On June 9, 2015, the Competition Bureau released an update to its draft Intellectual Property Enforcement Guidelines for comment. The Guidelines describe the Bureau’s approach to the interface between competition policy and intellectual property rights and describe how the Bureau will determine whether conduct involving intellectual property raises an issue under the Competition Act.
The changes focus on providing guidance on the application of the Bureau’s analytical framework in respect of specific activities, including representations made in the context of asserting patents, and conduct involving patents that are essential to an industry standard (“standard essential patents”). The guidance on such activities will be of particular interest to businesses in the high tech sector, where issues associated with these activities most often arise. The changes also cover settlements of proceedings under the Patented Medicines Notice of Compliance Regulations, reviewed in our June 2015 RxIP Update.
Representations made in the context of asserting patents
The updated Guidelines provide guidance on conduct involving companies who acquire patents for the sole purpose of asserting them against firms allegedly infringing the patented technologies (i.e. they do not manufacture or sell products or services related to such patents). Such companies are often referred to as “patent assertion entities”, “non-practicing entities”, or, colloquially, “patent trolls”.
Specifically, the Bureau indicates that the conduct of such companies would be examined under the “false or misleading claims” provisions of the Act, which prohibit making a representation to the public that is false or misleading in a material respect, or which is made knowingly and recklessly, respectively. For example, where there is evidence that the company sent thousands of notices to various businesses indiscriminately or was indifferent as to whether the allegations of infringement contained in the letters were accurate (e.g. claiming to have proof of infringement where no such proof exists), then such conduct would raise concerns under the civil and criminal misleading advertising provisions of the Act.
Conduct involving patents that are essential to an industry standard
Industry standards (i.e. a common set of characteristics for a good or service) often rely on patented technologies. The updated Guidelines indicate that the development of standards through formal Standard Development Organizations or other means can pose competition concerns and provides the following examples:
- Where the standard-setting process involves discussions between rivals or potential rivals in one or more markets, who are all members of a Standard Development Organization, of licensing terms and conditions for access to patented technology, there is a risk that the collective discussion among competitors may lead to agreements to fix the price of goods or services or to “naked agreements on licensing terms”.
- Where the owner of a patent fails to disclose its patent to a Standard Development Organization and later asserts the patent after the patented technology has been implemented into a standard (“patent ambush”).
- Where the owner of a patent agrees to license its technology on fair, reasonable and non-discriminatory terms to encourage its technology to be incorporated into a standard, and then reneges on that licensing commitment and demands a higher royalty once its technology has been incorporated into the standard or seeks an injunctive order against firms that are “locked into” the standard (“patent hold-up”).
The Bureau indicates that if a Standard Development Organization standard setting arrangement is reviewed, the Bureau would proceed according to the process set out in the Bureau’s Competitor Collaboration Guidelines. With respect to “patent ambush” and “patent hold-up” activities, the Bureau indicates that these activities would likely be reviewed under the abuse of dominance provision in section 79 of the Act.
While the changes made to the updated Guidelines do not represent a significant departure with respect to how the Bureau approaches the interface between competition policy and intellectual property rights, the changes should assist parties in understanding the Bureau’s approach to enforcement in respect of the particular activities discussed, and may signal greater interest on the part of the Bureau with respect to enforcement in these areas.
The Bureau has invited interested parties to provide their views on the draft updated Guidelines by August 10, 2015. We will continue to monitor and report on this topic as it develops.