Competition Bureau releases updated IPEGs

On March 14, 2019, the Competition Bureau of Canada released its revised and updated Intellectual Property Enforcement Guidelines (“IPEGs”). The IPEGs are an informational, non-binding resource intended to support compliance with the Competition Act by articulating how the Bureau understands the intersection between competition policy and intellectual property rights.

The Bureau released the original IPEGs in March 2016. The recently-announced update to the IPEGs follows a round of public consultation in November and December 2018 on a draft revision.

The Bureau has published three public comments received during the consultation. The App Association (an industry association representing over 5000 app-makers and mobile companies), the Fraunhofer-Gesellschaft (a German-based research organization), and the Canadian Generic Pharmaceutical Association each submitted written comments on the new IPEGs.

The Bureau made only two substantive changes to the IPEGs through the recent revisions, which are described below.

1. Recent developments in Competition Act jurisprudence

First, the Bureau made an addition to the IPEGs to reflect recent jurisprudence considering the relationship between intellectual property rights and a party’s alleged anti-competitive behaviour.

Subsection 79(5) of Competition Act states that any act engaged in pursuant only to the exercise of an intellectual property right does not constitute an anti-competitive act. The original IPEGs included a brief discussion of two 1997 decisions of the Competition Tribunal considering the application of subsection 79(5).

The revised IPEGs include a new paragraph regarding the Federal Court of Appeal’s 2017 decision in Toronto Real Estate Board v. Commissioner of Competition, 2017 FCA 236 (“TREB”). In this decision, the Court found that Parliament intended subsection 79(5) of the Act to strike a balance between the monopoly and exclusivity rights granted in intellectual property laws and the need to protect the public against anti-competitive behaviour. The Court in TREB focused on the inclusion of the world “only” in subsection 79(5) and held that “anti-competitive behaviour cannot shelter behind a claim of copyright unless the use or protection of the copyright is the sole justification for the practice.”

The IPEGs now include the following summary of the TREB case under the heading “Enforcement Principles”, at paragraph 41:

“TREB was upheld in a decision by the Federal Court of Appeal […] The FCA noted that subsection 79(5) does not state that any assertion of intellectual property right shields what would otherwise be an anti-competitive act. The FCA also noted that Parliament intended to insulate intellectual property rights from allegations of anti-competitive conduct where the IP right is the sole purpose of exercise or use. Finally, the Court held that because the conditions TREB imposed on its copyright licenses were anti-competitive, it could not rely on copyright as a defence pursuant to subsection 79(5).”

The Bureau’s inclusion of the TREB case in the updated IPEGs does not change the law, or even signal a shift in the Bureau’s approach to intellectual property rights. However, the addition suggests that the Bureau may give increased scrutiny to a party’s motives or perceived purposes in asserting its intellectual property rights when assessing that party’s potentially anti-competitive behaviour. More generally, the new IPEGs suggest that the Bureau is anxious to prevent an unintended expansion of the scope of the anti-competition defence in subsection 79(5) of the Act.

Second, the new IPEGs include a discrete change to reflect 2017 amendments made to the Patented Medicines (Notice of Compliance) Regulations under the Patent Act. These amendments allow for the validity of a patent to be finally adjudicated in the context of a notice of compliance action, avoiding the common follow-on actions that occurred when notice of compliance proceedings were adjudicated by way of application.

To reflect these regulatory changes, in the new IPEGs, the Bureau has removed a paragraph from section 7.3 regarding the risks of “dual litigation” or “double jeopardy.” The text of the removed paragraph is below:

Dual Litigation: Brand and generic firms in Canada must cope with a system of legal double jeopardy created by the PMNOC regulations. Even after having succeeded in defending a prohibition proceeding brought under the PMNOC proceedings, a generic firm faces the possibility of an infringement action by the brand firm if the generic chooses to launch prior to patent expiry. Similarly, a brand firm whose prohibition application was successful still faces the possibility of proceedings for impeachment of its patent(s). The potential follow?on litigation is a relevant consideration when evaluating the magnitude of a brand firm’s payment to the generic firm in a settlement agreement.

This former language referred to the possibility, under the old PMNOC Regulations, that a generic pharmaceutical company could face an infringement action by a brand company even after successfully defending against a prohibition application under the Regulations (or conversely, that a brand company could face an impeachment action from a generic even after a successful prohibition application).

Because the validity of patents is now an issue which courts can conclusively determine under the amended PMNOC Regulations, this “double jeopardy” risk no longer exists, and the Bureau has updated the IPEGs accordingly.

Neither of these changes represents a fundamental shift in the Bureau’s approach to intellectual property rights. As noted by the Bureau in a news release, “[t]he updates are modest and will not substantially change the Bureau’s approach in enforcing the Competition Act with respect to matters involving intellectual property.”

According to a subsequent news release accompanying the updated IPEGs, the Bureau notes that its goal in publishing the Guidelines is to support compliance with competition law, including for entities operating in the high-tech industry, which may have sizeable intellectual property portfolios.

Authors: Jordan Scopa, Jaclyn Tilak and Wes Dutcher-Walls, 2018/2019 Articling Student-at-law