After years of negotiations, the Comprehensive Economic and Trade Agreement (CETA) between Canada and Europe was finally approved by all 28 European Union member states on October 28, 2016, and was signed promptly thereafter by Canadian Prime Minister Justin Trudeau on October 30, 2016. This historic agreement promises, inter alia, to bring important changes to intellectual property protection for pharmaceutical patentees in Canada – such as patent term extension and an end to dual litigation – which will bring Canada more in line with European practice.

On October 31, 2016 – the day after Prime Minister Trudeau signed CETA – the Canadian Government introduced Bill C-30 in Parliament, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures (text available online). Introducing Bill C-30 is the first step towards implementing CETA in Canadian law and, as such, it proposes several changes to the Canadian Patent Act and Food and Drug Act as they pertain to protection of innovative pharmaceuticals.

Patent term extension

Canada is currently the only G7 country that does not provide some form of patent term restoration or extension to restore part of the life of a patent consumed by clinical trials and delays due to bureaucratic approval processes. However, under CETA, Canada has agreed to provide up to two years of additional (sui generis) protection for eligible pharmaceutical patents. This is a welcome change for pharmaceutical innovators in Canada, although the cap of the period of additional protection in the EU remains higher, at five years.

Bill C-30 proposes to amend the Canadian Patent Act to introduce a Supplementary Protection Certificate (SPC) system similar to the European SPC system. Eligible drugs are defined broadly to include human and veterinary drugs. However, SPCs are not available for all patents. Eligible patents will have to pertain to a “medicinal ingredient” or a “combination of medicinal ingredients”, and only one patent can be the subject of an SPC. Where there are multiple patents, Bill C-30 provides rules for determining which patent is eligible.

Rights of appeal and a possibility to end dual litigation

Currently, Canada has a system that allows for two legal proceedings (dual litigation) between the same parties relating the same drug and patent: (i) a proceeding under the Patented Medicines (Notice of Compliance) Regulations (PM(NOC) Regulations) which link the patent regime to regulatory approval by Health Canada; and (ii) a patent infringement or impeachment action.

Both innovators and generics are unhappy with the current system, although for different reasons.

Under the current PM(NOC) Regulations, pharmaceutical innovators do not have an effective right of appeal. When a PM(NOC) decision in favour of the generic is rendered, a generic is typically issued a Notice of Compliance (ie marketing approval) by Health Canada very shortly thereafter and an appeal becomes moot. Conversely, a generic can appeal an PM(NOC) decision that finds in favour of the innovator, even if the patent has expired. This situation has long been a sore spot for innovators.

On the other hand, under the current regulations, a PM(NOC) decision is only a summary proceeding that does not provide a final determination of validity, and thus a decision in favour of the generic does not prevent an innovator from suing for patent infringement under the Patent Act. The result is the possibility of “dual litigation”. Generics have complained that this situation is unfair, as it creates unpredictability for them.

Canada has made a general commitment under CETA to ensure that both innovators and generics are afforded “equivalent and effective rights of appeal”, which gives scope for Canada to end the practice of dual litigation.

Under Bill C-30, it appears that the PM(NOC) system would survive but in an amended form that would effectively replace the current summary PM(NOC) proceedings with full patent infringement and validity actions that would result in a final determination on infringement and validity issues. Changing PM(NOC) proceedings to full actions should obviate the objections that both innovators and generics have with the current system.

Data protection

Canada rejected the EU’s request to provide 10 years of data protection for innovative drugs, but agreed to lock in the current Canadian practice of providing eight years of market exclusivity. Bill C-30 would not change that outcome, but it does propose to amend the Food and Drugs Act (which governs data protection, amongst other things) to provide regulation-making authority to Health Canada to implement Canadian obligations under international agreements with respect to any food, drug, cosmetic or device. This may have implications for how other trade agreements are implemented in Canada.

Next steps

Bill C-30 has only received a first reading in the House of Commons, and it is expected to go through additional readings in the House and the Senate before passing into law and coming into force. There may be some edits to the Bill along the way, but it is unlikely that the substance of it will change significantly. The Bill will probably not be passed by Parliament until 2017 or later, and it is expected amendments to the PM(NOC) Regulations will follow. Thus, it will probably be several years before the full effect of CETA is seen on pharmaceutical patent protection, but these are promising developments that pharmaceutical patentees will want to take into account now, when developing their business strategies for patenting and marketing new drugs in Canada.