How might CETA affect TPP?

By Scott Foster and Patrick Cashin

In the January/February 2016 edition of Bio Business, the opportunities that the Trans-Pacific Partnership Treaty (TPP), if ratified, might provide to biotech-related industries in Canada were described. Our analysis also included a brief discussion of the impact that the Canada-European Union Comprehensive Economic and Trade Agreement (“CETA”) might have on implementation of the provisions of the TPP. On February 29, 2016, almost immediately after the earlier article was published, the federal government announced that a legal review of the English text of CETA was complete and the text of the final agreement was published. International Trade Minister Chrystia Freeland has said she hopes that CETA will be ratified later this year and come into force in 2017. We have reviewed the final legal text of CETA and can provide the following updates to the earlier article. We will also briefly describe some other provisions of CETA that are likely to be of interest to biotech-related industries in Canada.

Patent term restoration for pharmaceutical products

As described in the earlier article, for patents covering pharmaceutical products, patent terms can be extended where “unreasonable curtailment” of the patent term occurs during the marketing approval process. A similar principle applies in Europe. The objective is to provide additional patent protection to permit the patentee to recover some of the expensive research and development costs.

Under the final legal text of CETA, the maximum additional period of protection is to be between two and five years. The Canadian government has publicly suggested that it intends to set the maximum time available at two years. In contrast, in Europe the maximum extension allowed to innovators is five years. It therefore appears that there is to be a significant difference in the period of protection available in Europe and Canada. The TPP does not state how long the delay must be before a patent is entitled to a term extension. In comparison, CETA appears to require a minimum regulatory delay of five years between the filing of a patent and granting of marketing approval to qualify for patent term restoration. This would be harmonious with the Supplementary Protection Certificate regime currently in force in Europe.

Patent linkage mechanisms

A company may not market a medicine, drug or biologic in Canada until that product has been approved by the issuance of a Notice of Compliance (“NOC”) under the Food and Drug Regulations. For the innovator, this requires the submission of a New Drug Submission containing data on the safety and efficacy of the product; including the results of clinical trials which can cost (particularly when combined with the costs of drug discovery) hundreds of millions of dollars. In contrast, a generic drug manufacturer seeking to market a generic product only needs to file an Abbreviated New Drug Submission (“ANDS”) and establish that its product is bioequivalent to an approved drug. In this manner, it is not necessary for the generic company to invest in the expensive and extensive clinical studies.

When filing an ANDS, the generic must also address any patents listed against the innovative drug before the Minister of Health will grant an NOC. Under the Patented Medicines (Notice of Compliance) Regulations (the “Regulations”), the generic company sends a Notice of Allegation to the innovator and thereafter the innovator may commence an application under the Regulations to prohibit the Minister of Health from granting an NOC to the generic. The Regulations thus establish a link between the granting of an NOC and the patent system to summarily prevent any potential drug approvals that would also be considered an infringement of a valid patent.

In proceedings under the Regulations, should the innovator be unsuccessful and the generic’s drug approval submission be considered approvable, the Minister of Health is mandated to issue a NOC. Under such circumstances, any appeal by the innovator is considered moot as the generic company is already approved. The innovator’s only recourse is therefore to commence a patent infringement action in the courts.

The lack of an effective appeal mechanism for innovators would appear to be ameliorated by CETA, which would require that “all litigants [be] afforded equivalent and effective rights of appeal” in linkage proceedings. Thus, CETA, which aims to allow the innovator a right of appeal, will most likely require amendments to the Regulations.

Counterfeit goods

CETA also includes several obligations aimed at curtailing trade in counterfeit goods; including enhanced border enforcement rights and more severe remedies and penalties. These provisions will be useful to help stem the flow into Canada of counterfeit products such as pharmaceuticals, veterinary products and agricultural tools and products. Canada has already implemented the enhanced border measures when it passed the Combating Counterfeit Products Act amending the Copyright Act, the Trade-marks Act and the Customs Act to provide the Canada Border Services Agency and rights holders with tools to help limit the flow of counterfeit goods in or out of Canada. These provisions came into force on January 1, 2015, and are commonly referred to as the Request for Assistance Program. The Copyright Act was also amended by the Combating Counterfeit Products Act to contain provisions that criminalize the possession, sale or distribution of infringing works. New Prohibitions also apply to those importing products which violate trade-mark rights, and these prohibitions have been incorporated into the Trade-marks Act. Persons found to contravene these provisions are subject to fines of up to $1 million and imprisonment for up to five years.

Geographical indications

A geographical indication (“GI”) is currently defined in the Trade-marks Act as an indication that identifies the wine or spirit as originating in the territory, region or locality of a member of the World Trade Organization, where a quality, reputation or other characteristic of the wine or spirit is essentially attributable to its geographical origin. Under CETA, Canada will provide protection for over 173 additional terms covering various agricultural products and foodstuffs. Examples include “prosciutto di parma” and “parmigiano reggiano”. CETA requires Canada to set up a means for rights holders to block unauthorised parties from using protected GIs and to allow rights holders to block registration by third parties of marks that are protected as GIs. A number of exceptions listed in Part A of Annex 20-A of CETA allow for different uses of certain GI-protected terms. The impact of such protection is potentially quite broad. In 2015, the Toronto Star reported that the Italian trade commissioner to Canada estimated that Canada buys $3.6 billion dollars’ worth of “fake” Italian foods yearly. Blocking use of protected terms should result in a decrease of such “fake” imports.

Conclusion

It is likely that as a result of the ratification of CETA, some aspects of Canada’s intellectual property laws and systems will need to change. Innovative companies in particular can expect to see enhanced protections for innovative drugs, with substantial changes in the litigation process.  

Scott Foster is Partner, Gowling WLG in Vancouver and Patrick Cashin is Associate, Ottawa.

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