Last week, Canada became the first country to issue a compulsory licence for the production and export of a patented medicine to a developing country pursuant to a plan negotiated under the auspices of the World Trade Organization (WTO).

WTO Doha Declaration and Subsequent Negotiations

On November 14, 2001, at the conclusion of the WTO’s Ministerial Conference at Doha, the Declaration on the TRIPS Agreement and Public Health (Doha Declaration) was issued in an effort to address the difficulties faced by developing and least-developed countries in accessing patented medicines for public health problems through WTO member compulsory licensing

One of those obstacles was the compulsory licence provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which require that such licences be issued predominantly for the supply of the domestic market in the licence-granting country. Accordingly, WTO member countries with manufacturing capabilities were not permitted to issue a licence for the export of patented pharmaceuticals to developing and least-developed countries without such capabilities. The Doha Declaration recognized this and proposed further negotiations to develop a solution.

On August 30, 2003, the WTO’s General Council issued a decision waiving the requirements of TRIPS that (i) compulsory licences be issued predominantly for the domestic market and (ii) "adequate remuneration" be paid to the right-holder in the importing country, thus facilitating the use of compulsory licensing as a means of delivering patented medicines to developing and least-developed countries facing public health problems.

Implementation in Canada

In 2004, Canada became the first country to implement the August 2003 General Council decision. Bill C-9, An Act to amend the Patent Act and Food and Drug Act (The Jean Chrétien Pledge to Africa), provides for compulsory licences for the export of generic versions of patented medicines to countries with dire pubic health problems.

Included within the Canadian legislation are provisions intended to protect the rights of the patent-holder vis-à-vis the medications themselves and their commercial value. Before being issued a compulsory licence, a generic manufacturer must certify its attempt to procure a voluntary licence from the patent-holder on reasonable terms and conditions. The compulsory-licence-holder is obliged to pay royalties to the patent-holder, the sum of which is contingent on the total value of the medication being exported under the licence and on the country to which it is being exported. Higher royalties will apply in the case of exports to countries with relatively high rankings on the United Nations Human Development Index (UNHDI), while lower royalties will apply for shipments to countries with low UNHDI rankings.

The patent-holder may apply to the Federal Court to terminate the compulsory licence if it can demonstrate that the relevant medication has been re-exported in violation of the 2003 WTO decision or that it had been exported to a country other than the one specified in the licence. In addition, if the price of the generic medication is 25 per cent or greater than the cost of its patented equivalent in Canada, the patent-holder may apply to the Federal Court to have the compulsory licence terminated or to secure a higher royalty rate, on the grounds that the generic manufacturer’s export activities are commercial in nature. To facilitate the patent-holder’s ability to enforce these rights, the compulsory-licence-holder is under an obligation to notify the patentee of the quantity of medication in each export shipment and of the name of each party that will be handling the product in transit from Canada to the destination country.

Compulsory Licence for TriAvir

On October 4th, 2007, Canada notified the WTO that it had authorized Canadian generic producer Apotex to manufacture and export a generic version of TriAvir, a patented AIDS medicine. This generic version will be called Apo-triAvir. Canada’s notification completes the second step of the initiative commenced by Rwanda on July 17th, 2007, when it notified the WTO of its intention to import 260,000 packs of TriAvir.

TriAvir is a fixed-dose combination product of zidovudine, lamivudine and nevirapine. The patent for two of the antiretrovirals (ARV), lamivuine and zidovudine, is held by GlaxoSmithKline and Boehringer Ingelheim own the patent on the third ARV.

Approval of the Apotex generic is the first time a country has agreed to allow export of a generic version of a patented medicine to a developing country.

For further information and assistance regarding these or any other WTO or trade-related issues, please do not hesitate to contact any member of McCarthy Tétrault’s International Trade and Investment Law Group.