March 10, 2003
Risk of Small Entity Status.
Court Decision Reduces Risk of Claiming Small Entity Status in Canada
Caution still recommended when claiming small entity status
On March 10, 2003, the Federal Court of Appeal in Dutch Industries [Barton No-Till Disk Inc. and Flexi-Coil Ltd. v. Dutch Industries Ltd. and The Commissioner of Patents, 2003 FCA 121 partially overturned the lower court decision relating to the payment of maintenance fees in the Canadian Patent Office. The lower court trial division decision [Dutch Industries Ltd. v. Canada (Commissioner of Patents) [2002] 1 F.C. 325, (2001) 14 C.P.R. (4th) 499 (F.C.T.D.)] stated that the payment of maintenance fees as a small entity when one was not entitled to small entity status was not rectifiable by a simple "top-up" payment, as was the traditional practice of the Canadian Patent Office.
In partially overturning the decision, the Federal Court of Appeal held that:
(i) Entity status of an application only has to be determined once, and that will be when the first fees are payable i.e. upon filing of the patent application;
(ii) If the application qualifies as a small entity at the time of filing, then all future fee payments for that application can be paid at the small entity rate, irrespective of the "actual" entity status at the time of the future payment. In other words, a reconsideration of the entity status for an application or the resulting patent is not required; and
(iii) Simple "top-up" payments for maintenance fees are not possible. Therefore incorrectly claiming small entity status at the time of filing an application can be a fatal error, unless the error is discovered in time to take corrective action.
The Federal Court of Appeal has recognized the difficulty in consistently and correctly monitoring one's entity status and has thus relieved some of this burden from the Applicant. However, the burden of being correct at the time of filing remains and may represent a significant danger for applicants. Irrespective of the Court's decision, for the time being we maintain our previous recommendation to file and maintain all applications as a large entity and avoid the consequences of making an incorrect "small entity" determination.
In effect, the result of the Court's decision is that where an applicant was entitled to small entity status on filing, the application and any resulting patent will be in good standing as long as all maintenance fees are timely paid whether at small or large entity rate. If however an applicant was or is not entitled to small entity status at filing, all maintenance fees must be or have been paid at the large entity rate and if any errors have occurred the application must be reinstated within 12 months of the date the maintenance fee error occurred. The court did not necessarily deal with any other fees such as the initial filing fee, examination fees, or issue fees.
This case does not affect any applications or patents where the applicants have consistently claimed large entity status. Nor does it affect any applications or patents where the applicant qualified as a small entity at the time of filing irrespective of whether the entity status has changed.
Even though the decision may be appealed to the Supreme Court of Canada and legislative amendments may be forthcoming, we thought it best to keep our clients informed of the current status of the case in Canada.
Do not hesitate to contact us if you have any questions or concerns regarding this decision.
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