On February 18, 2016, the Québec Court of Appeal released its decision in 7158548 Canada Inc c Desbiens, 2016 QCCA 306, affirming a lower court decision requiring the appellant to pay royalties on the sale of certain products.  The appellant had bought all assets of a bankrupt company “free and clear” during a bankruptcy sale, which assets included a patent licence (Licence).  The Québec Court of Appeal concluded that if the appellant took on the benefits of the Licence, then it must also pay the royalties required under the Licence.

The Licence relates to a patent filed by the respondent, Micheline Desbiens.  Desbiens’ patent covers a non-toxic plasticine dough for use as a toy, and the process for preparing it.  Bojeux Inc (Bojeux) had licensed the patent from Desbiens in exchange for royalties and bonuses.  The royalty obligations under the Licence were perpetual so long as the invention was practised, without regard to the expiry or validity of the patent.  Bojeux eventually declared bankruptcy and the Licence was acquired by the appellant - a company that was controlled by the same person as Bojeux - in a bankruptcy sale.  Desbiens brought an action against the appellant seeking royalties owed under the Licence. 

The Court awarded royalties to Desbiens, noting the significance of a continuing obligation to pay royalties for practicing the invention notwithstanding the patent’s term or validity.  The Court also recognized that Boyeux and the appellant were related parties, and as a result, were aware of the obligation to pay royalties under the Licence when it was acquired.

E-TIPS® ISSUE

16 03 09

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