On April 2, 2014, the Competition Bureau (Bureau) released for comment draft updated Intellectual Property Enforcement Guidelines (IPEGs), which are intended to replace the prior iteration released in 2000. On the same day, the Bureau entered into a memorandum of understanding (MOU) with the Canadian Intellectual Property Office (CIPO). These announcements follow indications from the Bureau that it is now focusing on the interface between intellectual property (IP) law and competition law, especially in the pharmaceutical sector.
Draft Updated IPEGs
The draft updated IPEGs mainly reflect the amendments to the Competition Act (Act) that have been made since the previous version was released in 2000. The conceptual framework therefore remains the same as that of the old IPEGs. The Bureau views IP law and competition law as complementary for the promotion of efficient markets. The circumstances in which the Bureau will intervene to address anti-competitive conduct associated with the exercise of IP rights fall into two categories:
- If the conduct at issue involves "something more" than the mere exercise of IP rights, the Bureau will apply the general provisions of the Act (e.g., criminal conspiracy under section 45, abuse of dominance under section 79, and agreements between competitors that prevent or lessen competition under section 90.1). The Bureau considers that any arrangement or agreement between independent entities involving the transfer or licensing of IP rights, or allowing for the use or enforcement of IP rights, constitutes "something more" than the mere exercise of IP rights. As an example of its advocacy, the Bureau cites its intervention before the Federal Court of Appeal (FCA) in Apotex Inc. v. Eli Lilly and Co.,1 where the FCA agreed with the Bureau’s submissions that the assignment of a patent under the Patent Act could still constitute an illegal criminal conspiracy under the Act.
- Where competition concerns arise from the "mere exercise" of an IP right, typically the refusal to license IP, the Bureau will analyse the conduct under section 32 of the Act, which allows the Attorney General to seek an order to prevent an undue restraint of trade or lessening of competition, including ordering the licensing of the IP right. The IPEGs indicate that the Bureau will use these special remedies only in very rare circumstances.
The draft updated IPEGs are open for public consultation until June 2, 2014.
MOU with CIPO
The MOU mandates closer cooperation, consultation and information sharing between the Bureau and CIPO for matters that straddle IP and competition law. For example, the MOU brings the two agencies closer together by creating an employee exchange program and setting up meetings between senior management of the agencies. Moreover, the MOU favours referrals of competition concerns arising from IP rights from CIPO to the Bureau.
Bureau’s Focus on Pharmaceutical IP
These developments follow an increased focus by the Bureau on the pharmaceutical industry, both in terms of enforcement and advocacy initiatives, including a workshop held in November 2013 on this sector. More specifically, the Bureau has expressed concerns with respect to "pay-for-delay" settlements and patent life cycle management, such as "product hopping."
Pay-for-delay (or "reverse payment") settlements occur when, as part of a patent litigation, a brand manufacturer enters into a settlement with a generic company that involves a payment to the generic manufacturer and the generic delaying its entry into the market. Such settlements have been under close scrutiny by antitrust authorities in the United States (including the Supreme Court’s recent Actavisdecision) and Europe. The Bureau has reviewed some pay-for-delay settlements in the context of advisory opinions to pharmaceutical companies,2 but has not yet undertaken enforcement action in this area.
Product hopping (or "product switching") refers to the development of a new formulation of a drug by a brand manufacturer and subsequent attempts to shift consumption from the original drug to the new formulation, thus preventing effective generic competition for the original patented brand drug. The Bureau has an ongoing investigation under the abuse of dominance provisions concerning alleged "product hopping" by a brand manufacturer of prescription ophthalmic solutions.
The Bureau will consider comments received on the draft updated guidelines in order to conduct a more substantive review of its IPEGs later this year. Given the Bureau’s willingness to address the complex issues raised by the intersection of IP law and competition law, interested parties should consider participating in the consultation process. We will continue to report on the IPEGs review process, as well as on the Bureau’s enforcement action and advocacy initiatives with respect to IP rights.