Standard essential patents (SEPs) are patents that protect inventions necessary to implement a particular technology standard. From WiFi and Bluetooth to 5G telecommunications and video compression, these patents underpin the connectivity that modern business depends upon. Yet despite their commercial importance, SEP litigation in Canada remains largely uncharted territory.
Unlike the United States and Europe, where courts have developed extensive jurisprudence on fair, reasonable, and non-discriminatory (FRAND) licensing obligations, Canadian courts have not yet issued a binding decision on SEPs or FRAND requirements. For technology companies operating in Canada, whether as patent holders or implementers, this creates both uncertainty and opportunity. Working with an expert Toronto-based patent lawyers can help businesses navigate this emerging area of law before disputes arise.
Canada’s Legislative Framework for SEPs
The Patent Act has recognised the existence of SEPs since 2018, when section 52.1 came into force. This provision establishes one key rule: a licensing commitment in respect of a standard essential patent that binds the patentee also binds any subsequent patentee. In other words, if an SEP holder makes a FRAND commitment to a standard-setting organisation (SSO), that commitment transfers with the patent if it is sold or assigned.
Beyond this transfer provision, however, the Patent Act provides little guidance. Section 52.2 authorises the Governor in Council to make regulations defining what constitutes a “licensing commitment” or a “standard-essential patent,” but no such regulations have been promulgated. The result is a legislative framework that acknowledges SEPs exist but provides no mechanism to determine whether a particular patent qualifies as essential or what FRAND terms should look like.
The Absence of Binding SEP Jurisprudence
To date, there has been no binding Canadian court decision directly addressing the definition of an SEP or FRAND requirements in patent infringement cases. Most SEP disputes have settled before trial, leaving fundamental questions unanswered.
The Federal Court addressed section 52.1 in Wheel Monitor Inc. v. Digi-Star LLC, one of the rare cases to comment on SEPs. The defendant argued that the patent at issue was a standard essential patent because Ontario regulations required certain vehicles to use the patented control system. The Court rejected this argument, finding that there is no regulatory or statutory regime defining what constitutes an SEP or an SEP licensing commitment. Absent such a regime, the Federal Court held it has no independent jurisdiction to designate a patent as standard essential.
This leaves Canadian litigants in an unusual position. While SEPs are litigated extensively in the United States, Europe, and China, Canadian courts have yet to rule on issues such as: what makes a patent “essential” to a standard; how FRAND royalty rates should be calculated; whether injunctions should be available against willing licensees; and what conduct constitutes a breach of FRAND obligations.
Remedies Available in SEP Litigation
In the absence of SEP-specific rules, Canadian patent litigation proceeds according to general principles. If a valid patent is infringed, the patentee is presumptively entitled to the full range of remedies under the Patent Act: damages, reasonable royalties, accounting of profits, and injunctions.
The Federal Court of Appeal’s 2024 decision in Rovi Guides, Inc. v. Videotron Ltd. reinforced that non-practising entities (including licensing companies that hold SEPs) are entitled to elect an accounting of profits and can generally expect injunctive relief following a finding of validity and infringement. The fact that a patentee licenses rather than practises an invention carries no weight against granting these remedies.
How these principles will interact with FRAND commitments remains untested. In other jurisdictions, courts have debated whether an injunction should issue against a “willing licensee” who has engaged in good-faith FRAND negotiations. Canadian courts have not yet addressed this question.
Competition Law Considerations
Canada’s Competition Bureau has issued guidance on the application of competition law to SEPs in its Intellectual Property Enforcement Guidelines. The Bureau’s approach is generally permissive toward patent rights: asserting an SEP per se will not be considered anticompetitive.
However, the Guidelines identify specific conduct that may raise competition concerns, including “patent ambush” (failing to disclose patents during the standard-setting process), reneging on a licensing commitment, and seeking injunctions against willing licensees after making a FRAND commitment. The Bureau emphasises that it is not a price regulator for licensing agreements and imposes no specific requirements on the content or form of FRAND agreements.
Strategic Considerations for Technology Companies
For SEP Holders
The absence of binding FRAND jurisprudence in Canada means that SEP holders have considerable freedom, but also uncertainty, in licensing negotiations. Best practices from other jurisdictions suggest that patent holders should document good-faith licensing offers, maintain consistency with FRAND commitments made to SSOs, and be prepared to justify royalty demands with economic evidence if litigation becomes necessary.
Patent holders should also consider that the Rovi decisions provide comfort that licensing business models will not disadvantage them in Canadian litigation. Injunctions and profit disgorgement remain available remedies.
For Implementers
Companies implementing standards-based technologies should proactively engage in licensing negotiations rather than waiting for litigation. Demonstrating willingness to take a FRAND licence may be relevant to remedies, even if Canadian courts have not yet developed a formal framework. Document all licensing discussions and counteroffers carefully.
Implementers facing SEP assertions should also scrutinise whether the asserted patents are truly essential to the relevant standard. Essentiality is often disputed, and patents declared essential by their owners are frequently found to be non-essential upon closer examination.
Looking Ahead
SEP litigation is increasingly important globally, and Canada cannot remain insulated forever. As wireless connectivity, IoT devices, and video streaming become ubiquitous, disputes over the patents underlying these technologies will inevitably reach Canadian courts.
When they do, the absence of binding precedent means that early cases will shape the law. For technology companies, whether asserting or defending against SEP claims, understanding the current landscape and engaging experienced patent litigation counsel early is essential to protecting commercial interests in this evolving area.
