HIGHLIGHTS

The Competition Bureau’s new draft Intellectual Property Enforcement Guidelines:

• Recognize that IP and competition laws are complementary
• Provide that “in the vast majority of cases” the Bureau will review settlements of pharmaceutical patent litigation as a civil matter, not as a criminal matter
• Give insight into how the Bureau intends to apply Canadian abuse of dominance rules to conduct involving standard essential patents (SEPs)
• Are subject to a public consultation period; interested parties are to submit comments on the draft IP Enforcement Guidelines by August 10, 2015

On June 9, 2015, the Canadian Competition Bureau (Bureau) released its draft Intellectual Property Enforcement Guidelines (Guidelines) for public comment. The Guidelines set out how the Bureau will assess conduct concerning IP under the Competition Act (Act). The Guidelines are the Bureau’s first major revision to its substantive enforcement policies in the IP area since 2000 and reflect many of the developments that have occurred in the area of IP and competition law these past 15 years.

According to the Guidelines, where conduct constitutes the “mere exercise” of IP rights, the Bureau will only scrutinize conduct under a special section of the Act if certain conditions are met; otherwise it will not scrutinize the conduct. That section permits the Bureau to refer a case to the Attorney General, who is permitted to seek an order from the Federal Court for, among other things, the voiding of a licence and the mandating of a licence.

However, many types of conduct, including different forms of licensing, the transfer of rights, and even the non-use of IP rights may not constitute a “mere exercise” of IP under the Guidelines. Where conduct constitutes “something more” than the “mere exercise” of IP rights, the Bureau will scrutinize conduct under the general provisions of the Act, i.e., the substantive provisions that apply generally to commercial activity. Depending on the conduct, this scrutiny could take the form of a pre- or post-closing merger investigation, a civil investigation where unilateral conduct or agreements among competitors prevent or lessen competition substantially, or a criminal investigation on a per se standard of evidence.

The Guidelines contain many illustrative examples of how the Bureau will enforce the Act in the IP context. Examples concerning settlements of pharmaceutical patent litigation and the licensing of SEPs are particularly interesting.

PHARMACEUTICAL PATENT LITIGATION SETTLEMENTS

The Guidelines provide:

• “In the vast majority of cases” the Bureau will review pharmaceutical patent litigation settlements as a civil competitor collaboration section of the Act. The examples suggest that the Bureau will only review settlements as a criminal matter where, for example, a settlement precludes a generic manufacturer from entering until an additional period after the expiry of the patent, or where the Bureau uncovers “convincing documentary evidence that both [the innovator manufacturer and the generic manufacturer] recognized that the patent was not valid.”
• A safe-haven for settlements that do not involve the transfer of value from an innovator manufacturer to a generic manufacturer and that leave the generic to enter upon the expiry of the patent or at an earlier time.
• The Bureau will look at the size of any payment by an innovator manufacturer to determine whether a payment was made for the purpose of settling litigation or delaying the generic manufacturer’s entry.

STANDARD ESSENTIAL PATENTS

The Guidelines describe how the Bureau will apply the Act to conduct that takes place within the context of standard setting organizations (SSOs) and involving SEPs.

• The Guidelines recognize that the work of SSOs can be pro-competitive and provide that the Bureau will not investigate as a criminal matter any SSOs that obligate their members during the standardization process to disclose ownership of patents that are essential to a standard or future maximum royalty rates.
• Examples in the Guidelines explain how the Act will apply to the licensing of SEPs. For example, the Bureau would review as an abuse of dominance: a patent owner’s non-disclosure of patents to an SSO and subsequent requests for licences; breach of a commitment to license at no more than a previously disclosed maximum royalty rate by the original patent owner or a subsequent transferee of the patent rights; and a patent owner seeking an injunction against a “willing licensee.”