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PRB 99-46E

Patent Protection for Pharmaceutical Products in Canada —
Chronology of Significant Events *

Kristen Douglas, Célia Jutras
Law and Government Division

Revised 6 October 2008

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1923 – The Patent Act was amended to provide for compulsory licensing for manufacturing purposes for food and drug patents.  In relation to patented medicines, the amendment allowed a compulsory licence to be granted if a medicine’s active ingredients were manufactured in Canada. (A compulsory licence is a statutory licence that gives the licensee the right to manufacture, use, or sell a patented invention before the patent expires. Licences could be granted without the consent of the patent holder and the licensee was required to pay a royalty.)

1969 – The Patent Act was amended to permit compulsory licences to import medicines into Canada.  This allowed generic drug producers to import a medicine’s active ingredients and process them into final form for sale.  The Commissioner of Patents was authorized to issue compulsory licences to import and to fix a royalty for them.  Royalty rates were set at 4% of the net selling price of a drug in its final dosage form.

1983 – The federal Minister of Consumer and Corporate Affairs called for a rebalancing of the 1969 policy on compulsory licensing in order to generate growth in the pharmaceutical industry.

1984 – The federal government established the Commission of Inquiry on the Pharmaceutical Industry (Eastman Commission), part of whose mandate was to make recommendations on patent protection for the pharmaceutical industry.

1985 – The Commission of Inquiry on the Pharmaceutical Industry recommended that an owner of a patent for a medicine be granted a short period of exclusivity (four years) from the date when a new drug received a Notice of Compliance (NOC)(1) authorizing marketing.  The Commission also recommended that royalties paid under compulsory licences should be put into a special royalty fund.  The royalty rate would be determined in accordance with a formula that took into account the value of a licensee’s sales of compulsorily licensed products in Canada, the pharmaceutical industry’s world-wide ratio of research and development to sales, plus 4%.  Distributions from the fund to firms whose patents were under compulsory licence were to be based on the relative research intensity of the patent-holding firms.

1987 – Bill C-22, which amended the Patent Act, made significant changes to the compulsory licensing system for patented medicines. The amendments guaranteed patent owners a period of protection from compulsory licences. A brand-name drug manufacturer receiving an NOC for a drug after 27 June 1986 was guaranteed 10 years of protection against compulsory licences to import and seven years’ protection against compulsory licences to manufacture.  Patented medicines for which NOCs had been issued on or before 27 June 1986, and for which generic drug producers had obtained either an NOC or a compulsory licence to import, but not both, were entitled to seven years’ protection against compulsory licences to import.  Similarly, medicines for which an NOC had been issued on or before 27 June 1986, but for which neither a compulsory licence nor a generic NOC had been issued, had eight years of protection against compulsory licences to import.

Additional protection was granted to drugs invented and developed in Canada; compulsory licences to import were not available, but compulsory licences to manufacture could be issued if, within the seven years after the NOC for the drug had been issued, the inventor failed to make the drug in Canada for the purpose of completely or substantially supplying the Canadian market.

Bill C-22 also changed the general patent law to provide that the term of a patent would be 20 years from the date on which a patent application was filed, rather than 17 years from the date the patent was issued. This change became effective in 1989.

1991 – The then Director-General of the General Agreement on Tariffs and Trade, Arthur Dunkel, compiled a Draft Final Act for the conclusion of the Uruguay Round of the GATT multilateral trade negotiations, which also contained a text of the draft Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).  Article 31 of the TRIPS agreement contained provisions on “Use Without the Authorization of the Right Holder.”  It was generally accepted that the Canadian compulsory licensing regime for pharmaceutical products in existence at this time was incompatible with Article 31.  (The text of the TRIPS Agreement as contained in the so-called Dunkel text was informally agreed to by all parties to the GATT negotiations and became part of the Agreement finally adopted in 1994.)

1992 – The federal government endorsed the Dunkel text.  The text of the North American Free Trade Agreement (NAFTA) was finalized, with Chapter 17 largely based on, and in many instances identical to, the provisions of the then draft TRIPS Agreement.  Article 31 of the TRIPS Agreement was reproduced almost identically in Article 1709(10) of NAFTA.

1992 – The federal government moved to further modify the Patent Act and to implement the TRIPS and NAFTA provisions on intellectual property by introducing Bill C-91, the Patent Act Amendment Act, 1992, in the House of Commons.  The bill eliminated compulsory licences for pharmaceutical products though compulsory licences in existence before 20 December 1991 continued in effect, subject to the seven and ten-year limitations established in Bill C‑22. Compulsory licences granted after 20 December 1991 but before the day the Act came into force were terminated when the Act became effective.

Bill C-91 also created two exceptions to an action for patent infringement (the rule that anyone who, without the consent of the patent owner, makes, uses or sells a product where a patent is in force is liable for patent infringement).  Both exceptions permit persons to use a patented product for certain purposes before the patent expires.  The first exception, known as the “early working” exception, allows a person to use a patented invention while the relevant patents are in force only for obtaining regulatory approval to sell an equivalent product after the patents have expired (section 55.2(1)). Under this provision, a generic drug manufacturer could develop a generic version of a medicine and take whatever steps were necessary to meet the regulatory requirements pertaining to its sale before the expiry of the relevant patents.  The second exception (“stockpiling” exception) allows a person to use a patented invention for a period of time before the patent expires in order to manufacture and store a product intended for sale after the expiry of the patent (section 55.2(2)).

Bill C-91 also provided for product patents for pharmaceutical inventions. Prior to the bill such inventions were only patentable as process patents (or so-called “product-by-process patents”).

February 1993 – The Patent Act Amendment Act, 1992 became law.

March 1993 – The Patented Medicines (Notice of Compliance) Regulations (Linkage Regulations) detail how the granting of an NOC for a generic drug will be linked to the expiry of patents for the brand-name equivalent drug.  Essentially, these regulations provide that, unless a patentee consents to the making of the generic drug, the relevant patents are invalid, or there is no infringement of any patent rights, the Minister of Health cannot issue an NOC to a generic manufacturer until the relevant patents expire.

The Manufacturing and Storage of Patented Medicines Regulations provide that a generic manufacturer can stockpile a generic version of a drug six months before the relevant patents are due to expire.

April 1997 – The House of Commons Standing Committee on Industry issued a report on the Patent Act Amendment Act, 1992 recommending that the government re-visit the regulatory regime associated with Bill C-91.

December 1997 – The European Union (EU) requested that Canada hold consultations under the World Trade Organization (WTO) dispute settlement procedures in relation to the protection of pharmaceutical inventions under the Canadian Patent Act and Canada’s obligations under the TRIPS Agreement.

March 1998 – Amendments to the Patented Medicines (Notice of Compliance) Regulations came into effect.  Although the amendments made a number of changes to the operation of the Linkage Regulations, they did not change the overall regime governing patent infringement, early working or stockpiling.

February 1999 – The Dispute Settlement Body under the WTO established a Panel to hear the European Union’s challenge under the TRIPS Agreement in respect of the early working exception (section 55.2(1)) and the stockpiling exception (section 55.2(2)) of the Patent Act

The EU argued that Patent Act and the regulations that provide for the manufacturing and stockpiling of pharmaceutical products without the consent of the patent holder for a period of six months prior to the expiration of the 20-year patent term (section 55.2(2)) violate Canada’s obligations under the TRIPS Agreement (Article 28.1 and Article 33).

Moreover, the EU maintained that by treating patent holders in the field of pharmaceutical inventions less favourably than patent holders of inventions in all other fields of technology, Canada had violated its obligations under Article 27.1 of the TRIPS agreement. This requires patents to be available and patent rights to be enjoyable without discrimination as to the field of technology.

The EU further contended that the provisions of Article 28.1 of the TRIPS Agreement are violated by the provisions of the Patent Act (section 55.2(1)), whereby a third party may, without the consent of the patent holder, use a patented invention while the patent remains in force in order to obtain regulatory approval for the sale of an equivalent product after the patent has expired.

Canada, on the other hand, argued that that section 55.2(1) and 55.2(2) of the Patent Act did conform with Canada’s obligations under the TRIPS Agreement, because:

each of these provisions is a “limited exception” to the exclusive rights conferred by a patent within the meaning of Article 30 of the TRIPS Agreement; and

these provisions neither discriminate as to the field of technology in which any relevant invention occurs nor reduce the minimum term of patent protection.

September 1999 – A Dispute Settlement Body under the WTO established a panel to deal with an allegation by the United States that Canada’s term of patent protection for patents issued in relation to applications filed before 1 October 1989 was inconsistent with Canada’s obligations under the TRIPS Agreement. 

The U.S. argued that the Agreement requires a minimum patent term of 20 years from the date a patent application is filed.  Patents based on applications filed before 1 October 1989 (Old Act patents), where the term is 17 years from the date the patent is issued would, according to the U.S., violate the TRIPS Agreement if the 17-year term from the date of the issue of the patent was shorter than a 20-year term counted from the date the patent application had been filed.  This argument would therefore apply to Old Act patents that had been granted within three years from the date the application had been filed.

Canada argued that Old Act patents had essentially the same protection as New Act patents and that the term of protection provisions of the TRIPS Agreement did not apply to patents issued before TRIPS came into force.

March 2000 – The WTO Panel agreed with Canada on the early working exception in section 55.2(1) of the Patent Act, holding that it was not inconsistent with Canada’s obligations under the TRIPS agreement; however, the Panel sided with the EU with respect to the stockpiling exception in section 55.2(2) and concluded that this was inconsistent with Canada’s TRIPS obligations.

April 2000 – Canada announced that it would implement the WTO Panel’s finding that Canada’s stockpiling exception is not consistent with Canada’s TRIPS obligations.

May 2000 – Ruling in favour of the United States, a WTO Panel concluded that Canada’s term of patent protection for patent applications filed before 1 October 1989 (17 years from the granting of the patent) did not meet the minimum term of patent protection established under TRIPS.  The Panel found that TRIPS requires a minimum term of 20 years from the date a patent application is filed.

Bill C-22 created two patent term provisions:  17 years from the granting of the patent for applications filed before 1 October 1989 (“old regime”) and 20 years from the filing of the application for applications filed on or after 1 October 1989 (“new regime”). 

The United States claimed that TRIPS required a minimum 20-year term from the date of filing for all patents.  The dispute concerned patents granted under the old regime within three years from the date that the applications for them had been filed.

Canada announced that it would appeal the WTO Panel decision.

September 2000 – The WTO Appellate Body upheld the Panel decision that the section of the Canadian Patent Act which provides for a term of 17 years from the date of issuance violates Canada’s obligations under the TRIPS Agreement.

October 2000 – The Governor General in Council, on the recommendation of the Minister of Industry, revoked the Manufacturing and Storage of Patented Medicines Regulations to comply with the WTO Panel ruling on the stockpiling exception (E.U. dispute).  As a result, the stockpiling exception no longer had any legal force and effect.

November 2001 – Ministers met in Doha, Qatar, to launch the latest round of multilateral trade negotiations in the WTO.  The Doha Ministerial Declaration on TRIPS and Public Health (Doha Declaration), which emerged from the Ministerial meeting, clarified the implementation issues regarding WTO agreements signed in 1994, at the end of the Uruguay Round of Trade Negotiations.

Paragraph 6 of the Doha Declaration recognized the limiting consequences of TRIPS on compulsory licences exceptions.  For example, Article 31(f) of TRIPS restricts granting compulsory licences “predominantly” for domestic market supply, hindering the capacity of poor countries with insufficient manufacturing to benefit from this exception.  The ministers urged the General Council to seek an expeditious solution to this problem.

June 2001 – Bill S-17, An Act to amend the Patent Act, came into force on 14 June 2001 and was a response to the E.U. and U.S. challenges to certain provisions of the Patent Act.  The new law was consistent with Article 33 of TRIPS, which requires that WTO members provide a minimum term of patent protection of 20 years from the filing date.

August 2003 – The General Council of the WTO implemented Paragraph 6 of the Doha Declaration and released a decision waiving certain obligations in the TRIPS Agreement.The waiver of WTO members’ obligations under Article 31(f) allowed countries to produce generic copies of patented pharmaceutical products under compulsory licences for export to developing and least-developed countries that did not have the capacity to manufacture such products domestically.

November 2003 – Canada was the first country to consider the implementation of the WTO General Council decision to allow generic versions of patented drugs to be exported.  Bill C-56, An Act to amend the Patent Act and the Food and Drugs Act, did not progress beyond second reading as Parliament was prorogued on 12 November 2003.

May 2004 – The Parliament of Canada passed Bill C-9, An Act to amend the Patent Act and the Food and Drugs Act (The Jean Chrétien Pledge to Africa), to facilitate access to safe and effective pharmaceuticals and eliminate barriers to the export of cheaper generic versions of patented drugs to developing countries unable to manufacture the drugs locally.  More specifically, the amendments to the Patent Act (Clause 1, which adds new sections 21.01 to 21.17 after section 21) allowed for the issuance of compulsory licences to Canadian firms authorizing them to manufacture in Canada specific, patented pharmaceutical products for export to certain developing and least-developed countries.

Eligible pharmaceutical products and importing countries appeared in Schedules 1 through 4 of Bill C-9.  These schedules can be readily amended by the Governor in Council with the object of remaining current with international developments.

May 2005 – An Act to amend the Patent Act and the Food and Drugs Act (The Jean Chrétien Pledge to Africa) and its regulations came into force, implementing “Canada’s Access to Medicines Regime” (CAMR).  The regime was created to provide the legislative and regulatory framework permitting the Canadian Commissioner of Patents to grant export-only compulsory licences.

The main features of CAMR are the following:

December 2005 – WTO members approved changes to TRIPS that will transform the August 2003 decision into a permanent amendment once it is ratified by two thirds of WTO members.  This General Council decision marked the first time a core WTO agreement would be amended.  The period of acceptances by WTO members of the Protocol Amending the TRIPS Agreement was set to end on 1 December 2007.

May 2007 – Rwanda became the first country to notify the WTO of its intention to import
7 million tablets of Apo-TriAvir, a once-a-day generic antiretroviral HIV/AIDS medication to be manufactured by Apotex Inc., a Canadian pharmaceutical company.

August 2007 – Brand-name pharmaceutical companies Boehringer Ingelheim Canada Ltd. and GlaxoSmithKline, together holding patents rights for the three molecules in Apo-TriAvir, gave consent to Apotex Inc. to generically manufacture the drug.

September 2007 – The Commissioner of Patents issued the compulsory licence and authorized Apotex Inc. to start manufacturing Apo-TriAvir. Comments in the media criticized the complicated nature of the legislation and the time taken to send Canadian generic drugs to least developed countries. 

December 2007 – The period for acceptances by Members of the Protocol Amending the TRIPS Agreement was extended until 31 December 2009. TRIPS currently stands without any permanent amendments.

Industry Canada concluded its review of Canada’s Access to Medicines Regime and concluded that criticisms of CAMR may be unfounded.  Based on the efficiency with which Apotex Inc.’s application for a compulsory licence was granted by the Commissioner of Patents, Industry Canada found that it was premature to suggest amendments to CAMR.

September 2008 – The first Canadian-manufactured generic AIDS medicine, Apo-TriAvir, was shipped to Rwanda.  The shipment of 7 million doses is expected to treat at least 21,000 people for one year.  A second shipment of 7 million doses is scheduled to leave in September 2009.

Upon release of these medicines, Apotex Inc. informed the media that it will not be going through the process again unless the CAMR is reformed.  The generic drug company requested that the government address the complexity of the process, its time demands, and the cost of the compulsory licensing request.  The company estimates it has spent $3 million in the process, not including legal fees.


Endnotes

* The original version of this document was prepared by Margaret Smith, formerly of the Library of Parliament.

  1. A Notice of Compliance is the name given to the document issued by the federal Department of Health that formally authorizes the sale of drug after it has met the requisite safety and efficacy standards.

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