Protests Do Not Result in a Higher Burden in Subsequent Litigation

Pollard Banknote Limited v BABN Technologies Corp 2016 FC 883 Locke J
            2,752,551

Pollard v BABN raised two issues related to the standard of review. The more significant holding was that a party which protests or submits prior art during prosecution, pursuant to s 34.1, will not be disadvantaged by a higher burden of proof if it subsequently challenges the same patent in litigation. I believe this is the first decision to address this issue.

In Wellcome / AZT 2002 SCC 77 [42]-[44], the SCC apparently held that a challenge to the validity of a granted patent was somehow a form of judicial review of the Commissioner’s decision to grant the patent, and that decision should be treated with deference, so that the patent would only be held invalid if the Commissioner’s decision to grant it was unreasonable. The SCC’s conclusion was rejected by Gauthier J in Cefaclor 2009 FC 991 [350]-[370], who, after a devastating critique of the SCC’s reasoning, held that the correct standard was the traditional balance of probabilities. Subsequent decisions of the FC addressing this issue have consistently followed the lead of Gauthier J, essentially (and rightly, in my view) treating the SCC statements in Wellcome / AZT as having been made per incuriam. Locke J in this case did the same, citing Cefaclor and recognizing, as the SCC did not, that “[t]here is no standard of review applicable to Pollard’s challenge to the validity of the 551 Patent because this is not a judicial review of the decision to allow the 551 Patent to issue. . . . The standard is the balance of probabilities” [129].

The more interesting issue related to s 34.1. Pollard had been involved in challenging the patent during prosecution by filing 12 protests pursuant to s 34.1, including both prior art submissions and argument [128]. SG argued that “in view of the depth of Pollard’s involvement in challenging the patented invention during prosecution, it benefited from what was effectively a patent opposition process. For this reason, and because of the extraordinary delay SG experienced in obtaining allowance of its patent application, SG argues that a degree of deference to the examiner’s decision to allow the 551 Patent to issue should apply” [128].

Locke J rejected SG’s argument. He noted that SG could not be held accountable for the delay:

[131] Its protests contributed to the delay in the 551 Patent’s issuance only inasmuch as the examiner accepted the arguments contained in those protests and included them in the rejection letters that were sent to the applicant. A more direct reason for the delay in the issuance of the 551 Patent is that it took many exchanges with the patent examiner before the applicant found the claim language that would be accepted. I see no basis for criticizing Pollard for having filed its protests.

The delay should not be attributed to the protests, because if they are well-founded, the examiner should have raised them in any event, and if they are not, the examiner need not and should not require the applicant to respond.

Locke J also raised an important policy issue:

[133] Another concern I would have about raising the burden on Pollard for its validity challenge is that it would, as a result, have a higher hurdle than other interested members of the public who might wish to mount a similar challenge. It should also be noted that an impeachment action, if successful, is a benefit not just to the plaintiff, but also to the public as a whole since an unjustified monopoly is thereby removed from the patent register.

If a party faced a higher burden for issues it raised during prosecution, that would no doubt affect its decision whether to protest or submit prior art under s 34.1, and as Locke J pointed out, it is in the interest of the public as a whole to ensure that unjustified patents are not granted. The flip side of the coin is that a interested party like SG gets two kicks at the can – though that is perhaps not a serious problem if its contribution to the prosecution imposes no significant additional burden on the applicant, as Locke J indicated. 

Locke J also noted on the facts that the applicant was apparently not concerned about the delay, because it “responded at or near the end of the six-month deadline for responding to the examiner’s action in every case but one” [132]. Quare whether this would form the basis for a distinction in a future case? I think not, given the rest of Locke J's reasoning, but the fact that he mentioned this point leaves the question open. And of course, future judges might see the whole issue differently.