On September 18, 2014, the Competition Bureau (Bureau) released updated Intellectual Property Enforcement Guidelines (IPEGs). These IPEGs are an update of the original guidelines released in 2000 and result from recent consultations; the Bureau has announced that it will soon conduct another consultation phase in order to address additional competition/IP law issues. Below, we outline the most significant revisions to the IPEGs.
In a previous article we outlined the differences between the draft updated IPEGs released for public consultation last spring and the original IPEGs. In response to comments, substantive changes have been made to the examples section of the updated IPEGs, clarifying the Bureau's approach to patent pooling agreements and adding a product switching scenario as an example of circumstances when the non-use of an IP right could be reviewed:
- Patent Pool: The previous example involved a patent pool where one of the members may not have needed the pool in order to bring its product to market without infringing on other patents, which would lead to the Bureau likely investigating the pool as a criminal conspiracy (section 45 of the Competition Act (Act)). The new example describes the features of a pool that the Bureau evaluates when determining whether it raises competition concerns. Most interestingly, the Bureau now states that it is likely to investigate patent pools under the civil provision for agreements among competitors (section 90.1 of the Act) rather than as criminal conspiracies, unless there is evidence that the pool is a sham to conceal a conspiracy.
- Product Switching: Under the updated guidelines, refusal to use intellectual property can constitute “something more” than the mere exercise of IP rights and can therefore be challenged under the abuse of dominance provision. The updated IPEGs include a product switching example to clarify the Bureau’s position on the non-use of IP rights. Product switching (also known as “product hopping”), which we described in a previous article, is a product life-cycle management strategy whereby a brand name drug company shifts consumption from an old formulation of a drug whose patent is expiring shortly to a functionally similar new formulation with a longer patent life in order to block generic entry. In the example, the brand name drug company ceases manufacturing the old formulation and buys back existing inventory, thereby switching the market to the new formulation and blocking generic entry, which is contingent on prescriptions of the old formulation. The Bureau states that it will likely investigate product switching as abuse of dominance (section 79 of the Act).
The Commissioner of Competition has indicated that the IPEGs will be updated in two stages, with the release of these updated IPEGs concluding the first stage. The Bureau will conduct in the near future public consultation on a further update of the IPEGs to address new competition/IP law issues, including patent litigation settlements, life-cycle management strategies, the conduct of patent assertion entities and activity related to standard essential patents.