Medicines and Patented Medicine

1992-01-01

MEDICINESANDPATENTEDMEDICINES:THESTATEOFTHELAWINCANADA

by
ThierryOrlhac*

LEGERROBICRICHARD,Lawyers,
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8
thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242-Fax(514)8457874
www.robic.ca-info@robic.com

A.Introduction
B.Historicalhighlights
C.TheCanadiancompulsorylicensingprovisions
D.Experimentaluseasadefencetoaclaimofpatentinfringment.

A.Introduction

MajorchangeshavemarkedtheevolutionthroughtimeoftheCanadianLaw
inrespectofpatentsformedecines.Weoughttovisualizethesechangesby
takingabrieflookatsomeofitsrecenthistoricalhighlights.
Secondly,wewillexaminethestateoflawinCanadaregardingpatented
medecines,byemphacizingoneofitsmajortopic:thenewCanadian
compulsorylicensingprovision.
Thirdly,itisgenerallyknownthattheCanadianPatentActconferstothe
patenteetherighttothebenefitofapatentandincludestherightforthe
patenteetopreventanyactinvolvingtheuseofwhatisclaimedinthe
patentwithouthispriorauthorization.Thepatentalsogivesthepatenteethe
righttoworkhisinventiononacommercialscale.However,doesthe
Canadianlawadmitsasanexceptiontothescopeofthepatentright,the
experimentaluseasadefencetoaclaimofpatentinfringment.Wewill

*
©LEGERROBICRICHARD,1992.
PatentAgent,ThierryOrlhacisonoftheseniorpartnersinthepatentandtrademarkagency
firmROBIC,g.p.towhichthelawfirmLEGERROBICRICHARD,g.p.isassociated.Thismaterial
wasdesignedasasummarypresentationofsomeissuesencounteredintheCanadian
pharmaceuticalpatentedmedecine;itwasdesignedtobeincorporatedinaSeptember
1992specialissueoftheManagingIntellectualPropertyReviewdealingwiththe
pharmaceuticalIndustry.Thismaterialwasmeantfordiscussionanddoesnotconclusively
statetheopinionoftheauthororthemembersofhisfirmonthesubjectmatternordoesit
provideanexhaustivereviewthereof.Publication169.

examinethisquestionandtrytoansweritinthelightoftheCanadianPatent
ActandrelatedCanadiancourt`sdecisions.
B.Historicalhighlights
a)Since1923,theCanadianPatentActhasalwaysincludedcompulsory
licensingprovisionsspecifictopatentsforinventionsregardingfoodor
medecine.Theapplicantdoesnothavetowaitforapatenteetoabusehis
rightsunderthepatentnorwaitforagraceperiodtoobtainacompulsory
licenceunderapatentforfoodormedecine.
Upuntil1969,thegrantofcompulsorylicenceswaslimitedtothe
manufactureofpatentedmedecineinCanada.Thismeansthatno
compulsorylicencegrantedallowedtheimportationofmedecinesinto
Canada.Theseprovisionsdrovetheinnovativepharmaceutical
manufacturersinapositionofforce.Theyusedthispositiontogenerateuge
profitsoutoftheirmedecinesbysellingthematprohibitiveprices.This
becameapparentwhenthesepriceswerecomparedtothoseofthesame
productssoldbythesamecompaniesinothercontries.
Thisabuseoftheirexclusiverightsundertheirpatentsrenderedtheinnovative
companiessuspect,sotheybecamethesubjetofmanypublicenquiries,in
thesixties.Atthetime,Canadawasveryinterestedintheseenquiries,
becauseitwasachievingthenationalizationofmedicalservices,andwas
beginningtopayforthem.
Asaresult,1969sawthecompulsorylicencingprovisionsbeingcompletely
revisedtopermitthegrantofcompulsorylicencesforimportationinto
Canada.ThatiswhytheformerCanadiancompulsorylicencingprovisions
weregenerallywellknowntothepublic.ThesemodificationsofthePatent
Actaimedatthereductionoftheabusedonebytheinnovativecompanies
andwereanattemptoreducetheretailpriceofdrugsbyincreasingthe
competitionontheCanadianlevelbetweeninnovativeandgenericdrug
manufacturers.
ThePatentActmadeitpracticallysurethatanyinterestedpersonwho
requestedit(mainlymanufacturersofgenericdrugs)begranteda
compulsorylicencefrominnovativepharmaceuticalcompaniesinrespectof
theirpatents.Accordingly,manylicenceswereappliedforandgranted.The
licencesconferredthelicenseestherighttomanufactureorimportinto
Canadamedecinesinreturnforwhichthelicenseeswererequiredtopayan
amountofroyaltytothepatenteeofthedrug.(Section41,asitreadpriorto
theamendmentstothePatentsActR.C.1985,c.33(3rdsupp.)).However,the
royaltyfeespayabletothepatenteesweresolow,thattheydidnotprovidea

sufficientrewardfortheinvestmentsmadebyinnovativedrugmanufacturers
inrespectoftheresearchanddevelopmentleadingtothenewdrugs.
Asaresult,theseprovisionsencouragedthegrowthofthegenericindustryin
Canada,buttheywerealsothecauseofadropintheinvestmentsrelatedto
developmentandresearchintheCanadianpharmaceuticalindustry,
becausenearlyallthecompulsorylicencesgrantedwerelicencestoimport
medecinesintoCanada,andsomeinnovativedrugmanufacturersmoved
abroad.
TwomainfeaturesmadetheCanadiancompulsorylicensingprovisions
different:

Since1969,most,ifnotallofthecompulsorylicenceapplicationsappliedfor
andnotabandoned,havebeengranted,whatevertheargumentssubmitted
bythepatentee;and
Theamountofroyaltygrantedtothepatenteehasalwaysbeenfixedata
verylowpercentageofthenetsellingprice(4%)ofthedrug,whateverthe
argumentsofthepatenteemighthavebeen.
TheCanadiancourtsnerverreversedthedecisionoftheCommissionerof
Patentsonsuchgrounds.
Inaddition,theseprovisionsoftheCanadianPatentActwhenattackedona
constitutionallevelweredeclaredtobeconstitutionalandinaccordwiththe
CanadianCharterofRights.
b)AnotherfeatureoftheformerPatentAct,inrelationtopatentsfor
medecines,qualifiesasananachronismforitshistorygoesbacktotheBritish
PatentActof1919.ItsgoalatthetimewastorelievetheBritishchemical
industryfromtheGermandominationinthisfield.Theseprovisionsprovided
thatinventionsrelatingtosubstancespreparedorproducedbychemical
processesandintendedforfoodormedecinecouldnotbeclaimedperse,
butcouldonlybeclaimedinaproduct-by-processform(Section41(1),asit
readpriortotheamendmentstothePatentActR.C.1985,c.33(3rdsupp.)).
ByreasonoftheCanadianpharmaceuticallobbying,andbecauseofthe
influenceoftheinternationalopinion,theseprovisionswereabrogatedbythe
actualCanadianPatentAct.Asaresult,inventionsrelatingtosubstances
preparedorproducedbychemicalprocessesarepatentablepersein
Canada,sinceNovember1987(Section14,R.C.1985,c.33(3rdsupp.)).
However,theactualPatentActintroducednewprovisionsinNovember1987.
Accordingtotheseprovisions,inventionsrelatingtonaturallyoccuring

substancespreparedorproducedbymicrobiologicalprocessesand
intendedforfoodormedecinecouldnotbeclaimedperse,butcouldonly
beclaimedinaproduct-by-processform(Section14,R.C.1985,c.33(3rd
supp.)).Theseprovisionsceasedtohaveeffect4yearslater,onNovember19,
1991.Weneverunderstoodtheveryreasonoftheexistenceofthese
provisions.Perhapstheyintendedtoprovidetemporaryprotectiontothe
newlydevelopingindustryofmanufacturersofgenericdrugs.
SinceNovember1991,inventionsrelatingtonaturallyoccuringsubstances,
preparedorproducedbymicrobiologicalprocessesandintendedforfoodor
medecine,arepatentableperseinCanada.
C.TheCanadiancompulsorylicencingprovisions
WiththereformofthePatentActof1969anditsnumerousdrawbacksin
respectofitscompulsorylicensingprovisionswhichwereconsideredunfairto
innovativedrugmanufacturers,Canadabegantobeperceivedasan
inhospitablelandforpharmaceuticalinvestment.Thisledthelegislatorto
amendthePatentAct,inNovember1987.
1.Compulsorylicensing
The1969compulsorylicensingprovisionswerereplacedbyasomewhatless
permissivesystem.Thissystemprovidestemporaryprotectiontopatentees
andaimsatincreasingtheresearchanddevelopmentofthepharmaceutical
industryinCanada,sodrugsmightbecomeavailableatareasonableprice
toCanadianconsumers.
Pertainingtothenewcompulsorylicensingsystem,adistinctionmustbe
madebetweenCanadianpharmaceuticalinventionsandthosewhichare
not.
a)Canadianpharmaceuticalinventions
Inordertoincreasethedevelopmentandresearchinthepharmaceutical
industryinCanada,thenewActgivesaveryspecialstatustopatenteesof
drugsinventedanddevelopedinCanada.Accordingly,whenthepatentee
satisfiestheCommissionerthatthemedecinehasbeeninventedand
developedinCanada,theCommissionershallnotgrantacompulsory
licencefortheimportationofthedrug,duringthelifespanofthepatent(s.
39.16(1),39.16(2)ofthePatentAct).However,acompulsorylicenceforthe
manufacturingofthedruginCanadacanberequestedbyanyinterested

personafter7yearsfromthedatethenoticeofcompliance(authorization
givenbyHealthandWelfareCanadatoadrugmanufacturersohecan
distributehisproductinCanadaifthesaidproductmetthevarious
requirementsregardingsafetyandefficacy)wasaccorded,ifitappearsat
thetimeoftheapplicationthatthepatenteeisnotmakingthemedecinein
Canadaforthepurposesofcompletelyorsubstanciallysupplyingthe
Canadianmarketforthatmedecine(s.39.16(4)ofthePatentAct).
b)NonCanadianpharmaceuticalinventions
InrespectofmedecinewhichwerenotinventedanddevelopedinCanada,
theperiodofprotectionavailabletopatenteesvariesinrespectof
thefollowingfactors:
-thelicenceisappliedformanufactureorimportation;
-thedatethepatentwasgranted;and
-thedateofissueofthenoticeofcompliance
i.LicenceappliedformanufactureinCanada
AcompulsorylicenceforthemanufacturemedecinesinCanadaisavailable
7yearsafterthedateofissueofthefirstnoticeofcompliancetothe
patentee,providedthatthisnoticewasissuedafterJune27,1986(s.39.14(1)
ofthePatentAct).
ii.LicenceappliedforimportationintoCanada
Withrespecttothecompulsorylicencesappliedfortheimportationof
patentedmedecineintoCanada,acompulsorylicencemaybegranted:
-7yearsafterthedateofissueofthefirstnoticeofcompliance,ifthisnotice
wasissuedbeforeJune27,1986andalicencehasbeengranted,butno
noticeofcompliancehasbeenissuedtothelicenseeinrespectofthe
medecine,oralternatively,thelicenseehasobtainedanoticeofcompliance
inrespectofthemedecine,butnolicencehasbeengrantedtotheperson
(s.39.11(2)aofthePatentAct).
-8yearsafterthedateofissueofthefirstnoticeofcompliance,ifthisnotice
wasissuedbeforeJune27,1986andthatneitheracompulsorylicencewas
granted,noranothernoticeofcomplianceissuedinrespectofthemedecine,
atthatdate.

-10yearsafterthedateofissueofthefirstnoticeofcompliance,ifthisdate
followsJune27,1986(s.39.11(2)cofthePatentAct).
Theseforegoingperiodsofprotectionaccordedtopatenteesofmedecine
whichwereeitherinventedanddevelopedinCanadaorelsewhere,are
subjecttomodificationsbythePatentedMedecinePricesReviewBoard
(39.16(7)dands.39.15(3)dofthePatentAct)incaseswhere,intheopinionof
theBoard,amedecineisbeingsoldinCanadaatanexcessivepriceorifa
patenteeviolatedcertainprovisionsofthePatentAct.
Atthistime,itisworthmentioningthattheseperiodofexclusivitydonotapply
toalicenceafterthedateofexpirationofthefirstpatentgrantedinCanada
inrespectofthatmedecine(s.39.11(3)).Thisalsostandsforasubsequent
inventionthatisaprocessforthepreparationorproductionofsubstantially
thesamemedecine(s.39.13ofthePatentAct).Moreover,thePatentAct
doesnotaffectanycompulsorylicencepertainingtoamedecinegranted
beforeJune27,1986andforwhichanoticeofcompliancehasbeenissued
tothelicensee(s.39.11(4)ofthePatentAct.).
2.ThePatentedMedecinePricesReviewBoard
ThePatentActcreatedthePatentedMedecinePricesReviewBoard(the
“Board”)soitcouldreviewthepriceschargedforpatentedmedecinesin
Canada(s.39.18tos.39.24ofthePatentAct).Theideaofcontrollingthe
pricesofpatentedmedecinesisnotsurprisingnornewsincethecontroversial
amendmentsof1969wereintroducedtodealwithsuchexcessivepricingby
innovativedrugmanufacturersandhealthservicesarenationalizedin
Canada.
TheprimefunctionoftheBoardistomakesurethatCanadiansdonotpay
excessivepricesforpatentedmedecines.ThesecondtaskoftheBoardisto
providetheMinisterofHealthwithanannualreportgiving:thesummaryof
pricingtrendsandthetrendsinthedevelopmentandresearchinthe
pharmaceuticalindustryandthenamesofpatenteessubjectedtoenquiries
incasesofexcessivepricing(s.39.24to39.25ofthePatentAct).
InorderfortheBoardtoobtaintheseinformations,thePatentActimposeson
patenteesobligationsastoprovidespecificinformationsandreportstothe
Board.Theseinformationswilldiffersubstantiallyuponwhetertheyrelateto
theprimaryorthesecondarytaskoftheBoard.
3.ThePricesReviewProcessandthePowersoftheBoard

a)WhenapatenteeincreasesthepriceofadrugsoldinCanadabya
percentagesuperiortothatofthepercentageincreaseintheConsumer
PriceIndexaspublishedbyStatisticsCanada,theBoardmayrequestthe
patenteetojustifythatincrease.IfthepatenteefailstoprovidetheBoardwith
suchinformationoriftheBoardstillconsidersthatthemedecineisbeingsold
atanexcessiveprice,afterconsiderationofthefollowinglistoffactors:
-thepricesatwhichthepatenteesoldthemedecineduringthepreceding5
years;
-thepricesofothermedecinesbelongingtothesametherapeuticclasssold
soldduringthepreceding5years;
-thepricesatwhichthemedecineandothermedecinesbelongingtothe
sametherapeuticclasshavebeensoldinothercountriesdurindthe
preceding5years;andiftheBoardisstillundecidedonwheterornotthe
medecineisbeingsoldatanexcessiveprice,itisentitledtoconsiderthe
Canadianportionofthecostsofmakingandmarketingthemedecine,and
otherfactorsdeemedrelevant(s.39.15(6to8)ofthePatentAct)
theBoardmay,byorder,revoquethetimeperiodsforexemptionfromthe
compulsorylicensing(s.39.15(3))inrespectofeitherorboththepatent
pertainingtothemedecineforwhichtherewasexcessivepricingoranyother
patentofthepatenteeforaninventionthatpertainstoothermedecines
(s.39.15(3)d).Asanalternative,iftheBoarddoesnotdeemitnecessaryto
revoquetheperiodofexclusivity,itmayorderthatthepriceofthemedecine
sold,bereducedtoanacceptablelevel.Ifthepatenteedoesnotcomply
withsuchanorder,heispunishedbyafurhterordertoreducethepriceofthe
medecineorbytherevocationoftheperiodofexclusivityfromcompulsory
licensing.
InrespectofpatenteesofmedecinesinventedanddevelopedinCanada,
theforegoingpenaltiesmaybeinvoquedbytheBoard,forthesamereasons,
asstatedabove.Therefore,thepatenteesofCanadianpharmaceutical
inventionsmightloosetheirspecialstatus(s.39.16(7)d)oralternatively,by
orderoftheBoard,beforcedtoreducethepriceofthemedecine.
4.SalesandExpenseInformation
Theinformationtaskoftheboardpertainingtopricingtrendsinthe
pharmaceuticalindustryandcostsofresearchanddevelopmentrelatingto
patentedmedecineinCanadarequiresfromthepatenteesofmedecine
thattheyprovidetheBoardeverysixmonthswith:
-thepriceatwhichthemedecineisbeingsoldinCanada,orelsewhereand

-thecostsofmakingandmarketingthemedecine(s.39.15(1)ands.39.16(5)of
thePatentAct).
EachpatenteemustalsoprovidetheBoardeveryyearwith:
-thenameofanylicenseeofthepatenteeinCanada;
-therevenu,wheterdirectorindirect,fromsalesofmedecineinCanada;and
-theexpendituresmadebythepatenteeinCanadatowardsthecostof
researchanddevelopmentrelatingtomedecine.
Ifpatenteesfailtoprovidesuchinformation,asrequiredbytheBoard,the
Boardmayapplythesamepenaltiesasforexcessivepricingexcept,of
course,forthereductionofprice(seepart3.ThePricesreviewProcessand
thePowersoftheBoard).
D.Experimentaluseasadefencetoaclaimofpatentinfringment
AccordingtothePatentAct(Section42,R.S.1985,c.P-4),apatentgrantsto
thepatenteetheexclusiveright,privilegeandlibertyofmaking,constructing,
andusingtheinventionandsellingittootherstobeused.Inaccordancewith
theseexclusiverights,apersonwhoviolatesapatentisliabletothepatentee
andtoallpersonsclaimingunderthepatenteeforalldamagessustainedby
thepatenteeorbyanysuchperson(Section55(1)aR.S.1985c.P-4).
Thesestatutoryprovisionsdefinethepositiverightsconferredtothepatentee
upongrantofapatent.However,thereisnostatutoryexclusionwhichfurther
definessuchrightsconferredtothepatenteenoranyspecificexceptionwith
respecttotheexperimentaluse.
Nevertheless,thislastspecificquestionwasaddressed,onastatutorybasis,in
theWorkingPaperonPatentLawRevisionof1976(p.203).Itspurposewasto
exposedforpubliccriticism,proposalsforreformofthelawrespecting
patents.Theworkinggroupconsideredtheproposedlawinrespectofadding
toitaseriesofexclusionsinordertomakeclearwhataretherightsaccorded
tothepatentees.Someofthesespecificprovisions(Section24)weredevised
torestricttherightsofpatenteestothecommercialexploitationofinventions.
Section24(1)b,furtherspecifiedthattherighttocarryoutexperimentsutilizing
aninventionismutuallyexclusivetotherightofthepatenteetoexploithis
inventiononacommercialbase.TheWorkingpaperspecifiedthattherights
conferredbyapatenttoapatenteeshallnotextendto:
“24(1)ctheadministrationofamedecineoritspreparationin
individualcasesforsuchuse”.

Thesespecificprovisionswerenotconsideredinthereformofthelaw
regardingpatents.
Ontheotherside,ifweexaminetheCanadiancourt`sdecisions,thesituation
isratheruncertain.TherearefewCanadiancases.
TheSupremeCourtofCanadadecidedinMicroChemicalsLtd.v.SmithKline
&FrenchInter-AmericanCorp.(1971),2C.P.R.(2d)193,S.C.thatabonafide
experimentaluseofaninventiondoesnotconstituteinfringment.TheCourt
followedthereasoningofJesselM.R.inFrearsonv.Loe(1878)9Ch.D.48atpp.
66-67:
“Hesaidhedidthismerelybywayofexperiment,andnodoubtif
amanmakesmerelybywayofbonafideexperiment,andnot
withtheintentionofsellingandmakinguseofthethingsomade
forthepurposeofwhichapatenthasbeengranted,butwiththe
viewofimprovingupontheinventionthesubjectofthepatent,or
withtheviewofseeingwheteranimprovementcanbemadeor
not,thatisnotaninvasionoftheexclusiverightsgrantedbythe
patents.Patentrightswerenevergrantedtopreventpersonsof
ingenuityexercisingtheirtalentsinafairway.Butiftherebe
neitherusingnorvendingoftheinventionforprofit,themere
makingforthepurposeofexperiment,andnotforafraudulent
purpose,oughtnottobeconsideredwithinthemeaningofthe
prohibition,andifitwere,itiscertainlynotthesubjectforan
injunction.”
Yet,inordertobetterseizethescopeofthisdecision,wehavetoreplaceitin
itscontext.Thefactsareasfollow:theapplicant,Micro,appliedfora
compulsorylicenceandmadesmallquantityoftheproductforwhichhewas
applyingforalicence.Hispurposewastostudytheprocessoffabrication
andtoduplicateit,economically,oncethelicencewasissued.Micro`s
defenceconsistedinprovingthattheusehewasmakingofthesubstance
wasnotforprofit,butservedtoestablishthefactthathecouldmanufacture
thesubstancesafelywithaqualityequivalenttothatofthepatentee,sothe
chancestheCommissionerofPatentswouldgranthimtheappliedforlicence
wouldbetter.
Thetrialcourtconsideredthisaninfringment,buttheSupremeCourtof
Canadareversedit.TheSupremeCourtsaidthatitmaynotalwaysbe
necessarytoshowtheCommissionerofPatentsthecapacitytomanufacture,
butitisaprudentthingtodo.Moreover:

“[…]thefactthatanapplicantputhimselfinapositiontoshow
thatheispossessedoftheequipment,skillandknowhowby
experimentationdoesnot,inmyopinion,makehimaninfringer.”
Inotherwords,bonafideexperimentaluseisthelogicalresultoftherightto
applytoacompulsorylicenceandaprudentthingtodo,aslongasthe
applicantdoesnotuseorselltheinventionforprofit.
TheSupremeCourtseemstohaveputasidethespringboardprincipleina
caseofcompulsorylicenceunderapatentforamedecine[Instituteof
Canada,p.459-460].
Moreover,thisdecisionoftheSupremeCourtdoesnotfullydefinethescope
ofwhatisanacceptableexperimentalusewithinthemeaningofthelaw
regardingpatents.Followingcasesaddtothisconfusion.
Recently,inthecaseoftheWellcomeFoundationLtd.v.ApotexInc.[1991]32
C.P.R.(3d)350,F.C.T.D.,theFederalCourtdecidedthattheimportationofa
smallquantityofapatentedmedecineforexperimentaluseinhospitals,in
ordertoobtainanoticeofcompliancebeforeacompulsorylicencewas
deliveredtothedefendants,doesnotconstituteabonafideexperimental
usewithouttheideaofmakingprofit,andshouldthereforebeconsideredan
infringment.However,thecourtrefusedtodiscussthisquestionanyfurtherin
itsdecision.
Weconcludethatthefullscopeoftheexperimentaluseasadefencetoa
claimofpatentinfringmenthasnotbeensettledyetinCanada.

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