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What Article 1709(7) Of NAFTA Will Mean To Canadian Practitioners
1993 – Twenty-seventh Spring Meeting of the Patent and Trademark Institute of Canada, March 10, 1993
WHAT ARTICLE 1709(7) OF NAFTA WILL MEAN TO CANADIAN PRACTITIONERS*
by Charles L. Gholz **
Article 1709(7) of NAFTA provides in part that "patents shall be available and patent rights enjoyable without discrimination as to . . . the territory of the Party where the invention was made." In essence, an inventor making an invention in any one of the three countries party to NAFTA is supposed to be able to obtain a patent in either of the other two countries and enforce it in that country just as if he or she had made the invention in that country. However, while the language of Article 1709(7) is neutral on its face, it is not, and was not intended to be, neutral in practice. Article 1709(7) of NAFTA was bargained for by Canada and Mexico in order to compel the United States to amend the infamous first sentence of section 104 of its patent statute. That section contains two sentences, and it reads in its entirety as follows:
In proceedings in the Patent and Trademark Office and in the courts, an applicant for a patent, or a patentee, may not establish a date of invention by reference to knowledge or use thereof, or other activity with respect thereto, in a foreign country, except as provided in sections 119 and 365 of this title. Where an invention was made by a person, civil or military, while domiciled in the United States and serving in a foreign country in connection with operations by or on behalf of the United States, he shall be entitled to the same rights of priority with respect to such inventions as if the same had been made in the United States.
Insofar as is relevant here,[1] the first sentence of 35 USC 104 provides that inventors who make their inventions in Canada may not establish a date of invention by reference to activity with respect thereto in Canada.
The first sentence of 35 USC 104 is not contrary to the United States's obligations under the Paris Convention because it makes the prohibition on establishing a date of invention turn on where the activity takes place, not upon the nationality of either the inventor or the person whose acts are at issue. (That person may, of course, be the inventor, but he or she need not be.) It is the second sentence of 35 USC 104 which has been held to be, and which clearly is, contrary to the United States's obligations under the Paris Convention. However, practically speaking, non-U.S. inventors are likely to make their inventions in countries other than the United States (typically, their home countries), and U.S. inventors are likely to make their inventions in the United States. Hence, practically speaking, the first sentence of 35 USC 104 operates far more often to the disadvantage of non-U.S. inventors (and their assignees, which are usually non-U.S. companies) than it does to the disadvantage of U.S. inventors (and their assignees, which are usually U.S. companies). Hence, the first sentence of 35 USC 104 is, in practice, blatantly protectionist legislation. We know that,[2] and you know that. That is why you (and the Mexicans) negotiated for Article 1709(7).
2.0 THE ATTEMPT TO DENY CANADA THE BENEFIT OF ITS BARGAIN WITH RESPECT TO 35 USC 104
The first thing that I am here to tell you is that there is a serious movement afoot in the United States to deny you (and the Mexicans) the benefit of the bargain that you negotiated. NAFTA is not self-implementing. It will have to be implemented by legislation, and there are those in the United States (typically house patent counsel for large U.S. corporations) who hope to see Article 1709(7) of NAFTA implemented in a fashion that will make it, at least in significant part, of no practical effect.
The first sentence of 35 USC 104 is operative in two situations, one of which occurs in ex parte practice and one of which occurs in inter partes practice - i.e., in interferences.
In ex parte practice, antedatable references may be cited against an applicant under two sections of our statute.[3] In each case, the reference may be removed (or antedated) by proof that the applicant made his or her invention before the applicable date of the reference — i.e., what is, prima facie, a reference may be proved to, in fact, not be a reference. However, the first sentence of 35 USC 104 means that applicants can only remove such references by proof that they made their inventions in the United States before the dates of the removable references. Article 1709(7), on its face, will require the United States to amend the first sentence of 35 USC 104 to permit applicants to antedate removable references by proof of activities with respect to their inventions in Canada and Mexico. That aspect of Article 1709(7) is relatively non-controversial, and I expect that the implementing legislation will implement that aspect of NAFTA in a straightforward and, if I may say so, honorable fashion.[4]
The inter partes aspect of the first sentence of 35 USC 104 is, however, quite controversial. For a variety of reasons, applications and patents that get involved in interferences tend to be, on average, more valuable than applications and patents that do not, and some applications and patents that get involved in interferences are extremely valuable. The first sentence of 35 USC 104 gives U.S. companies a decided advantage in many interferences with foreign companies. Not unnaturally, house patent counsel for U.S. companies like that advantage, and some of them want to keep it.
However, it looks like NAFTA is going to be approved by the legislatures of all three countries, and Article 1709(7) of NAFTA is not one of the portions of NAFTA that President Clinton is trying to renegotiate. How, then, to keep the advantage of the first sentence of 35 USC 104?
The answer is to adopt implementing legislation that is in facial compliance with Article 1709(7) but that, practically speaking, will keep Canadian and Mexican companies from taking advantage of it. However, in order to get such legislation passed, it must be appealing to U.S. legislators, who presumably do not wish to be seen as shirking their obligations under NAFTA. The brilliant solution to this problem is to submit legislation which, its proponents insist, will insure a "level playing field" as between U.S. companies on the one hand and Canadian and Mexican companies on the other hand involved in interferences.
Pursuant to this end, the special committee on implementation of NAFTA of the American Intellectual Property Law Association ("AIPLA")[5] has drafted a substitute for 35 USC 104, and the board of directors of the AIPLA has approved the proposed substitute. The executive director of the AIPLA (who also serves as its legislative liaison — i.e., as its lobbyist) and representatives of a number of major U.S. corporations will try to get the proposed substitute for 35 USC 104 incorporated into the administration's NAFTA implementing legislation. While there is, of course, no guarantee that the language that I am about to show you will appear in the administration's bill,[6] I think that there is an excellent chance that it or something very similar to it will — in the absence of an outcry from the Canadians and/or the Mexicans sufficient to cause the office of the Special Trade Representative (which will be responsible for drafting the proposed implementing legislation) to focus on this issue.
The proposed substitute for 35 USC 104 drafted by the AIPLA contains three paragraphs, and it reads as follows:
(a) In proceedings in the Patent and Trademark Office, in the courts, and before any other competent authority, an applicant for patent or a patentee, may not establish a date of invention by reference to knowledge or use thereof, or other activity with respect thereto, in a foreign country, other than Canada, or Mexico, except as provided in sections 119 and 365 of this title.
(b) If, in a proceeding in the Patent and Trademark Office, in a court, or before any other competent authority, the testimony of a witness or the obtaining of discovery of information, documents, things or activities, relating to a date of invention, is not available, for any reason, in Canada, or in Mexico, to the same extent as if such witness, information, documents, things or activities were in the United States, an applicant or patentee in that proceeding may not establish a date of invention by reference to knowledge or use thereof, or other activity with respect thereto, in Canada, or in Mexico, except as provided in section 119 or 365 of this title.
(c) Where an invention was made by a person, civil or military, while domiciled in the United States, Canada, or Mexico and serving in a foreign country in connection with operations by or on behalf of the person's country of domicile, the person shall be entitled to the same rights of priority with respect to such inventions as if the same had been made in the person's country of domicile.
Paragraph (b) is the important one, so I will deal briefly with the other two paragraphs first.
Paragraph (c) simply expands the language of the second sentence of the current 35 USC 104 to give Canadian and Mexican inventors the advantage of that unfortunate piece of legislation. In my judgment, the present language of the second sentence of 35 USC 104 is contrary to the United States's obligations under the Paris Convention, and paragraph (c) of the draft implementing legislation is equally contrary to our obligations under the Paris Convention. However, by making Canada and Mexico co-conspirators, as it were, it is not contrary to our obligations under Article 1709(7) of NAFTA. Moreover, it addresses a situation which, in practice, very seldom arises.
Paragraph (a) is a straightforward implementation of Article 1709(7) of NAFTA. In my judgment, the implementing legislation should consist only of paragraph (a) of the draft, and paragraphs (b) and (c) should not be part of the implementing legislation.
Paragraph (b) of the draft is the zinger. This is the section that is supposed to ensure a "level playing field". It purportedly addresses two concerns, the blocking statutes of certain Canadian provinces and the absence in Canadian law of an equivalent to 35 USC 24. I will address each concern in turn, and then I will explain why I think that proposed 35 USC 104(b), if adopted as drafted by the AIPLA, will make proposed 35 USC 104(a) of no practical value to Canadians and Mexicans, at least in inter partes situations.[7]
The concern expressed with respect to the Canadian blocking statutes is that they will permit Canadian companies involved in interferences to put on their evidence that is favorable to them but resist discovery orders from examiners-in-chief in interferences on the ground that they are precluded by a relevant blocking statute from producing the discovery ordered by the examiner in-chief, thereby preventing an opponent (which could be of any nationality) from unearthing evidence that is unfavorable to the Canadian interferent and that is in the possession, custody, or control of a Canadian entity — whether the Canadian interferent or a nonparty. However, in my judgment that concern is either misplaced or disingenuous. The examiner-in-chief who has ordered the discovery has the power under 37 CFR 1.616[8] to impose sanctions up to and including entry of an adverse judgment for a party's failure to provide discovery that he or she has ordered. The examiners-in chief have exercised that power in the past.[9] The chairman of the Board of Patent Appeals and Interferences has stated publicly that the examiners-in-chief will impose such sanctions even if a Canadian interferent states that it would love to comply with the examiners-in-chief's discovery order, but that it is prevented from doing so by an applicable Canadian blocking statute. I have no doubt that the examiners-in-chief will do that — and I have very little doubt that, if faced with such a prospect, Canadian interferents will find a way to comply with the examiner-in-chief's order. After all, the blocking statutes were not passed in order to deal with situations remotely like the one I am talking about.
The concern expressed with respect to the absence of a Canadian equivalent of 35 USC 24 is legitimate, but de minimis. 35 USC 24 reads as follows:
A judge of a court whose clerk issued a subpoena may enforce obedience to the process or punish disobedience as in other like cases, on proof that a witness, served with such subpoena, neglected or refused to appear or to testify. No witness shall be deemed guilty of contempt for disobeying such subpoena unless his fees and traveling expenses in going to, and returning from, and one day's attendance at the place of examination, are paid or tendered to him at the time of the service of the subpoena; nor for refusing to disclose any secret matter except upon appropriate order to the court which issued the subpoena.
What this Statute does is to authorize discovery against third parties, in order to obtain information and/or documents that are not in the possession, custody, or control of a party to the interference. It can be used, for instance, against former employees of the assignee of a party to an interference. In certain cases, 35 USC 24 can be very useful, and I do recommend it to your attention. That is, I think that it would be a very good idea if Canada would amend its laws to provide for something like 35 USC 24. However, that is not the issue. The issue is whether the United States can (or should) condition its adoption of legislation like paragraph (a) of the draft statute on Canada's amending its laws to adopt 35 USC 24, or something similar thereto.
The reason that I think that proposed 35 USC 104(b), if adopted as drafted by the AIPLA, will make proposed 35 USC 104(a) of no practical value to Canadians and Mexicans, at least in inter partes situations, is that paragraph (b) does not require a nexus between "the testimony of a witness or the obtaining of discovery of information, documents, things or activities, relating to a date of invention" that "is not available, for any reason, in Canada . . . to the same extent as if such witness, information, documents, things or activities were in the United States" and the testimony that the Canadian interferent is trying to introduce about occurrences in Canada. Hence, if a Canadian interferent puts on testimony about occurrences in Canada, it seems to me that it will be sufficient for its opponent to object to the introduction of that testimony when it is offered, then, during its rebuttal testimony period, put on the testimony of an expert in Canadian patent law to the effect that Canada does not have a statute similar to 35 USC 24 that would permit the opponent to compel "the testimony of a [nonparty] witness or the obtaining of discovery of information, documents, things or activities [from a nonparty], relating to a date of invention,"[10] and then move under 37 CFR 1.656(h)[11] to suppress all of the Canadian interferent's evidence of occurrences in Canada.
Now, I should point out that there are respected U.S. patent attorneys who disagree with me about this likely interpretation of 35 USC 104(b). They contend that 35 USC 104(b) should be interpreted so that the Canadian interferent's evidence of occurrences in Canada should be suppressed only if its opponent establishes that it tried to obtain evidence from a nonparty in Canada and was unable to do so — either because of a Canadian blocking statute or because of the absence of a Canadian equivalent to 35 USC 24. I have three responses to that contention.
First, as I said before, I was involved in the drafting of proposed 35 USC 104(b), and I know that it was the intent of some of those involved in the drafting of that language to come up with language that, while not blatantly protectionist on its face, would be susceptible of, and would likely be given, the interpretation that I have suggested above.
Second, if proposed 35 USC 104(b) does become law, and if it is first interpreted by a protectionist judge or a protectionist panel of the Board of Patent Appeals and Interferences, I think that it is very likely to be given the interpretation that I have suggested above.
And third, and most importantly, even if proposed 35 USC 104(b) does become law, but it is interpreted so that Canadian interferents' evidence of occurrences in Canada will be suppressed only if their opponents establish that they tried to obtain evidence from a nonparty in Canada and were unable to do so, I think that the U.S. interference bar will rapidly become adept at providing such evidence. There are always potential witnesses whose testimony one does not take because it simply does not seem to be worth the effort and expense. If, however, one could knock out all of one's Canadian opponent's priority evidence by proving that one tried to obtain the compelled testimony of such a witness and was unable to do so, either because of a Canadian blocking statute or because of the absence of a Canadian equivalent of 35 USC 24, there would be a powerful temptation to go through the effort precisely in order to fail, thereby obtaining indirectly the result really intended — namely, laying the predicate for a motion to suppress all of the Canadian interferent's priority testimony.
I have two comments on what I see to be the real issue here.
First, the United States NAFTA negotiators could have conditioned their acceptance of Article 1709(7) upon the Canadian and Mexican negotiators' acceptance of a provision obligating Canada and Mexico to amend their laws to provide for something like 35 USC 24. However, the United States NAFTA negotiators did not do that. Slipping that requirement into our implementing legislation now is a little like our conditioning passage of paragraph (a) of the proposed rewrite of 35 USC 104 on Canada's agreeing to readjust the southwestern boundary of Canada to 54°40'. To Americans, that may sound like an excellent idea with a legitimate historical basis, but I would not expect Canadians to see it in quite the same light.
Second, the problem that is posed by the absence in Canadian law of an equivalent of 35 USC 24 is really de minimis. I have an extremely active interference docket, but in my twenty years of interference practice, I have only used 35 USC 24 two or three times. Moreover, I have discussed the matter with some of my colleagues in the interference bar, and they agree that they seldom have need to resort to 35 USC 24. For one thing, in most cases, former employees are either friendly to their former employers, in which case their testimony is really under the "control" of their former employers, or hostile to their former employers — in which case they are delighted to testify voluntarily for an adversary of their former employers! Other real life needs to use 35 USC 24 are quite uncommon, practically speaking.
In summary, my advice to the Canadian patent bar is to rise up and contact your government. Tell whoever the appropriate people are that powerful interests in the United States are seeking to deny Canada the benefit of the bargain that it negotiated with respect to 35 USC 104. If you do not do that, the second part of my talk may be moot.
3.0 HOW EVIDENCE WOULD BE SUBMITTED ON BEHALF OF CANADIAN INVENTORS INVOLVED IN U.S. INTERFERENCES
Assuming that NAFTA is ratified and that nothing like draft 35 USC 104(b) becomes part of U.S. law, your Canadian clients will have the opportunity to attempt to prevail in U.S. interferences by "establish[ing] a date of invention by reference to knowledge or use thereof, or other activity with respect thereto, in . . . Canada . . . . But what does that mean?
Then are three types of activities that are, at least potentially, relevant: conception of the invention, actual reductions to practice of the invention, and continuous diligence from a time just prior to one's opponent's conception to one's own subsequent reduction to practice, whether the reduction to practice is an actual reduction to practice or a constructive reduction to practice. (A constructive reduction to practice is the filing of a patent application that discloses and enables subject matter within the scope of the count of the interference.)
There is a fourth type of activity that can take place in Canada that we can already prove, notwithstanding the first sentence of 35 USC 104. That is derivation of the invention. The first sentence of 35 USC 104 has been construed as inapplicable to evidence of derivation,[12] and U.S. interferents already routinely offer evidence of that type of activity taking place in foreign countries.[13]
How will such activities be proven? I do not have time to discuss the nitty gritty details of the practice, but I will briefly discuss the three points that are likely to be of the most interest to you.
First, testimony in interferences does not have to be taken in the United States. 37 CFR 1.684[14] does provide that testimony in interferences can only be taken outside the United States with the prior authorization of the responsible examiner-in-chief, but such prior authorization is often given. Where one interferent is in Canada, I would expect the examiners-in-chief to readily authorize the taking of testimony in Canada. Indeed, 37 CFR 1.684 may be revised to provide that, when a party is a Canadian or a Mexican, testimony could be taken in Canada or Mexico even without getting advance permission from the examiner-in-chief.
Second, when testimony is taken abroad, it does not have to be taken by a practitioner admitted in the foreign country where the testimony is taken. That is, at least insofar as the United States Patent and Trademark Office is concerned, there will be no need for a Canadian practitioner to be present while testimony is being taken in Canada. However, in practice where a foreign party is involved, it is very common for a practitioner from that country (particularly house counsel) to be present during the taking of testimony from a foreign witness.
Third, the transitional provision will probably provide that interferents will be able to prove "knowledge or use . . . [of an invention], or other activity with respect thereto, in . . . Canada . . ." prior to the effective date of the implementing legislation, but that such events will be treated as if they had occurred on the effective date of the implementing legislation. That is how we treat evidence of such events that took place prior to the relevant date alleged in a preliminary statement (which is the basic pleading filed soon after the declaration of an interference), and there seems to be general agreement that that would be a fair way to handle proof of inventive activities taking place in Canada or Mexico prior to the effective date of the implementing legislation.
In conclusion, welcome to the wonderful world of interferences! I think that you will find them far more challenging than Canadian conflict proceedings were. Unfortunately, your clients will find them far more expensive than Canadian conflict proceedings were. But, on the other hand, NAFTA Article 1709(7) will, if implemented honestly, permit Canadian companies to win interferences with U.S. companies in situations where they would lose today.
First published in the Canadian Intellectual Property Review, volume 10 (1993), pages 433-41.
*.Presented at the Twenty-seventh Spring Meeting of the Patent and Trademark Institute of Canada, March 10, 1993.
**.©1993 Charles L. Gholz, Oblon, Spivak, McClelland, Maier & Neustadt, P.C., Arlington, Virginia, U.S.A.
[1].Everything I am saying about Canadian inventors is, of course, equally applicable to Mexican inventors. However, in view of my audience, I will focus on the impact of Article 1709(7) on Canadian inventors.
[2].See generally Moy, Patent Harmonization, Protectionism, and Legislation (1992), 74 JPTOS 777.
[3].The two sentences are 35 USC 102(a) and 102(e). 35 USC 102 reads in relevant part as follows:
(e) the invention was described in a patent granted on an application for patent by another filed in the United States before the invention thereof by the applicant for patent, or on an international application by another who has fulfilled the requirements of paragraphs (1), (2), and (4) of section 371(c) of this title before the invention thereof by the applicant for patent. . . .
[4].An amusing, and perhaps unintentional, consequence of Article 1709(7) of NAFTA in this regard is that it would permit Canadian and Mexican inventors to obtain U.S. patents in situations where they could not obtain home country patents — by antedating references in U.S. practice that are available against their corresponding home country applications and that would prevent them from obtaining home country patents!
[5].I should disclose that I am a member of this committee. However, I dissented from the committee's report!
[6].Apparently all activity within the new administration with respect to drafting legislation to implement Article 1709(7) is on hold pending nomination and confirmation of the new Commissioner of Patents and Trademarks. Once the new Commissioner is in office, however, things should move very quickly indeed.
[7].I should also disclose at the outset that there are respected U.S. patent attorneys who disagree with me as to the likely interpretation of draft 35 USC 104(b).
[8].37 CFR 1.616 reads as follows:
Sanctions for failure to comply with rules or order.
[9].See, e.g., Asari v. Zilges (1987), 8 USPQ2d 1117 (PTOBPAI).
[10].Alternatively, the testimony could be of an expert in Canadian evidentiary and/or procedural law to the effect that a relevant Canadian blocking statute would not permit the export of evidence favorable to the Canadian interferent's opponent's case even if the party in possession of that evidence were willing to make it available voluntarily.
[11].37 CFR 1.656(h) reads as follows:
(h) If a party wants the Board in rendering its final decision to rule on the admissibility of any evidence, the party shall file with its opening brief an original and three copies of a motion (§ 1.635) to suppress the evidence. The provisions of §1.637(b) do not apply to a motion to suppress under this paragraph. Any objection previously made to the admissibility of an opponent's evidence is waived unless the motion required by this paragraph is filed. An original and three copies of an opposition to the motion may be filed with an opponent's opening brief or reply brief as may be appropriate.
[12].Hedgewick v. Akers (1974), 497 F.2d 905,182 USPQ 167 (CCPA).
[13].See, e.g., Asari v. Zilges (1987), 8 USPQ2d 1117 (PTOBPAI).
[14].See generally Gholz, Compelled Testimony, Testimony Abroad, and Protective Orders in Interference Proceedings Under the New Rules, 67 JPTOS 239 (1985). 37 CFR 1.684 reads as follows:
Testimony in a foreign country.
(a) An examiner-in-chief may authorize testimony of a witness to be taken in a foreign country. A party seeking to take testimony in a foreign country shall, promptly after the testimony period is set, file a motion (§ 1.635):
(1) Naming the witness.
(2) Describing the particular facts to which it is expected that the witness will testify.
(3) Stating the grounds on which the moving party believes that the witness will so testify.
(4) Demonstrating that the expected testimony is relevant.
(5) Demonstrating that the testimony cannot be taken in this country at all or cannot be taken in this country without hardship to the moving party greatly exceeding the hardship to which all opposing parties will be exposed by the taking of the testimony in a foreign country.
(6) Accompanied by an affidavit stating that the motion is made in good faith and not for the purpose of delay or harassing any party.
(7) Accompanied by written interrogatories to be asked of the witness.
(b) Any opposition under § 1.638(a) shall state any objection to the written interrogatories and shall include any cross-interrogatories to be asked of the witness. A reply under §1.638(b) may be filed and shall be limited to stating any objection to any cross-interrogatories proposed in the opposition.
(c) If the motion is granted, taking of testimony abroad must be completed within the testimony period set under § 1.651 or within such time as may be set by the Examiner-in-Chief. The moving party shall be responsible for obtaining answers to the interrogatories and cross-interrogatories before an officer qualified to administer oaths in the foreign country under the laws of the United States or the foreign country. The officer shall prepare a transcript of the interrogatories, cross-interrogatories, and recorded answers to the interrogatories and cross-interrogatories and shall transmit the transcript to Box Interference, Commissioner of Patents and Trademarks, Washington, DC 20231, with a certificate signed and sealed by the officer and showing:
(1) The witness was duly sworn by the officer before answering the interrogatories and cross-interrogatories.
(2) The recorded answers are a true record of the answers given by the witness to the interrogatories and cross-interrogatories.
(3) The name of the person by whom the answers were recorded and, if not recorded by the officer, whether the answers were recorded in the presence of the officer.
(4) The presence or absence of any party.
(5) The place, day, and hour that the answers were recorded.
(6) A copy of the recorded answers was read by or to the witness before the witness signed the recorded answers and that the witness signed the recorded answers in the presence of the officer. The officer shall state the circumstances under which a witness refuses to read or sign recorded answers.
(7) The officer is not disqualified under § 1.674.
(d) If the parties agree in writing, the testimony may be taken before the office on oral deposition.
(e) A party taking testimony in a foreign country shall have the burden of proving that false swearing in the giving of testimony is punishable as perjury under the laws of the foreign country. Unless false swearing in the giving of testimony before the officer shall be punishable as perjury under the laws of the foreign country where testimony is taken, the testimony shall not be entitled to the same weight as testimony taken in the United States. The weight of the testimony shall be determined in each case.