Canada: How 2004’s Court Decisions Have Changed IP Law

Published in Managing Intellectual Property's World Contacts Handbook 2005.

In 2004, a number of developments, in the form of both legislative and judicial action, made an impact on Canadian law.

In Monsanto Canada Inc v Schmeiser ([2004] 1 SCR 902), the Supreme Court of Canada considered the patentability of genes and cells. At issue was whether Monsanto’s patent to modified canola genes and cells was valid, and whether Percy Schmeiser, a farmer, infringed Monsanto’s patents by planting seeds and growing plants containing the patented genes and cells, even though Monsanto’s patent did not claim canola plants or seeds themselves. This decision was closely followed by the biotechnology and agriculture industries in Canada. They were concerned that the Court might extend its reasoning in the 2002 case of Harvard College v Canada (Commissioner of Patents) ([2002] 4 SCR 45) (Harvard Mouse) to invalidate the Monsanto patents; in Harvard Mouse, the Supreme Court had held that higher life forms were unpatentable.

The Court, in a split decision, upheld Monsanto’s patent and held that Schmeiser’s activities had constituted an infringement. The majority rejected Schmeiser’s argument that the modified gene and cell claims of Monsanto’s patent are unpatentable subject matter because granting such a patent would amount to granting a patent on a whole plant. The majority noted that the patentability of genes and cells was not questioned in Harvard Mouse and that only higher life forms could not be patented. As a result of this judgment, gene and cell claims should be allowable in Canada without being limited to isolated material.

The harsh consequences of the decision in Barton No-Till Disk Inc v Dutch Industries (2003 FCA 121) (Dutch Industries) were again highlighted in Johnson & Johnson Inc v Boston Scientific Ltd (Johnson & Johnson) (2004 FC 1672), in which the Federal Court invalidated a number of Johnson & Johnson’s patents on the basis that at the time of the application, small-entity fees were paid in error in place of the large-entity fees. Following the Federal Court of Appeal’s reasoning in Dutch Industries, the trial court held that a top-up payment at a later time would not remedy the situation.

Shortly after the Johnson & Johnson decision, Bill C-29 was tabled in the House of Commons, proposing to amend the Patent Act by incorporating a provision that top-up payments made after the payment of a small-entity fee would be deemed made at the same time as the payment of the smallentity fee. Under the bill, corrective payments would be acceptable up to a year after payment of the small-entity fee. To become law, however, the bill must still move through the legislative process.

The government of Canada has also proposed amending the Patented Medicines (Notice of Compliance) Regulations and the Food and Drug Regulations. The amendments are particularly important to pharmaceutical companies because these regulations, in combination with the Patent Act, form the regulatory structure governing the protection of pharmaceutical patents in Canada.

The Minister of Health maintains a patent register that lists patents for medicinal products that have been approved for use in Canada. As part of the marketing approval process, a generic drug manufacturer wishing to market a product by comparing it to a medicinal product that has related patents listed on the register must either wait until the listed patents expire or serve the patent holder with a notice of allegation specifying why it should be allowed to market its comparable product before the listed patent expires. If the patent holder commences legal proceedings in response to that notice, there is an automatic stay of marketing approval for up to two years.

The proposed amendments would restrict the type of patents listed on the patent register to those that include claims to the compound, formulation or use for which approval is being sought – that is, to patents whose commercial product embodies the patent. The amendments would exclude from the register patents that have typically been eligible for inclusion for activities such as brand name changes, manufacturing site changes, process changes and quality control changes. Moreover, under the amendments, a generic company must address in its notice of allegation only patents that were listed as a result of a patent holder’s submission for marketing approval filed before the generic company’s request for marketing approval of its product. The generic companies would also have broader bases of allegations. On the other hand, the amendments propose to extend the protection for data submitted by patent owners to the Minister of Health from five to eight years (eight and a half for paediatric studies), as part of the procedure for obtaining approval for a new drug. These proposed changes have not yet become law, so the final regulatory changes are still awaited.

In addition to proposing new patent legislation, the Canadian legislature approved Bill C-9, which, although not yet in force, aims to implement a World Trade Organization (WTO) agreement, making Canada the first country to do so. Bill C-9 amends patent laws to allow Canadian generic pharmaceutical manufacturers to obtain licences to make specified generic versions of patented medicines and export them to certain developing countries. The bill makes the acquisition of compulsory licences by generic drug manufacturers a relatively uncomplicated process, subjecting the generic companies only to straightforward regulatory approval. Some safeguards against the abuse of this process are provided, but these safeguards are limited. For example, no opportunity exists to make submissions to the Patent Commissioner regarding the appropriateness of the grant of a licence.

Copyright holders and internet service providers (ISPs) will be interested to learn of the new developments in Canadian copyright law in 2004. On June 30 2004, the Supreme Court of Canada rendered its decision in Society of Composers, Authors and Music Publishers of Canada v Canadian Association of Internet Providers (2004 SCC 45), on the issue of imposing a copyright tariff on the use of streamed musical works on the internet. The Society of Composers, Authors, and Music Publishers of Canada argued that all parties involved in the online transmission of music, which included ISPs, should pay a royalty. In opposing the tariff, the ISPs cited the intermediary exception in the Copyright Act, whereby intermediaries are deemed not to infringe copyright because they merely facilitate the transmission of the material in question. The Court decided in favour of the ISPs. However, when it can be shown that an intermediary, such as an ISP or a host server, acts as a content provider rather than as a conduit for that content, or effectively authorizes infringement – for example, by failing to remove infringing material after being notified that it is transmitting such material – the ISP may be found liable, irrespective of its location. The Court went on to say that caching, the temporary copying and storing of information, is also covered by the intermediary exemption because the practice allows for faster and more economic service. Lastly, the Court decided that it is impractical to expect an ISP to monitor whether the material it transmits infringes copyright.

On March 4 2004, the Supreme Court of Canada also released its decision in the case that pitted three Canadian legal publishers against the Law Society of Upper Canada (LSUC) in CCH Canadian Ltd v Law Society of Upper Canada (2004 SCC 13). The LSUC operates a legal reference and research library that provides self-serve photocopiers as well as a photocopying service. The legal publishers argued that the photocopying constituted either authorized infringement in the former case or actual infringement in the latter case. The Court found that, although the photocopied works were original copyright-protected works, the LSUC was not liable for copyright infringement because the photocopying was for research purposes, triggering the fair dealing exemption in the Copyright Act. A central issue in the case was the degree of originality required for a work to be protected by copyright. The Court found that to be original, a work must be by an author and must not have been copied from another work; it must also be some product of the author’s exercise of skill and judgment that is more than just a purely mechanical exercise.

As a result of the Federal Court’s decision in BMG Canada Inc v John Doe (2004 FC 488), Canadian online peer-topeer file swappers may, temporarily at least, continue to swap music over the internet. Several recording labels brought suit against 29 unnamed defendants for copyright infringement due to online swapping of music files. The Federal Court refused to order ISPs to disclose the names and addresses of their customers, preventing the plaintiffs from naming the defendants personally in the action. In any event, the Court found that the act of using filesharing programs to swap music online did not infringe copyright so the case for copyright infringement had not been made.

Although no major changes were made to Canadian trade mark law in 2004, the Federal Court of Appeal was active in the area. Famous marks do not appear to be recognized in Canada, but this issue is likely to arise in the appeal that was granted on November 18 2004 to the Federal Court of Appeal’s decision, handed down on April 22 2004, inVeuve Clicquot Ponsardin, Maison Fondée en 1772 v Les Boutiques Clicquot Inc Ltée (2004 FCA 164). Veuve Clicquot is in the Champagne business and owns several registered marks in Canada that incorporate the word clicquot. Les Boutiques Clicquot sells women’s clothing under the brands Boutiques Clicquot and Clicquot, and co-defendant Mademoiselle Charmante Inc owns two registered marks that include the word clicquot. The Court upheld the decision of the lower court, which found not only that no trade mark infringement had occurred, but also that no connection existed between the parties’ activities, even though Veuve Clicquot sold articles of clothing. The Court found no risk of confusion between the marks despite the fact that Veuve Clicquot’s Clicquot marks were inherently distinctive and well known, and that the co-defendants’ marks were found to resemble the plaintiff’s.

The Federal Court of Appeal also confirmed that the Registrar of Trademarks does not have the authority to amend the register of trade marks under section 38 of the Trade-marks Act. In Bacardi & Company Limited v Havana Club Holding SA (2004 FCA 220), the issue arose because the Registrar changed the name of the owner of the mark Havana Club from Jose Arechabala SA to Jose Arechabala SA Nacionalizada after the Cuban government nationalized the company’s assets in the 1960s. Title to the mark eventually resided with Havana Club Holding, which then filed new applications for similar marks under section 15 of the Act, which allows registration of a potentially confusing mark where all marks are in the name of the same entity (and are then referred to as associated marks). Bacardi argued that the Registrar had no authority to amend the register, because section 57 of the Act gives that power to the Federal Court exclusively. Bacardi argued that, as a result, Havana Club Holding could not have proper title to Havana Club and that it could not rely on section 15 of the Act to register further similar marks. Although the Registrar and Federal Court of Appeal agreed with Bacardi, the decision meant that the Registrar also could not correct the error and it was found that Bacardi should have properly brought the action under section 57 of the Act rather than as an opposition proceeding.

Also of interest in 2004 was the decision, on April 29 2004, by the Supreme Court of Canada to allow the appeal from the Federal Court of Appeal’s decision in Kirkbi AG v Ritvik Holdings Inc (2003 FCA 297). At issue in this case was whether the shape of the surface of a LEGO piece attracted the distinguishing guise provision of the Trademarks Act, a provision that grants trade mark protection to the shape or packaging of a product. The Federal Court of Appeal agreed with the lower court’s decision that the characteristics of the mark were primarily functional and not the proper subject for trade mark protection. The Supreme Court decision is eagerly awaited due to the recent addition of an issue not previously raised in this case – the constitutional validity of section 7(b) of the Act. This provision is the statutory embodiment of the common law action for passing off, and a finding of unconstitutionality could limit the Federal Court’s jurisdiction in deciding future trade mark matters.

On August 6 2004 in the case of Glaxo Group Limited v Defining Presence Marketing Group Inc (Manitoba) (CDRP Case 00020), the panel charged with deciding cases under the Canadian Internet Registry Authority’s Domain Name Dispute Resolution Policy (CDRP) found in favour of the complainant under each of the three tests under the CDRP bad-faith registration provision. The registrant had registered the domain name zyban.ca, which linked the user to a website advertising pharmaceuticals, including Glaxo’s Zyban product. The panel found that the registrant had registered the domain name to sell it for a profit, that the registrant had a history of registering domain names to which it was not entitled because they comprised third party trade marks, and that the registrant was Glaxo’s competitor and had registered the domain name to disrupt Glaxo’s business. As a result, Defining Presence Marketing Group was found to have registered the domain name in bad faith, and the registration was ordered transferred to Glaxo.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.