Changes to IP rights on the horizon: Canada introduces legislation to implement CETA

We previously reported on important changes the recently signed Comprehensive Economic and Trade Agreement between Canada and the European Union ("CETA") requires Canada to make to its Patent Act and Trade-marks Act. For example, CETA contemplates a new sui generis right for patent term restoration for pharmaceutical products and an effective right of appeal for innovative pharmaceutical companies in linkage proceedings. In addition, under CETA, Canada will provide protection for geographical indications relating to numerous agricultural products and foods.

On October 31, 2016, Parliament introduced Bill C-30,¹ An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures. This Bill proposes amendments to several federal Acts to implement CETA.

Having just recently been read into Parliament, Bill C-30 is not yet in force and remains subject to amendment. Nonetheless, the key proposed amendments affecting patents and trademarks are summarized below. If adopted, they would constitute significant changes to Canada's IP protection and would more closely align Canada's IP laws with other countries with similar IP regimes.

Draft Amendments to the Patent Act

Patent term extensions

In Canada, the owner of a patent currently has no recourse under the Patent Act for any lost patent protection due to delays in fulfilling regulatory requirements and obtaining approval required to market a product encompassed by that patent. This problem frequently arises in the pharmaceutical context due to the lengthy development and approval process in that field. Many jurisdictions with similar IP laws mitigate these kinds of delays by granting patent term extensions. Bill C-30 will address delays in the approval of pharmaceutical products by introducing a new form of protection called a "certificate of supplementary protection" (a "Certificate"). This protection is a distinct right related to the underlying patent right.

Certificates are not available for all patents. The criteria for obtaining a Certificate somewhat resemble those for Data Protection under the Food and Drug Regulations even though the purpose of these protections is different (the former is intended to compensate for the effective shortening of patent protection for a drug product due to regulatory delays, while the latter protects the investment in safety and efficacy studies needed for market approval). In addition to limiting each Certificate to a single patent, Bill C-30 provides that only one Certificate can be issued with respect to a "medicinal ingredient" or a "combination of medicinal ingredients". As pharmaceutical products comprising one or more medicinal ingredients are often covered by multiple patents, Bill C-30 includes priority rules and challenge mechanisms for determining which "patent"-"medicinal ingredient" combination is eligible for a Certificate when potential conflicts arise.

The proposed Certificates would also appear to provide more limited protection than patents. Patents broadly provide exclusivity in respect of the making, constructing, using and selling of the inventions they claim. In contrast, a Certificate would provide exclusivity in respect of those same activities only for drug products containing the medicinal ingredient (or combination) for which the Certificate was granted. The Certificate does not appear to provide protection for the remaining scope of the invention claimed in the corresponding patent. The protection afforded by a Certificate also does not extend to otherwise infringing activity for the purpose of exporting a product, likely to reflect the Government of Canada's desire to "temper the impact on the generic industry and its competitiveness in the important United States market".²

Certificates will last for a maximum of two years. The specific term of a Certificate is calculated by subtracting five years from the period beginning on the filing date of the patent and ending on the approval date of the drug. For example, if a patent filing was followed by 6.5 years of drug development and regulatory testing before regulatory approval (ie. a Notice of Compliance) was ultimately granted, the Certificate term would likely be 1.5 years (ie, 6.5 years minus 5 years). Average time for development and regulatory approval of drug products has been estimated to be between 8 and 15 years. It would thus not be unexpected if the 2 year maximum term applied for most drug products.³

Once a Certificate is issued, actions for infringement or impeachment of a Certificate would mirror those for patents. However, Bill C-30 provides that, in addition to patent invalidity attacks which could be leveled at a Certificate, it may be possible to impeach Certificates for failing to satisfy the eligibility requirements.

Innovator Right of Appeal

In 1993, Canada implemented the Patented Medicines (Notice of Compliance) Regulations ("NOC Regulations") linking patent protection and regulatory approval for pharmaceutical products. The linkage proceedings under these regulations allow innovators, in certain circumstances, to prevent generic manufacturers from obtaining regulatory approval when doing so would result in patent infringement. The NOC Regulations however have been frequently criticized for failing to provide an effective right of appeal for innovators when they are not successful in such proceedings. Subsequent appeals by innovators have proven to be ineffective because appellate courts have typically dismissed them on the basis that they are moot: once the generic receives regulatory approval, there are no other remedies available under the NOC Regulations. Unsuccessful generic drug manufacturers, however, have not faced this same hurdle as the prohibition on issuing them regulatory approval remains a live issue for appellate courts to address.

We previously reported that changes to the NOC Regulations were anticipated to implement the "effective right of appeal" to linkage proceedings required by CETA. Bill C-30 does not itself provide this right, but constitutes the first step in this direction. It expands and clarifies the Governor in Council's regulation-making powers with respect to these linkage regulations.

In particular, Bill C-30 expressly grants the Governor in Council the ability to make regulations relating to "any appeals from decisions and orders" relating to, among other things, "disputes with respect to the day on which such a document may be issued or take effect." The preamble of Bill C-30 also foreshadows how this effective right of appeal may be achieved: by expanding the regulation-making authority to permit the replacement of the current NOC proceedings, which are summary in nature, with full actions resulting in final determinations of patent infringement and validity. Those determinations would then likely be subject to the fulsome appeals available in the normal course in regular patent actions, unlike the current appeals under the NOC Regulations, which address the narrow remedies under those regulations and are seldom available to innovators.

In addition to an effective right of appeal, this proposed approach to pharmaceutical patent litigation would likely also have the effect of doing away with the "dual litigation" which has resulted from the non-binding, summary determinations under the NOC Regulations. Canada had indicated at least as early as October 2013 that it intended to end this practice.⁴

It appears therefore that a significant overhaul of the NOC Regulations is coming. However, the Governor in Council has yet to release any details about how specifically they will be amended. It is not clear, for example, whether and how the full actions referred to above are intended to be resolved within the two year time frame targeted for the current NOC proceedings. It is also not apparent what will be the role of the new regulation-making powers addressing suspension or revocation of regulatory approvals given the final determinations of patent infringement and validity, which presumably will give rise to permanent injunctions, where applicable.

Draft Amendments to the Trade-marks Act

Geographical Indications

The current Canadian Trade-marks Act limits geographical indications to wine and spirits. Geographical indications are defined in the current Act, in part, as a wine or spirit originating in the territory of a WTO Member, or a region or locality of that territory, where a quality, reputation or other characteristic of the wine or spirit is essentially attributable to its geographical origin, and which is protected by the laws applicable to that WTO Member. An example of a geographical indication is "champagne". Bill C-30 extends the definition of geographical indications beyond wine and spirits to include specific agricultural and food products such as specific cheeses, meats, and oils.

Bill C-30 lays out a procedure for protecting geographical indications. It also provides for an opposition procedure to enable interested persons to object to the protection of a particular geographical indication, including by way of filing evidence and making representations.

There are exceptions built into the proposed legislation to allow for the use of certain common names for wines, sprits, agricultural products or food (for example, Black Forest Ham), and exceptions to allow for comparative advertising and for continued historic uses in specific circumstances. There are also provisions which allow the use of certain specified cheese-related geographical indications provided a qualifying term such as "kind" or "style" is used in connection with the indication, and provided the geographical origin of the cheese is clearly displayed. For example, Feta-style cheese would be permitted provided the geographical origin of the cheese is clearly displayed.

Bill C-30 also includes the specific Korean geographical indications listed in the Canada-Korea Economic Growth and Prosperity Act such as Korean White Ginseng and Icheon Rice.

The proposed amendments also include specific import / export restrictions for geographical indications such that wines, spirits, agricultural products and foods cannot be imported or exported if they bear a protected geographical indication and either a) do not originate in the territory indicated by the indication or b) do originate in the territory indicated by the indication but were not produced or manufactured in accordance with the law applicable in that territory. There are exclusions in relation to goods imported or exported for personal use, and in relation to transshipped goods. Bill C-30 also expands customs and border protection measures to geographical indications such that owners of a protected geographical indication can file a Request for Assistance with the Canadian Border Services Agency so as to prevent the importation of counterfeit goods. Details on Canada's current Request for Assistance process can be found in our article Customs recordal now available in Canada to combat counterfeit goods.