Canada’s IP Reforms

Critics have labelled Canada an intellectual property outlier. Changes are afoot to address this controversial moniker

Changes to Canada’s intellectual property laws that are aimed at harmonizing them with international obligations and treaties will not occur until at least late 2016, according to the Canadian Intellectual Property Office.

To some, that’s a shame. After all, no less august a body than the US Chamber of Commerce calls Canada an international IP outlier. Indeed, it is the only G7 country on the United States Trade Representative’s intellectual property watch list, which this country has graced since 1985 in company with countries like Russia, China and India.

“While the original optimistic CIPO view saw the Trade-marks Act amendments in force mid-2015 (there were even some suggestions of early 2015), the draft regulations for not only the Trade-marks Act but the Patent Act and Industrial Design Act too are now not ‘expected’ to be published in the Gazette until ‘late 2016,’” advises Scott MacKendrick of Bereskin & Parr LLP in Toronto in an e-mail.

To others, there’s no need to panic — not in the least.

“We’re not outliers at all,” says Carol Hitchman of Gardiner Roberts LLP in Toronto. “Some of our laws may be different, but that’s not the same as being an outlier. To suggest we’re anti-patentee, for example, is absolute nonsense.”

As Hitchman points out, countries like the UK and the US have certain laws that are harsher on patentees than their Canadian counterparts. “The test for obviousness is easier in the UK than it is in Canada,” she says. “And the US has file wrapper estoppel, which holds patentees to the interpretations they put on claims in their patent applications. In Canada, you can say one thing to the patent office and something different in litigation.”

As for Canada’s much-maligned doctrine of “utility” (discussed in more detail later in this article), Hitchman maintains that other countries have similarly problematic approaches. “It’s just that those approaches have different names, like ‘enablement’ in the US,” she says.

However that may be, those supporting greater international harmonization of Canada’s IP laws are optimistic that things are gradually lining up.

“Canada is at least going in the right direction, so we’re not the outliers we once were,” says Glen Bloom of Osler, Hoskin & Harcourt LLP in Ottawa. “But there will always be those who argue that we’re not going far enough and others who say we’re going too far.”

Bill C-59, which received Royal Assent on June 23, 2015, represents the most recent legislative change in Canada’s IP evolution. Its most significant IP component provides a statutory privilege for confidential communications with patent and trade-mark agents. Similar provisions exist in Australia, New Zealand, the United Kingdom, France and Sweden, as well as in the proposed regulations for the European Union’s Unified Patent Court.

Bill C-59 also remedies Canada’s historic inflexibility regarding the loss of rights for failure to meet deadlines, particularly force majeure events like floods, ice storms and power outages. The legislation allows the Canadian Intellectual Property Office to extend key deadlines in the face of force majeure events.

From a copyright perspective, Bill C-59 brings Canada onside with the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who are Blind, Visually Impaired or Otherwise Print Disabled. It also extends protection of sound recordings and performance from 50 to 70 years after the first recording release.

 

Bill C-43, which received Royal Assent in December 2014, is also significant. Among other things, the Economic Action Plan 2014 Act, No. 2, went a long way to harmonizing the Patent Act and Industrial Design Act with the Patent Law Treaty and the Hague Agreement Concerning the International Registration of Industrial Designs. The patent changes came more than 14 years after Canada undertook adherence to the Patent Law Treaty, which was adopted in Geneva in June 2000 by 36 countries, including the US and the EU.

The Patent Law Treaty seeks to simplify and harmonize administrative practices among national IP offices with respect to the patent application process. The domestic amendments relate to filing formalities, additions and incorporations by reference, notification of unpaid fees, the reinstatement process, restoration requirements, intervening rights and transfers.

The changes to the Industrial Design Act modernize the legislation’s language and amend provisions relating to the contents of registration applications, the requirements for a registrable design, the grace period for filing and the term of an exclusive right for a design.

Six months earlier, in June 2014, Bill C-31 had received Royal Assent. Despite opposition from most – but not all – of the country’s intellectual property Bar, it introduced fundamental changes to trade-mark law. The changes brought Canadian law into conformity with international agreements such as the Madrid Protocol, the Singapore Treaty on the Law of Trademarks and the Nice Agreement.

Most significantly, the changes remove previous use of a trade-mark, in Canada or elsewhere, as a requirement for registration. They align Canada with other jurisdictions, including the EU, where trade-mark rights are based on registration alone. The upshot of the amendments is that anyone will be able to register a trade-mark whether or not they have a legitimate commercial application in mind for the mark, and they may do so without the necessity of showing prior use.

“The amendments simplify the trade-mark application process by eliminating red tape for businesses and aligning Canada with its major trading partners,” an Industry Canada spokesman said in an email.

The new system does allow legitimate users to oppose an application for a mark. They can also attack a trade-mark registration on the basis of non-use, but only three years after a mark has been registered. Because the amendments allow registration with no details of use, however, it will be far more difficult and expensive to assess the viability of a decision to oppose a new application or move to expunge one.

In the 1980s, several Latin American countries initiated registration systems. Almost immediately, speculators moved to register luxury brand names, like Ralph Lauren and Polo, forcing brand owners to either commence lengthy and costly proceedings to expunge the trade-marks, or to negotiate the purchase of the mark from the speculators.

Otherwise, the Comprehensive Economic and Trade Agreement (CETA) between Canada and the EU, on which agreement in principle was announced in 2014, will improve Canadian protection of pharmaceutical innovators’ patents — but not narrow the gap entirely.

The three key areas in which Canadian protections lag behind those of other developed nations, such as the US and the UK, are patent-term restoration, which extends the life of patents to account for mandatory regulatory delays; data exclusivity, which limits the period during which generics may use innovator data for drug approval applications; and rights of appeal, which Canada’s Patented Medicines (Notice of Compliance) Regulations, used to resolve issues between innovators and generics, grants only to generics.

Currently, the US and EU offer up to five years of patent restoration, while Canada offers none: CETA envisions Canadian protections to a maximum of two years. Innovators will also get a right of appeal when a court invalidates their patents. Otherwise, data protection does not appear to have been addressed in CETA, meaning that the gap between Canada, at up to eight-and-a-half years, and the EU, which offers 10 years plus one year for new indications, will likely remain. There’s also a difference between Canada and the US: the US offers five years plus one year for regulatory delays plus three years for new indications for pharmaceuticals, and 12 years for biologics.

According to Nadeem Esmail in Calgary, Senior Fellow at the Fraser Institute, the partial harmonization from CETA could signal more change as Canadian trade policy expands.

“These enhanced protections might also be valuable in future trade negotiations and relationships such as the Trans-Pacific Partnership (TPP) and in regions like Asia and Latin America, where the EU and US are aggressively pursuing free trade agreements,” he writes.

 

Despite these changes, important harmonization issues remain, especially in patent law.

So much so that pharmaceutical giant Eli Lilly, having seen Canadian courts invalidate patents for its ADHD drug Atomoxetine (Strattera) and the anti-psychotic Olanzapine (Zyprexa), has cited the US watch list in filing a C$500-million NAFTA claim alleging that Canadian patent law does not conform with NAFTA and other international treaties because it is unpredictable and weaker than international norms.

“Our patent system is getting a bad rap internationally because it has become extremely liberal in moving from pro-patentee to anti-patentee,” says Andrew Bernstein of Torys LLP in Toronto.

Canada’s allegedly sullied reputation arises largely because it is the sole developed nation that requires applicants to demonstrate the “utility” of an invention at the time of application.

“Utility has always been and still is the issue on which Canada remains the biggest outlier,” says Christopher Van Barr of Gowling Lafleur Henderson LLP in Ottawa. “Counsel and clients elsewhere still find it difficult to believe that our law is so different from the rest of the world.”

To be sure, Canada’s Patent Act mandates that an invention must be “useful” to be patentable. Usefulness is not defined in the legislation, but throughout the twentieth century courts consistently ruled that an invention only needed to have a “scintilla of utility” to be patentable.

All this changed in 2002 in the seminal decision of Apotex Inc. v. Wellcome Foundation Ltd. Historically, utility had been examined by the Patent Office as of the date the patent was challenged. But in Wellcome, the SCC held that patent applicants must either demonstrate or “soundly predict” the utility of an invention as of the filing date. This effectively required applicants to evidence utility in the patent application, even though this disclosure requirement is not found in the Patent Act. Some lawyers say that makes sense because pharmaceutical patent applications are often filed long before the clinical trial process is over.

Consequently, courts have been assessing utility against the “promise of the patent,” a subjective construct that the courts determine by reading the patent as a whole, as opposed to just the patent claims. The upshot is that determining the promise has become a very contentious and unpredictable issue in Canadian patent litigation and a fruitful ground for attacking pharmaceutical patents in particular.

In following Wellcome, Canadian courts have gone so far as to strike patents on the basis that utility has not been shown in the patent application even though the drugs have in fact proved useful by the time the courts dealt with the issue. Generic drug companies, of course, have benefited from this jurisprudence because it allows them to launch generic versions of a drug in Canada well before a patent would otherwise have expired.

According to Donald Cameron of Bereskin & Parr LLP in Toronto, who represents innovators, Canadian courts have decided that a host of blockbuster drugs are not “useful” under Canadian patent law. Apart from Strattera and Zyprexa, the list includes Mevacor, a cholesterol-lowering agent; Nexium, an acid reflux medication; Evista, used to treat and prevent osteoporosis; Altace, prescribed for high blood pressure; and Xalatan, for high eye pressure. Eli Lilly says that decisions of this kind have cost it C$1 billion in sales and deprived the country of 280 jobs.

Still, utility isn’t the only area in which Canadian patent law has departed from international norms.

Consider, for example, the case of the “Harvard mouse,” known scientifically as the oncomouse. Scientists at Harvard Medical School engineered the oncomouse more than 30 years ago by manipulating genes that cause cancer. Because Harvard scientists created the mouse to quickly develop cancers found in humans, these mice have proven invaluable to researchers studying cancer cures and treatments.

Harvard obtained numerous patents on the mouse in the United States, Europe, Japan and Australia. But the university’s 17-year battle to patent the oncomouse in Canada ended with disappointment in December 2002 when the Supreme Court of Canada ruled, in a 5-4 decision, that the mouse wasn’t patentable under Canadian legislation. That left Canada as the only first-world country to refuse the patent.

Otherwise, Canada lags far behind other jurisdictions in bringing forward emerging patent issues, such as the patentability of human genes, for judicial consideration. Consequently, it’s uncertain whether Canadian courts will follow the lead of the US Supreme Court’s 2013 decision in Association for Molecular Pathology v. Myriad Genetics, Inc., which found that naturally occurring genetic information was a product of nature that could not be patented simply because it had been isolated or sequenced.

The Canadian position could be determined in a recent case brought by Nathaniel Lipkus and Sana Halwani of Gilbert’s LLP in Toronto on behalf of the Children’s Hospital of Eastern Ontario. The hospital is seeking a declaration that University of Utah patent claims relating to five genes implicated in a heart disorder are invalid; the hospital is also attacking the validity of patents for related diagnostic tests.

“Canada remains an outlier with respect to utility, with respect to the patentability of methods of medical treatment and to the patentability of higher life forms,” Van Barr says. “These issues continue to leave us in a category separate from the US and other countries.”