BP-462E

TABLE OF CONTENTS

PATENT ACT

LINKAGE REGULATIONS

REVIEW OF THE PATENT ACT AMENDMENT ACT, 1992

AMENDMENTS TO THE LINKAGE REGULATIONS

   A. Patent List

   B. Notice of Allegation

   C. Disclosure/Burden of Proof

   D. Dismissal of Application/Damages/Costs

   E. Stay

PATENTED MEDICINES (NOTICE OF COMPLIANCE) REGULATIONS
UNDER THE PATENT ACT:  1998 AMENDMENTS

Prior to the passage of the Patent Act Amendment Act, 1992(1) (Bill C-91), Canadian patent law permitted the issuance of compulsory licenses(2) in relation to patents pertaining to pharmaceutical products. This allowed generic drug manufacturers to produce and sell copies of patented medicines before the expiration of the relevant patents. The Patent Act Amendment Act, 1992 eliminated compulsory licensing, thereby ensuring that the owners of pharmaceutical patents would be protected from generic competition until their patents expired.

A person owing a patent for a product has the exclusive right to make, use and sell the product for a specified period of time. Under Canadian law, a patent has a term of 20 years from the date on which the application for the patent is filed. Anyone who uses a patent or makes a product to which a patent relates without permission of the patent owner and before the patent expires risks an action for patent infringement.

Sections 55.2(1) and (2) of the Patent Act, as enacted by section 4 of the Patent Act Amendment Act, 1992, create an exception to an action for infringement by permitting generic manufacturers to use a patented product for certain purposes before the patent expires. Section 55.2(1) provides that it is not an infringement of a patent for a person to "make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information" required under federal or provincial law or the law of another country that regulates the manufacture, use or sale of the product ("early working"). Thus, generic drug manufacturers are allowed to develop a generic copy of a patented medicine and to take whatever steps are necessary to meet the regulatory requirements pertaining to the sale of the medicine before the expiry of the relevant patents for the brand-name equivalent drug.

Section 55.2(2) provides it is not an infringement of a patent for a person to use a patented invention during a period prescribed by regulation in order to manufacture and store a product intended for sale after the patent expires ("stockpiling").(3) This permits a manufacturer to make use of a patentee’s invention to stockpile generic copies of a patented medicine before a patent expires so that the drug will be ready for sale immediately after such expiry. Without this provision and section 55.2(1), a patentee could prevent a generic manufacturer from manufacturing a patented product until the patent had expired. Such a prohibition would effectively bar the generic manufacturer from the market for a period beyond the end of the patent term.

These provisions do not, however, give generic manufacturers a free rein to use a patented product. The Act is clear that they are limited to the uses outlined in section 55.2(1) and (2). Nevertheless, at the time Bill C-91 was before the House of Commons, brand-name drug manufacturers expressed concern that generic producers might abuse these exceptions to patent infringement and begin to sell generic products before expiry of the relevant patents. Should such a situation arise, brand-name manufacturers would have to pursue generic manufacturers in the courts for patent infringement.

Section 55.2(4) of the Patent Act was enacted to allay these concerns of brand-name manufacturers. It authorizes the Governor in Council to make regulations to prevent generic drug manufacturers that use a patented invention in accordance with subsections 55.2(1) and (2) from infringing the patent. More particularly, such regulations can specify:

(a) the conditions that must be fulfilled before a notice, certificate or permit pertaining to a patented product can be issued to a patentee or to any other person pursuant to any Act regulating the product;

(b) the earliest date on which a notice, certificate or permit issued to a person, other than a patentee, is to take effect;

(c) how disputes between a patentee and a generic manufacturer as to the issuance or effective date of a notice, certificate or permit are to be resolved; and

(d) the right of a patentee to pursue a court action with respect to disputes concerning the effective date of a notice, certificate or permit.

Before a new drug can be sold to the Canadian public, the federal Department of Health must approve it. The document evidencing this approval (a "Notice of Compliance" (NOC)) certifies that the drug meets the requisite standards for safety, efficacy and quality.

The primary purpose of section 55.2(4) is to ensure that a generic drug manufacturer is not granted an NOC for a drug by the Minister of Health (Minister) until it can be shown that the drug does not infringe existing patent rights. In most cases, an NOC for a generic drug will not be issued until expiry of the patent or patents for the brand-name equivalent product, thus ensuring that the issuance of the NOC is linked to a patent’s expiry.

The Patented Medicines (Notice of Compliance) Regulations(4) (Linkage Regulations) establish how the granting of an NOC for a generic version of a patented medicine is to be linked to the expiration of patent rights. Essentially, these regulations provide that, unless a patentee consents to the making of a generic drug, the relevant patent is invalid or there has been no infringement of any patent rights, the Minister cannot issue an NOC to a generic manufacturer until the patent expires.

Under the Linkage Regulations, patentees submit to the Minister a patent list that sets out the Canadian patents for a particular medicine. When a generic manufacturer applies for an NOC for a generic product, it must certify the status of the patents issued for the brand-name equivalent drug. Under section 5 of the Linkage Regulations, the generic manufacturer must:

(a) accept that the NOC for the generic drug will not be issued until the relevant patents expire; or

(b) allege that

(i) the patentee does not own the patent,
(ii) the patent has expired,
(iii) the patent is not valid, or
(iv) it is not infringing any patent.

A generic manufacturer that makes any of the allegations listed above must provide a detailed statement of the legal and factual basis of its allegation and serve notice of the allegation on the patentee.

Within 45 days after being served with a notice of an allegation, a patentee can apply for a court order prohibiting the Minister from issuing an NOC for the generic drug until after the expiration of the patent to which the allegation relates.(5) Among other things, the Linkage Regulations provide that the Minister cannot issue an NOC to a generic manufacturer until 30 months after the patentee has applied for a court order, the parties reach an agreement, the relevant patents expire, or the court renders a decision, whichever comes first.

The Linkage Regulations give the court the authority to award damages against a patentee to compensate the generic manufacturer where the patents have expired; however, the NOC is not issued for some time thereafter.

A contentious aspect of the Regulations is the 30-month stay that is imposed upon the issuance of an NOC once a patentee commences a court proceeding.

Section 14 of the Patent Act Amendment Act, 1992 provides for a review of the legislation by a parliamentary committee four years after the Act received Royal Assent. The House of Commons Standing Committee on Industry carried out this review in early 1997.

The Linkage Regulations engendered considerable discussion before the Committee. The Pharmaceutical Manufacturers Association of Canada (PMAC), which represents the brand-name drug manufacturers, supported the regulations but suggested a number of amendments. The PMAC asserted that injunctive relief through the courts was virtually unavailable to patentees because of the difficulty associated with meeting the criteria required for issuing an injunction. The Canadian Drug Manufacturers Association (CDMA), representing the generic drug manufacturers, called for the repeal of the Linkage Regulations. Among other things, the CDMA claimed that the automatic 30-month prohibition on the issuance of an NOC was tantamount to an injunction and therefore unfair.

The Committee recommended that the government re-visit the regulatory regime associated with Bill C-91.(6)

Proposed amendments to the Linkage Regulations were published in the Canada Gazette, Part I, on 24 January 1998. A 30-day consultation period followed. By order of the Governor in Council, amendments to the Regulations came into effect on 12 March 1998.(7)

There has been no change to the overall regime governing patent infringement, early working and stockpiling. The present exceptions in the Patent Act, which allow for early working and stockpiling by a generic manufacturer, continue. The link between the regulatory approval of a generic copy of a drug by Health Canada and the status of the patents pertaining to the brand-name version of the drug is maintained.

Amendments to the Linkage Regulations include the following:

The generic drug companies criticized the presence on the patent list of patents that are irrelevant to certain medicines. Health Canada had instituted a policy of auditing the list for process patents, but its authority to do so was challenged. The amendments give the Minister of Health authority to audit the list of patents for a drug provided by a patentee. In particular, the Minister can refuse to add or delete any information that does not meet the requirements of the list.

Patentees will be required to certify that the patents they submit on the list for a drug are relevant to the dosage form, strength and route of administration of that drug.

Patentees will continue to have 30 days after the grant of a Canadian patent to add newly issued patents to the patent list.

   B. Notice of Allegation

The amendments require generic manufacturers to be more specific when making an allegation relating to non-infringement. When a generic manufacturer alleges that the drug it intends to market does not infringe a particular patent on a patent list, it will be required to include a description of the dosage form, strength and route of administration of the drug.

The amendments provide that a generic manufacturer must serve the patentee with a notice of allegation relating to non-infringement of a patent at the same time as or after it applies for an NOC for the drug. Thus, a generic manufacturer cannot submit a notice alleging that it is not infringing a patent before it has filed a submission for an NOC with the Minister of Health.

The amendments also deal with the disclosure of information. The court can order a generic manufacturer to produce any portion of its submission for an NOC that is relevant to the disposition of the issues before it. Such documents are to be treated confidentially.

An additional amendment sets out the burden of proof in cases where non-infringement is alleged. A generic manufacturer that wishes to produce a version of a patentee’s drug and that alleges that it will not thereby infringe a product-by-process patent on the patent list will have the burden of proving the allegation.

The Regulations have been amended to provide that the court can dismiss a patentee’s application for an order prohibiting the Minister of Health from issuing an NOC if:

(a) the court is satisfied that the patents at issue should not have been included on the patent list or are irrelevant to the version of the drug for which the generic manufacturer has filed an NOC application; or

(b) the application is redundant, scandalous, frivolous, vexatious, or an abuse of process.

The court may order costs, including costs on a solicitor-and-client basis. When making an order for costs, the court can consider the diligence with which the parties have pursued the application, the improper inclusion of a patent on the patent list, and the failure of a patentee to keep the patent list up to date.

The amendments broaden and clarify the damages provision of the Regulations. If the patentee withdraws or discontinues its application for an order prohibiting the Minster of Health from issuing an NOC to the generic manufacturer, or if the application is dismissed by the court, or if the order is granted but reversed on appeal, the court can order a patentee to compensate a generic manufacturer for any loss the latter has suffered. Depending on the circumstances of the case, the court may make an order for relief by way of damages or profits.

The length of the time during which the Minister of Health is stayed from issuing an NOC to a generic manufacturer is reduced from 30 months to 24 months.

There are changes to the criteria whereby the court can lengthen or shorten the stay. The court can change the 24-month period if the parties consent. A patentee’s failure to cooperate reasonably in expediting its application can result in a reduction of the 24-month period, while a similar failure by the generic manufacturer can result in a lengthening of the period.