Ontario Court Affirms the Enforceability of Patent No-Challenge Clauses

In a recent decision[1], the Ontario Superior Court of Justice, Divisional Court (the “Court”), affirmed the enforceability of patent restrictive covenants (so-called “no-challenge clauses”) in settlement agreements.

In 2014, Loops L.L.C. and Loops Flexbrush L.L.C. (“Loops”) and Maxill Inc. (“Maxill”) entered into a settlement agreement to resolve a patent infringement action by Loops against Maxill. The agreement, governed by the laws of Canada and Ontario, contained a no-challenge clause in which Maxill agreed “not to directly or indirectly assist any person in attacking the validity” of certain Loops patents.[2] Loops subsequently commenced actions in Ontario and Utah claiming Maxill breached the agreement and infringed a U.S. patent covered by the agreement.[3] Loops filed a motion for an interlocutory injunction in the Ontario action. The motion judge dismissed the injunction request.[4] The motion judge found that a strong prima facie case was lacking because Loops’ evidence was rebutted by the fact that the no-challenge clause was not reasonable in the public interest, based on U.S. caselaw principles.[5]

The main issue on appeal was whether the motion judge erred in finding that Loops did not have a strong prima facie case when applying the three-part test for an interlocutory injunction.[6] The Court rejected the motion judge’s reasoning, acknowledging that while there may be limits on contractual restrictions that harm the general public, imposing such a limitation would require evidence allowing the Court to weigh the implications of enforcing the contract. The Court found that no such evidence had been adduced. On this basis, the Court reasoned that an agreement precluding the subsequent use of a defence by a party to the benefit of another party was not able to be limited to prevent public harm.[7]

The Court rejected a line of U.S. caselaw holding that no-challenge clauses may be void under U.S. law due to concerns that they restrict the free use of ideas in the public domain by inhibiting challenges to patent validity.[8] The Court clarified that, contrary to U.S. decisions setting aside the principle that patent licensees may be estopped from attacking patent validity, the estoppel principle continues to apply in Canada.[9] In view of this, and the fact that the no-challenge clause at issue was part of a settlement of a case in which the validity of Loops’ patents was challenged, the Court held that the no-challenge clause was enforceable and, accordingly, Loops had a strong prima facie case.[10]

Upon finding that Loops also satisfied the second and third parts of the test (irreparable harm and balance of convenience), the Court granted the appeal and ordered an interlocutory injunction against Maxill.[11]

This decision will be of interest to patent owners, licensees, and others who may be bound by no-challenge clauses. Notably, the Court left open the possibility that it could be persuaded to hold a no-challenge clause unenforceable with evidence of public harm. The Court’s reasoning is broad enough that it may be applied to other intellectual property rights as well (e.g., copyright). Fasken’s team of experienced intellectual property lawyers are available to consult on all manner of IP matters including litigation, dispute settlement, and licensing.


[1] Loops L.L.C. v. Maxill Inc., 2020 ONSC 5438.

[2] Ibid at paras 3-4.

[3] Ibid at paras 7-9.

[4] Ibid at para 1.

[5] Ibid at paras 47-49.

[6] Ibid at paras 14-15.

[7] Ibid at para 50.

[8] Ibid at paras 52-71.

[9] Ibid at para 72.

[10] Ibid at para 73.

[11] Ibid at paras 74-80 and 83.

IAM Global Leaders

Jean-Nicolas Delage Recognized as IAM Global Leader for 2021
Fasken partner, Jean-Nicolas Delage, has been recognized in the 2021 edition of IAM Global Leaders Guide.

Now into its second year, the IAM Global Leaders Guide brings together the world’s foremost private practice patent experts. Congratulations Jean-Nicolas! Read the full guide here.

Jean-Nicolas is the co-leader of the Technology, Media and Telecommunications group and specializes in intellectual property strategy for rapidly growing technological clients.

“Zombie” Privacy & IP Rights: Protecting the Rights to an Individual’s Image after Death: Part 2 of 2

Part 2: Intellectual Property

In Part One of our series on protecting individuals’ images after their death, we examined the privacy rights that govern the use of these ‘zombie’ celebrities, just in time for Halloween. We considered what privacy rights attach to dead celebrities, and whether these rights can be exercised by their estates/heirs. In this Part Two, we will consider what intellectual property rights could govern this so-called resurrection of dead celebrities!

As you will recall from Part One, it is not surprising that movies and concerts are reaching back to long dead stars to “perform” for audiences. What intellectual property rights govern the resurrection of a dead celebrity? If property rights are the best way for a deceased’s heirs to protect the image of the deceased, how can the “property” regime of intellectual property rights assist?

There are a number of statutory IP regimes as well as common law causes of action which can allow online influencers and the estates of deceased celebrities to control and monetize these valuable assets and continue to monetize as technology allows them to do so.

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“Zombie” Privacy & IP Rights: Protecting the Rights to an Individual’s Image after Death: Part 1 of 2

Part 1: Privacy

James Dean could soon be starring in a new movie, over 60 years after his death! In what would be his fourth movie role, Dean’s image could be superimposed on a live actor for the film Finding Jack.  Animating deceased celebrities is not new however: a holographic image of deceased musician Tupac Shakur debuted at the CochellaTM music festival as far back as 2012.

Possible through the magic of computer technology, it would seem that deceased celebrities are as popular as ever and still command significant attention.  It is not surprising that movies and concerts are reaching back to long dead stars to “perform” for audiences. There will likely be no new scandals with these celebrities and they can be made to do whatever the creators have in mind without any “diva” pushback. While not everyone welcomes these developments, it will likely become more common as the technology continues to improve.

However, “employing” such “zombie” celebrities raises fascinating new legal issues, in particular in the areas of privacy law, and intellectual property law. 

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CIPO Fees to Increase After January 1, 2021

The Canadian Intellectual Property Office (“CIPO”) has announced that many of its fees for Canadian trademarks, patents, industrial designs, and integrated circuit topographies will increase on January 1, 2021. Among the fees being increased by 2% are those for an application to register a trademark as well as examination of patent and industrial design applications. A full list of the adjusted fees can be found in the links above or on the CIPO website.

The CIPO website should be consulted for an up-to-date listing of the adjusted fees because the applicable Tariff of Fees in the Patent Rules may not yet be updated. Whether the current fee or the adjusted fee must be paid for a given service will depend on the date on which the fee is received by CIPO, not the date on which the service is requested.

Fasken’s team of experienced intellectual property lawyers, patent agents, and trademark agents would be pleased to assist you with any and all CIPO matters.