As explained in our previous article, Canada will soon be implementing a patent term adjustment (PTA) system to account for unreasonable delays by the Patent Office in issuing a patent. The necessary amendments to the Patent Act were enacted in 2023. Proposed regulations implementing the PTA system were published for public comment on May 18, 2024. The proposed regulations define the starting point at which PTA may begin to accrue and the periods of time that are excluded or deducted from the PTA calculation.
This article summarizes the proposed PTA system on the expectation that the proposed regulations will come into force without substantive amendment, as legislation is rarely changed substantially at this stage.
Table of contents
Key takeaways
It appears that few Canadian patents will qualify for PTA. The Patent Office will always have a cumulative total of at least 60 months (and sometimes up to 84 months)* to perform the following tasks:
- issue the first Examiner’s Report after examination is requested;
- issue the second Examiner’s Report after the applicant responds to the first Examiner’s Report;
- issue either a third Examiner’s Report or a Notice of Allowance after the applicant responds to the second Examiner’s Report; and
- issue the patent after the issue fee has been paid.
Under current Patent Office performance targets, it should take no more than a total of 39 months to complete the above steps, far less than the permitted 60 months.
In most cases, it should be possible to quickly rule out the prospect that PTA would be granted, avoiding the need to pay the substantial official fee of $2,500 to have this confirmed by the Patent Office.
Background
Historically, Canada has not provided PTA to account for delays in the processing of patent applications. On July 1, 2020, the Canada-United States-Mexico Agreement (CUSMA) entered into force, replacing the North American Free Trade Agreement (NAFTA) of 1994.
Article 20.44 of CUSMA requires the Parties to provide PTA to compensate the patentee for unreasonable delay in the issuance of a patent. An “unreasonable delay” includes “a delay in the issuance of a patent of more than five years from the date of filing of the application in the territory of the Party, or three years after a request for examination of the application has been made, whichever is later.” Certain periods of time may be excluded from the determination of a delay:
- periods of time that do not occur during the processing or examination of the application by the Patent Office;
- periods of time that are not directly attributable to the Patent Office; and
- periods of time that are attributable to the patent applicant.
Canada must implement the PTA provisions of CUSMA no later than January 1, 2025, and they will apply to all Canadian patent applications filed on or after December 1, 2020.
Canadian patent filing and examination procedure
Some basic details concerning Canadian patent application filing and examination procedure help put the proposed PTA system into context.
Filing date
A Canadian patent application may be filed: (1) directly in the Canadian Patent Office; (2) as the Canadian national phase of a PCT application; or (3) as a division of either of the foregoing.
A PCT application must enter the Canadian national phase within 30 months of the earliest priority date. The deemed Canadian filing date of a PCT national phase application is the PCT international filing date.
The deemed filing date of a divisional application is that of the earliest parental application, not the “presentation date” on which the divisional application was actually submitted to the Patent Office.
Deferred examination
Substantive examination of an application may be deferred. This can allow the applicant and the Patent Office to rely efficiently on the search and substantive examination results of foreign prosecution, e.g. under the Patent Prosecution Highway (PPH) system.
Examination must be requested, and the examination fee paid, within four years of the Canadian filing date. Hence, in a typical PCT national phase application where the PCT application claims Convention priority, the examination request can be deferred up to 30 months from the date of entry into the Canadian national phase. There is a different rule for divisional applications, which may be filed as late as the day before grant of a patent on the parent application, and which may be filed in serial or “cascading” fashion. The examination request and fee for a divisional application are due the later of four years from the filing date of the earliest parental application and three months from the “presentation date” of the divisional application.
Examination and Final Action practice
The deadline for responding to an Examiner’s Report is four months from the date of the Report, extendable by two months if the Patent Office is satisfied the circumstances justify the extension.
If an impasse is reached during examination (i.e. the Examiner will not withdraw a rejection and the applicant will not amend the rejected claim), the Examiner will issue a Final Action. If the applicant’s response to the Final Action does not overcome all the rejections, the application is reviewed by the “Patent Appeal Board,” which, having given the applicant the opportunity to make written and oral submissions, makes a recommendation to the Commissioner of Patents concerning the disposition of the application, to be issued as a “Commissioner’s Decision.” The applicant may appeal a negative Commissioner’s Decision to the Federal Court. A further appeal lies to the Federal Court of Appeal, and ultimately to the Supreme Court of Canada, should the Supreme Court grant leave to appeal.
As there is no continuation application procedure in Canada and, as discussed below, a request for continued examination does not reset or reopen prosecution, the examination procedure before the Patent Appeal Board after a Final Action (and then any subsequent review by the courts) is largely a “one-way street,” with no exit ramp to expedite prosecution. The procedures before the Patent Appeal Board and courts could consume much of the 20-year patent term.
Fortunately, the Patent Office does not rush to issue a Final Action, and typically gives the applicant warning that a Final Action may be forthcoming if the outstanding issues are not resolved. Invariably, an action is not made final unless it is at least the third or fourth Examiner’s Report issued in an application.
Request for continued examination
Although Final Actions are rare, to file a response to the third Examiner’s Report (which is the first Examiner’s Report that realistically might be made a Final Action), the applicant must file a request for continued examination (RCE) and pay the associated fee (presently $1,110). An RCE at this stage does not restart or vary the course of examination. It is merely an official fee for the purpose of urging the applicant toward compact examination by concluding prosecution with no more than two Examiner’s Reports being issued, thereby avoiding additional examination fees. Indeed, the RCE fee is the same as the original examination fee, which is also presently $1,110. A further RCE is then required to respond to every second subsequent Examiner’s Report, should examination become so protracted.
Allowance and grant
Upon issuance of a Notice of Allowance, the applicant must pay the final fee (issue fee) within four months. The patent typically then issues within about eight weeks. Alternatively, if the applicant files an RCE instead of paying the final fee, the Notice of Allowance is set aside, the application may be amended and examination resumes.
Canadian patent term adjustment provisions
Calculation of the adjusted term
Under the new PTA system, starting no later than January 1, 2025, additional term shall be granted for a Canadian patent issuing on an application filed on or after December 1, 2020, if there is an unreasonable delay in issuance of the patent.
As discussed above, CUSMA defines an “unreasonable delay” in issuing a patent as including a delay of more than five years from filing or three years from the examination request, whichever is later, subject to various exclusions (e.g. for periods of time attributable to the applicant).
The additional term is the number of days the patent issued after the later of five years from filing or three years from the examination request (but qualified as discussed below) minus the number of days falling within the prescribed exclusions.
Delay of more than five years from the filing date or three years from the examination request
Because the deemed Canadian “filing date” of a PCT national phase application or divisional application is earlier than the date on which the Patent Office receives the application and can examine it, delay of issuance more than five years from filing or three years from the examination request is qualified in the proposed regulations. A patent will be eligible for the granting of additional term if the patent issues after:
Excluded periods of time
The duration of the additional patent term is calculated as the number of days beyond the relevant applicable date in the above table on which the patent is issued, minus the sum of the number of days in the excluded periods of time as defined in the proposed regulations.
The proposed regulations systematically exclude essentially every day under the Patent Act and Patent Rules on which the applicant could (but did not) take action during prosecution, enumerating 38 different excluded periods. Of these, four are of primary practical importance:
- Each day that the request for examination is deferred is excluded. For instance, if the examination request is deferred by one day after filing a Canadian patent application, that one-day period is then deducted from any accrued PTA. Similarly, if the applicant defers requesting examination by four years from the filing date, that four-year period is then deducted from any accrued PTA.
- All days starting from the date the applicant files a first RCE and ending on the date on which the final fee (issue fee) is paid are excluded from the PTA calculation (i.e. deducted from accrued PTA).
- Each day that the applicant delays in responding to an Examiner’s Report is excluded. No minimum reasonable term for response is provided. If an Examiner’s Report issues on Tuesday, and the applicant responds on Wednesday, that equals one day of applicant delay.
- Likewise, each day of delay in an applicant paying the final fee after a Notice of Allowance issues constitutes a day that is excluded and thus deducted from accrued PTA. Even paying the final fee the day after the Notice of Allowance issues constitutes one day of applicant delay.
While the expression “applicant delay” is used here as a matter of convenience, the excluded periods (aside from time after an RCE) can also be thought of as the entirety of time that “the ball is in the applicant’s court” for the purposes of examining the application. For instance, the Patent Office cannot examine an application before examination is requested and the examination fee paid, or when the applicant has not yet responded to a previous Examiner’s Report. Similarly, the Patent Office cannot start preparations to issue the patent before the applicant has paid the final fee.
Practical consequences of the PTA system
As a result of at least the four types of “applicant delay” or exclusions from the PTA calculation described above, it appears that PTA will rarely be granted.
First, because all deferral of the request for examination is deducted from accrued PTA, the Patent Office will effectively always have at least five years (and in some instances up to seven years) from the date examination is requested to grant a patent without the patent possibly qualifying for PTA.
Second, exclusion from the PTA calculation of all time between the first RCE and the date the final fee is paid means that much of the time spent in prosecution of difficult (even if meritorious) applications will not qualify toward PTA. As discussed above, an RCE is required to respond to the third Examiner’s Report, cutting off PTA for any further steps in prosecution until the final fee is paid. Dealing with a third or subsequent Examiner’s Report, or any review by the Patent Appeal Board after a Final Action or subsequently by the courts, even if ultimately in the applicant’s favour, will not count toward PTA because an RCE will inevitably have been filed.
Third, by providing no time for applicants to respond to Examiner’s Reports and pay the final fee, there will always be some deduction from any accrued PTA in view of the time needed by the applicant to prosecute the application—the applicant will not be able to respond to Examiner’s Reports the day they issue or pay the final fee the day the Notice of Allowance issues.
These points are illustrated in a simple example of a routine application in the biotechnology or electrical divisions, where the backlogs are highest, and examination is slowest.
This example ends with the last substantive Patent Office communication being either a third Examiner’s Report or Notice of Allowance. Any time taken by the applicant to respond to the third Examiner’s Report or Notice of Allowance is deducted from accrued PTA, and the applicant’s response to the third Examiner’s Report must be accompanied by an RCE, tolling accrual of PTA until the final fee is paid. Thus, any steps beyond issuance of the third Examiner’s Report or Notice of Allowance are irrelevant to accrual of PTA, other than the time taken by the Patent Office to issue the patent once the final fee is paid.
The Patent Office always has a minimum of 60 months (and sometimes up to 84 months) “with the ball in its court” to issue three Examiner’s Reports (or two Examiner’s Reports and a Notice of Allowance) and then grant the patent once the final fee has been paid. But, at its current performance targets, the Patent Office should need no more than about 39 months to complete these steps. This gives the Patent Office a cushion of 21-45 months in delay in one or more of these steps before PTA would be granted.
From the present vantage point, it appears that a patent might qualify for PTA only in the case of truly extraordinary delay by the Patent Office in one or more of: (1) issuing the first or second Examiner’s Report; (2) issuing either the third Examiner’s Report or Notice of Allowance; and (3) issuing the patent after the final fee is paid.
PTA application procedure
An application for PTA must be filed by the patentee within three months of the date a patent is granted. The application fee is $2,500 ($1,000 for a small entity).
The Patent Office will send the patentee a notice with a preliminary determination of the duration of PTA. The patentee and any other person may make observations regarding the preliminary determination within two months of the notice. The Patent Office will then issue a certificate of additional term or dismiss the application, in either case providing reasons for the determination of the additional term or for dismissing the application.
Maintenance fees during PTA term
Annual maintenance fees are payable on Canadian patent applications and patents from the second through nineteenth anniversaries of the filing date.
Further annual maintenance fees of $1,000 ($400 for a small entity) are required to maintain a patent in force during the additional PTA term.
Reconsideration of duration of additional term and powers of the Federal Court
The Commissioner of Patents can reconsider the duration of the additional term granted on the Commissioner’s own initiative or upon the application of any person. Upon reconsideration, the additional term may remain the same or may be shortened, but it cannot be lengthened.
An action may be brought in Federal Court for an order shortening (but not lengthening) the duration of the additional term granted for a patent.
Concurrent term of PTA and certificates of supplementary protection
A certificate of supplementary protection (CSP) may be granted on a Canadian patent to account for delay in the regulatory approval process for medicines. The term of a CSP is determined as [the date of marketing authorization for the medicine] – [the filing date of the patent application] – [five years], with a maximum CSP term of two years. Thus, the maximum CSP term can be obtained if the marketing authorization for the medicine is issued by Health Canada at least seven years after the filing date of the patent application.
The CSP term commences on the expiry of the 20-year patent term. The CSP and PTA terms run concurrently. Specifically, the term of the CSP commences at the expiry of the basic 20-year patent term, not at the expiry of the additional term acquired because of PTA.
Recommendations
Because extension of term via PTA is so unlikely, applicants are not well served by adopting prosecution strategies focused on PTA. Deferring examination has many advantages, including e.g. settling commercial strategies, awaiting the outcome of foreign prosecution, and permitting use of PPH. Applicants can aim to respond promptly to Examiner’s Reports and the Notice of Allowance, but some delay is inevitable. Compact prosecution and avoidance of RCEs may be desirable, but even this may be difficult if the first Examiner’s Report is confined to the issue of unity of invention—in such cases, the third Examiner’s Report, requiring an RCE to respond, will only be the second Examiner’s Report on the merits.
One point is clear: patentees should consult their Canadian patent agent before incurring the proposed $2,500 official fee for a PTA application. Indeed, the proposed official fee just for the Patent Office to determine PTA is greater than the sum of the filing fee, examination fee and issue fee (total $2,081). In most cases, it should be possible to quickly rule out the prospect that PTA would be granted, avoiding the need to pay the official fee of $2,500 to have this confirmed by the Patent Office.
* This interpretation is based on the English text of the official PDF version of the proposed regulations, entitled Regulations Amending the Patent Rules and Certain Regulations Made Under the Patent Act, as published in Canada Gazette, Part I, Volume 158, Number 20 on May 18, 2024.
Paragraph 117.03(1)(k) of the proposed regulations subtracts from accrued PTA all days the applicant defers in making the examination request after the filing date, the date of national phase entry, or the divisional application “presentation date,” as applicable. Without further qualification to this rule, the applicant would be penalized for deferring the examination request.
However, paragraph 117.03(8) provides, in effect, that if three years from the date of the examination request ends later than five years from filing, national phase entry, or the “presentation date” of a divisional application (i.e. the applicant defers the examination request), then the various periods of applicant delay (including deferring examination) “are deemed not to include the days preceding the applicable day.” But as the “applicable day” is a defined term meaning the date of filing, national phase entry, or the presentation date of a divisional application, excluding delay before the applicable day serves no purpose in this context. It may be that the aim was to waive applicant delay occurring after the “applicable day” but before examination is requested.
But even in the latter case, the outcome does not appear justified. For example, if the applicant requested examination two years after filing, the two years of applicant delay would not be excused under paragraph 117.03(8) because three years from the examination request is not later than five years from filing, and the delay would be deducted from any accrued PTA. In contrast, if the applicant requested examination four years after filing, the four years of applicant delay would be excused under paragraph 117.03(8) and not deducted from any accrued PTA. Why is delay of four years excused but not delay of two years?
If the intent in the proposed regulations is not to penalize the applicant for deferring examination, the simpler approach appears to be to remove proposed paragraph 117.03(k) and never count deferring examination as applicant delay in the first place.
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