Routine Correction of Inventorship in the Face of Pending Litigation

H Lundbeck A/S v Canada (Commissioner of Patents) 2021 FC 1394 Pentney J

2,705,163

This is a routine correction of inventorship under s 52, with a twist in that the application for correction was brought in the face of what was arguably pending litigation.

Pentney J ordered the records of the Patent Office varied to remove three of the original four named inventors from Lundbeck’s 163 patent, and also removing one of the original two named co-owners. The error arose because the claims had been substantially narrowed during prosecution, such that the new claims were addressed exclusively to the contribution of only one of the four original named inventors [7]–[8]. The ownership point arose because the four original named inventors were employees of two different companies, which thereby became co-owners. With inventorship changed to one of the inventors, their employer was accordingly the sole owner. By inadvertence, inventorship and ownership were not amended accordingly.

Pentney J noted that “[i]n previous cases involving the addition or deletion of an inventor’s (or co-inventor’s) name, the Court has considered the test set out in subsections 31(3) and (4) of the Act, which relate to the addition or removal of applicants to a pending patent application” [15]. The use of the word “considered,” is significant, as Pentney J is not suggesting that the test in s 31(3), (4) is the same as the test under s 52. On its face the powers granted to the Court by s 52 are broader than the Commissioner’s powers of correction under s 31(3), and it is now clear in practice that the Court is not restricted by the criteria set out s 31(3), (4): see eg Inguran 2020 FC 338, (discussed here) removing an inventor without the affidavits from the remaining applicants required by s 31(3); SALT v Baker 2020 FCA 127 (here) adding an owner in a contested case in which the omission was not by inadvertence. The effect is that the criteria in s 31(3), (4) are sufficient but not necessary for removal or addition in a granted patent; the Court will consider those criteria, and if they are satisfied, the addition or removal will be ordered routinely, but the power of correction under s 52 is not limited to those routine cases.

There was one “wrinkle,” namely that “subsequent to filing its Motion Record in this matter, Lundbeck received a Notice of Allegation (NOA) in relation to the 163 Patent” [20], and “[t]he question is whether this constitutes “pending litigation” and as a consequence any other party should have been given notice of this proceeding” [20] While accepting that this arguably constituted pending litigation, Pentney J ordered the correction nonetheless, noting that there was no indication that the parties to the NOA would be prejudiced [22], given that the NOA did not allege improper inventorship or ownership [20]. The key principle is that “It is immaterial to the public whether there is one inventor or two joint inventors as this does not go to the term or to the substance of the invention nor even to entitlement” Micromass v Comm’r of Patents 2006 FC 117 [16], quoted at [22]. As Pentney J noted, this principle has been regularly affirmed and applied [21]. This is perhaps not to say that a change in inventorship can never be material, but rather that it must be shown to be material before an amendment will be refused on this basis. As Martineau J commented in Everlight 2017 FC 1108 (here) [5], quoted by Pentney J at [21], “[t]he proposed variation will cause no prejudice to third parties, as no outsider is claiming an interest in the Patent, there is no ongoing infringement case, and the rest of the Assignment is immaterial to the public.”

Salt v Baker Applied

Mud Engineering Inc v Secure Energy Services Inc 2020 FC 1049 Aalto CMJ

As discussed here, Stratas JA’s decision in Salt Canada 2020 FCA 127 clarified previously unsettled law by holding that the Federal Courts always have jurisdiction to determine ownership of a patent pursuant to s 52, overruling prior caselaw which held that the FC lacked jurisdiction when the matter relates “primarily” to contract law. This case provides an excellent illustration of the shortcomings of the prior law and shows that the salutary effects of Salt v Baker are already being felt.

Prior to the decision in Salt Canada, Mud Eng brought an action alleging infringement by Secure Energy, which in turn defended on the usual grounds of non-infringingement and invalidity [5]. But Secure Energy also alleged that it was the rightful owner of the patents at issue [5]. If it was, that would likely end the litigation [29]. But before deciding who owned the patents, the parties faced the problem of figuring which court should decide who owned the patent. One problem with the prior law is that the FC lacked jurisdiction in some cases, forcing the parties to litigate in two venues. And to make things even more complicated, the nature of the test for FC jurisdiction turned on the fact-specific question of whether the matter “primarily” related to contractual interpretation, so it was difficult to know, without litigation, whether the FC had jurisdiction.

Because of that uncertainty, an action was commenced in the Alberta Court of Queen’s bench, with the result that the parties were engaged in actions with identical allegations in both the Federal and Alberta courts. My impression is that both parties would have been happy to litigate in the Federal Court, given its expertise in patent law and the fact that its judgment can be enforced nationwide [12], but they did not want to bounce back and forth between the two. Mud Eng brought an application before Ashcroft J in the Alta QB to stay the Alberta action in favour of the Federal Court. The motion was brought prior to the decision in Salt Canada, and the motion was refused on the basis of the uncertainty with respect to the jurisdiction of the Federal Court in these matters [9]. This illustrates the very unsatisfactory nature of the prior jurisprudence; Ashcroft J was not able to determine what view the Federal Court would take of the Federal Court’s jurisdiction. In dismissing the stay application, Ashcroft J invited the parties to seek a preliminary determination from the Federal Court on the issue of jurisdiction [10], indicating that she would be willing to reconsider her decision on the stay in light of the result.

This invitation was taken up by Mud Eng in the present application for a determination of a point of law. Mud Eng argued that the Federal Court did indeed have jurisdiction; and Secure Energy did not oppose the motion, reinforcing the point that lack of clarity in the law is the real problem: [11]–[12].

Aalto J had no difficulty in deciding that the Federal Court did indeed have jurisdiction in this case, holding that Salt Canada “is a complete answer to the jurisdictional issue” [14]. Aalto J decided the matter as a question of law under Rule 220, rather than by way of a declaration, which “ensures that this Order will not be construed as case specific” [20]. Consequently, we may hope that in the future such orders will not be necessary, as the parties will be able to have confidence that the Federal Courts will take jurisdiction in these types of cases. The benefit of Salt Canada is not only in preventing duplicative litigation, but also in promoting predictability in the law, thereby promoting settlement and reducing the cost of litigation.

Aalto J also addressed a legal point of interest. In its counterclaim arguing that the FC did not have jurisdiction, Secure Energy stated that the claims “are not ancillary to any matter within the jurisdiction of the Federal Court.” Aalto J noted that this engages the three-part test set out in ITO [1986] 1 SCR 752. Aalto J explained that:

[25] ITO, and the jurisprudence flowing from it, allows the Federal Court to assume jurisdiction in a matter over which it does not have direct statutory jurisdiction if the matter is “ancillary” to a claim properly within the jurisdiction of the Federal Court. Secure Energy argues that the Federal Court does not gain jurisdiction over ownership of patents through contract interpretation as an ancillary issue to patent infringement. Notably, ITO was not discussed or referred to by Justice Stratas in Salt Canada. For good reason, there was no need to discuss the jurisdiction of ownership of patents through ancillary means when the jurisdiction of the Federal Court is clear pursuant to s. 52 of the Patent Act.

I must admit that I have struggled a bit to understand the place of the ITO test, and I was wondering why it had not been addressed by Stratas JA in Salt Canada. I’m pleased to have this point clarified, at least in my own mind.

 PS: I'm still working on my post on the inventive concept aspect of Apotex v Shire 2021 FCA 52. It might take a while.

Jurisdiction of the Federal Court to Interpret Contracts Relating to Patents: A Fresh Start

SALT Canada Inc v Baker 2020 FCA 127 Stratas JA: Near, Woods JJA rev’g 2016 FC 830 Boswell J

            2,222,058

In a direct and vigorous decision, Stratas JA for the FCA has held that the Federal Court always has jurisdiction to determine who has title to a patent in an application under s 52 of the Act [12], [47], [49], expressly repudiating a line of cases holding that the FC does not have jurisdiction if determination of ownership of the patent is “primarily” a matter of contractual interpretation [27]-[31]. This a very welcome development that will simplify litigation in this area. This issue has been a pet peeve of mine ever since the trial decision in SALT v Baker four years ago and I am very pleased to see the issue dealt with so clearly. There is, however, one loose end, namely the effect on Innotech (1997) 74 CPR (3d) 275 (FCA) rev’g 72 CPR(3d) 522 (FCTD), holding that the Federal Court does not have jurisdiction when a contract relating to patent ownership is used as a sword, rather than a shield. Innotech is formally distinguishable, in that it did not involve an application under s 52, but the holding is extremely difficult to reconcile with Stratas JA’s reasoning in this case. In my view, Innotech is no longer good law, but some uncertainty remains, as it is an FCA decision and was not directly addressed in SALT v Baker.

As discussed here, SALT v Baker involved conflicting assignments of rights in the ‘058 patent from the inventor, Dr Markels. The first was a complex series of assignments which ultimately led to the respondent, Baker. Baker registered his ownership with the Patent Office. Some of the assignments in this series included provisions requiring the ‘058 patent to be reassigned to Markels if certain conditions were breached. Believing that the conditions had indeed been breached, in 2015 Markels assigned title to the Applicant, SALT. Markels also prepared a reassignment from Baker to Markels, which was, however, never executed by Baker. SALT sought to have its ownership registered, but the Patent Office refused on the basis that the assignment was not executed by Baker, the registered owner [3]-[9]. SALT then brought this application for a declaration under s 52 that the register be varied to list SALT as the owner of the ‘058 patent (as well as other additional and alternative relief). A key substantive question related to the interpretation of the various agreements, and whether the conditions in the first series of assignments had been breached, such that Markels was entitled to a reassignment [24].

Boswell J at first instance, relying primarily on Lawther (1995), 60 CPR(3d) 510 (FC), held that the Federal Court “lacks jurisdiction where determination of the ownership of a patent depends upon the application and interpretation of contract law principles” [20]. The question is whether the matter at hand “relates primarily to contract or to patent law: this Court will have jurisdiction over a case that primarily concerns the latter, but not the former” [21].

The FCA has now reversed. The reasoning of Stratas JA was straightforward. The basis of the FC jurisdiction is the grant by Parliament. The text of s 52 of the Patent Act is clear [8]:

[5] Section 52 of the Patent Act provides that the “Federal Court has jurisdiction…to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged”. The application before the Federal Court sought just that. On the plain language of . . . section 52 of the Patent Act, the Federal Court had jurisdiction over the appellant’s application.

There is no constitutional objection to the grant of jurisdiction under s 52 [49].

Ownership Can Be Raised as a Defence but Not as a Counterclaim

Farmobile, LLC v Farmers Edge Inc 2018 FC 1269 Mactavish J aff’g 2018 FC 915 Ring J
            2,888,742 / Farming data collection

Farmobile, the patentee in this action, sued Farmers Edge (FE) for infringement of the 742 patent. FE asserted, by way of both defence and counterclaim, that it was the rightful owner of the patent [915-3]. The defence and counterclaim were both based on the same facts [14], [914-38], to the effect that the right in the invention had been assigned to it [8]-[12], [914-4]. Farmobile sought to strike the allegations related to ownership from both the Statement of the Defence and the Statement of Counterclaim, which were considered separately. Ring J granted the motion to strike the counterclaim, but allowed the same allegations to stand as a defence (see here). Mactavish J has now affirmed.

In affirming that the allegation of ownership may stand as a defence, Mactavish J established what appears to be a novel point, albeit a minor one, namely that ownership of the patent by the defendant is indeed a defence to a claim of patent infringement which may be asserted in Federal Court, like non-infringement, invalidity and use pursuant to a licence [31]. This was in the face of Farmobile’s argument that the Federal Court lacked jurisdiction to entertain ownership in any context; it asserted that “while ownership is indeed a defence to a claim for patent infringement, it is not one that can be asserted in this Court” (Mactavish J’s emphasis). As Mactavish J pointed out, it is well-established that a licence to use is a valid defence, notwithstanding that assessing the merits of such a defence involves a matter of contractual interpretation, and “A licence is, after all, merely one form of contract” [32]. This holding seems clearly correct, but it is nonetheless a relief.

At the same time, Mactavish J affirmed that the Court does not have jurisdiction to consider exactly the same issue, based on exactly the same facts, by way of counterclaim. Mactavish J held that the contracts relating to ownership may be used a shield, but not as a sword [26], [35], [50]. The rationale is that in the defence, the essence of the litigation is patent infringement, while in the counterclaim, the essence of the litigation is patent ownership. This distinction does have support in the cases, in particular Innotech (1997) 74 CPR (3d) 275 (FCA), relied on by Mactavish J [34],[43]-[50]. And it is also reasonable to say the that the Federal Court can determine ownership when raised as a defence to an infringement action, even if it does not have jurisdiction to do so when ownership is raised independently.

However, the shield / sword distinction does not address, or affect, the more fundamental issue as to whether the Federal Court has jurisdiction to consider patent ownership when raised indepednently. If the Federal Court does not have such jurisdiction, then the sword / shield distinction makes sense; but if it does have such jurisdiction, then it doesn’t. Mactavish J’s reasoning is sound if one accepts that the Federal Court does not have jurisdiction to determine patent ownership on its own, but nothing in her decision addresses that fundamental point, one way or the other.

In previous posts, here and here, I have argued that the Federal Court does indeed have such jurisdiction, in light of s 20(2) of the Federal Court Act which gives the Federal Court “concurrent jurisdiction in all cases. . . in which a remedy is sought under the authority of an Act of Parliament or at law or in equity respecting any patent of invention.” In Kellogg [1941] SCR 242 the SCC interpreted the predecessor provision of the Exchequer Court Act as follows:

It will be noticed that subsection (c) deals with the "remedy" which is sought. And it enacts that the Exchequer Court shall have jurisdiction between subject and subject in all cases where a "remedy is sought" "respecting any patent of invention" "under the authority of any Act of the Parliament of Canada or at Common Law or in Equity." The remedy sought by the appellant, as a result of paragraph 8 of its statement of claim, is evidently a remedy in Equity respecting a patent of invention. The appellant claims that remedy as a consequence of the facts alleged in its paragraph 8 [that the appellant was owner by assignment]. It claims the remedy as owner deriving its title from the same alleged inventor of whom the respondent claims to be the assignee, through other assignors. In such a case, the invention or the right to the patent for the invention is primarily the subject-matter of the appellant's claim, and the remedy sought for is clearly "respecting any patent of invention." And this is covered by subsection (c) of section 22 of the Exchequer Court Act, as it stands at present.

Mactavish J interpreted Kellogg as holding that the Federal Court “may resolve contractual issues raised in an action that is in ‘pith and substance’ within the Court’s jurisdiction” [20]. I’m not sure that is exactly right: what the above passage says is that a party has jurisdiction when seeking a remedy respecting any patent of invention; which, of course, is what s 20(2) of the Act says on its face.In any event, whatever the broader principle, it seems to be to say quite explicitly that the Court does have jurisdiction in the circumstances at hand.

The argument endorsed above was made in the alternative (though that does not detract from its authority, as it was "obviously intended for guidance" and so should be accepted as authoritative: R v Henry 2005 SCC 76 [57]). Mactavish J implicitly distinguished Kellogg by saying that in that case the “primary issue” was a matter of patent law, not that alternative argument, citing pages 249-250. The exact “matter of patent law” at issue in Kellogg at 249 was as follows

the appellant is entitled to the benefit of the invention because John L. Kellogg, Jr. [the putative inventor], at the time when he is alleged to have made it, was in the employ of the appellant and then carrying out work which he was instructed to do on the plaintiff's behalf, and that, by virtue of his contract of employment and the circumstances under which the invention was made, he became and is a trustee of the invention for the company; if it be true further that, by reason of his being such a trustee, he was unable to transfer any right, title, or interest in the invention to any other party, and that the plaintiff is now the owner of any invention so made by John L. Kellogg, Jr., this would be one of the reasons why the appellant should be declared entitled, as against the respondent, to the issue of a patent including the claims in conflict as applied for by it.

That is, the "matter of patent law" is the question of who is the true owner of the patent in light of the contract of employment. This is exactly the question at issue in Farmobile: see the allegations [915-4], reproduced in my post on Ring J’s decision. The argument which I have previously discussed, based on what is now s 20(2), was an argument in the alternative. The primary basis for the decision in Kellogg, which Mactavish J acknowledged was a matter of patent law, is that ownership of a patent by virtue of contractual assignment and related circumstances, is essentially a matter of patent law and so the Federal Court has jurisdiction by virtue of that fact. This is entirely apart from any authority to award a remedy under s 20(2), or vary the Register under s 20(1). This aspect of Kellogg strikes as even more fundamental and directly on point. I cannot see how it is distinguishable from the facts at hand.

I remain perplexed by the Federal Court’s unwillingness to accept jurisdiction in these situations. When SCC precedent is unsound, I can understand that the Federal Court would resist its application by looking for tenuous distinctions. Indeed, that is in part how the common law “works itself pure.” But to my mind Kellogg makes perfect sense. The Federal Court consistently recognizes that it is “inconvenient” to require a party to commence a second proceeding in a provincial superior court in such circumstances [52]; the Court does not seem to be resisting jurisdiction out of concern that it would create some practical problem, which might not be apparent to an academic such as myself. It is of course true that inconvenience in itself is not a basis to assert jurisdiction where it does not exist [52], but conversely, creating inconvenience is not a basis to refuse jurisdiction where it does exist.

More broadly, a court faced with the question of who is the present owner of the patent must address who was the inventor, in order to determine who had the right to make a valid assignment in the first place, and that is surely a matter of patent law; as well as the question of how is the first owner, which is usually said to be a matter of patent law (see Comstock 38 CPR(3e) 29, 51-54; s 49); as well as the matter of priorities under s 51. Ultimately the remedy is amendment of the Register, which is established pursuant to s 12, and which the Federal Court, but not the provincial superior courts, has the authority to order amended, pursuant to s 52. Thus, patent law and the Patent Act is implicated at every stage of an patent ownership dispute. Consequently, while contacts of assignment are also implicated, the matter of ownership of a patent seems to me to be essentially a matter of patent law, and that is what Kellogg says on its face.

Kellogg Co v Kellogg and Jurisdiction of the Federal Court to Interpret Contracts Related to Patent Ownership

Farmobile, LLC v Farmers Edge Inc 2018 FC 915 Ring J
            2,888,742 / Farming data collection

Farmobile brought an action against Farmers Edge for infringement of the 742 patent. Farmers Edge wants to defend on the basis that it is the rightful owner of the 742 patent. On this motion to strike, Ring J has held that the Federal Court lacks jurisdiction, because determination of ownership is essentially a matter of interpretation of the contracts of assignment. This means that in order to effectively defend against this action brought against it, Farmers Edge will have to bring a separate action in a different forum seeking a declaration that it is the true owner [55].

The jurisdiction of the Federal Courts in such matters is governed by s 52 of the Act, which (in combination with s 20) gives the Court jurisdiction “to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.” Ring J stated that “It is well-established that this Court lacks jurisdiction to entertain a claim under section 52 of the Patent Act where the issue to be decided is the proper owner of a particular patent, and the determination of ownership depends on the interpretation of various contract documents between the parties and the application and interpretation of contract law principles” [27].

There is indeed a well-established line of authority in the Federal Court to that effect. In my post on SALT Canada Inc v Baker 2016 FC 830, I suggested that this line of authority had overlooked the SCC decision in Kellogg Co v Kellogg, [1941] SCR 242, or interpreted it too narrowly. Kellogg also involved a motion to strike, where the underlying action was a conflict between pending applications. It is worth setting out the pleading (246) which was allowed to stand by the Supreme Court:

8. In the event that the Court should find as a fact that the said John L. Kellogg, Jr., was the first inventor of the subject-matter of the said application serial No. 450,047, then the plaintiff alleges

(a) That the late John L. Kellogg, Jr., was employed in the Experimental Department of the Kellogg Company from October 15, 1936, until December 19, 1936;

(b) If any invention was made by the said John L. Kellogg, Jr., which is not admitted but denied, it was made during and in the course of his employment by the plaintiff and when he was carrying out work which he was instructed to do on the plaintiff's behalf. By virtue of the contract of employment and the circumstances under which the invention was made the said John L. Kellogg, Jr., became and was a trustee of the invention for the company which was and is entitled to the benefit of it.

(c) The said John L. Kellogg, Jr., was by reason of his being such a trustee unable to transfer any right, title or interest in the invention to any other party and the plaintiff is now the owner of any invention covered by the application serial No. 450,047.

Compare this with the allegations which were stuck in Farmobile (reformatted for clarity)

[4] In support of its assertion that all rights to the invention claimed in the ‘742 Patent were ultimately assigned to it, Farmers Edge pleads that

(a) the three individuals who incorporated Farmobile, Heath Gerlock, Randall Nuss, and Jason Tatge, had previously been employed by Crop Ventures Inc., the corporate predecessor of Farmers Edge;

(b) Ron Osborne, who was the CEO of Crop Ventures, and Gerlock and Nuss jointly conceived and developed the invention claimed in the ‘742 Patent while they worked for Crop Ventures;

(c) Gerlock and Nuss each signed confidentiality and non-competition agreements whereby they assigned all rights and interests in the intellectual property to the inventions claimed in the ‘742 Patent to Crop Ventures; and

(d) Tatge signed an employment terms letter agreement whereby he agreed to sign Crop Venture’s standard Proprietary Information and Inventions Agreement [collectively the “Agreements”].

The allegations are substantively virtually the same: they are both to the effect that the invention was made during the course of employment and therefore belong to the employer.

Ring J distinguished Kellogg as follows (original emphasis):

[33] Further, I am of the view that the Supreme Court’s decision in Kellogg Co v Kellogg, [1941] SCR 242, is distinguishable and does not assist Farmers Edge in responding to Farmobile’s motion to strike. In Kellogg, the moving party sought an order striking out a claim, pled in the alternative, that the plaintiff was entitled to the benefit of an invention by virtue of an employment contract. In the present case, the essence of the Amended Counterclaim, namely the claim of ownership to the subject matter of the ‘742 Patent based on a series of Agreements, is sought to be struck out.

The distinction being drawn by Ring J is evidently that in Kellogg the disputed pleading was in the alternative, whereas in Farmobile it was by way of counterclaim. While that is true, I do not see it as a satisfactory distinction, for two reasons.

First, in the preceding section of her decision, Ring J had made the point that jurisdiction over the counterclaim has to be assessed separately from jurisdiction over the main action, relying on Innotech (1997) 74 CPR (3d) 275 (FCA) rev’g 72 CPR (3d) 522 (FC). In Innotech, the FCA held that “The counterclaim, when viewed by itself, would stand alone as an action for breach of contract and as such is not within the jurisdiction of this Court.” The same principle would appear to apply to the alternative claim in Kellogg, as the issue raised in the disputed pleading would have been capable of standing alone as a separate action. That is, if the pleading in Kellogg had been struck, and the plaintiff had subsequently lost and the patent issued to the defendant, nothing would have prevented the plaintiff from bringing an action to establish its ownership of the patent based on the facts alleged in the pleading at issue.

Secondly, and more importantly, there is not the least hint in Kellogg itself that the fact that the pleading was in the alternative is at all relevant; it was mentioned in the description of the facts, but never even adverted to in the Court’s reasoning.

Ring J then stated:

[34] Kellogg stands for the proposition that the Federal Court may resolve incidental contractual issues where the overall claim is, in “pith and substance”, within the Court’s jurisdiction. However, this Court has no jurisdiction to adjudicate a claim (or in this case, a counterclaim), where the claim is “purely and simply” a contractual dispute (Kellogg), or where an issue over which the Court may have jurisdiction is “secondary to and dependent upon” the resolution of a contractual issue (Salt).

[35] Since the relief sought by Farmers Edge in its Amended Counterclaim is dependent on a prior determination of the rights conferred by the Agreements described in the Amended Counterclaim, and the interpretation of these Agreements is clearly a matter of contract, rather than patent law, it is plain and obvious that the Court lacks jurisdiction to adjudicate the impugned portions of the Amended Counterclaim, and those pleadings must be struck out.

Ring J’s point is that the interpretation of the agreements is “purely and simply” a contractual dispute. One could certainly say that the dispute is over the interpretation of a contract, which just happens to involve ownership of a patent; but one could also say that the dispute is over the ownership of a patent, which just happens to turn on contractual interpretation. In my view, the SCC decision in Kellogg makes it quite clear that the second way of looking at the matter is correct. 

Here is the crux of the SCC’s reasoning in Kellogg (249-50):

It is undoubtedly true, as stated by the learned President, that the Exchequer Court has no jurisdiction to determine an issue purely and simply concerning a contract between subject and subject (His Majesty the King and Hume and Consolidated Distilleries Limited and Consolidated Exporters Corporation Limited); but here the subject-matter of the appellant's allegation only incidentally refers to the contract of employment between John L. Kellogg, Jr., and the appellant. The allegation primarily concerns the invention alleged to have been made by him and of which the appellant claims to be the owner as a result of the contract and of the other facts set forth; in the allegation. The contract and the claims based thereon are advanced for the purpose of establishing that the appellant is entitled both to the rights deriving from the invention and to the issue of a patent in its own name. That is precisely the remedy which the Exchequer Court of Canada has the power to grant under paragraph (iv) of subs. 8 of sec. 44 of the Patent Act

That is, in Kellogg the claim was allowed to stand because it was primarily about who owned the patent – even though the answer to that question turned entirely on the contract of employment. On its face, Kellogg says that a contractual dispute over ownership of an invention is primarily a dispute about the invention, not primarily about the contract. This holding was not obiter: the result in Kellogg itself is that Court had jurisdiction over a contractual dispute concerning the ownership of a patent, because of the subject matter of the dispute, ownership of the patent, meant it was more than “purely and simply” a contract between a subject and subject. An example of a dispute which is purely and simply between subject and subject is Consolidated Distilleries, in which the SCC held that the Exchequer Court did not have jurisdiction to hear a claim for indemnity for loss suffered by reason of certain bond agreements; it was a contractual dispute about a underlying issue which was itself unrelated to any head of federal power.

While I don’t find Ring J’s attempt to distinguish Kellogg to be at all persuasive, I again acknowledge that she was right to say that her decision is consistent with a well-established line of Federal Court authority. In my view, Farmobile illustrates the inconsistency between Kellogg and that line of cases. At the very least, there is a real tension. We should keep in mind that this was a motion to strike. It may be plain and obvious that the Court lacks jurisdiction based on the recent line of Federal Court cases; but the real question is whether it is plain and obvious that those cases are consistent with with Kellogg. Even if my interpretation of Kellogg is wrong, I would like to think that it is not “plain and obvious” that I am wrong. Ring J’s attempt to distinguish Kellogg implies that if the facts were such that the claim at issue in Farmobile had been pleaded in the alternative, it would have been allowed to stand. Is it plain and obvious that there is a crucial principled distinction between a counterclaim and a claim in the alternative?

Ring J, and the Court of Appeal, have said that the fact that the parties whose claim is struck will have to bring its action in a different forum is an “inconvenience,” but “such inconvenience ‘is not, of itself, a basis for this Court assuming jurisdiction.” [39], [55]. No doubt it is true that the Court cannot assume jurisdiction simply because it would make good practical sense for it to do so, but the problem should not be dismissed as a mere inconvenience. It is a defect in our patent system — indeed, a scandal worthy of Dickens — that a party seeking to defend a patent action should have to bring a separate action based on overlapping facts in a different court. If the law requires such a scandalous result, so be it, but I remain unconvinced.

Correction of Ownership Does Not Necessarily Require Direct Evidence from Assignor

Copperhead Industrial Inc. v. Canada (Attorney General) 2018 FC 311 Gleeson J
            2,614,533 / 2,919,266

Copperhead Industrial concerns a contested application to vary the ownership records of the Patent Office. The applicant’s legal corporate name is Copperhead Industrial Inc, and its Ontario Corporation Number is 002152706 [2]. The applicant’s sole director mistakenly believed that its legal name was 002152706 Ontario Ltd., and that Copperhead was its trade name [8]. Consequently, the inventor of the patents at issue assigned them to 002152706 Ontario Ltd, and that was the name reflected in the Canadian Patents Database. Copperheard subsequently commenced actions alleging infringement by Charger & Dresser, who responded in part by arguing that because 002152706 Ontario Ltd. is not a legal corporate entity, all the patent rights remain with the inventor. (The inventor was seriously ill when the action was commenced and is now deceased [11]-[12].) Copperhead therefore brought this application, pursuant to s 52, to have the records corrected to show Copperhead Industrial Inc. as the owner of the patents. While the Patent Office did not oppose the application, and did not appear, Charger & Dresser opposed the application as an intervener [5]-[6].

Gleeson J held that the Federal Court has jurisdiction, as there is no question of a contested interpretation of a contract of assignment [21]. He further held that while non-hearsay evidence from relevant inventors and assignors is commonly provided, and is of assistance to the Court, it is not required [22]-[23]. (The inventor was too ill to provide an affidavit before his death.)

Gleeson J also held that when the Patent Office records are varied, an effective date of variation is not required [34] . He explained that the effect of an order pursuant to section 52 is to correct an error or mistake; it does not serve to alter the effective date of the assignment or other underlying contractual documents, and consequently there is no requirement to identify an effective date for such an order [35].

On the facts, Gleeson J held that the error was due to an honest misunderstanding on the part of the applicant, and the intervener would not suffer any substantive prejudice in the related litigation as a result of the correction [36]. He therefore ordered the Patent Office records corrected to show Copperhead Industrial Inc. as the owner of the patents.

It Is Not Possible to Contract out of the Priority Provisions of the Patent Act

SALT Canada Inc v Baker 2016 FC 830 Boswell J
            2,222,058

The main issue in SALT Canada v Baker was whether the FC had jurisdiction to order the patent register to be varied under s 52 to list SALT as the owner of the `058 patent, where determining SALT’s ownership turned on the interpretation of contracts assigning the patent rights to various parties. My earlier post on this case focused on the issue of the court’s jurisdiction. This post is a belated footnote, elaborating on a point I had addressed only in passing.

As part of his analysis of the Court’s jurisdiction, Boswell J emphasized that “Statutory rights in a patent are governed by the laws of the jurisdiction in which the patent exists,” no matter what court has jurisdiction over the dispute, and regardless of what law is applicable to the contract of assignment. “Therefore, no assignment or transfer can take place except in accordance with the laws of [the jurisdiction of the patent]” [30].

[31] Accordingly, nothing in the assignment agreements could have the effect of exempting them from the operation of section 51 of the Patent Act, which renders an unregistered assignment void against subsequent assignees. . . .

[32] The ultimate outcome of this case will thus need to take the Patent Act into account notwithstanding whatever provincial or foreign law may be applicable to the assignment agreements at issue. This will be so regardless of the forum that ultimately adjudicates this dispute, be it a provincial superior court in Canada or the Superior Court of the State of Georgia. . . .

I felt this point to be so clearly correct that all I said in my earlier post is that “This is certainly true.” Since then, I have seen some comments suggesting that it was a legal point of significance, so I thought I might elaborate.

The general principle is that the issue priority of rights affects third parties, and so cannot be varied by contract. A third party must know where to look to determine its rights. In particular, as Boswell J noted, s 51 renders an unregistered assignment void against subsequent assignees. This allows a party seeking to take an assignment from the current registered owner to look to the Canadian register to determine whether there are any prior rights that might impair its title. If the registration venue could be changed by contract, this would defeat the purpose of s 51. Therefore s 51 must apply regardless of the proper law of the contract, and by the same token it is not possible for the parties to an assignment of a Canadian patent to use a choice of law clause to displace the statutory priority provisions.

This is a long-established general principle of priorities. As the USSC explained in Harrison v. Sterry (1809) 5 Cranch 289, 298-99:

The law of the place where a contract is made is, generally speaking, the law of the contract; i. e. it is the law by which the contract is expounded. But the right of priority forms no part of the contract itself. It is extrinsic, and is rather a personal privilege dependent on the law of the place where the property lies, and where the court sits which is to decide the cause. . . . In this country, and in its courts, in a contest respecting property lying in this country, the United States are not deprived of that priority which the laws give them, by the circumstance that the contract was made in a foreign country, with a person resident abroad.

See similarly Gimli Auto Ltd. v. BDO Dunwoody Ltd., 1998 ABCA 154:

[9] Nor need one consider a choice-of-law clause in a lease, for the statute sets which law applies. Nor is this a suit between two parties to a contract. The whole point of the P.P.S.A. is to overrule certain contractual or property rights: Re Giffen, supra. The lessor and lessee could not, by contracting that the lease would be valid even if not registered, bind others. This is legislation on priorities: ibid.

The scholarly commentary wholly endorses this position. Cuming, Walsh & Wood, Perspnal Property Security Law (2d ed), 187-88 put is this way:

To what extent are the secured party and the debtor free to choose a different governing law than the law designated as applicable by the PPSA? Clearly, a contractual choice of law clause cannot bind third parties. It follows that contracting parties cannot displace the legal regime to which the PPSA refers issues relating to the validity, perfection and priority of security interests by selecting a different governing law in their contract. The proposition is a long-standing one, codified rather than introduced by the PPSA.”

See also the UNCITRAL Legislative Guide on Secured Transactions, Chapter 10, esp. para.13:

13. A corollary to recognizing party autonomy with respect to the personal obligations of the parties is that the conflict-of-laws rules applicable to the property aspects of secured transactions are matters that are outside the domain of freedom of contract. For example, the grantor and the secured creditor are normally not permitted to select the law applicable to priority, since this could not only affect the rights of third parties, but could also result in a priority contest between two competing security rights being subject to two different laws leading to opposite results.

Jurisdiction of the Federal Court and IP Related Contracts

SALT Canada Inc v Baker 2016 FC 830 Boswell J
            2,222,058

Section 52 of the Act gives the Federal Court “jurisdiction. . . to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.” SALT Canada brought an application for a declaration under s 52 that the register be varied to list SALT as the owner of the ‘058 patent. Boswell J dismissed the application for lack of jurisdiction. In so doing Boswell J reviewed a number of cases and provided a helpful and clear statement of the law related to the jurisdiction of the FC under s 52. However, he did not discuss Kellogg Co v Kellogg [1941] SCR 242, presumably because it was not cited to him. This omission is unfortunate, as that case might be taken to suggest a different result, and it would have been interesting to see how it would have affected his reasoning. Boswell J also emphasized the need for the court which does have jurisdiction hear the dispute to take into account s 51 of the Act, which establishes a priority scheme for patent title based on registration. But that same point, looked at from the other direction, suggests that the FC might have jurisdiction to begin with. So, while Boswell J’s holding initially appears to be a straightforward application of existing law, a closer look suggests there may be a reasonable argument for a broader interpretation of the Court’s jurisdiction.

The case involved two conflicting assignments of rights in the ‘058 patent from the inventor, Dr Markels. The first was a complex series of assignments which ultimately led to the Respondent, Baker. Baker registered his ownership with the Patent Office. Some of the assignments in this series included provisions requiring the ‘058 patent to be reassigned to Markels if certain conditions were breached. Apparently believing that the conditions had indeed been breached, in 2015 Markels assigned title to the Applicant, SALT. Markels also prepared a reassignment from Baker to Markels, which was, however, never executed by Baker. SALT sought to have its ownership registered, but the Patent Office refused on the basis that the assignment was not executed by Baker, the registered owner [3]-[9].

SALT then brought this application for a declaration under s 52 that the register be varied to list SALT as the owner of the ‘058 patent (as well as other additional and alternative relief). A key substantive question related to the interpretation of the various agreements, and whether the conditions in the first series of assignments had been breached, such that Markels was entitled to a reassignment [24].

FC Has Authority to Vary Ownership When Uncontested

Imperial Oil Resources Ltd v Canada (Attorney General) Exxonmobil Upstream, 2015 FC 1218 LeBlanc J
            2,740,481

This was an uncontested application by Inperial Oil and Exxonmobil Upstream, as listed co-owners of the ‘481 patent, to amend inventorship and ownership. The application for the patent listed11 inventors. During prosecution, the scope of the claimed subject-matter was restricted, and only three of the 11 inventors contributed to the elected subset of claims and in consequence of the change in inventorship, Upstream should not have been listed as owner. The patent was issued without the proper modifications. This was all uncontested, and the only question was whether the court had jurisdiction to order the amendment pursuant to s 52. The application was not opposed by the Commissioner.

LeBlanc J noted that “This Court has interpreted the word ‘title’ in section 52 of the Act broadly to include ‘matters relating to the root of title’ such as inventorship” [12] and consequently the court had jurisdiction to amend the inventorship. On the issue of ownership, LeBlanc J noted that while the court does not have jurisdiction under section 52 of the Act to determine ownership of patents, as this would require the application and interpretation of the provincial law on contracts, in this case there was no substantive issue as to ownership, and therefore the Court had jurisdiction to vary the ownership of the ‘481 Patent as a consequence of correcting inventorship [18].