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27 January 20255 minute read

Due care in patent prosecution: Matco Tools Corporation v. Canada

Since 2019, patent applicants or patentees have been required to show due care when requesting reinstatement of an application or patent when a maintenance fee was not paid before the date set in a notice. The understanding has been that due care should be consistent with the Patent Cooperation Treaty (PCT) under Rule 26bis.3. The recent decision by the Federal Court of Canada in Matco Tools Corporation v. Attorney General of Canada suggests a shift in the determination of due care under s. 46(5) of the Patent Act, such as in the context of missed maintenance fee payments. In this article, we look at the impact of the Court’s decision on the interpretation and scope of due care in patent prosecution.

Due care under MOPOP

The patent commissioner outlines the due care standard in sections 9.04.03 and 27.03.03 of the Manual of Patent Office Practice ("MOPOP"), requiring that a reasonably prudent applicant take all reasonable measures to avoid certain types of failures. Despite these measures, the failure still occurred. This standard is strict, focusing heavily on actions taken before the failure and requiring clear establishment of due care by all parties involved. This approach implies that the Patent Office typically disregard reasons related to why the initial deadlines (for maintenance fees or examination requests) were missed, as missing these deadlines does not immediately result in abandonment or deemed expiry. This reflects a focus on ensuring that procedural responses to formal notices are timely and complete, emphasizing post-notice actions rather than the circumstances leading up to the notice issuance.

The Federal Court decision

In Matco Tools Corporation v. Attorney General of Canada, Matco Tools Corporation (“Matco”) is what may be considered as a sophisticated patent applicant. Matco is a US based company with US patent counsel. For many foreign applicants, it is common to have a Canadian patent agent who communicates through US patent counsel without direct contact with the ultimate patent applicant, Matco in this case. In addition, Matco engaged third-party service providers to handle maintenance fees and expressly instructed their US counsel to not handle maintenance fee issues. Due to an administrative oversight during a transition of third-party service providers responsible for handling maintenance fees, a failure to pay the required maintenance fee before the initial deadline occurred. The notice from the Canadian Intellectual Property Office (“CIPO”) was issued to the Canadian patent agent who then forwarded it to the US counsel. As US counsel was not responsible for maintenance fee matters, they did not pass the notice to the patent applicant and the maintenance fee with the late fee was not paid. Accordingly, despite having an established multi-layered management system intended to handle such payments, a critical data migration error led to the non-payment by the initial deadline. 

The Commissioner of Patents denied reinstatement of the patent application, emphasizing a strict interpretation of the "due care" standard. The Commissioner concluded that Matco failed to demonstrate due care, particularly noting, "only measures taken before the failure occurred will be considered in the analysis," and deemed the initial data migration error as "not relevant" to the due care determination. The decision highlighted significant communication failures and organizational shortcomings, stating, "the failure could still have been prevented through proper handling of the Commissioner’s notice within the prescribed period." The Commissioner criticized the communication protocols within Matco’s system, asserting that "all parties involved in the maintenance and prosecution of the application must demonstrate due care," and concluded that this was not achieved, leading to the refusal to reinstate the patent application.

Matco appealed the decision of the Commissioner, arguing that the data migration error was the proximate cause of the abandonment, and thus should be a key consideration in the due care analysis. The Court agreed, highlighting that the Commissioner's focus was too narrow, primarily focusing on post-Notice obligations noting that, "The Commissioner completely overlooks the fact that, but for the migration error, the maintenance fee would have been paid and the Commissioner’s Notice would not have been required or sent."

Impact of the Court’s decision on the interpretation and scope of due care

The Court's decision criticizes the previous narrow interpretation of due care, suggesting that a broader view is necessary, one that incorporates the proximate cause of the failure into the analysis. The Court noted that a “robust due care inquiry should cover the entire chain of events, from the earliest root cause to the final opportunity for correction.” According to Justice Zinn, this approach allows for a more comprehensive assessment of whether due care was exercised throughout the entire process, not just in response to the final notice of abandonment.

The decision notably appears to extend the relevant point in time for the due care analysis in patent maintenance fee cases by introducing the concept of "proximate cause." This shift allows for a broader evaluation that includes not just the actions taken immediately before a failure, such as the non-payment of a fee, but also the initial causes and systemic issues that led to such failures. By focusing on the entire chain of events, including the setup and management of maintenance fee systems, the decision emphasizes a more comprehensive approach to determining due care. This requires patent holders and their agents to ensure robust oversight and proactive management throughout the entire lifecycle of the patent, significantly expanding the timeframe and scope of what is considered in assessing due care.

The attorney general has until February 21, 2025 to appeal this decision if they wish to do so.