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Longer Monopolies and Single Legal Proceedings vs Generics – the Gift of CETA to Canadian Drug Patentees

Canadian pharmaceutical patent owners can expect two substantive changes in the next year following implementation of the Canada–European Union Comprehensive Economic and Trade Agreement (“CETA”):

  • certificates of supplementary patent protection (“SPC”) of up to 2 years will be available to compensate for regulatory approval delay
  • an overhaul of the NOC litigation procedure is expected, with current “not-so-summary” proceedings to be replaced by one action, similar to US ANDA litigation

The recently released draft implementing legislation (“Bill C30”) provides an overview of the timing and steps for SPC, with details to follow in subordinate regulations. Procedures regarding the modified NOC litigation regime are only set out in broad strokes – specifics will be the subject of new NOC Regulations. Early strategies may be developed in view of available information, and modified as further legislative particulars are provided.

Certificate of Supplementary Protection

What – Where a patent “pertains” to an approved medicinal ingredient for humans or animals (to be defined in subsequent regulations), a patentee can apply to the Minister of Health for an SPC to subsequently take effect on patent expiry. A pharmaceutical drug invention may therefore be protected by:

  1. a patent
  2. a SPC

The SPC is more limited in nature than full patent rights. Rights are granted “only with respect to the making, constructing, using and selling” of the approved drug containing the medicinal ingredient, or combination of medicinal ingredients included in the SPC. Unapproved drugs are not protected. An SPC is also not applicable against an infringer who only exports medicinal ingredient.

When – The trigger event is a drug’s first “market authorization for sale” – definition to follow in the regulations. The date as to when such authorizations can start being used, to engage the SPC regime, will also be prescribed. There is a certain prescribed period of time during which an SPC application can be filed. The period starts with either the market authorization date (where a patent was previously issued) or the patent issue date (if market approval was previously obtained). Additional requirements mandate filing for market authorization in Canada within a certain prescribed time following foreign regulatory market applications. Otherwise parties lose the right to apply for an SPC – an incentive to file for Canadian regulatory approval shortly after foreign applications are filed.

How – Only one SPC can be obtained in respect of each drug. Parties may not obtain multiple SPCs in respect of the same drug. The priority of SPC applications depends on whether patents are issued before or after “market authorization”. A patent issued before market authorization has priority over patents issued after market authorization (as would be expected, given that earlier issued patents have had more of their patent monopoly wasted during government approval). In the group of patents issued after market authorization, the earliest issued patent is accorded priority.

In the group of patents issued before market authorization, all patents are accorded equal priority and in such instances challenges must be made to the Federal Court for determination as to whether a disputed SPC has complied with threshold requirements (ie. it pertains to a medicinal ingredient, an SPC has not previously been granted in respect of the same first market authorization etc.). It is expected that the Regulations will clarify how the court selects the “first priority” SPC where all challenged SPCs are found to be technically compliant in this group. Obviously it appears that simply having the earliest issued patent, and therefore feasibly the greatest lost monopoly time in this group, is not necessarily a deciding factor according to the draft legislation. Regulations will also provide for withdrawal of an application for an SPC (presumably in a way that may allow for a “clean slate” so as to avoid interfering with other lower priority SPC applications).

Term – the SPC is calculated as: [authorization for sale] – [patent filing date], minus 5 years, to a maximum of 2 years. In other words, the SPC provides a benefit where there has been at least a 5 year delay from filing a patent to market authorization. Where the patentee is also the person who obtained authorization, the term may be decreased where a brand’s failure to act contributed to market delay. The SPC may be revoked – details to follow in the regulations. The SPC or any patent claim set out in the SPC may be impeached, including on the basis of noncompliance with SPC procedures. Once a SPC issues it acts as a bar to anyone else obtaining a SPC for that drug – even if the SPC is later held invalid.

Many of the Patent Act amendments are directed at incorporating this new protected form, for example:

  • the SPC holder is still subject to pricing controls of the Patented Medicine Prices Review Board
  • a patent that is expired, but still protected by a SPC, may be reissued
  • infringement of a SPC is brought in the same manner as infringement of a patent
  • new NOC Regulations will also relate to infringement regarding a SPC that could result from “making, construction, use or sale of a patented invention or invention protected by a certificate of supplementary protection”
  • although standard maintenance fees are not due with respect to SPCs, regulations are expected to detail a separate fee scheme regarding SPC filing etc.

New NOC Regulations

The Summary section of Bill C30 provides the most informative explanation of the expected new procedures. It suggests that the new NOC Regulations may be completely overhauled into one action, or at least specifically permit this:

“(ii) [The Patent Act is amended to] provide further regulation-making authority in subsection 55.2(4) to permit the replacement of the current summary proceedings in patent litigation arising under regulations made under that subsection with full actions that will result in final determinations of patent infringement and validity” [emphasis added]

Other notable “hints” as to the expected new NOC Regulations may be gleaned from the regulation making authority powers set out in the Bill:

  • Preliminary proceedings may continue in some form (ie. before a generic sells its product, directed at resolving infringement that “could result” from a generic NOC). Full actions directed at resolving infringement that “results” from a generic NOC are also included.
  • There will be new procedures setting out actions to include impeachment rights, and specific guidance on joinder of parties and consolidation with other cases (presumably to control the “repeat litigation” under the current NOC Regulations where there may be multiple generics and NOC applications followed by actions).
  • There will now be a brand appeal right (meaning that even if a generic wins at trial they may only obtain an interim NOC, that may be quashed should a brand be successful on appeal).
  • The timing for an NOC case will need to be addressed – actions are unlikely to be completed in the current two year injunction time period. At the same time the parties will not be re-litigating the same patents in subsequent actions over several more years.
  • The framework of section 8 damages (directed at compensating a successful generic who was unjustly kept off the market during its NOC proceeding) will require modification/re-evaluation given there may no longer be a two year automatic injunction. It is unclear whether Canadian generics will be permitted to launch “at risk” after a certain mandated injunction period (as in the comparable US Hatch Waxman proceedings).

Next steps

Once the Patent Act revisions are in force, draft regulations are expected to be published for consultation and subsequently put into force in 2017/2018. Extensive litigation challenges are expected shortly thereafter as to the propriety of SPCs, as well as the new NOC Regulations. Certainly there will be new areas for judicial interpretation and explanation, given past events involving “summary” NOC applications over their nearly 25 year history.

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[1] BILL C-30, An Act to implement the Comprehensive Economic and Trade Agreement between Canada and the European Union and its Member States and to provide for certain other measures (October 31, 2016); currently at Senate review stage; recent government commentators have suggested the Bill is expected to be passed by late Spring 2017 (per European Union Chamber of Commerce in Canada February 23, 2017 seminar in Toronto).

[2] Patent Act, new draft sections 104-134

[3] Filed after October 1, 1989 (ie. meaning “New Act” patents subject to being published 18 months after filing)

[4] Query whether the broad interpretation of “pertains” in the context of the sections of the Patent Act relating to the Patented Medicines Prices Review Board should be equally applicable here. Given the statutory purposes are clearly distinct, one would expect a much narrower interpretation in the context of SPCs. The PMPRB regime controls excessive prices by patentees who have arguably carved out monopolies on a drug even where they are not actually commercializing such monopolies. The SPC regime is directed at rewarding patentees with extended monopolies only with respect to patent claims that actually relate to the commercial product, where monopolies have been eaten up by regulatory approval delays.

[5] Interestingly the current draft Bill only links the patent and the drug, and does not recite any necessary link between the SPC applicant and the entity receiving the “market authorization”. The SPC regime may therefore provide additional protection for patents (including process patents) owned by third parties. It is not limited to patents owned by the brand who receives market authorization. It is expected the regulations will further clarify practical implications of this broad linking.

[6] There has been at least one case where parties agreed to conduct a customized combined “NOC/action”, but such integrated procedures are not currently set out in the NOC Regulations, and are the exception, not the rule.

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