The patent litigation that propels generic and biosimilar products to market will soon change dramatically. July 15, 2017, marked the release of long-awaited proposed amendments to the Patented Medicines (Notice of Compliance) Regulations, which govern patent infringement and invalidity disputes involving patented medicines between “first” and “second” persons (i.e., brand v. generic and biologic v. biosimilar). The resolution of these disputes determines the timing of market approval of generic and biosimilar products. The proposed regulations are subject to a brief public consultation period until the end of July. The amendments could affect new cases starting as early as September 21, 2017, when the Comprehensive Economic Trade Agreement (CETA) that inspired the changes will likely take effect.

Legislative changes always bring new challenges and opportunity. In high-stakes pharmaceutical and biosimilar litigation, the parties involved rarely agree on the interpretation of the governing legislation—but it is beyond dispute that the proposed changes will profoundly affect their respective decisions on business, marketing, litigation and negotiation strategy.

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Assuming the proposed regulations are promulgated in their current form, some of the key differences between the old regulations and the new are the following:

Old: Applications

New: Actions

Litigation proceeded by application. Witnesses swore affidavits and were cross-examined before a court reporter. There was no documentary or oral discovery or live testimony. The case was argued at a hearing on a paper record.

Litigation will proceed by action. There will be oral and documentary discovery, including certain mandatory productions by both parties, live witnesses and a trial.

Old: Double Jeopardy New: Final Determinations of Patent Invalidity and Infringement
The decision that a patent was valid and infringed prevented the Minister of Health from granting market authorization to a generic or biosimilar drug submission. A decision to the contrary did not prevent approval, but also did not constitute a final determination of invalidity or infringement. As a result, after the generic launched its product, the application could be and often was followed by an infringement suit based on the very same subject matter, and at times with the opposite outcome.

Determinations of invalidity and infringement will now be final as between the parties. Further, the First Person must take the opportunity to litigate, within the time limits established by the regulations, those patents it chooses to list on the Patent Register (to be governed by the regulation). Failure to do so may mean estoppel from suing on those patents in the future.

Old: 24-Month Stay on Market Approval or Bust

New: First Person Can Waive 24-Month Stay; Generics and Biosimilars Launch at Risk

The 24-month stay on generic or biosimilar regulatory approval of the product at issue was triggered when the First Person started an application. The stay remained in place until patent issues were resolved between the parties or 24 months elapsed—whichever came first. Patent issues could be resolved (at least the first time) before the generic or biosimilar launched its product.

The First Person will now be able to waive the 24-month stay so the Minister of Health can grant market approval to the generic or biosimilar product while the patent proceedings continue.

Old: First Persons’ Appeals Sometimes Moot

New: Appeals Guaranteed

Once the generic or biosimilar received market approval, for example, where 24 months had elapsed, or the generic or biosimilar had prevailed and the First Person awaited appeal, the First Person’s patent proceedings were deemed moot. This meant that the First Person sometimes could not appeal an adverse decision

The First Person will now be guaranteed a right of appeal from an adverse decision.

Old: Compensatory Damages for Market Delay Within a Defined Period

New: First Person Can Control Eligibility for Compensatory Damages

The generic or biosimilar was entitled to damages incurred during the period that the 24-month stay prevented sales of the product; those sales would have been made “but for” the effect of the regulations, ending on the day of approval.

The generic or biosimilar will still be entitled to damages for the “but-for” period and now beyond, but the First Person will be able to waive the 24-month period and avoid liability for damages. That First Person could now face generic or biosimilar competition immediately, but the new entrant will risk liability for damages for patent infringement.

Old: Detailed Statement Set Litigation Issues in Stone New: Pleadings Govern Litigation
Generics and biosimilars were required to serve detailed statements of fact and law that confined their allegations of invalidity and infringement. The allegations could not be changed regardless of what was learned throughout the proceedings.

The detailed statement will remain a requirement, but the proceedings will be governed and delimited by pleadings, which can be amended in the ordinary course of an action.

Old: 20-Year Patent Exclusivity

New: Patent Terms Extended to Compensate for Market Approval Delay

The patents at issue in the proceedings remained in force for a maximum of 20 years from the date of filing.

Certificates of Supplementary Protection grant patent-like protection to compensate for some of the market exclusivity lost while the First Person awaited regulatory approval for its product. These certificates may be asserted in actions under the new regulations.

Old: Minister of Health a Party to the Proceedings

New: Minister of Health Kept Informed

The Minister of Health was a party to the proceeding but rarely participated. At the end of the proceeding, the Minister of Health was either prohibited from approving the product by an order of prohibition—or not. The Minister of Health will receive regular updates on the proceeding to ensure timely issuance of generic or biosimilar approval. If the court issues a declaration of infringement, the Minister will be prohibited from approving the biosimilar or generic product until patent expiry.
Old: Certain Claims of Listed Patents Eligible for Litigation

New: All Claims of Listed Patents Eligible for Litigation

Only certain eligible claims within a patent that appeared on the Patent Register were the subject of proceedings.

The First Person will now be able to sue on all claims within patents that appear on the Patent Register. This means that in certain cases process claims, which have never before been part of these proceedings, will be the subject of litigation.

Old: Patent Delisting Dispositive

New: Patent Delisting Not Dispositive

A generic or biosimilar could challenge the eligibility for patent listing and, if successful, could have the proceeding against it summarily dismissed.

A generic or biosimilar will be able to challenge the eligibility of a patent listing, but this will not dispose of the action.