Out With The New, In With The Old: The F.C.A. Provides Clarity On Its Ability To Interpret Contracts

• Published date: 30 July 2020
• Subject Matter: Intellectual Property, Litigation, Mediation & Arbitration, Patent, Trials & Appeals & Compensation
• Law Firm: McMillan LLP
• Author: Mr Keith Bird, Pablo Tseng, Tilaye Terrefe and Adam Chisholm

On July 28, 2020, the Canadian Federal Court of Appeal delivered its much anticipated decision in SALT Canada Inc v John W Baker, 2020 FCA 127 ("Salt") with regard to the Federal Court's ability to interpret contracts, licenses and other contractual documents in proceedings made pursuant to statutory provisions (e.g. Section 52 of the Patent Act). The Salt decision: (i) reverses a line of Federal Court decisions stemming from the 1995 decision of Lawther¹ which held that contract interpretation was outside of the jurisdiction of the Federal Court; and (ii) re-affirms the Supreme Court of Canada's 1941 decision of Kellogg² and the former Exchequer Court's 1960 decision of Clopay³ which held that "the Federal Court can interpret contracts between private citizens as long as it is done under a sphere of valid federal jurisdiction vested in the Federal Court".⁴

Background

In December 2010, Dr. Markels executed a document transferring Canadian patent number 2,222,058 (the "'058 Patent") to Mr. Baker (the respondent herein), subject to royalty payments and a reversionary clause should such payments stop. Specifically, if the royalty payments stopped, Dr. Markels was entitled to request Mr. Baker to assign his ownership rights in the '058 Patent back to Dr. Markels.

Mr. Baker made his last royalty payment related to the '058 Patent in 2011. In 2015, Dr. Markels, acting within his contractual rights, requested Mr. Baker to assign ownership of the '058 Patent back to Dr. Markels. Mr. Baker, however refused.

Later in 2015, Dr. Markels assigned his rights in the '058 Patent to SALT Canada Inc. (the appellant herein, also referred to herein as "SALT"). Under that assignment agreement Dr. Markels was obligated to assist SALT in having Mr. Baker removed as the registered owner of the '058 Patent. Ultimately, Dr. Markels was not successful in securing an executed assignment of rights from Mr. Baker.

Pursuant to Section 52 of the Patent Act, SALT applied to the Federal Court to vary the title to the '058 Patent and list SALT as the registered owner of the '058 Patent (click here for the Federal Court decision).

The Federal Court, citing the Lawther decision and consequently dismissing SALT's application, stated as follows:⁵

In this case, the Applicant seeks an order to vary the records of the Patent Office. On its own, such an order would appear to be within the Court's jurisdiction. However, the issuance of any such order is secondary to and dependent upon a prior interpretation of the various assignment...