LS-390E

 

BILL S-17: AN ACT TO AMEND
THE PATENT ACT

 

Prepared by:
Margaret Smith
Law and Government Division
1 March 2001


LEGISLATIVE HISTORY OF BILL S-17

 

HOUSE OF COMMONS

SENATE

Bill Stage Date Bill Stage Date
First Reading:

3 May 2001

First Reading:

20 February 2001

Second Reading:

 

Second Reading:

12 March 2001

Committee Report:

 

Committee Report:

5 April 2001

Report Stage:

 

Report Stage:

 

Third Reading:

 

Third Reading:

1 May 2001


Royal Assent:
Statutes of Canada







N.B. Any substantive changes in this Legislative Summary which have been made since the preceding issue are indicated in bold print.

 

 

 

 

TABLE OF CONTENTS


BACKGROUND

   A. Overview

   B. WTO Challenges

      1. European Union Challenge

      2. United States Challenge

ANALYSIS

COMMENTARY


BILL S-17: AN ACT TO AMEND
THE PATENT ACT

BACKGROUND

   A. Overview

Bill S-17, An Act to amend the Patent Act, was introduced and given first reading in the Senate on 20 February 2001 by the Honourable Sharon Carstairs, Leader of the Government in the Senate.  The bill would amend the Patent Act to implement two recent decisions of the World Trade Organization (WTO):  one relating to the term of patents filed before 1 October 1989; and the other pertaining to the “stockpiling” provision under the Patent Act.

In 1987, a number of significant changes were made to the Patent Act.  Among these was an amendment to the general patent law to change the term of a patent from 17 years from the date a patent was issued to 20 years from the date on which a patent application was filed.  This change became effective on 1 October 1989.

With this amendment, the Patent Act contained two different terms of patent protection:  17 years and 20 years.  The term of 17 years from the date the patent was issued (section 45) continued to apply to patent applications filed before 1 October 1989 (Old Act patents); while the term of 20 years from the date the patent application was filed (section 44) applied to patent applications filed on or after 1 October 1989 (New Act patents).

Prior to the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) multinational trade negotiations, the GATT did not cover intellectual property rights.  The Uruguay Round, which gave birth to the World Trade Organization, also produced the Agreement on Trade-Related Aspects of Intellectual Property Rights (the “TRIPS Agreement”).  The TRIPS Agreement contains a number of provisions dealing with patent protection.  Article 33, for instance, provides that the term of protection available under a patent must be at least 20 years from the date a patent application is filed.

In 1992, the federal government moved to modify the Patent Act by introducing Bill C-91, the Patent Act Amendment Act, 1992, in the House of Commons.  The Patent Act Amendment Act, 1992 eliminated compulsory licenses for pharmaceutical products.  (A compulsory license is a statutory license that gives the licensee – and only the licensee – the right to manufacture, use or sell a patented invention before the patent expires.)  It also created two exceptions to an action for patent infringement (the rule that anyone who manufactures, uses or sells a product where a patent is in force and without the consent of the patent owner is liable for patent infringement) by permitting persons to use a patent for certain purposes before the patent expires.

  • The first exception (the “early working” exception) allows a person to use a patented invention while the relevant patent is in force only for obtaining regulatory approval to sell an equivalent product after the patent has expired (Patent Act, section 55.2(1)).  Under this provision, a generic drug manufacturer, for example, could develop a generic version of a medicine and take whatever steps were necessary to meet the regulatory requirements pertaining to the sale of the drug before the expiry of the relevant patent.

  • The second exception (the “stockpiling” exception) allows a person to use a patented invention for a period of time before the patent expires in order to manufacture and store a product intended for sale after the expiry of the patent (Patent Act, section 55.2(2)).  The Manufacturing and Storage of Patented Medicines Regulations provide that a generic manufacturer can stockpile a generic version of a drug six months before the relevant patent is due to expire.

   B. WTO Challenges

      1. European Union Challenge

In late 1997, the European Union (EU) requested that Canada hold consultations under the WTO dispute settlement procedures in relation to the protection of pharmaceutical inventions under the Patent Act and Canada’s obligations under the TRIPS Agreement.   The EU’s complaint focused on the early working and the stockpiling exceptions.  In early 1999, the WTO established a panel to hear the European Union’s challenge under the TRIPS Agreement in respect of these two exceptions. 

The EU argued that the Patent Act and the regulations that provide for the manufacturing and stockpiling of pharmaceutical products without the consent of the patent holder for a period of six months prior to the expiration of the patent term (section 55.2(2)) violate Canada’s obligations under the TRIPS Agreement (Article 28.1 and Article 33).(1)

The EU also maintained that by treating patent holders in the field of pharmaceutical inventions less favourably than those for inventions in all other fields of technology, Canada had violated its obligations under Article 27.1 of the TRIPS Agreement, which requires patents to be available and patent rights enjoyable without discrimination as to the field of technology.(2)

The EU further contended that the provisions of the Patent Act (section 55.2(1)) – that allow a third party, without the consent of the patent holder, to use a patented invention while the patent remains in force to obtain regulatory approval for the sale of an equivalent product after the patent has expired – violate Article 28.1 of the TRIPS Agreement.

Canada, on the other hand, argued that section 55.2(1) and 55.2(2) of the Patent Act conform with Canada’s obligations under the TRIPS Agreement, because:

  • each of these provisions is a “limited exception” to the exclusive rights conferred by a patent within the meaning of Article 30 of the TRIPS Agreement;(3) and

  • these provisions neither discriminate as to the field of technology in which any relevant invention occurs nor reduce the minimum term of patent protection.

The WTO panel agreed with Canada on the early working exception in section 55.2(1) of the Patent Act, holding that it was not inconsistent with Canada’s obligations under the TRIPS Agreement, but sided with the EU on the stockpiling exception in section 55.2(2) by concluding that it was inconsistent with Canada’s TRIPS obligations.(4)

Canada was to implement the panel ruling on the stockpiling exception by 7 October 2000.  The Manufacturing and Storage of Patented Medicines Regulations were revoked to comply with the ruling.

      2. United States Challenge

In September 1999, a WTO panel was established to deal with an allegation by the United States that Canada’s term of patent protection for patents issued in relation to applications filed before 1 October 1989 was inconsistent with Canada’s obligations under the TRIPS Agreement.  The U.S. argued that the Agreement requires a minimum patent term of 20 years from the date a patent application is filed.  Patents based on applications filed before 1 October 1989 (Old Act patents), where the term is 17 years from the date the patent is issued would, according to the U.S., violate the TRIPS Agreement if the 17-year term from the date of the issue of the patent was shorter than a 20-year term counted from the date the patent application had been filed.  This argument would therefore apply to Old Act patents that had been granted within three years from the date the application had been filed.

Canada argued that Old Act patents had essentially the same protection as New Act patents and that the term of protection provisions of the TRIPS Agreement did not apply to patents issued before TRIPS came into force.

In October 2000, the WTO ruled in favour of the United States, finding that the term of protection for Old Act patents is inconsistent with the TRIPS Agreement in situations where the patents were granted within three years from the date the patent application was filed.(5)

ANALYSIS

Bill S-17 would amend the Patent Act in response to the WTO decisions based on the EU and U.S. challenges to certain provisions of the Patent Act.

Clause 1 would amend section 45 of the Patent Act by providing that for patents filed before 1 October 1989 where the 17-year term had not expired before the date on which the section came into force, the patent term would be the later of 17 years from the date the patent had been issued or 20 years from the date the patent application had been filed.

This amendment would extend the term of certain Old Act patents to 20 years from the date the applications for these patents had been filed.  Patents filed before 1 October 1989, however, whose 17-year term expires before clause 1 comes into force, would not be extended.  According to Industry Canada, approximately 138,800 Old Act patents were in force as of 1 January 2001, of which some 53,500 have a term of less than 20 years from the date their patent applications were filed.(6)  A much smaller number of these 53,500 patents (approximately 30), have some current commercial value.(7)

Clauses 3 and 4 would amend sections 78.1, 78.2, 78.4 and 78.5 of the Patent Act.  These amendments would reconcile the various patent regimes(8) operating under the Patent Act, and clarify how and when certain provisions of the Act would apply to these regimes.

Clause 5 provides that the bill is to come into force on a day or days fixed by the Governor in Council.  A WTO arbitrator’s decision issued on 28 February 2001 stated that a “reasonable period of time” for Canada to implement the recommendations and rulings arising from the U.S. challenge would be ten months from 12 October 2000.  This period will, therefore, expire on 12 August 2001.(9)

COMMENTARY

Bill S-17 takes its origins from two separate WTO decisions relating to provisions of the Patent Act.  These decisions have a particular impact on the pharmaceutical sector.

The first decision, resulting from a European Union challenge, applies to the stockpiling exception to patent infringement found in section 55.2 of the Patent Act and the accompanying Manufacturing and Storage of Patented Medicines Regulations.  The WTO found these measures – which allow generic manufacturers to manufacture and stockpile a generic version of a drug six months before the relevant patents expire – to be inconsistent with certain provisions of the TRIPS Agreement.

The second decision was based on a United States challenge to the 17-year term of protection for patent applications filed before 1 October 1989.  The WTO found the 17-year term to be inconsistent with the 20-year protection period provided for in the TRIPS Agreement.

Each of these decisions will have an impact on when generic versions of brand-name drugs become available on the Canadian market.  The stockpiling exception enabled generic manufacturers to have their products available for sale immediately after the patent for the equivalent brand-name drug expired.  Because this exception is no longer available to permit generic manufacturers to make their products in advance of the patent expiry, there is likely to be a delay between the time a patent expires and the entry of the generic product on the market.

The provision of Bill S-17 that would extend the term of certain Old Act patents to 20 years from the date the applications for these patents had been filed would affect patents for many different products.  However, its impact will be most sharply felt in the pharmaceutical sector where, according to Industry Canada, “the patent term of some 30 commercially significant drugs protected by Old Act patents”(10) would be extended.  Industry Canada calculates the average extension period to be less than six months.(11)  An extension in the patent term could delay by a similar period the potential entry on the market of generic substitutes.  This would take place as the terms of the pre-1 October 1989 patents expire between now and 2009.


(1) Article 28.1 of the TRIPS Agreement provides: “A patent shall confer on its owner the following exclusive rights: (a) where the subject matter of a patent is a product, to prevent third parties not having the owner’s consent from the acts of: making, using, offering for sale, selling, or importing for these purposes that product.”  Sub-section (b) of this Article refers to the patent of a “process” and is similar to (a). Article 33 of the TRIPS agreement refers to the “term of protection” and reads: “The term of protection available shall not end before the expiration of a period of twenty years counted from the filing date.”

(2) Article 27.1 of TRIPS reads in part: “...patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application... patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.’’

(3) Article 30 allows countries to provide limited exceptions to the exclusive rights conferred by a patent.

(4) Canada – Patent Protection of Pharmaceutical Products, WT/DS114, 7 April 2000.

(5) Canada –Term of Patent Protection, WT/DS170, 12 October 2000.

(6) Industry Canada, Backgrounder, World Trade Organization Ruling on Patent Term, 20 February 2001.

(7) Ibid.

(8) Under the Patent Act, there are three operating patent regimes:  (1) patents filed and issued before 1 October 1989; (2) patents filed before 1 October 1989 but issued on or after that date; (3) patents filed and issued on or after 1 October 1989.

(9) WTO, Canada – Term of Patent Protection, Arbitration, WT/DS170/10, 28 February 2001, p. 17.

(10) Industry Canada, Backgrounder (2001).

(11) Ibid.