canada – patent protection of pharmaceutical products (ds 114)

Canada– Patent Protection of Pharmaceutical Products (DS

114)

Presented by: I32031 - Hang Nguyen

I33017 - Li Nan I33023 - Yuan Huan

Main issues

European Communities and its member states claimed Canadian’s legislation about pharmaceuticals (which was also called as Patent Act), is not compatible with its obligations under the TRIPS Agreement.

The provisions of the Patent Act, Section 55.2(1) and Section 55.2(2), create the exceptions to the exclusive rights of patent owners.

EC’s argument: Canadian law violated the Article 27.1 (non

discrimination rule) and Article 28.1 (exclusive rights of patent owners).

Canada’s argument:Violation of Article 28.1? Section 55.2(1) and Section

55.2(2) are the exceptions authorized by Article 30. Violation of Article 27.1? Article 27.1 does not apply to

the measures authorized by Article 30. Even if it applies, these two provisions do not discriminate in violation of Article 27.1

Violation of Article 33? Section 55.2(2) does not violate Article 33.

Main arguments

The relevant provisions of Canadian’s patent act

Patent Act, Section 55.2(1)—Regulatory Review Exception:

“It is not an infringement of a patent for any person to make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product.”

The relevant provisions of Canadian’s patent act

Patent Act, Section 55.2(2) - The stockpiling exception

“It is not an infringement of a patent for any person who makes, constructs,

uses or sells a patented invention in accordance with subsection to make,

construct or use the invention, during the applicable period provided for

by the regulations, for the manufacture and storage of articles

intended for sale after the date on which the term of the patent expires.”

Manufacturing and storage of Patented Medicines Regulation. By virtue

of these Regulations , the applicable period referred to in subsection

55.2(2) of the Patent Act is the six month period immediately preceding

the date on which the term of the patent expires.

The relevant provisions of TRIPS Agree-

ment

Article 30 Exceptions to Rights Conferred

“Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties.”

The relevant provisions of TRIPS Agreement

Article 27 Patentable Subject matter

“Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an incentive step and are capable of industrial application. Subject to paragraph 4 of Article paragraph 8 of Article 70 and paragraph 3 of this Article, 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.”

The relevant provisions of TRIPS Agreement

Article 28 Rights Conferred

“(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; (b) where the subject matter of a patent is a process, to prevent third parties not having the owner’s consent from the act of using the process, and from the acts of: using, offering for sale, selling, or importing for these purposes at least the product obtained directly by that process.”

Article 33 Term of Protection

“The term of protection available shall not end before the expiration of a period of twenty years counted from the filing date .”

• From the article 28.1, it gives patent holders the exclusive rights of making, using, offering for sale, selling, or importing.

• But the section 55.2(2) allows the acts which was referred to article 28.1 (a) and (b) related to product patent and process patent which give the exclusive right to patent owners.(Five basic rights)

• It means that anybody was allowed to perform the act of making, constructing and using of the invention during the last six month of the patent term without the authorization of the patent holder.

• Canadian act permits at least three activities, it curtail the patent right.

Conflict between Section 55.2(2) and Article

28.1

Canada Arguments

Section 55.2(2) is a limited exception under Article 30 of TRIPS Agreement.

Article31 Vienna Convention

"[a] treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose". Article 7 of TRIPS Agreement

”the protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations”. take the social welfare into consideration


Article 8 of the Agreement: (Article 8.1)

Principles

1. Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.

Article 8.1 elaborates the socio-economic policies, with particular attention to health and nutritional policies

Canada Arguments

Canada Arguments


Section 55.2(2) only allows the third party who made, constructed, used or sold a patented invention, in the manner contemplated by subsection 55.2(1), during the last six months of the patent term only for the purposes of manufacture and storage of articles.

• ‘Limited’ -- "confined within definite limits", or "restricted in scope, extent, amount".

• The stockpiling exception in Section 55.2(2) is restricted in scope because it has only a limited impact on a patent owner's rights.

• The commercial sales of the patent owner during the term or any other economic benefit of a patent will not be affected. The exclusive right to sell is preserved .

Article 30: first requirement - Limitation ExceptionsThe manufacturing and stockpiling possibility under Canadian law is inconsistent with a limited exception under article 30 of the TRIPS agreement. It is not a limited exception.

1) In article 28.1, there are five fundamental rights of making, using, offering for sale, selling and importing. But the section 55.2(2) stockpiling and manufacturing under the Canadian law is not a limited, at least took away three of these rights. The right to prevent others from making and using and importation. So impairment of three out of five basic rights is in itself extensive enough to be considered "not limited”.

2) there was no limitation as to the quantities of material that could be manufactured and stockpiled.

3) there is no royalty fees are due for such production, and that the patent holder does not even have a right to be informed of the use of the patent.


30

Interpretation of Article 30

‘Three-step Test’: (1) the exception must be ‘limited’;

Different from “in certain special cases”, Article 9(2) of the Berne Convention

Narrow exception (2) the exception must not ‘unreasonably conflict with

normal exploitation of the patent’; ‘exploitation’ = commercial activity for economic benefits

(3) the exception must not ‘unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties’. ‘legitimate interest’ – in a legal discourse: a normative claim

calling for protection of interests that are ‘justifiable’ in the sense that they are supported by relevant public policies or other social norms

Panel’s Findings

Case of stockpiling:

The Panel did not agree with the EC’s position that the curtailment

of legal rights can be measured by simply counting the number of

legal rights impaired by an exception.

The Panel could not accept Canada’s argument that the curtailment

of the patent owner’s legal rights is ‘limited’ just so long as the

exception preserves the exclusive right to sell to the ultimate

consumer during the patent term.

The question of whether the stockpiling exception is a ‘limited’

exception turns on the extent to which the patent owner’s rights to

exclude ‘making’ and ‘using’ the patented product have been

curtailed.

the stockpiling exception removes that protection entirely during

the last six months of the patent term.

Panel Report

The stockpiling exception (Section 55.2(2)) was inconsistent with Article 28.1 of the TRIPS Agreement and was not covered by the exception in Article 30 of the TRIPS Agreement.

Under the stockpiling exception, competitors are allowed to manufacture and stockpile patented goods during a certain period before the patent expires, but the goods cannot be sold until after the patent expires.

The panel considered that, unlike the regulatory review exception, the stockpiling exception constituted a substantial curtailment of the exclusionary rights required to be granted to patent owners under Article 28.1 to such an extent that it could not be considered to be a limited exception within the meaning of Article 30 of the TRIPS Agreement.

• Article 28.1 it gives the exclusive right to the patent owners during the patent period.

Conflict between Canadian domestic law and international law.• Canadian patent act allowed all activities ( which is only given to the

patented owners ) related to obtain marketing approval carried out by a third party without the consent of the patent holder at any time during the patent term.

1) no limited in time, they might be performed without the consent of the right holder at any point in time during the 20-year patent term.

2) it took away all the right of a patent granted its owner, did not stipulate any quantitative limits for these activities.


28.1

Canada Arguments

Section 55.2(1) Regulatory Review Exception

Limited Exception• The right given to the third parties does

not damage patent owner’s right to exclude all other “commercial sale” of the patented products during the term of the patent.

• Subsequent practices of other WTO members

US’s "Bolar exemption"

Argentina, Australia, Hungary and Israel’s similar legislation

Japan and Portugal’s interpretations

First requirement: Section 55.2(1) of the Canadian patent act is not a limited exception under article 30 of the TRIPS agreement.

1) permits third parties to perform all five of the activities which is the exclusive rights of patent owners. Only the intentions of the activities is related to the development and submission of information required for obtaining marketing approval. Curtail all the patented rights, even the rights to prevent selling and offering for sale the wide-ranging activities by so many operators would substantial impaired the exclusive rights of patent owners.

2) there is no limited in timing, the denial patent protection under article 55.2(1) of the Canadian patent act could occur at any time during the 20-year patent term.

3) if objective was marketing approval anywhere in the world, the exception provision allowed infringing acts of a significant extent, the extent of permissible activities was out of the control of the Canadian authorities.


30

Canada Arguments


Normal exploitation• “Exploitation" of the patent involves the

extraction of commercial value from the patent by "working" the patent.

by selling the product in a market from which competitors are excluded

or by licensing others to do so or by selling the patent rights none of these activities are deprived

• Section 55.2(1) does not conflict with "normal exploitation”.

It does not conflict with the patent owner's exclusive marketing rights throughout the term of the patent.

Whether the “normal exploitation” contained the additional period of the market exclusivity.

Additional period should not be contained

Second requirement: Section 55.2(1) of the Canadian patent act conflicted unreasonably with a normal exploitation of patents.

• "Normal exploitation" should be defined in terms of the market exclusivity of patent owner.

• The market exclusive rights are the five fundamental rights which is expressed in the article 28.1.

• But the section 55.2(1) disregarded all patent rights if the intention is to obtain market approval.


30

Canada Arguments


Legitimate interest

• "legitimate" --“conformable to law, lawful, proper".

• “legitimate interests”--"relate to the rights and duties that the patent laws confer or impose“

• A patent holder had a legitimate interest in “working” the patent as a monopolist and earn economic benefits during the term of protection.

Third requirement: Section 55.2(1) act unreasonably prejudiced the legitimate interests of the patent owner.

1) Third parties has the same rights as the patent owners during the patent period--- that is full enjoyment of legal rights which is only exclusive to the patent owners.

2) 'Legitimate interests' of the patent owner can only be the full enjoyment of his patent rights during the entire term of the patent.

3) The legitimate interest of third parties, the legal rights of the patent owner's competitors should be the rights to make, use or sell the patented product on the day after the patent expires. So during the patent period, therefore, they have no legal rights to make or use (or sell) the patented products during the term of patent period.


30

Canada Arguments


“Notwithstanding the private economic advantage that would be obtained by doing so, a patentee can have no legitimate interest deriving from patent law in exercising its exclusive use and enforcement rights within the term of protection to achieve, through exploitation of regulatory review laws, a de facto extension of that term of protection beyond the prescribed period, thereby unilaterally altering the bargain between the patentee and society. In this respect, the interests of a patentee of a pharmaceutical invention can be no different from those of patentees in other fields of technology.

• Section 55.2(1)did not impair a patentee's right to bring infringement proceedings at any time during the term of protection to restrain others from making any commercial sale of the patented invention

Panel’s Findings

Case of the regulatory review exception Is a ‘limited exception’ within the meaning of TRIPS Article 30 There is no marketing regulation of the kind covered by Section

55.2(1), and thus there is no possibility to extend patent exclusivity by delaying the marketing approval process for competitors.

It did not rest on a claim of interest in the ‘normal’ means of extracting commercial benefits from a patent. Instead, it was a distinctive claim of interest, resting on a distinctive situation applicable only to patent owners affected by marketing approval requirements, asking for an additional means of exploitation, above and beyond ‘normal exploitation’, to compensate for the distinctive disadvantage claimed to be suffered by this particular group of claimants.

• Article 27.1 emphasized the non-discrimination principle as to the place of invention, the field of technology and whether products are imported or locally produced.

• Section 55.2(2) is inconsistent with article 27.1.

• Because it treated holders of pharmaceutical patents less favourably than holders of patents in all other fields of technology.

• Reasons:

• From the text of the law read as if its provisions would apply to all fields of technology, it did in practice only applied to pharmaceuticals.


27.1

1) From the legislation history of this provision of Canada, other areas of technology were not even mentioned.

2) Pharmaceuticals were the only products mentioned in Canada's 1991 legislative debates on the enactment of sections 55.2(1).

From the two elements it imposes de jure discrimination against pharmaceuticals.

3) Because the actual effects of section 55.2(1) are limited to pharmaceutical producers, and these differential effects amount to a case of de facto discrimination.

Section 55.2(1) only applied to pharmaceutical products

Conclusion: it means that in pharmaceutical period, any person can make, construct, use or sell the patented invetion only for development and submission of information. It means that for other fields of technology, they cannot use all the information of patented products in order to the requiring the market approval. So for the pharmaceutical products, the patent ownerers are not protected compared to other patented owners of other field.

Section 55.2(1) only applied to pharmaceutical products

Canada Arguments

Section 55.2(1) is not inconsistent with Article 27.1

Canada hold two defenses:• the non-discrimination rule of Article 27.1

does not apply to exceptions taken under Article 30.

• Canada argued that Section 55.2 (1) does not discriminate against pharmaceutical products.

• whether Section 55.2(1) of the Canadian Patent Act discriminates as to fields of technology?

• the de jure scope of Section 55.2(1) is limited to pharmaceuticals

Applicability of Article 27.1 to Article 30 exceptions

the anti-discrimination rule of Article 27.1 does apply to exceptions of the kind authorized by Article 30.

de jure discrimination: the EC had not presented sufficient evidence to raise the issue in the face of Canada’s formal declaration that the exception of Section 55.2(1) was not limited to pharmaceutical products.

de factor discrimination: although the EC’s response to the Panel’s questions indicated that it did intend to raise the issue of de facto discrimination, the EC did not propose a formal definition of de facto discrimination, nor did it submit a systematic exposition of the evidence satisfying the elements of such a concept.

The Panel concluded that the EC had not demonstrated that the provisions of the Canadian Patent Act had a discriminatory effect limited to pharmaceutical products.

Panel Report

The regulatory review exception provided for in Canada’s Patent Act (Section 55.2(1)) — the first aspect of the Patent Act challenged by the EC — was not inconsistent with Article 27.1 of the TRIPS Agreement and was covered by the exception in Article 30 of the TRIPS Agreement and therefore not inconsistent with Article 28.1 of the TRIPS Agreement.

Under the regulatory review exception, potential competitors of a patent owner are permitted to use the patented invention, without the authorization of the patent owner during the term of the patent, for the purposes of obtaining government marketing approval, so that they will have regulatory permission to sell in competition with the patent owner by the date on which the patent expires.

Implementation of adopted reports

Pursuant to Article 21.3 of the DSU, Canada informed the DSB on 25 April 2000 that it would require a reasonable period of time in order to implement the recommendations of the DSB.

At the DSB meeting of 23 October 2000, Canada informed Members that, effective from 7 October 2000, it had implemented the DSB’s recommendations.

Implications

Article 30’s very existence amounts to a recognition that the definition of patent rights contained in Article 28 would need certain adjustments.

The case played a decisive role in acknowledging the regulatory review exception in patent law. The regulatory review exception enables a generic producer to avoid undergoing the marketing approval process after patent expiry, which will usually save him several years.

The Panel’s decision became an important tool for generic manufacturers to support their early entry into the market after patent expiry, it is important to note that laws protecting the use of clinical test data can interfere with the generic producer’s ability to reap the full benefits of an existing regulatory review exception.

canada – patent protection of pharmaceutical products (ds 114)

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