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Canadian Patents: Importance of Registering Assignment
The Medium

This is a review of a recent decision of the Ontario Superior Court of Justice, which has implications for Canadian patent owners and assignees.  

 The case is Verdellen v. Monaghan Mushrooms Ltd.

The facts are that the Applicant (“Verdellen”) sought a declaration that he was the owner of certain patent rights outside North America for an invention he founded while employed by Rolland Farms (“Rolland”). Verdellen claimed such rights pursuant to a December 2008 written assignment agreement, which purported to assign the rights from Rolland to Verdellen (the “Assignment”).

The invention in question was the subject of a Patent Cooperation Treaty (“PCT”) Application with a Canadian National Phase Application. 

In late 2009, Monaghan Mushrooms Ltd. (“Monaghan”) purchased Rolland’s business, including the entirety of Rolland’s intellectual property rights. Monaghan took the position that Verdellen could not establish the validity of the Assignment. Alternatively, Monaghan argued that notwithstanding the Assignment, it acquired the patent rights as a bona fide purchaser for value without notice of Verdellen’s rights.

Monaghan also argued that the Assignment was void under Section 51 of the Patent Act, which provides that an assignment is void against any subsequent assignee unless such assignment is registered with the Canadian Intellectual Property Office (“CIPO”) in accordance with Sections 49 and 50 of the Patent Act. 

Importantly, Verdellen did not register the Assignment with CIPO. Following its purchase of Rolland, Monaghan registered an assignment of the patent rights from Rolland to Monaghan.

The Judge found too many factual issues to make a finding on the validity or enforceability of the Assignment. That said, the Judge decided that even if the Assignment was valid, Verdellen would have acquired only an equitable interest in the patent rights owing to the fact that the Assignment contemplated the future assignment of the patent rights and did not affect an assignment of the rights.

The Judge found that even if the Assignment was valid, Monaghan undertook an extensive due diligence process, which on all accounts showed Rolland to be the owner of the patent rights in question.

The Judge ultimately concluded that even assuming the Assignment to be valid and enforceable, Monaghan was a bona fide purchaser for value without notice of the Assignment or any rights held by Verdellen and therefore took title to the patent rights free and clear of any equitable interest held by Verdellen. 

The Judge went on to consider Monaghan’s alternative argument under Section 51 of the Patent Act and found that because the issue was in respect of foreign non-Canadian rights under the PCT Application, the Canadian Patent Act did not apply.

Notwithstanding the above, the Judge commented that had the issue concerned Canadian patent rights in a PCT Application, the Patent Act would have applied. In such a situation, Section 50(2) would have dictated that Verdellen’s failure to register the Assignment would deprive him of priority against Monaghan as a subsequent assignee with a registered assignment. In this situation, Verdellen’s assignment would be rendered void. The Verdellen decision provides a practical perspective on the possible implications of failing to register assignments of patent rights in Canada.