Focus: Where IP intersects with competition law

The Competition Bureau’s first major update to its Intellectual Property Enforcement Guidelines in a generation marks a good opportunity for IP lawyers to reacquaint themselves with their competition law colleagues, according to one leader in the field.

The bureau released its final update to the IPEGs in March after two years of consultations, implementing the first major revision to the guidelines since they were introduced in 2000. 

IP litigator Peter Wells, a partner with McMillan LLP in Toronto, says despite the complementary nature of competition and IP law, very few practitioners overlap between the areas in their own practice. 

“It’s useful for everyone to have an idea of how the bureau sees the intersection of these two areas of law, and it forces those in IP who don’t do a lot of competition law to get it back in our heads,” Wells says.

“The takeaway for most lawyers is that you should be aware of all the tools available when someone attempts to muscle your client. If you’re an IP lawyer, you should think about talking to a competition lawyer, and vice versa.

“Between the two of you, you may get a combination of tools that will have a synergistic effect and give a lot more bang for the buck than any one of the remedies alone.” 

He says the guidelines were due for an update in order to keep up with trends in the marketplace.

“Since the year 2000, people have found some clever ways of using their intellectual property that are not always competition-friendly, which the Competition Bureau has taken a dim view of,” Wells says.

According to Andrea Kroetch, an Ottawa lawyer with IP boutique Smart and Biggar, the updated IPEGs were greeted with caution by businesses in the high-tech sector.

“It’s obviously good to have more guidance, but when you get an update like this, it always makes you wonder if it could signal a renewed interest in enforcement on the part of the Competition Bureau,” she says.

Jonathan Bitran, a lawyer in the business law group at McCarthy Tétrault LLP’s Toronto office, says the updated IPEGs reinforce the idea that it will typically take “something more” than the “mere exercise” of an intellectual property right to attract the attention of the bureau under the general provisions of the Competition Act. He says the bureau’s musings on pharmaceutical patents caused some of the most chatter from clients. 

“Pharmaceuticals are a big focus for the bureau, so it’s not surprising that they feature prominently.

“The framework and principles are broadly the same, but they’ve put a lot more meat on the bone,” he says.

The IPEGs clarify when the bureau will (or will not) get involved concerning settlements made under the Patented Medicines (Notice of Compliance) Regulations.

For entry-split agreements governing the entry of generic drugs in a particular market, the bureau will stay out as long as the settlement does not provide for payment to the generic manufacturer, and the generic’s entry comes on or before the expiry of the patent at issue.

However, in the case a settlement includes a payment from the manufacturer of a brand-name drug to the makers of a generic version of the same drug, the bureau says the parties should expect a review under s. 90.1 of the Competition Act. 

According to the IPEGs, parties to agreements can eliminate the chance of a criminal review under s. 45 of the act as long as the settlement:

•    does not extend beyond the expiry of the patent;

•    does not restrict competition for products unrelated to the patent at issue;

•    is not a sham.

“The legal community is happy about” the bureau’s clarity over criminal liability, according to Bitran, who says earlier draft versions of the IPEGs appeared to contemplate a broader scope for a s. 45 review.

The updated guidelines also draw a distinction between “hard” and “soft” product hopping, the name given to circumstances when drug makers introduce a new formulation of a medicine whose patent is expiring.

The idea is to switch the market to the new tweaked offering, which can undercut the generic market for the old off-patent drug.

In the “hard” version of the practice, the patentee removes its old product from the market altogether.

That could attract an inquiry under the abuse of dominance provisions in s. 79 of the Competition Act, the bureau warns in the IPEGs.

However, a softer version of switching, in which the patentee continues to make the old drug available but simply stops promoting it to physicians in favour of the newer formulation, will not raise competition issues for the bureau, as long as the manufacturer did not engage in false or misleading marketing about its old product.  

The IPEGs also touch on the hot topic of PAEs: patent-asserting entities, more colloquially (and dismissively) known as “patent trolls.”

The bureau defines PAEs as businesses that acquire patents without actually using or making products based on the patented technologies it owns.

According to example scenarios given in the IPEGs, patentees who agree to share revenue by assigning their rights to PAEs for enforcement are unlikely to face proceedings by the bureau.

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