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
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SENATE
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Bill
Stage |
Date |
Bill
Stage |
Date |
First
Reading: |
3 May 2001
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First
Reading: |
20 February
2001
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Second
Reading: |
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Second
Reading: |
12 March 2001
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Committee
Report: |
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Committee
Report: |
5 April 2001
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Report
Stage: |
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Report
Stage: |
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Third
Reading: |
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Third
Reading: |
1 May 2001
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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.
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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.
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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 Canadas obligations under the TRIPS Agreement.
The EUs complaint focused on the early working and
the stockpiling exceptions. In
early 1999, the WTO established a panel to hear the European Unions
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
Canadas 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 Canadas obligations under the TRIPS Agreement,
because:
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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
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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 Canadas
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
Canadas 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 Canadas term of patent protection for
patents issued in relation to applications filed before 1 October 1989
was inconsistent with Canadas 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)
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 arbitrators 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.
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