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Pre-Grant Compensation for Patent Infringement

What happens if someone infringed your patent application after you have filed your patent application but before it is granted? In many instances, this can be a surprisingly long period of time – typically several years. It can also be a crucial time in the development and commercialization for a new company. The Patent Act provides some relief, but you can only get a remedy after the patent has granted.

As an example, for patents granted in 2019, the median duration patent applications are pending between filing (international or national filing date) and grant at the Canadian Intellectual Patent Office was about six and half years for patents granted in 2019, about a third of the patent 20-year lifespan. The shortest period between filing and grant was about four and half months, but the longest was just over 20 years (the patent rights had expired before the patent was granted) – see my earlier column on how long does it take to get a patent.

In a proceeding for infringement of a granted patent, a patentee, or an entity claiming under the patentee, such as a licensee, may claim monetary relief for pre-grant activity. Section 55(2) of the Patent Act states:

55 (2) A person is liable to pay reasonable compensation to a patentee and to all persons claiming under the patentee for any damage sustained by the patentee or by any of those persons by reason of any act on the part of that person, after the specification contained in the application for the patent became open to public inspection, in English or French, under section 10 and before the grant of the patent, that would have constituted an infringement of the patent if the patent had been granted on the day the specification became open to public inspection, in English or French, under that section.

Basically, this section allows a court to order “reasonable compensation” to the patentee for the time starting from when the patent application was ‘published’ by the patent office, typically 18 months after the patent was filed, or the priority date.

While this section is often straightforward to apply, there are several areas of complexity that can arise and there is little jurisprudence on this section of the Patent Act.

The courts have interpreted “reasonable compensation” to be equivalent to a reasonable royalty. A “reasonable royalty” is a remedy available for patent infringement assessed based on what a hypothetical negotiation between the parties would have resulted in at the time of infringement. A calculation of the pre-grant compensation may therefore simply be an extension pre-grant of any post-grant reasonable royalty calculation.

The time period covered by this reasonable compensation period may be shortened by section 55.01 of the Patent Act which states that “No remedy may be awarded for an act of infringement committed more than six years before the commencement of the action for infringement.” In the context of pre-grant compensation, this has been interpreted as cutting off the pre-grant compensation at six years prior to the start of the action.

Since the “publishing” of a patent application is supposed to provide notice to the public, and the potential infringer, what if the claims of the published application differ from the granted claims? Often the claims of a patent application are amended while it is being examined at the patent office. If a defendant would not infringe pre-grant published claims but is found to infringe the granted patented, is it liable during the pre-grant period? What if the pre-grant published claims would have been invalid, but the defendant is found to infringe different but valid granted claims? Or should the pre-grant claims be irrelevant under section 55(2)? There is some uncertainty on this point and these various scenarios. In Western Oilfield Equipment Rentals Ltd. v. M-I LLC, 2019 FC 1606 at para 264, the Court appeared open to these types of arguments to shorten the pre-grant compensation but did not have to actually apply them as the defendant was found to infringe the pre-grant claims during the relevant period.

Recently amended sections of the Patent Act further limit pre-grant remedies. Liability during the pre-grant period may be interrupted by periods of prescribed abandonment of the patent application. Section 55.11 states that activities that take place while a patent application is abandoned in certain circumstances “is not an infringement of the patent”. These circumstances are patent application abandonments arising from failure to a pay a maintenance fee or failure to request examination (see the Patent Rules on ‘Third Party Rights’). In either case, third parties may be free of claims of infringement for activities during these periods, as well as after that period.

All this shows that while pre-grant compensation can be an important aspect of the remedies sought in a patent infringement proceeding, the details can get complicated and unfortunately may not provide a patentee with much comfort in the early days of development and commercialization while their patent application is still pending. It is therefore important to develop a patent filing strategy that protects innovations, leads to enforceable rights and takes into account the timing of likely infringement risk.

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