The Competition Bureau (Bureau) released revised Intellectual Property Enforcement Guidelines (2016 IPEGs) on March 31, 2016, after engaging in a lengthy consultation period based on a draft released in June 2015 (2015 Draft). In releasing the 2016 IPEGs, the Bureau stated that it is “making it a priority to provide increased clarity on how it deals with competition issues involving intellectual property. To support innovation and ensure that guidance keeps pace with developments, it has committed to review the IPEGs annually and will revise them as needed in light of experience, changing circumstances and decisions of the Competition Tribunal and the courts.” As evidence of the importance and broad implications of these issues, the Bureau received a significant volume of comments from various domestic and international stakeholders, including the Canadian Bar Association, the American Bar Association, U.S. Federal Trade Commissioners, economists, Google, Microsoft, Apple, Ericsson and other private companies.

The 2016 IPEGs go well beyond simply clarifying the Bureau’s overall conceptual approach to the interface between the Competition Act (Act) and intellectual property (IP) matters. Rather, they provide welcome substantial and practical guidance to the legal and business communities on the Bureau’s approach to this interface in the context of dynamic IP matters, including patent settlement agreements, product switching, patent assertion entities (PAEs), and collaborative standard setting and standard essential patents (SEPs). In summary:

  • Patent Settlement Agreements – Antitrust scrutiny of patent litigation settlement agreements has been a high profile and controversial topic among competition law enforcers in the United States and Europe for years. The Bureau had been notably silent on the issue until the fall of 2014 when it released a white paper devoted to the topic. The white paper unleashed significant criticism primarily because of its lack of clarity about when the Bureau would pursue criminal enforcement action in respect of such settlements and about the factors the Bureau would examine in determining whether a settlement involving a payment from the brand to the generic raised a significant competition law concern under the civil provisions of the Act. It also created controversy as it called for the introduction of a notification regime for all patent settlements similar to that in the United States. The 2016 IPEGs effectively deal with these key issues by
    • clarifying that settlements will be reviewed under the criminal provisions of the Act in only three specific circumstances and, outside of these narrow circumstances, settlements will typically be reviewed under the civil competitor agreement provisions of section 90.1 of the Act
    • providing detailed guidance on the factors the Bureau will consider when determining whether the payment from the brand to the generic has the effect of delaying generic entry and is likely to result in a substantial lessening or prevention of competition
    • eliminating the suggestion of a notification regime for patent settlement agreements
  • Product Switching – The 2016 IPEGs confirm that while an IP owner’s use or non-use of the IP is usually the mere exercise of an IP right (and therefore not subject to the general provisions of the Act), in certain circumstances such as product switching the non-use of IP may constitute something more than “mere exercise” and could raise competition concerns.
  • PAEs – The 2016 IPEGs acknowledge the ongoing debate regarding the establishment and conduct of PAEs and note that as developments occur in this rapidly evolving area the Bureau will continue to further refine its enforcement approach. Hypothetical examples address patent assignments for the sole purpose of enforcement as well as misleading advertising and deceptive marketing in the context of a PAE asserting its patents against alleged infringers.
  • Collaborative Standard Setting and SEPs – Here, as in its discussion on PAEs, the Bureau explicitly signals that its thinking about the interface of IP and antitrust in this dynamic area may evolve such that it “may revisit certain aspects of the guidance in this subsection in the future in light of experience, changing circumstances and court decisions.” With this caveat, the 2016 IPEGs
    • confirm that joint conduct involving participants in standard development organizations (SDOs) that is clearly for the purpose of setting an industry standard would be reviewed under the civil agreement between competitor provisions of section 90.1 and not the criminal conspiracy provisions of section 45
    • resolve the confusion in the 2015 Draft about SEPs and differentiating patents by clarifying that SEPs are part of the standards developed through formal SDOs and eliminating any suggestion that SEPs include proprietary differentiating patents, including those that others have labelled as commercially essential or “de facto” standards
    • confirm that alleged anti-competitive conduct by a SEP holder will be reviewed under the abuse of dominance provision rather than being treated only as a contractual dispute between the parties
    • discuss in practical terms the potential for anti-competitive conduct by a SEP holder seeking to improperly leverage its SEPs (e.g., patent hold up, patent ambush, reneging on a license commitment or seeking an injunction against willing licensees after making a licensing commitment) and the Bureau’s framework for analyzing such conduct under the abuse of dominance provision of section 79 of the Act

This Update provides further information regarding the review process that culminated in the 2016 IPEGs as well as a more detailed discussion of each of the topics outlined above.