request a refund. While duplicate fees were paid on the "14" patent, no fees were paid on Repligen’s “41" patent and CIPO sent a Maintenance Fee Notice to Repligen’s former agent advising that the patent would lapse unless payment was made within twelve months. Repligen’s former agent did not respond [5], and the “41" patent lapsed.

Repligen then switched agents. Its new agent attempted to have the patent reinstated, arguing that the Commission should exercise her discretion to correct the clerical error under s 8 of the Act and reinstate the patent. The Commissioner refused, primarily on the basis of the lengthy delay and the potential for prejudice to third parties who might have relied on the register showing the patent as lapsed [#1 59].

In Repligen #1 2010 FC 1288 Lemieux J held that the Commissioner had not properly exercised her discretion. A crucial point was that the Commissioner’s concern regarding prejudice to third parties was speculative as she had no evidence of third party prejudice. Lemieux J contrasted this with Bristol-Meyers (1998), 82 C.P.R. (3d) 192 (FCA) in which two other companies had filed priority claims for similar drugs [#1 60(f)]. Lemieux J noted the “catastrophic consequences” of the loss of patent rights [#1 59], and insisted that the Commissioner take into account the impact on Repligen in deciding whether the patent should be reinstated [#1 60(a)].

I am inclined to think that the Commissioner was right on this point. There may be many cases in which a third party would have relied on the lapse of the patent in a way that could not come to the attention of the Commissioner. For example a third party might have done patent clearance search before deciding to invest in developing a new product and then proceeded after having determined that its product would infringe the Repligen patent, but that the patent had lapsed. Given the nature of third party rights, it seems likely that it would be only in relatively unusual circumstances, such as those in Bristol-Meyers, that the Commissioner could become aware of the prejudice to third parties. It is true that the consequences to Repligen of the loss of its patent rights can be catastrophic, but it is also true that infringement of those rights could be catastrophic to a third party.

In any event, this was not the view of Lemieux J, who remitted the matter to be reconsidered by a different official in the Patent Office. The Commissioner once again refused to correct the error, and Repligen once again sought judicial review, leading to this decision in Repligen #2. This time the Commissioner focused on potential prejudice to Rolls-Royce. The Commissioner argued that “‘[c]orrecting Repligen's error today could retroactively have the effect of causing the Rolls-Royce patent to have expired in 2008' since the payments originally applied to it would automatically turn over to the Repligen Patent” [# 2 16]. Near J rejected this argument, rightly in my view. Fees were always paid in respect of Rolls-Royce’s patent, which never lapsed and has now expired [# 2 31]. I see this argument by the Commissioner as a way of attempting to point to an actual prejudice rather than a speculative prejudice in order to satisfy the direction by Lemieux J. It is an unsatisfactory attempt, as the Commissioner identified the real issue correctly in the first instance; the real question is whether the Commissioner should consider harm to third parties who may have relied on the lapse, unbeknownst to the Commissioner. Lemieux J, and now Near J, have held that it should not.

The matter had been remitted to the Patent Office once again. Even if the patent is reinstated, I am not sure Repligen’s troubles are over. Loss of patent rights is not “catastrophic” if those rights are never exercised. But if Repligen has the patent reinstated and then brings an infringement action against a competitor who can show that it did in fact rely on the lapsed patent, there is a a very strong argument that that defendant should have some kind of equitable defence. If the defendant can say “I searched for patents before undertaking my business, I found this patent that I would have infringed, I determined that it had lapsed, and I then invested $10 million in reliance on that,” it would be a serious failure of the patent system to allow Repligen to enforce against that defendant.

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