Bill C-30, the bill to implement CETA, received royal assent on May 17, 2017, and is expected to provisionally take force on July 1, 2017. Bill C-30 brings new and important changes to the Patent Act, and authorizes the government to amend Canada’s PM(NOC) linkage regime.
CETA’s implementation in Canada will significantly impact biologic/pharma patents in three major ways. First, it will implement, for the first time, patent-term restoration. Second, it will revamp the current framework for linkage between patents and the approval of biosimilar/generic drugs in Canada by giving innovators a right of appeal. Third, it will change the nature of the PM(NOC) proceedings to a more U.S. style approach, and provide for finality in such litigation.
Each of these proposed amendments are described in more detail below.
(1) Patent Term Restoration
Bill C-30 amends the Patent Act by providing for the issuance of Certificates of Supplementary Protection (“CSP”), which will help compensate patentees for the effective loss of patent protection they suffer as they await regulatory approval to market a drug in Canada. A CSP will maximally add 2 years of extra patent protection upon certain criteria being met.
The term of the CSP will be calculated by subtracting five years from the period beginning on the patent’s filing date and ending on the day on which a Notice of Compliance (“NOC”) is issued, up to a maximum of two years. The Minister of Health is granted discretion to reduce the term of a CSP if the Minister is of the opinion that there was unjustified delay on the part of the pharmaceutical company.
Although the government had previously indicated that some degree of patent term restoration may apply retroactively, the legislation is silent on whether a longer patent term will be available for currently marketed patented medicines.
One notable exception is that a CSP will not provide protection to innovators seeking to prevent generic pharmaceutical companies from exporting drugs to the U.S. (and elsewhere).
(2) Innovator Rights of Appeal in PM(NOC) Proceedings
In the current PM(NOC) regime, innovators (known as "first persons") currently have no effective right of appeal from unsuccessful PM(NOC) applications because the issuance of a NOC to the generic pharmaceutical company renders the appeal moot. The implementation of CETA now changes this by requiring Canada to introduce new regulations to permit appeals by both innovators and generic/biosimilar manufacturers.
The precise mechanism that grants innovators a right of appeal will be elucidated in the amendments to the PM(NOC) Regulations to come.
(3) Procedural Changes to PM(NOC) Proceedings
Under the current scheme, PM(NOC) Proceedings proceed by way of summary application, on a paper record, without any viva voce evidence or rights of discovery. The relief sought is to prohibit the Minister of Health from granting a NOC to a generic manufacturer until the expiry of the patent(s) at issue. The burden of proof in these proceedings is on the patentee/innovator to prove that the allegations made by the generic (including both non-infringement and invalidity) are not justified Because these proceedings were intended to be summary and the question to be decided relates to whether the allegations made by the generic are "justified", the proceeding is not a final determinations of patent validity or infringement. This allows parties on both sides to commence subsequent impeachment/infringement actions if they are unsuccessful in a PM(NOC) Proceeding.
CETA’s implementation seeks to end this dual litigation while adding procedural protections. The government has been consulting with stakeholders and will soon be introducing regulations that replace the “current summary proceedings” with “full actions that will result in final determinations of patent infringement and validity”. The new regulations will revamp the procedure by which these actions are commenced and determined.
The anticipated amendments to the PM(NOC) Regulations are not yet known; however, we expect a shift in practice towards U.S. style Hatch-Waxman proceedings which will provide for some form of consolidation or joinder of multiple cases involving the same drug and the same patent, discovery rights for all parties, and a bench trial (potentially lasting no more than 10 days) with live witnesses.
Next Steps
In the coming weeks, we expect the government to release implementing regulations to introduce the changes to the PM(NOC) regime discussed above. We will report on the details and the likely impact on the pharmaceutical industry in Canada.
About the authors
Steven Mason is a partner at McCarthy Tetrault in the Litigation Group in Toronto and the chair of the firm's National Intellectual Property Litigation Group. His practice is focused on intellectual property and related disputes.
Sanjaya Mendis is a lawyer at McCarthy Tetrault in the Intellectual Property Group in Toronto. Sanjaya advises technology, pharmaceutical, and biotechnology companies on their litigation, regulatory, and commercial issues.