Canada amends Patent Act due to COVID-19

Summary

Canada has experienced the same social and economic disruptions resulting from the COVID-19 pandemic as other countries. There were existing IP law provisions relevant to addressing public health crises. However, the Government of Canada has amended the Patent Act and the Food and Drugs Act in a direct response to the COVID-19 pandemic. The amendments to the Patent Act expand the powers of the government to use and authorise the use of patented inventions on a time-limited basis during the current health emergency. The amendments to the Food and Drugs Act permit regulations to address drug shortages.

This article examines both the new and existing provisions concerning the use of patented inventions during a public health emergency.

The new IP provisions to tackle COVID-19

Commissioner gets new power

The COVID-19 Emergency Response Act was enacted as Statute of Canada 2020 c.5 on March 25, 2020. The Act includes temporary financial and other measures to address the COVID-19 pandemic.These measures include an expansion of government powers to use patented inventions and to address drug shortages. 

The legislation amends the Patent Act to include a new section 19.4, which is associated with the provisions on government use. The new section allows the Commissioner of Patents, on the application of the health minister, to authorise the Government of Canada and any person specified in the application to make, construct, use and sell a patented invention to the extent necessary to respond to the public health emergency described in the application.

An application under section 19.4 must:

(a) set out the name of the patentee and the patent number;

(b) include a confirmation that the Chief Public Health Officer believes that there is a public health emergency that is a matter of national concern;

(c) include a description of the public health emergency; and

(d) specify a person, if any, that is to be authorized to make, construct, use and sell the patented invention for the purposes of responding to the public health emergency.

Authorisations can have a term of no more than one year after the authorisation is granted, and no authorisation may be issued after September 30, 2020.

Old and new government use provisions compared

Many aspects of new section 19.4 are similar to the existing provisions of the Act (reviewed below) concerning government use of patented inventions:

• As in the broader case of a national emergency or extreme urgency, there is no requirement under section 19.4 to seek the patentee’s consent to use the patented invention when providing an authorisation to respond to a public health emergency that is a matter of national concern.
• The commissioner must notify the patentee of any authorisation granted and provide the details concerning the authorisation.
• The Government of Canada and any person to whom an authorisation is granted shall pay the patentee remuneration the commissioner considers to be adequate in the circumstances, taking into account the economic value of the authorisation and the extent to which they make, construct, use and sell the patented invention.
• An authorisation is not transferable.
• An authorisation ceases to have effect when the health minister notifies the commissioner that the authorisation is no longer necessary to respond to the public health emergency set out in the application (with the above-mentioned limitation that an authorisation can be in effect for no more than one year).

There are also differences between new section 19.4 and the existing provisions of the Act that may make section 19.4 of broader application in some aspects:

• The existing provisions specify that an authorisation may be granted to the Government of Canada or the government of a province per se.  In contrast, the new section 19.4 explicitly permits authorisations to be granted to other persons.
• Section 19.4 contains no exception for semiconductor technology.  Thus, it is possible that an authorisation could be granted under section 19.4 for the use of patented semiconductor technology in responding to a public health emergency, and the authorisation could not previously have been made because the use is not a public, non-commercial use.
• The existing provisions specify that any use shall be authorised primarily to supply the domestic market.  Section 19.4 does not contain a parallel restriction and does not explicitly state that the public health emergency of national concern must be within Canada.

A review of the existing IP provisions 

The Canadian Patent Act has for many years contained provisions to deal with a public health crisis.

Use of patents by the government

Sections 19 -19.3 of the Patent Act permit the commissioner, on application by the Government of Canada or the government of a province, to authorise the use of a patented invention by that government. 

The commissioner shall settle the terms of any such authorised use in accordance with the following principles:

(a) the scope and duration of the use shall be limited to the purpose for which the use is authorised;

(b) the use authorised shall be non-exclusive; and

(c) any use shall be authorised predominantly to supply the domestic market.

The commissioner must notify the patentee of any use of the patented invention that is authorised, and the authorised user is required to pay to the patentee such remuneration that the commissioner considers to be adequate in the circumstances, taking into account the economic value of the authorisation.

An authorisation may subsequently be terminated where the commissioner is satisfied that the circumstances that led to the granting of the authorisation have ceased to exist and are unlikely to recur, subject to such conditions as the commissioner deems appropriate to protect the legitimate interests of the authorised user.

The commissioner may not authorise the use of a patented invention under sections 19 to 19.3 unless the applicant establishes that:

(a) it has made efforts to obtain consent from the patentee, on reasonable commercial terms and conditions, to use the patented invention; and

(b) its efforts have not been successful within a reasonable period.

Notably, the requirement for the government to seek the patentee’s authorisation to use the patented invention does not apply in cases of national emergency or extreme urgency, or where the use for which the authorisation is sought is a public non-commercial use.   

Semiconductor technology is treated differently under the Act: the commissioner may not authorise any use of semiconductor technology other than a public non-commercial use.

Use of patents for international humanitarian health purposes

Sections 21.01 - 21.2 of the Patent Act establish a scheme to permit developing and least-developed countries, particularly those lacking their own manufacturing capacity, to access pharmaceutical products patented in Canada to addressing public health problems such as HIV/AIDS, tuberculosis and malaria.  This is in contrast to sections 19 - 19.3 of the Act, which concern supplying the needs of the domestic market only.

Pursuant to sections 21.01 - 21.2 of the Act, provided certain conditions are met by the applicant, the commissioner shall authorise the applicant to make or use a patented invention solely for purposes directly related to the manufacture of a specific pharmaceutical product named in the application and to sell it for export to a specified country named in the application.  The specific pharmaceutical products and the countries to which they may be sold are listed in schedules under the Act. 

An authorisation may only be granted where the applicant has, at least 30 days prior to the application, sought from the patentee a licence to manufacture and sell the pharmaceutical product for export to the country named in the application on reasonable terms and conditions and such efforts have not been successful.

Pharmaceutical products manufactured and sold for export must meet the requirements of the Canadian Food and Drugs Act and related regulations, and be packaged and labelled so as to distinguish them from the patentee’s Canadian product.

The patentee must be notified of an authorisation.  Authorisations are limited to a maximum quantity of the pharmaceutical product to be manufactured and sold for export as set out in the application, and the maximum term of an authorisation is two years, renewable once.  Authorisations are non-transferable, and the use of a patented invention under an authorisation is non-exclusive.

Royalties are to be paid to the patentee according to a calculation set out in the regulations, which is based on the ranking of the country to which the pharmaceutical product is to be exported on the Human Development Index of the United Nations Development Programme.

Authorisations may be terminated for a variety of reasons, including a finding that the essence an agreement to manufacture and export a pharmaceutical product under the authorisation is “commercial in nature.”

There has been little activity under sections 21.02 - 21.2 of the Patent Act (only one licence has been granted to date).  Nevertheless, these provisions could be used to assist with addressing the COVID-19 pandemic in developing countries.

Dealing with abuse of patent rights

Sections 65 - 71 of the Patent Act provide remedies for the abuse of patent rights.

The Attorney General of Canada or any interested person interested may, after three years from the grant of a patent, apply to the commissioner alleging that there has been an abuse of rights under the patent. 

There are a number of prescribed circumstances deemed to amount to an abuse of patent rights, the most relevant to a health crisis being that the demand in Canada for a patented article, including an article made by a patented process, is not being met to an adequate extent and on reasonable terms.

An application to the commissioner may be opposed by the patentee or any other person and this can result in a hearing before the commissioner.  Where an application is not dismissed and either the parties consent, or the proceedings require a prolonged examination of documents or a scientific or local investigation that cannot conveniently be made before the commissioner, the whole matter may be transferred to the Federal Court.

Where the commissioner is satisfied that there has been an abuse of rights, the commissioner may grant a license to the applicant, although the considerations to be taken into account are different to those under the provisions of the Act which concern health crises.  They include:

• securing the widest possible use of the invention in Canada consistent with the patentee deriving a reasonable advantage from the patent rights; and
• securing for the patentee the maximum advantage consistent with the invention being worked by the licensee at a reasonable profit in Canada.

But the available remedies extend beyond this, and the patent may be revoked where the commissioner is satisfied that a compulsory licence is insufficient.

The abuse provisions of the Patent Act have rarely been used, but again they provide a potential tool in certain circumstances where patent rights pose an unacceptable impediment to dealing with a public health emergency.

Increased regulatory powers

The COVID-19 Emergency Response Act also amends the Food and Drugs Act to provide broad powers to make regulations that: (i) require persons to provide information to the Minister of Health in respect of food, drugs, cosmetics or devices in circumstances other than those provided in the Act; and (ii) allow for measures that are necessary “for the purpose of preventing shortages of therapeutic products in Canada or alleviating those shortages or their effects, in order to protect human health.” Among other purposes, the powers could be used to prohibit export, or to require manufacture, of high-demand products. These provisions will be repealed on October 1, 2020. Click here to learn more about the changes to the healthcare regulatory regime in Canada.

Outlook

The Canadian legislators have responded rapidly to COVID-19, including amending the Patent Act and the Food and Drugs Act within a matter of days. These are unprecedented changes in response to a similarly unprecedented public health crisis. It will be particularly interesting to learn in the coming weeks or months whether authorisations are granted under new section 19.4 of the Patent Act or regulations relating to COVID-19 promulgated under the Food and Drugs Act, both as contemplated by the COVID-19 Emergency Response Act.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, any other of its practitioners, its clients, or any of its or their respective affiliates. This article is for general information purposes only and is not intended to be and should not be taken as legal advice. Please contact the author(s) if you have any questions about this article.

Authors

Nancy Pei (Partner)

David Schwartz (Partner)