Archived — The Competition / Intellectual Property Interface-Present Concerns And Future Challenges
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The Interface Between Competition Law And Intellectual Property Law
Present Concerns And Future Challenges Facing Industry Canada
Richard F.D. Corley
Blake Cassels & Graydon LLP
"The fact is, though, that the monopoly on the bricks is over, and Mega Bloks and Lego bricks may be interchangeable in the bins of the playrooms of the nation - dragons, castles and knights may be designed with them, without any distinction ... The appellant is no longer entitled to protection against competition in respect of its product. It must now face the rigours of a free market and its process of creative destruction."*
*Kirkbi AG v. Ritvik Holdings Inc., 2005 SCC 65, paras. 61, 69 (Nov. 17, 2005)
Table of Contents
I. The Intellectual Property/Competition Law Interface
Intellectual property ("IP") laws and competition laws are both intended to promote efficiency. However, the different mechanisms that each employs to achieve this goal have sometimes been viewed as a potential source of tension. Competition laws have traditionally tended to focus on the achievement of static allocative and productive efficiencies by preventing the inappropriate accumulation or exercise of market power with respect to existing products or services. IP laws seek to foster long-term dynamic efficiency gains through incentives to invest in the creation of valuable developments, which may involve the acquisition, perfection and protection of IP rights ("IPRs") and, in some cases, confer an element of market power on the holder.
In some circumstances, however, the achievement of certain dynamic efficiencies necessarily precludes the attainment of other allocation or productive efficiencies and vice versa. Consequently, there is a danger that the traditional competition law emphasis on shorter-term allocative efficiency may result in enforcement activities that adversely impact the incentives to innovate and the long-term benefits to society that flow from the research and development activities which are fostered by the protection of IPRs.1
1. Objectives of Intellectual Property Law
IP laws were first enacted to protect the inventors of new inventions and creators of original works from the unscrupulous exploitation of their work without compensation. For example, the preamble of the first copyright law -- the Statute of Anne,2 which was enacted by the British Parliament in 1709 -- provides insight into the underlying problem faced by the legislators at that time:
Whereas Printers, Booksellers and other Persons have of late frequently taken the Liberty of printing, reprinting and publishing; or causing to be printed, reprinted, and published, Books and other Writings, without the Consent of the Authors or Proprietors of such Books and Writings, to their very great Detriment, and too often to the Ruin of them and their Families...3
In the civil law context, the term droit d'auteur began to be adopted by the middle of the 19th century and in contrast to 'copyright' was identified as a personality right. The emphasis is on the human author as the beneficiary of the right as compared to English tradition of placing greater emphasis on the protection of the right to copy a work.4 In Canada, while both terms have been adopted, the degree of influence of one or the other over Canadian law offers scope for discussion.5
In any case, in Canada there has been a recognition that the protection of the creator's rights in new inventions and original works serves to encourage further innovation. In the 1950s, the Royal Commission on Patents, Copyright and Industrial Designs was formed to undertake a comprehensive study of the IP law system in Canada. The Commission, led by Chief Justice Ilsley, had the following terms of reference for its study:
To enquire as to whether Federal legislation relating in any way to patents of invention, industrial design, copyright and trade marks affords reasonable incentive to invention and research, to the development of literary and artistic talents, to creativeness, and to making available to the Canadian public scientific, technical, literary and artistic creations and other applications, adaptations and uses, in a manner and on terms adequately safeguarding the paramount public interest, the whole in the light of present economic conditions, scientific, technical and industrial developments, trade practices, and other relevant factors and circumstances, including practices under or related to the said legislation and any relevant international convention to which Canada is a party .6
The Patent Act,7 the Copyright Act,8 the trade-marks Act,9 the Industrial Design Act,10 the Integrated Circuit Topography Act11 and the Plant Breeders' Rights Act12 reflect Canada's commitment to protecting IPRs and allowing creators to benefit from the fruits of their ideas and innovations. The relevance of effective IP protection is highlighted by the observation that currently nearly three quarters of the value of publicly traded companies in the U.S. comes from intangible assets, and the estimated revenue from technology licensing worldwide is U.S. $ 100 billion.13 These economic benefits arise not only from a strong regime for protection of IPRs, but equally as a result of a vibrant economy, supported by a robust competition regime.
As discussed in greater detail below, there is an inherent need to be mindful of the appropriate balance between the proprietary rights accorded to creators by IP laws and the promotion of principles of sound competition policy.
a. The Patent Act
The Patent Act grants an inventor a patent over an invention, which is defined as any "new and useful art, process, machine or composition of matter" or any "new and useful improvement in any art, process, machine or composition of matter."14 A principal objective of the Patent Act is to encourage innovation and invention;15 and it achieves this in two ways. First, by only conferring a time limited right; once the patent expires, the invention passes into the public domain for all to use and build upon. Second, patent laws require the details of the invention to be disclosed so that the invention can be made use of by all after expiry of the patent and so that the disclosure adds to knowledge in the art.16 This is consistent with certain competition policy related objectives,17 as recognized by the Bureau in its Intellectual Property Enforcement Guidelines (the "Guidelines" or the "IPEGs").18
The grant of a patent provides its owner exclusive rights to make, sell or use the invention, for a limited time period - currently the period between the grant of the patent and the twentieth anniversary of the filing date of the application.19 If the patent is ultimately granted, a more limited contingent right to collect reasonable compensation for unauthorized use by others is retroactively available, for the period from the date the application is laid open to the public 18 months after the effective filing date, to the date of the grant of the patent.20 Because the grant of a patent provides the patent holder with a monopoly over an invention, there is an ongoing concern that patents could be used in an anti-competitive manner or have an anti-competitive outcome.
The Patent Act acknowledges this concern through, for instance, Section 65 of the Patent Act, which allows for compulsory licensing of patents where the exclusive rights under a patent have been abused by a patent holder (see Section IV.A.1 below for a more detailed discussion of Section 65 of the Patent Act). Similarly, in Apotex v. Eli Lilly and Co.21 (discussed in Section I.C.1 below), the Federal Court of Appeal held that where there is evidence of "something more than the mere exercise of patent rights" that may affect competition in the relevant market, the exercise of the patent rights is subject to the provisions of the Competition Act.22 Therefore, it is perhaps more difficult for IP law and policy makers to strike the appropriate balance between IPRs and competition principles when dealing with patents, as opposed to other forms of IPRs (e.g., copyright, trade-marks).
Because the manner in which patents are exploited by commercial entities is increasingly raising competition policy concerns, IP law and policy makers are faced with a number of challenges that require careful consideration of the appropriate balance between IPRs and principles of competition. These issues are discussed in more detail in Section II.A below.
b. The Copyright Act
The Copyright Act grants the owner of a copyright in an original work a bundle of rights that prevents others from exploiting the work.23 Copyright is distinct from other forms of IPRs in that a work is fully protected under the Copyright Act as soon as it is created, without the need for any procedural activity to obtain registration, provided that the author satisfies certain eligibility requirements. To be protected by copyright, a work must be original; that is, the work must not have been copied and must be the exercise of some skill and judgment in its authorship.24 There is no requirement of novelty or non-obviousness.25
Copyright protection subsists in a wide variety of works, including literary, dramatic, musical, artistic works and compilations thereof. For example, literary works include books, other writings, and computer programs. Copyright is also available for performers' performances, sound recordings and broadcasting signals. The rights of a copyright owner vary, depending on the work, but for some works include the rights to reproduce the work, to first distribute an unpublished work, to translate the work, to communicate the work by telecommunication, to publicly perform the work, to exhibit the work, etc.
Copyright protects only the expression of an idea, and not the idea itself. Although the Copyright Act grants the copyright owner a number of rights, copyright does not provide a monopoly right. The idea behind the work that is protected is itself free to be used by anyone and expressed in a different manner. Any such other work, if original, would then be protected by copyright. There is also no exclusion of the independent creation of a similar work. Accordingly, there are relatively fewer instances of tension between the application and development of copyright law and competition policy.26 At the same time, there are certain aspects of copyright policy that are deserving of attention from a competition policy perspective, particularly given changes in technological advancements. Making multiple copies of a work and transmitting them has become easier and inexpensive. Courts have increasingly had to grapple with issues relating to the transmission of copyrighted material over the internet27 and copyright in works published on online databases.28 As a result, policy makers have been forced to adopt different methods of copyright protection and enforcement, which can raise competition policy concerns (see Section II.B below).
Trade-marks are signs, such as names, designs, letters, numerals, colours, slogans and other figurative elements, that distinguish or are capable of distinguishing between products.29 The purpose of a trade-mark is "the protection of the distinctiveness of the product, not of a monopoly on the product."30 trade-mark rights arise at common law as a result of the use of a mark which distinguishes the source of wares and/or services. Unregistered trade-mark rights are protected under common law through the passing-off action and pursuant to the trade-marks Act by a corresponding statutory action.31 However, registration of a trade-mark with the trade-marks Branch of the Canadian Intellectual Property Office ("CIPO") under the trade-marks Act affords the registrant some additional benefits. Registration of a trade-mark grants the owner exclusive rights to the use of the trade-mark in association with the wares and/or services for which the mark is registered.
The exploitation of trade-mark rights in and of itself is not likely to raise significant competition policy concerns, since trade-marks merely allow persons to distinguish their wares or services from the wares or services of others. There have been practices involving trade-marks that have been alleged to violate the CA, but that is because of the nature of the practice itself rather than because of the fact that a trade-mark was involved. For example, in Nutrasweet the Competition Tribunal (the "Tribunal") pointed out that it is conceivable that a trade-mark can be the subject of a tying arrangement.32 However, in that case the Tribunal did not find any evidence of such tying. Indeed, the Tribunal noted that the Commissioner of Competition (the Director of Investigation and Research as the position was then called) recognized that there should be no interference with NutraSweet's proprietary rights.33 Thus, even if a tying arrangement involving a trade-mark occurs, the activity will be illegal not because of the existence of the trade-mark rights, but because tying, under some circumstances and irrespective of whether it involves a trade-mark or not, is prohibited by the CA. In the Tele-Direct case the Tribunal concluded that mere selective licensing of a trade-mark, without more, is not an anti-competitive act. 34
In the more recent case of Kirkbi AG v. Ritvik Holdings Inc. involving the famous LEGO toy blocks, the Supreme Court pointed out that once a patent has expired, any attempts to bring it back under another guise, such as, by alleging that trade-mark rights can be obtained for functional aspects of the formerly patented product, are to be discouraged.35 The court found that the doctrine of functionality ensures that trade-mark protection cannot be obtained for the "utilitarian features" of a mark, whether the mark is registered or unregistered.36 Kirkbi's claim that the shape of LEGO blocks, most of which were governed by functional aspects, was a trade-mark was dismissed by the Supreme Court.
trade-marks are nothing more than "a symbol of connection between a source of a product and the product itself", which, while giving rise to economic value and rights to the holder, "do not protect the product as such".37 Thus, trade-marks on their own are not likely to give rise to anti-competitive concerns. On the contrary, trade-marks may even be considered pro-competitive since they perform the function of allowing consumer to distinguish between products easily and identify the source of the goods, enabling consumers to re-purchase products that they like.
However, as will be discussed in greater detail in Section II.C.1 below, some aspects of trade-marks, such as official marks, may give rise to some competition concerns.
d. Other IP Rights
There are some other rights that fall under the scope of IPRs. For instance, industrial designs are protected in Canada under the Industrial Design Act. An industrial design is the aesthetic features of a product, such as the shape, configuration, pattern or ornament that is applied to the product that "appeal to and are judged solely by the eye".38 Designs that are merely utilitarian are not capable of registration and protection. Similarly, an idea, a method of construction, material used in the construction, or the useful function of an article cannot be registered.39 Since industrial designs by definition, relate only to an aesthetic aspect, rather than a functional use, it is unlikely that there will be any significant adverse effect on innovation.
The Integrated Circuit Topography Act protects three-dimensional configuration of integrated circuits. However, this legislation is not extensively used in Canada.40
The Plant Breeders' Rights Act provides exclusive protection to new varieties of some plant species. This legislation, while providing certain protection for newly developed plant varieties, relates to different rights than those protected under the Patent Act.
Another form of rights that is often discussed under the rubric of IPRs are trade secrets. There is no legislation relating to trade secrets in Canada41, and it is instead protected under the general principles of provincial tort law.42 While trade secrets are unlikely to raise competition law concerns directly, the contracts under which trade secrets may be licensed for use by other parties may well have anti-competitive effects.
2. Objectives of Competition Policy
While various objectives of competition policy have been identified over the years, there has been an increasing trend in the past two decades towards the promotion of consumer welfare and economic efficiency. A June 1994 OECD Interim Report on Convergence of Competition Policies states that:
There is general consensus that the basic objective of competition policy is to protect and preserve competition as the most appropriate means of ensuring the efficient allocation of resources – and thus efficient market outcomes – in free market economies. While countries differ somewhat in defining efficient market outcomes, there is general agreement that the concept is manifested by lower consumer prices, higher quality products and better product choice. 43
The Report also notes that, although the competition laws of some countries also encompass other objectives, it is clear that the efficiency goal is central to competition enforcement in virtually all developed countries. The growing emphasis on economic efficiency is an important and positive trend since it leads to greater appreciation of the long-term benefits of competition policy which promote economic growth for the betterment of a society's citizens and businesses.
Most commentators agree that true efficiencies should give rise to consumer benefits.44 This is evident from the jurisprudence and academic writings in jurisdictions with a well developed competition law tradition, as well as from the statements of objectives in the competition laws of various developed and developing countries.45 Efficiencies can, for example, lead to lower product prices by creating economies of scale and synergies. In many instances, significant consumer benefits result from innovation and technological advances that lead to the development of new products or more efficient production methods. In other words, consumers may benefit from not only lower prices but also new opportunities as goods and services become better, cheaper, more accurate and reliable, and of course as new technologies are researched, developed and brought to market to satisfy latent commercial demands that previously went unsatisfied.
a. The Competition Act
The modern day CA was enacted in 1986 to encourage competition, efficiency and innovation in the Canadian economy. Section 1.1 of the Act provides that:
The purpose of this Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.
Although competition policy in Canada, and elsewhere, has been motivated by these and other objectives over the years, there has been a clear trend in Canada toward a careful balancing of two more fundamental evolving objectives: (i) the promotion of a marketplace framework whereby participants may contract, buy and sell free from the abusive exercise of market power by other marketplace participants (which will also promote economic efficiency in the long term); and (ii) the promotion of short-term economic efficiency which will have a consequential benefit to the international competitiveness of Canadian industry.46
In summary, the principal goals of Canadian competition law are the maximization of consumer welfare and the promotion of efficiency. In the new economy, these goals are usually best advanced through the promotion of innovation and the resulting development of new or improved products and services.
The CA reflects these objectives and prescribes the circumstances in which the public interest objectives advanced by the CA are to limit the exercise of private contractual or property rights. For example, the CA is intended to prevent competitors from implementing mergers or other arrangements or conduct that would substantially or unduly prevent or lessen competition.47 Parties will be found to have substantially prevented or lessened competition where an arrangement or conduct will permit them to obtain and exercise, unilaterally or interdependently with others, a materially greater degree of market power than in the absence of that arrangement or conduct. However, these limitations do not apply in cases where the impact on competition is a result of "superior competitive performance"48 or is offset by greater gains in efficiency.49
Canadian competition law also implicitly recognizes that traditional competition laws and IPRs are designed for the same purpose – to reward success on the merits of effort, creativity and skill. In this regard, the CA has taken into account specific considerations relating to IPRs. For example:
Section 32 gives the Federal Court the power, on application by the Attorney General, to make remedial orders if it finds that a person has used the exclusive rights and privileges conferred by a patent, trade-mark, copyright or registered integrated circuit topography to unduly restrain trade or lessen competition. (See Section IV.A.3 for a more detailed discussion of Section 32.)
Subsection 61(1), dealing with price maintenance, explicitly recognizes that exclusive rights and privileges conferred by a patent, trade-mark, copyright, registered industrial design or registered integrated circuit topography, could lead to price maintenance (although the language relating to IPRs in that provision is likely superfluous for all practical purposes).50
Subsection 79(4) provides a "superior competitive performance" exception that states that, in determining whether a practice has had, is having or is likely to have the effect of preventing or lessening competition substantially in a market, the Tribunal shall consider whether the practice is a result of superior competitive performance.51
Subsection 79(5) includes an exception to the abuse of dominance provisions, which provides that an act engaged in pursuant only to the exercise of any right or enjoyment of any interest derived under the Copyright Act, Industrial Design Act, Integrated Circuit Topography Act, Patent Act, trade-marks Act or any other Act of Parliament pertaining to intellectual or industrial property is not an anti-competitive act.
Also, the concept of "innovation" is specifically recognized as a factor in the review of mergers under the CA.52
b. The Bureau's Intellectual Property Enforcement Guidelines
On September 21, 2000, the Bureau released the final version of its IPEGs which, in addition to the provisions described above, articulate the Bureau's approach to the interface between competition policy and IPRs. The Guidelines have provided greater clarity with respect to the manner in which conduct involving IPRs will be assessed by the Bureau and, in particular, have made it clear that the mere exercise of IPRs will rarely give rise to competition law concerns in Canada. The Guidelines are intended to address the perception that the goals of IP law and competition law were inconsistent and make it clear that the Bureau does not in any way view the rights granted by IP law as inherently suspect.53
In general, the Guidelines recognize IP laws and competition laws as two complementary instruments of government policy that promote an efficient economy.54 In this respect, the manner in which IP laws generally serve to foster and promote innovation by creating enforceable and exclusionary proprietary IPRs is now widely considered to be self-evident. For example, the Guidelines recognize this function of IP in the following passage:
Adequate intellectual property ("IP") protection plays an important role in stimulating new technology development, artistic expression and the dissemination of knowledge all of which are vital to the knowledge-based economy.55
The Guidelines reflect the Bureau's recognition that dynamic change and innovation, which are fostered by the protection of IPRs, are increasingly important drivers of economic activity and productivity gains in Canada, and in many cases, are now the most important indices of competition. The Bureau generally considers licensing to be "pro-competitive, because it facilitates the broader use of a valuable IPR by additional parties".56
The Guidelines were prepared in response to the numerous requests that the Bureau provide greater transparency and certainty with respect to its approach to the exercise of IPRs as well as two decisions in which the Tribunal highlighted the limitations of the Bureau's ability to seek measures such as the compulsory licensing of IPRs.57 The business community was also interested in: (i) understanding whether the Bureau's approach to IPRs was consistent with that adopted by the U.S. Department of Justice and the Federal Trade Commission ("FTCs") in their April 6, 1995 Antitrust Guidelines for the Licensing of Intellectual Property (the "U.S. IP Guidelines"); and (ii) understanding the Bureau's views with respect to the application of Section 32 of the CA. The Guidelines reflected the input received by the Bureau: (i) from a panel of experts (of which Richard Corley was a member); (ii) in response to the drafts of the Guidelines, which were circulated by the Bureau for comment in June 1999 and in February 2000; and (iii) during the consultative meetings concerning the Guidelines which were held by the Bureau across Canada.58
The Guidelines make it clear, as a general proposition, that the CA applies to transactions and conduct involving IP in essentially the same manner as it applies to other property (and in this regard are consistent with the approach adopted by the U.S. IP Guidelines). However, the Guidelines provide additional guidance (and comfort for those concerned about the protection of IPRs) by specifically addressing two general categories of conduct: (i) conduct involving the "mere exercise" of IPRs; and (ii) conduct involving "something more than the mere exercise" of IPRs.
Conduct involving "the mere exercise of an IPRs" will be challenged by the Bureau only in very rare circumstances. By the "mere exercise", the Bureau means "the exercise of the owner's right to unilaterally exclude others from using the IP".59 The Guidelines indicate that conduct involving a mere exercise of IPRs will be assessed under Section 32 of the CA and will only be challenged in circumstances where the Bureau concludes that the requirements for a remedy to issue under Section 32 have been met and, in addition, that: (i) invoking a remedy against an IPR holder under Section 32 "would not adversely alter the incentives to invest in research and development in the economy"; (ii) "the alleged competitive harm stems directly from the refusal and nothing else"; and, (iii) "no appropriate remedy is available under the relevant intellectual property statute".60
Regarding the second broad category of conduct addressed in the Guidelines, i.e., conduct involving more than the "mere exercise" of IPRs, one of the more helpful statements indicates that the Bureau will only intervene to challenge licensing agreements if "they reduce competition substantially or unduly relative to that which would likely have existed in the absence of the license".61 (The qualifications "substantially or unduly" did not appear in earlier drafts). Examples of conduct to which the general provisions of the CA might apply (namely joint conduct or other conduct involving "something more than the mere exercise of the IPR") include bid-rigging, conspiracy, joint abuse of dominance and mergers (or other direct or indirect transfers of IPRs).
With respect to market definition, the Bureau declined to adopt an "innovation market" approach, and instead adopted a conventional approach to market definition. The Guidelines explicitly state: "The Bureau does not define markets based on research and development activity or innovation efforts alone."62 The Guidelines also indicate that the Bureau will not "define a relevant market around a license, but rather focuses on what the legal rights granted to the licensee actually protect."63 Where the anti-competitive concern is prospective, the Guidelines state that "relevant markets are normally defined using the hypothetical monopolist test" set forth in the Merger Enforcement Guidelines. However, when the anti-competitive concern is retrospective, the Bureau believes that "applying the hypothetical monopolist test could lead to erroneous conclusions about the availability of substitutes and the presence of market power" and will concurrently assess market definition and competitive effects.64
Regarding efficiencies, the Guidelines state that "there may be instances when creating or increasing market power is justified because of the efficiencies created".65 After noting that efficiencies in respect of mergers are explicitly recognized in Section 96 of the CA, the Guidelines state that "efficiency rationales and business justifications may be relevant to determining whether conduct is, on balance, anti-competitive" under the provisions in the CA dealing with abuse of dominance and non-price vertical restraints.66 While the Guidelines add that the Bureau will not assess all of the theoretically possible alternative means for achieving the claimed efficiencies, they state that the Bureau will assess whether "commercially reasonable [alternative] means to achieve the efficiencies likely would be less harmful to competition".67
B. Current Views on IP/Competition Interface
1. United States
U.S. legislation is largely silent on the issue of the relationship between competition and IPRs; hence, it is the U.S. antitrust enforcement agencies and the courts which have determined the interaction between competition law and IPRs. In the early part of the 20th century, the approach towards IPRs and competition law was that they had opposing purposes – while IPRs created and protected certain monopoly power, competition law was aimed at ensuring that monopolies did not come into existence.68 For instance, in Precision Instrument Manufacturing Co. v. Automotive Maintenance Machinery, the U.S. Supreme Court held that, "a patent is an exception to the general rule against monopolies and to the right to access to a free and open market."69
In the patent and copyright context, there have been also been a number of cases in the U.S. under the "patent misuse" (and corresponding "copyright misuse") doctrine, which is a principle of equity based on which the court refuses to assist a patentee who "misuses" its patent to suppress competition.70 The doctrine has evolved since Morton Salt by virtue of court decisions to increasingly take into account competition law principles71 and has been recognised by virtue of legislation.72
Over time, both the antitrust enforcement agencies and the courts have recognized that competition and IP are in fact compatible. The courts began to recognize that IPRs and competition concepts could co-exist,73 and the enforcement agencies began to narrow the types of conduct that were considered excluded from antitrust scrutiny.74 More recently, in Atari Games Corp. v. Nintendo of America, Inc., the Federal Circuit stated: "[t]he aims and objectives of patent and antitrust laws may seem, at first glance, wholly at odds. However, the two bodies of law are complementary, as both are aimed at encouraging innovation, industry and competition."75
The U.S. IP Guidelines note that, "intellectual property laws and the antitrust laws share the common purpose of promoting innovation and enhancing consumer welfare."76 The U.S. IP Guidelines adopt the following general principles in their treatment of IPRs in the context of competition law: (i) IPRs are treated as any other form of property; (ii) IPRs are no longer presumed to create market power; and (iii) the licensing of IPRs is recognized as having potentially pro-competitive effects.
To analyze situations that involve a restriction on the sharing of an IPR, the antitrust enforcement agencies adopt an approach that examines whether:77 (i) the restraint is likely to have an adverse effect on competition; and (ii) the pro-competitive effects of the restraint outweigh the anti-competitive effects.
The clear shift towards viewing IPRs and competition law as complementary to each other is seen in the 2003 Report by the FTCs that notes that patents do not necessarily confer monopoly power on their holders, and further that, even where a patent confers a monopoly power, that alone does not create an antitrust violation.78 This Report concludes that both IPRs and competition make significant contributions towards innovation, consumer welfare and prosperity, and in order to maximize these benefits, an appropriate balance between the two needs to be struck.
U.S. courts have recognized that IPRs are not completely immune from the operation of competition laws. Thus in Microsoft79 the Appeals Court accepted the Federal Court's statement that IPRs do not confer a privilege to violate the antitrust laws. Similarly, most recently, the U.S. Supreme Court in Illinois Tool Works, Inc. v. Independent Ink, Inc. overturned its long-held view that the mere possession of a patent gives rise to a presumption of market power. The U.S. IP Guidelines since 1995 have stated that the antitrust enforcement agencies themselves do not consider the mere possession of an IPR as granting the holder market power.80
Thus, even as the U.S. antitrust enforcement agencies have moved from treating antitrust and IPRs as contradictory to each other to recognizing their complementary features, the courts are still to some extent struggling to reconcile the application of these areas of the law. In this regard, the newly created Antitrust Modernization Commission has identified the balance between IPRs and promotion of competition as one of the issues to be examined by its "new economy" study group. Presumably, this group will also provide recommendations that will assist in finding the appropriate approach to competition and IP in the U.S.81
While there is no international treaty dealing with substantive competition law matters in which the interface between competition law and IPRs could be addressed, a number of international organizations, including the WTO, the OECD and UNCTAD, have considered the subject.
At the end of the Uruguay Round of negotiations, countries incorporated into the WTO set of agreements including the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS"), which expands on previous international IP treaties and requires that WTO member countries have legislation in place providing IP protection of a certain standard. TRIPS provides that member countries may take appropriate measures to limit the exercise of IPRs where action is necessary to prevent unreasonable restraints of trade or conduct adversely affecting the international transfer of technology.82 Further, WTO members may prescribe in their domestic legislation that licensing practices such as grant-backs, coercive package licensing, and prohibitions against challenges to validity, are anti-competitive.83 However, TRIPS does not resolve issues such as to what extent competitive considerations should limit the exercise of IPRs.84
A WTO agreement on competition law does not appear likely in the near future, as there is little consensus among WTO member countries on the feasibility of such an agreement. Nonetheless, the WTO Working Group on the Interaction Between Trade and Competition,85 formed in 1996, continues to examine issues relating to competition for possible negotiation. So far, the interface between IPRs and competition does not appear to be a particular focus for the Working Group.
The OECD, on the other hand, has looked at the interaction between IPRs and competition law more closely. For example, the OECD Competition Committee conducted a roundtable in 1997 on this issue and found that there was general, if qualified, consensus for the following principles:86 (i) it should not be presumed that an IPR creates or increases market power; (ii) competition policy should respect the basic rights granted under patent law; and (iii) a licensing re striction should be prohibited if it leads to a situation which is less anti-competitive than would occur if there were no license at all. Even where a licensing agreement fails this test, it should be permitted if there are sufficient actual or potential efficiencies to be obtained. The OECD Committee on S cience, Technology, and Industry has also examined the competition/IP interface. For instance, a 2002 working paper found that there was no evidence that competition policy impeded innovation, and provided a framework for guiding competition policy in the areas of innovation and IP.87
Another international organization that has examined the interface between IPRs and competition is the United Nations Conference on Trade and Development (UNCTAD). In 2000 the UNCTAD Secretariat prepared a report providing a comparative analysis of competition policy and rules relating to IPRs, focussing on the U.S., the E.U. and Japan, but also touching on Canada, Australia, Korea, Jamaica, Zambia, and India.88 The Report found that there was a general move away from doctrines that focus on the scope of the IPR towards an open inquiry into the purpose of the conduct engaged in by the IP holder and the effect of such conduct on competition.89
In summary, international organizations that have examined the interface between IPRs and competition policy appear to have found that there is a broad degree of consensus among countries that IPRs and competition law are compatible and should co-exist. However, there appears to be little discussion, let alone consensus, on the precise manner in which competition law should apply to IPRs.
C. Recent Canadian Decisions that Implicate the IP/Competition Law Interface
There have been relatively few cases focusing on IPRs or information technology that have been investigated and/or prosecuted recently by the Bureau (apart from cases involving deceptive representations). The relative dearth of competition law cases in this area may be attributable primarily to a group of early Canadian cases that constrained the use of competition law in alleging IP infringements90 and in recent years at least in part, to the guidance that the Guidelines provide with respect to the circumstances in which the Bureau is likely to challenge conduct involving the exercise of IPRs. Nevertheless, the following are two examples of recent significant developments in Canadian competition law that have raised issues related to the interface between IP and competition law.
1. Eli Lilly and Co. v. Apotex Inc.
A recent case that highlights the interface between IP and competition law is Eli Lilly and Co. v. Apotex Inc.91 In 1997, Eli Lilly brought suit against Apotex alleging infringement of eight of its patents. Four of these patents were assigned to Eli Lilly by Shinogi & Co. Ltd., a Japanese company. Apotex counterclaimed that the assignment of the four patents by Shinogi constituted an agreement that resulted in undue lessening of competition contrary to Section 45 of the CA. Subsection 45(1) makes conspiracies that unduly restrain trade unlawful. The Trial Division of the Federal Court held that an undue impairment of competition cannot be inferred from evidence of the exercise of patent rights alone.92 While granting a motion to strike the claims based on Section 45 of the CA, the Court pointed out that, although there was an agreement between Eli Lilly and Shinogi that had the effect of lessening competition, that lessening was not "undue" as required by Subsection 45(1) because it had been authorized by an Act of Parliament, specifically, Section 50 of the Patent Act.93 The Court also noted that this conclusion is compatible with the IPEGs.94
The decision of the Trial Division was appealed, and the Competition Bureau participated as an intervener before the Federal Court of Appeal. The Bureau argued that the trial judge erred in his characterization that, because the Patent Act permits the assignment of patents, any transfer of a patent between two entities could not give rise to an undue lessening of competition. Such a characterization would effectively allow IP law to take precedence over competition law on such an issue. The Bureau argued that such an approach was inconsistent with the IPEGs and encouraged the court to accept the Bureau's approach.
The Federal Court of Appeal explained that Section 50 of the Patent Act does not immunize the assignment of a patent from Section 45 of the CA "when the assignment increases the assignee's market power in excess of that inherent in the patent rights assigned."95 The Court found that Section 50 of the Patent Act and Section 45 of the CA do not conflict since the relevant provision of the Patent Act only authorizes, and does not compel, the assignment of a patent. The court noted that this approach allowed Section 50 of the Patent Act and Section 45 of the CA to "operate harmoniously in accordance with the ordinary meaning of the statutory language of the provisions."96 In so doing, the Court essentially adopted the approach set out in the IPEGs and, in fact, cited Section 4.2.1 of the IPEGs as being particularly relevant to the issue. The court concluded that "... the assignment of a patent may, as a matter of law, unduly lessen competition."97
The Federal Court of Appeal's decision attempts to strike a balance between promoting innovation through IPR protection, and promoting competition through the elimination of barriers to entry deriving from the grant of exclusive IPRs. While the "mere exercise" of an IPR will not attract the CA, scrutiny under the CA when conduct goes beyond such "mere exercise", cannot be avoided merely because an IPR derives from a statute.
It must be noted that these decisions were based on motions seeking to strike the claims relating to Section 45 of the CA. The result of the Federal Court of Appeal's decision was to restore the paragraphs of the claim alleging a violation of Subsection 45(1) of the CA, to accept the conclusion of the trial judge that there was a lessening of competition as a result of the assignment, and to allow the matter to go ahead on trial.98
2. LEGO Case99
While the LEGO case primarily dealt with the relationship between patent and trade-mark rights, it involved principles of competition law and policy to the extent that Kirkbi was attempting to seek continued IP protection that would restrict its competitors' actions even after Kirkbi's patent protection over the LEGO blocks had expired. The Supreme Court pointed out that IPRs cannot be used to extend the protection that IP offers from competition once the statutory period of protection expires.
Kirkbi manufactured LEGO products since 1949 under various patents in Canada and elsewhere. In Canada, the last patent expired in 1988. After the expiry of Kirkbi's patents, new competitors appeared and attempted to market virtually identical products. The most aggressive was Mega Bloks (originally Ritvik Holdings Inc.), the respondent, who created a line of blocks which were interchangeable with the LEGO blocks. "Facing new competition and now deprived of patent protection, Kirkbi attempted to protect its market position, employing a highly creative and aggressive use of the law of IP and unfair competition, in several different legal systems throughout the world." 100 In Canada, Kirkbi attempted to register the pattern of studs on a LEGO piece as a trade-mark or design. After the Register of trade-marks rejected the design as a trade-mark, Kirkbi asserted unregistered trade-mark rights in respect of the LEGO indicia. Kirkbi alleged that the marketing by Ritvik Holdings of its micro and mini lines of bricks using the same pattern caused confusion with its unregistered trade-mark. It claimed relief under Subsection 7(b) of the trade-marks Act and under the common law tort of passing off. Kirkbi claimed ownership of the unregistered mark, sought a declaration that its rights had been violated, and requested a permanent injunction to prevent the marketing of mini and micro bricks by Ritvik Holdings and damages.
Both the Federal Court, Trial Division, and the Federal Court of Appeal, found that purely functional features, such as the LEGO indicia, could not become the basis ofa trade-mark, whether registered or unregistered, and dismissed the action.
In dismissing the appeal by Kirkbi, Lebel J., writing for the Supreme Court of Canada, first made a distinction between patent rights and trade-marks. "Patents protect new products and processes. In consideration of disclosure of the invention, patent law grants a limited time monopoly to the patentee on the use and marketing of the subject matter of the patent." 101 However, "[i]n the case of trade-marks, the focus shifts from the product itself to the distinctiveness of the marketing... [and] seek to indicate the source of a particular product... so that, ideally, consumers know what they are buying and from whom." 102
When Kirkbi's patents over LEGO blocks expired, the technology fell into the public domain. Although the LEGO trade-mark was protected, the monopoly on the wares had expired. "The monopoly had been the key to the building up and preservation of LEGO's market share, and so Kirkbi employed a number of different means to protect it, one of which was the assertion of a trade-mark." 103
The doctrine of functionality in trade-marks reflects the purpose of a trade-mark – the protection of the distinctiveness of the source of a product, and not of a monopoly on the product. It recognizes that the law of trade-marks is not intended to inhibit the competitive use of "utilitarian" features of a product. "In the law of intellectual property, it prevents abuses of monopoly positions in respect of products and processes...[once] patents have expired, it discourages attempts to bring them back in another guise." 104 The court found further that:
Competition between products using the same technical processes or solutions, once patents rights are out of the way, is not unfair competition. It is simply the way the economy and the market are supposed to work in modern liberal societies. 105
In summary, in response to Kirkbi's position, the Supreme Court held:
In the end, the appellant seems to complain about th e existence of competition based on a product, which is now in the public domain...The fact is, though, that the monopoly on the bricks is over, and MEGA BLOKS and LEGO bricks may be interchangeable in the bins of the playrooms of the nation – dragons, castles and knights may be designed with them, without any dist inction. 106
D. Future IP/Competition Challenges for Canada
The IP/competition interface presents challenges for the development of both IP law and policy and competition law and policy in the following ways.
First, IP law and policy must continually reflect an appropriate balance between protecting the IPR-holder's ability to exclude others without restricting unreasonably the freedom of competitive forces and the benefits inherent to society from competition. In this manner, the ways in which IP law and policy is informed by competition policy and principles of competition (if not competition law) is critical to ensuring that IP laws work well in terms of promoting innovation through sound competition. Also, IP policy-makers face a number of challenges as a result of the ever-increasing pace of technological development, and the ongoing need for IP law and policy to keep up with such developments or, otherwise, risk becoming outdated, obsolete and, ultimately, inadequate. As discussed in Section II, there are a number of areas of IP law and policy deserving of further academic research and study in these respects.
Second, the provisions of the CA dealing with IP issues are well-established and the Bureau's Guidelines have now been in effect for over five years. However, these important aspects of Canadian competition policy must evolve with the continuing development of new technologies and new issues that emerge. Recent developments in competition law enforcement and policy dealing with IP highlight the fact that a number of challenges will emerge and will need to be addressed under Canada's existing competition policy regime, or an amended regime. Section III describes such challenges and provides suggestions for areas of further academic study and research.
II. Future Challenges For Intellectual Property Law And Policy Makers
A. Patent Law
1. Patent Pooling
"Patent pooling"107 involves two or more owners of different patents agreeing to pool together their individual patents and agreeing to collectively license the pooled set of patents. Patent holders might agree to pool their patents together for a number of legitimate reasons including: (i) to avoid costly infringement litigation in case one of the parties to the pool is alleging infringement of its patent by another party to the pool; (ii) to clear blocking patents owned by another person without which a person would not be able to develop its product; or (iii) to offer a single source for obtaining licenses for related patents thereby reducing transaction costs for licensees.
However, patent pooling could, in certain circumstances, amount to anti-competitive activity, such as price fixing, joint abuse of dominance or tying.108 The IPEGs address the issue of patent pooling by providing an example. While recognizing that such arrangements could have pro-competitive benefits, the IPEGs suggest that, where a patent pool does not result in the clearing of blocking patents, it could be challenged as being a conspiracy to prevent price competition under Section 45 of the CA.109 To date, the Canadian courts and the Tribunal do not appear to have considered a case involving patent pooling.
The U.S. IP Guidelines recognize that patent pooling may be a form of tying arrangement if the licensing of one product is conditioned upon the acceptance of a license of another, separate product.110 The U.S. IP Guidelines also recognize that patent pooling can be efficiency enhancing, and state that the antitrust authorities will evaluate its competitive effects in the same manner as for other tying arrangements.111 In the U.S., courts have held that, if the patent pool creates market power and the patents are potentially competing patents, the pool is likely to be anti-competitive.112 On the other hand, if the patent pool does not foreclose competition for a viable product, permits licensees to obtain licenses for individual patents within the pool, and does not create exclusive licenses, anti-competitive concerns are not likely to arise.113
Potential Area for Academic Study:
Empirical Study Concerning Patent Pooling in Canada. While the IPEGs present the problem of patent pooling and its competition policy concerns by way of an example, it may be worthwhile to examine if there is any empirical evidence to suggest that patent pooling is in fact being used for anti-competitive purposes or with anti-competitive effect. Questions that could be answered by an empirical study on patent pooling in Canada may include: How prevalent is the practice of patent pooling in Canada? In what industries is patent pooling most prevalent? How often is patent pooling engaged in by competitors/competition patents being pooled together? Is competition in Canada being lessened as a result of patent pooling? The answers to these questions would help inform the future outlook on patent pooling for IP law and policy makers.
2. Patent Ambush
"Patent ambush" occurs when a patent owner participates in the process of adoption of an industry standard by a standard setting organization ("SSO")114 without disclosing its ownership of pending patent applications or patents relating to implementation of an aspect of the standard, and then claims infringement of its patent after the SSO adopts, and others begin to use, the standard.
Setting industry standards can have pro-competitive effects as it assures producers that their products will be compatible. This can in turn promote innovation, lead to greater investment in research and development due to reduced research overlap, provide network efficiencies, and result in reduction of transaction costs. The competition law concern with such activities, however, is that businesses indulging in patent ambush acquire market power and exercise it to suppress competition in the very same emerging markets that the industry standards are aimed at promoting.
Issues relating to patent ambush are not dealt with by the CA or the IPEGs. In the U.S., the FTCs has filed complaints against patent owners on the basis that, through participation in SSOs, they manipulated the industry standard setting process by concealing information on pending patent applications and issued patents.115 For instance, the FTCs filed a complaint against Rambus Inc., a company specializing in semiconductor chip design alleging that Rambus deliberately and intentionally manipulated the standard setting process of the Joint Electron Device Engineering Council (JEDEC), a private SSO in which Rambus participated, by concealing information on pending and issued patents.116 The Administrative Law Judge of the FTCs dismissed the complaint, and an appeal is now pending before the FTCs Commissioner.117
Another recent case involved an allegation by the FTCs that Unocal had violated Section 2 of the Sherman Act118 by intentionally failing to disclose to the California Air Resources Board (a SSO) that it had relevant pending patent applications when it participated in discussions leading to the SSO adopting a standard relating to clean-burning gasoline, and subsequently asserting its proprietary interests. While the Administrative Law Judge of the FTCs dismissed all charges based on the "Noerr-Pennington" doctrine,119 the FTCs Commissioner reversed the decision and remanded the case to the Administrative Law Judge.120
Potential Areas for Academic Study:
Developing rules for Standard Setting. Currently no rules exist to address competition concerns arising from standard setting. Guidelines that clarify under what circumstances standard setting will be considered to be a violation of the CA would be beneficial, especially for the high-technology and network industries where the interaction between IPRs and competition are more prevalent and where standard setting often occurs. Such clarification would deal with issues such as: (i) conditions under which SSO's activities could result in attempted monopolization; or (ii) whether government sponsored SSO's should be treated differently than private SSOs.121
Nature of Disclosures. Some SSOs attempt to minimize the possibility of patent ambush by requiring participants to promise to offer reasonable and non-discriminatory ("RAND") license terms in case a standard that requires the use of their patent is adopted. Issues to consider might include: (i) the degree of detail the ex-ante negotiation of the license terms and promise to offer RAND licenses can go into without amounting to collusion; or (ii) the extent of open disclosure that should be required. Requiring the disclosure of all existing and potential patents and patent applications that relate to the product or process being standardized could involve great expenditure and dissuade patent owners and applicants who may not wish to disclose the existence of all their inventions, especially those for which applications are pending. On the other hand, requiring limited disclosure may not be sufficient.
3. Multiple Patents to Delay Market Entry
The process by which a patentee may prevent a generic manufacturer from obtaining regulatory compliance is governed by the Patented Medicines (Notice of Compliance) Regulations ("PM-NOC Regulations") under the Patent Act. Under these regulations, a patentee of a drug who has obtained or filed a submission for a notice of compliance ("NOC") for that drug can apply to have a patent relating to a drug containing a medicine listed on the patent register maintained by Health Canada. For another person, typically a generic drug manufacturer, to obtain a NOC to sell a generic version of the drug without filing a New Drug Submission ("NDS"), but only an Abbreviated New Drug Submission ("ANDS"), the generic must serve a notice of allegation ("NOA") on the patentee. The generic manufacturer is required to all ege that: (i) the generic manufacturer will not infringe the patent; (ii) the patent is invalid; or (iii) the generic manufacturer will wait until expiry of the patent before manufacturing and selling the drug. The patentee can then apply for an order of the Federal Court to prohibit the Minister of Health from issuing a NOC to the generic manufacturer. This process triggers an automatic stay which cannot exceed 24 months during which the generic manufacturer cannot obtain a NOC to manufacture its generic version.
Generic manufacturers have alleged that brand name drug companies attempt to keep extending their patent monopolies for as long as possible by obtaining patents for improvements and variations and adding these patents to the patent register (a process sometimes referred to as "evergreening"), thereby triggering the need for additional NOAs and resulting in subsequent stays. This allegedly has the effect of delaying the entry into the market of generic manufacturers. The Competition Bureau examined this issue based on a complaint received from the National Union of Public and General Employees and other national organizations. Consistent with the approach outlined in the Guidelines, which indicates that the Bureau is generally reluctant to use the CA to directly override IPRs (absent the extraordinary circumstances in which the Bureau has indicated that Section 32 might apply), the Bureau concluded that it was not the appropriate vehicle to examine this issue since this was largely a patent law dispute between two entities.122 At the same time, the Bureau suggested that the Government may wish to review its current rules relating to drug patents to ensure an appropriate balance between protecting IPRs and facilitating the supply of pharmaceutical products for Canadians.123
The decision by the Bureau to end its inquiry contrasts with a more aggressive approach taken by the U.S. FTCs in respect of alleged drug patent abuses. In March 2003, Bristol-Myers Squibb ("BMSs") entered into a consent order with the FTCs to settle charges that it had engaged in a series of anti-competitive acts with respect to three of its drug products.124 The FTCs complaint against BMSs alleged that BMSs had abused the special statutory 30-month stay by listing patents in the Orange Book (similar, but not identical, to the patent register in Canada) which did not meet the listing criteria, and that this had the effect of triggering an automatic 30-month stay of generic approval. The consent order, among other things, eliminated BMS's ability to obtain a 30-month stay on later-listed patents (i.e., patents listed after a generic manufacturer has sought U.S. Food and Drug Administration approval for a competing generic version).125
The Government of Canada has indicated that it would amend the PM-NOC Regulations in order to address some of these issues, including limiting the circumstances under which patentees can receive an automatic injunction, and increasing the period of time for which patent holders receive protection for the data relating to the patent thus allowing them to recover profits for some of the time lost when waiting for drug approvals.126 One remedy that already exists for generic manufacturers who claim unfair delaying tactics by the patented drug manufacturers is Section 8 of the PM-NOC Regulations. Under Section 8 of the PM-NOC Regulations a generic company can sue a brand name company for losses during the time period that a NOC proceeding kept the generic out of the market. A number of suits have been filed on this basis and are scheduled for trial while a number of motions for summary judgements have been dismissed.127
The main competition policy concern that arises from the practices adopted by patented drug manufacturers is that it provides an opportunity for patentees to extend their patent rights even beyond the statutory patent period, thereby reducing competition from generic manufacturers and ultimately adversely affecting the availability of lower priced generic drugs to consumers. It must be noted that these practices do not prevent the generic manufacturer from producing and marketing the generic version of the brand-name drug from the market since the patent protecting the 'original' brand-name drug has expired. Rather, the concern of the generic manufacturers is that they are prevented from competing with the improved and varied version of the brand-name drug that has now obtained patent protection. From a competition perspective, promoting competition among newer and innovative products is important as older versions and technologies become obsolete and disappear from the market. At the same time, since effective protection of IPRs is a crucial aspect of encouraging expensive research and development ("R&D") in the pharmaceutical industry, a balance between patent protection and competition policy needs to be found. In particular, the application of Section 79 of the CA should also be considered in this context.
Potential Area for Academic Study:
Empirical research on the effects of obtaining multiple patents on the cost and quality of patented medicines in Canada. This study could focus on whether the practice of obtaining multiple patents to delay market entry is increasing the cost of patented medicines in Canada. The study could also discuss whether there is any positive or negative effect on research, development and innovation that has occurred as a result of such practices. Any such study must consider the impact of federal price controls on patented medicines by the Patented Medicines Prices Review Board128 and price controls on generic drugs by provincial drug formulary regimes.129
4. Authorized Generics
Authorized generics130 are drugs made by brand-name drug companies but sold by generic drug companies at the lower generic price through a licensing agreement. Brand-name drug companies sometimes adopt the strategy of licensing their drugs to a generic company just before their patent expires in order to be the first on the market and thereby gain market share before other independent generics can enter the market subsequent to the expiry of the patent.
On the one hand, it can be argued that authorized generics result in a cheaper version of the patented drug being available to the consumers earlier than they would otherwise be. Indeed, in 2004 the United States Federal Drug Administration dismissed two petitions brought by generic manufacturers seeking to prohibit the marketing and distribution of authorized generics during the 180-day exclusivity period that U.S. law affords the first generic manufacturer that challenges a listed patent, on the basis that marketing of authorized generics increases competition and promotes lower prices for pharmaceuticals.131
On the other hand, it has been argued that authorized generics restrict competition since the authorized generic licensees are generally prohibited from marketing the licensed product only when at least one other independent generic product is competing or is about to compete with the brand name drug.132 In addition, concerns relating to a violation of Section 52 of the CA dealing with misleading representation have also been raised on the basis that authorized generic licensees falsely represent that the authorized generic originates from them, whereas in fact they originate from the patent holders.133 Finally, it has also been suggested that the use of authorized generics amounts to abuse of dominance since the brand name companies control the market even following the expiry of the patent until the first independent generic enters, and the existence of authorized generics either stops or delays the entry of independent generics.134
It is noteworthy that the FTCs is initiating a study on authorized generics.135 The issues relating to authorized generics may be of particular significance to Canada since it has been suggested that authorized generics account for as much as 25% of the total generic sales in the Canadian market.136
Potential Area for Academic Study:
Study of effect of authorized generics on consumers and innovation. This study could consider the various competition law aspects of authorized generics such as misleading representation and abuse of dominant position. Other aspects to consider would be the effect of authorized generics on innovation as well as the impact of authorized generics on consumers in the form of price competition.
5. Extraterritoriality of U.S. Patent Laws
The ongoing dispute between Research in Motion Limited ("RIM") and NTP, Inc. could have significant repercussions on the competitive abilities of Canadian technology companies. In particular, the decision of the United States Court of Appeal for the Federal Circuit in NTP v. Research in Motion137 in August 2005 raised the issue of extraterritorial operation of U.S. patent laws. The case held that, even though some aspects of the operation of the patented process occurred outside the U.S. (in Canada), the application of U.S. patent laws is not necessarily precluded.138 Indeed the Canadian Government had submitted a brief before the Court of Appeal for the Federal Circuit in support of an en banc review of the courts' earlier decision regarding the extraterritorial application of U.S. patent laws.139 The Canadian Government pointed out that the extraterritorial reach of U.S. patent laws may have a chilling effect on innovation by Canadian high-tech companies.140 A certiorari petition before the U.S. Supreme Court regarding the decision of the Court of Appeal for the Federal Circuit has been dismissed,141 and now is back before the District Judge of the Eastern District of Virginia.
Potential Area for Academic Study:
Implications for Canadian companies (and the Canadian high-tech industry) of the extraterritorial application of U.S. IP laws. Whatever the outcome of the certiorari petition, it would be beneficial to conduct a detailed study on the potential implications of the extraterritorial application of U.S. IP laws to Canada, and their potential effect on Canadian R&D, innovation and competitiveness. Topics would include: scope of legal liability; potential exposure to damages; and access to U.S. market.
Collective Management of Copyrights
The Copyright Act provides for the collective administration of copyrights in a number of circumstances. In general, collective societies may administer the rights assigned or licensed to them by individual copyright owners, and the collective societies in turn license out the copyrights to users, collect the royalties and distribute the royalties to the copyright owners. The collectives specifically dealt with by the Copyright Act can be generally categorized as "compulsory" collectives, "voluntary" collectives and "involuntary" collectives.142
"Compulsory" collectives are dealt with under Sections 67 and 67.1 and Part VIII of the Copyright Act. These collectives administer specified rights in certain types of works (specifically, the public performance and communication to the public of musical works, dramatico-musical works, performer's performances of such works, or sound recordings143 and the reproduction of musical works in order to make private copies144) and must annually submit proposed tariff rates and have them approved by the Copyright Board. S uch collectives may not commence an action to enforce their rights where a proposed tariff has not been filed in respect of a particular use.145
Voluntary collective societies administer any collection of works, performances, sound recordings or communication signals but are not otherwise subject to the compulsory system. These types of collective societies can voluntarily propose tariffs and have them approved by the Copyright Board to create general application tariffs.146 Voluntary collective societies are also free to enter into agreements directly with users.
Lastly, where a collective society and a potential user cannot agree on license terms, the Copyright Act allows either to apply to the Copyright Board to fix royalties and "related terms and conditions."147 In this way, a collective society that is not within the compulsory system and has not chosen voluntarily to file a tariff to be approved by the Copyright Board can still be forced to grant licenses as ordered by the Board.
While the administration of copyrights through copyright collectives offers a number of advantages, the main justification for their use is the reduction of transaction costs since collective administration enables potential users to access multiple works through a single source and individual owners of copyrights need not negotiate with numerous potential users. It is therefore generally argued that collective societies increase efficiency by reducing costs for licensing transactions which individually would not have high value, such as photocopying several pages of a book or playing a single song on a radio broadcast. In addition, because copyright collectives have developed in most countries across the world, there exists an international network of collectives that allows users to obtain licenses through the domestic copyright collective even when the copyright owners reside in a foreign jurisdiction and may be members of a foreign copyright collective.
The main objection to copyright collectives from a competition policy perspective is that they entail the joining together of a number of individual copyright owners to control the availability of their copyright protected works. Without some regulatory controls, this may result in a lessening of competition and the ability of the copyright owners, through their collective societies, to extract monopoly prices from the marketplace or otherwise abuse their market power.148 To some extent, the Copyright Act provisions discussed above relating to collective societies and the fixing of tariffs by the Copyright Board are intended to ensure that this potential market power of collective societies is eliminated or at least attenuated.
Finally, currently, there are upwards of 30 collective societies in Canada, dealing with different media, different copyrights, and different copyright holders. In addition, there are other organizations and companies that do not style themselves as copyright collectives but may fall within the definition of "collective societies" in the Copyright Act (for example, book publishers, record companies, motion picture studios). Users may often have to deal with multiple collectives and other organizations in order to fulfil their requirements and obtain the requisite licenses. This is particularly the case in the increasingly digital context – playing a song over the internet may arguably involve both the communication right of each of the composer and sound recording owner (for transmission over the internet) and reproduction rights (for downloading).149 Industry Canada has recognized such new technology issues as a part of the medium-term reform agenda of the Copyright Act.150 While dealing with collectives vastly reduces the complications of dealing with multiple owners or licensees of copyrights, dealing with multiple collective societies also increases complexity and transaction costs, running contrary to some of the key benefits of collectives.
Agreements entered into by copyright collective societies and users are in limited circumstances granted a somewhat favoured position when it comes to scrutiny by Canadian competition regulators. Where a collective society concludes an agreement to grant a license151 and files a copy of the agreement with the Copyright Board within 15 days, the Copyright Act provides an explicit exemption from the application of Section 45 of the CA,152 although the Commissioner may inspect the agreement and may request that the Board to "examine" it.153
Potential Areas for Academic Study:
Examination of Different Approaches to Collective Management of Copyright. It may be worthwhile to examine the approaches used in different jurisdictions to the issue of collective management of copyright, such as a system of "extended collective licensing" used by the Nordic countries (whereby if a collective society represents a substantial number of copyright holders in a particular category, the collective's repertoire is, by law, extended to cover all domestic and foreign copyright holders in that category, whether or not they chose to become part of the collective). Individual copyright holders who do not want to be part of this system can exclude themselves by notice to the society. In particular, it would be worth examining whether the Nordic system exacerbates competition issues or mitigates them. In this context, the use and effectiveness of the existing provisions of the Copyright Act (for instance Section 83(11)) that address a similar situation should also be considered.
Examination of Copyright Collectives under the CA. It would be worthwhile to examine in greater detail the relation between copyright collectives and CA, particularly with respect to high-tech industries. Issues could include: the pros and cons of the statutory exemption from the CA for copyright collectives, whether copyright collectives can seek exemption from the purview of the CA based on the regulated conduct defence in the absence of an explicit statutory exemption154 and whether, and if so, to what extent, copyright collectives are acting as a barrier to entry for small copyright owners who refuse to join a collective.
Pros and Cons of Copyright Collectives. Issues relating to the advantages and disadvantages of copyright collectives generally also need to be considered – for instance the efficacy of collectives in the digital era, including the benefits of an international network of collectives and the inefficacy of multiple copyright collectives. The impact of each of these aspects on consumers should also be considered.155 In considering each of the above issues, regard must also be had to the obligations under the international treaties to which Canada is a party and the international network of copyright collective arrangements.
2. Technical Protection Measures
Another competition law concern could arise in the context of the use of copyright protection devices, often referred to as "technological protection measures" or "TPMs". Copyright owners may use TPMs to make it difficult to create unauthorized copies of copyrighted material, and may also restrict the manner and extent to which a work may be accessed, used or distributed to third parties. A recent example of such "extended copy protection" technology involves software used in CDs that protects the copyright of the owner by ensuring that only a certain number of copies of the CD can be made, and that the music can be uploaded from the CD only onto specific devices.
One competition concern that can arise is that TPMs could limit inter-operability such that only particular devices can function with the purchased product. Situations may arise where, in order to use a copy protected product, the consumer would also have to purchase a particular type of player or device, which might raise an instance of tying under the CA. In addition, while the concept has not yet been employed by any Canadian courts, it is possible that TPMs that restrict access to, or use of, a legally-acquired copy of a work would be the basis for a "copyright misuse" claim. Lastly, to the extent that TPMs restrictions on the ability of a purchaser to access and use a legally acquired copy of a work are inconsistent with the advertised attributes of the work, this could form the basis for a misleading advertising charge pursuant to Section 52 of the CA.
Canada's international obligations with regard to providing IPRs to technical protection measures must also be taken into account when determining Canada's policy choices in this area.156
Potential Areas for Academic Study:
What is the impact of the use of new technologies to protect copyrights in the digital context from a competition perspective? For instance, could the use of technical protection measures result in tying?
Pursuant to Subparagraph 9(1)(n)(iii) of the trade-marks Act, an "official mark" is any badge, crest, emblem or mark adopted and used by any "public authority" in Canada as an official mark for wares and services in respect of which the Registrar has, at the request of the public authority, given public notice of its adoption and use.157 Subsection 9(1) of the trade-marks Act prevents the adoption in connection with a business or otherwise, by any person, of any mark consisting of, or so nearly resembling as to be likely mistaken for, an official mark.
Official marks have special status under the trade-marks Act. First, any mark may be protected; official marks are not subject to the usual limitations regarding trade-marks that are eligible for registration.158 Second, unlike the standard application process for a trade-mark, an official mark cannot be the subject of an opposition and can only be rejected by the trade-marks Office on very limited grounds.159 Third, official marks need not be limited to particular wares or services – the person at whose request publication of the official mark was made can use it for any goods or services that it chooses. Fourth, unlike for trade-marks, there is no provision under the trade-marks Act for contesting rights in a official mark.
Courts have held that the tests to determine whether an entity is a "public authority" are: (i) a significant degree of control must be exercised by the appropriate government over the activities of the body; and (ii) the activities of the body must benefit the public.160 A number of entities in Canada have received protection for their official marks, including the Canadian Olympic Association and Canada Post.161
The competition law concern is that some "public authorities" compete against other private entities in the provision of goods and services. This can lead to allegations of favouritism under international treaties when a foreign company has entered the market. For instance, United Parcel Service (UPS) has filed an action under NAFTA Chapter 11 (Investor Protection) alleging that Canada Post enjoys NAFTA-illegal subsidies granted by the Canadian Government that undermine UPS's market share.162 When entities such as Canada Post perform tasks that are in competition with private entities, the ability to obtain, without opposition, broad protection for official marks which is difficult to attack, could grant them an unfair competitive advantage against both domestic and foreign competitors.163 Indeed, this issue becomes even more stark when it is considered that, based on a recent decision, only Canadian public authorities, and not foreign authorities, can benefit from the protection of official marks in Canada.164
For example, concerns have been raised about the government of the North West Territories having obtained an official mark for "Canadian Diamond" without consulting industry participants.165 Canadian jewellers have objected to this, on the basis that the official mark hinders them in t heir ad vertising and marketing activities.166 On the other hand, the NWT Government has been trying to attract the diamond cutting and polishing industry by li censing out the official mark as a certification mark under certain circumstances. Due to the descriptive or generic nature of the phrase, it is questionable whether the NWT Government would have been able to obtain ordinary trade-mark protection for the words "Canadian Diamond". This situation illustrates the nature of the problems to which rights in an official mark may give rise.
The treatment of official marks under the trade-marks Act raises some of the same types of issues as the treatment under the CA of public and quasi-public entities engaged in commercial activities.167 For example, the regulated conduct defence is a common law doctrine that provides the basis for an exemption from the application of the CA where the impugned conduct is required or authorised by a legislation or regulation.168 Based on the regulated conduct defence, courts have exempted regulatory activities of agencies constituted under provincial legislation such as the fixing of prices, from the criminal provisions of the CA.169 More recently, the Supreme Court of Canada, while extending the application of the regulated conduct defence beyond competition law suggested that, in order for a regulated conduct defence to apply, it must be clear that the legislature intended the regulated conduct defence to be available, for instance, through some "leeway language" that denotes "public interest".170
Potential Area for Academic Study:
Examination of use of official marks by public authorities in the private market. It would be pertinent to examine more thoroughly whether public authorities have used official marks to obtain an advantage in the market for the provision of goods and services, and if so, whether such use is in line with the policy objectives behind the existence of official marks. In particular, the approach adopted by other jurisdictions and the influence of the jurisprudence surrounding the regulated conduct defence should also be taken into account. This study will help determine whether the regime relating to official marks needs to be reviewed.
D. Specific Types of IP Protection
As discussed in Section I.A.1.a above, patent policy is continually struggling to achieve the appropriate balance between granting a patent, which entails the right to exclude the manufacture, sale and use of the invention by others, and ensuring that such exclusion is not detrimental to the principles of sound competition policy. As a result, IP law and policy makers are faced with a challenge each time patent protection is sought for a new type of "invention." In addition, the strains on the patent protection process and system also need to be considered. We have identified at least three areas where IP law and policy makers in Canada are facing such challenges or will face them in the near future, any one of which could be the topic of future academic study in respect of appropriate patent policies:
1. Open Source Software (OSS)
OSS in simple terms is software that is made available on licensing terms that promote access to the software and any further development to anybody who wants to use it.171 An increasing number of technology companies, including the ones that traditionally are major filers of patent applications are providing and using OSS.172 OSS both uses IP protection and seeks to move away from it since OSS continues to be subject to copyright protection, but by allowing licensees to freely use and make modifications to the OSS, this detracts from the primary IP protection of exclusivity. As OSS becomes more popular, it would be worthwhile to consider issues relating to the possible benefits of using OSS such as potentially lower cost of innovation, and the drawbacks such as reduced incentive to innovate. Competition policy concerns such as enhanced access to hi-tech products would be an important part of such a study. Particular CA concerns could include questions such as whether OSS is a "relevant market" that is distinct from the market for traditional software.
2. Business Methods
In one sense, business method patents are no different from other patents except that the subject matter of the patent relates to a system of doing business. However, the jurisprudential extension of patent protection to business methods – particularly in respect of high tech/Internet business methods - has garnered considerable attention in the United States where business methods have received patent protection.173 For instance, the Amazon.com "1-click" patent (U.S. Patent No. 5,960,411) concerns the methodology whereby information associated with a user is pre-stored by a web site, and the user may thereafter order items from the web site with only one click of the mouse.174 In Canada, the Federal Court, Trial Division has held that business methods are not patentable.175 Given that the grant of patent protection entails the ability to exclude others from using the patented business method in question, business method patents could potentially have a tremendous impact on the scope and pace of technological innovation. An academic study could be undertaken to examine the likely impact on innovation of a number of policy alternatives towards business method patents in order to provide some guidance as to which policy should be adopted in Canada so that innovation and competition are bolstered – not weakened – by the patent system. In this regard, Canada's international treaty obligations should also be taken into account. For instance, TRIPS requires that Canada treat different technologies equally.176
3. Extension of Royalties Beyond the Life of a Patent
Generally patent licensing agreements require payment of royalties until the expiry of a patent or until it is found to be unenforceable or invalid. However, one issue that has competition implications is where the patentee requires a licensee to make royalty payments even after the expiry of the life of the patent. This could be considered a misuse of the monopoly right granted by a patent or an attempt at tying of a patented product (the product when the patent is still in force) and an un-patented product (the same product when the patent has expired).177 On the other hand, it could be argued that no competition concerns arise from requiring royalties to be paid beyond the life of the patent because during the life of the patent the patent holder has the statutory right to determine the terms of the license by virtue of being the patent holder, and once the patent has expired, nothing prevents others from exploiting the patent.
Indeed, these different arguments are brought to the fore by the differing manner in which courts in the U.S. and Canada have examined such situations. In the U.S., the Supreme Court has held a patentee's use of a royalty agreement that extends beyond the life of the patent is unlawful per se as such a device would subject the free market visualized after the expiry of the patent to "monopoly influences".178 In contrast, in Canada it has been held that the obligation to pay royalties arises by virtue of the licensing agreement and not the patent itself, and therefore if the agreement so specifies, the obligation to pay royalties may validly extend beyond the life of the patent and this would not be in restraint of trade or unreasonable or unconscionable or contrary to public interest.179
III. Future Challenges For Competition Law And Policy Makers
A. Commercial Practice Matters
1. Tying Arrangements
Tying (or "tied selling") is the supply of one product (the tying product) on the condition that the buyer takes a second product (the tied product) as well or on terms that induce the buyer to take the second product as well.180 Tying is addressed by Section 77 of the CA.181 The elements necessary to demonstrate tied selling are:182
The existence of two separate products – the tying product, and the tied product. This includes an examination of whether there is sufficient demand for the products to be sold separately, and whether the products can be supplied separately in an efficient manner;183
A "practice" of tying, which the Competition Tribunal has indicated means more than an "isolated act or acts";184
Anti-competitive effects - the tied selling must be engaged in by a "major supplier" or be "widespread in the market"185, and must, or be likely to, result in a substantial lessening of competition.186
Section 77 of the CA does not make specific reference to IP, but creates a defence to a finding of tied selling where the tied selling that is engaged in "is reasonable having regard to the technological relationship between or among products to which it applies."187 This provision has not been interpreted by the Tribunal or the courts.188 However, it is conceivable that the defence could be invoked where complementary patents are tied together, or even when a patented product and an unpatented product are tied together, for instance patented razors and unpatented blades. The meaning of "technological relationship" in the context of IPRs is, however, left unaddressed.
The IPEGs do not specifically address tied-selling apart from noting (in a footnote) that tied selling is a kind of transaction or conduct that could involve IP189 and citing Tele-Direct for the proposition that efficiency rationales and business justifications may be relevant to determining whether restrictive practices, including tied selling, are anti-competitive or pro-competitive.190
The Tribunal examined tied selling in the context of IPRs in NutraSweet, where it recognized that, "in appropriate circumstances, a trademark might be the subject of a tying arrangement".191 However, in that particular case, the Tribunal declined to make a finding with respect to tied selling on the basis that the Commissioner had not been consistent in arguing whether it was the NUTRASWEET brand Aspartame that was the tying product or whether it was the trade-mark itself.192
In contrast, the U.S. IP Guidelines specifically address tying arrangements and state that the authorities will consider both the anti-competitive effects and the efficiencies attributable to the tied selling.193 The U.S. courts have traditionally adopted a per se approach to analyzing tied selling;194 but in Microsoft195 the D.C. Court of Appeal held that the per se analysis was inappropriate in the "software platform" context, and instead adopted a "rule of reason" approach.196 It has been argued that the D.C. Court of Appeal's approach goes beyond "software platforms" and creates a "technology exception" to the use of the per se rule in tying cases.197
In Canada, the IPEGs are clear that there is no presumption that IPRs confer market power on the owner.198 On the other hand, in the United States, in Independent Ink, Inc. v. Illi nois Tool Works, Inc., a case involving tying of a patent with a product, the Court of Appeals for the Federal Circuit ("CAF C") held that, in a tying case where the tying product is an IP right, market power will be presumed.199 This was despite the fact that the U.S. IP Guidelines state that the antitrust authorities will not presume that an IP right confers market power upon its owner.200 Both U.S. agencies – the U.S. Department of Justice ("DOJ") and the FTCs – argued before the CAFC that tying requires coercive economic power, and there was no economic basis for inferring market power from a patent. The agencies contended that to conclude otherwise was a mistaken interpretation of recent U.S. jurisprudence. The CAFC, however, relied on older U.S. Supreme Court precedent, holding that market power could be presumed from a patent and that the presumption would be rebuttable, but only by "expert testimony or other credible economic evidence."201 Significantly, the U.S. Supreme Court has recently overturned the decision of the CAFC and held that in cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product, thus bringing the situation in the U.S. closer to that in Canada.202
Potential Area for Academic Study:
Empirical research on existing and potential instances of tying both in traditional industries and in high-tech areas. An empirical analysis of instances where tying have or could occur in relation to IPRs may be useful in determining the extent of the problem and what further action needs to be taken in order to address such issues. An instance already mentioned in Section II.B.2 above is the tying of products involving technical protection measures for copyright protection. In addition, an examination of the differences between tying involving patents and tying involving copyrights would also be pertinent. The pros and cons of tying especially in the IP context that already involves a monopoly right would need to be considered.
2. Essential Facilities
The essential facilities doctrine compels a dominant or monopoly owner of a resource, access to which is considered "essential" for effective competition, to provide such access to competing firms. To the extent that an IPR is based on granting such a monopoly right, the essential facilities doctrine may be inconsistent with IPRs.
The CA does not expressly discuss the essential facilities doctrine in the context of IPRs. Potentially relevant provisions of the CA include Section 75 that deals with refusal to deal, and Section 79 that is directed to the abuse of dominant position. Similarly, there has been no detailed consideration of the doctrine by the Tribunal or courts although, in Canada (Director of Investigation and Research) v. D & B Companies of Canada Ltd.,203 the Tribunal ordered the owner of certain scanner data to provide potential competitors with historical scanner data because it was "essential to restore competition in the market."204
- the holder of the IP has a dominant position in the relevant market;
- the IP is an essential input and therefore the refusal to license the IP prevents effective competition; and
- the refusal to license is stifling innovation.
In the United States, recent jurisprudence has cast some doubt over the extent of recognition that will be accorded to the essential facilities doctrine.207 Though the Supreme Court did not find it necessary "either to recognize it [the essential facilities doctrine] or repudiate it", it did note that, where a federal or state agency has the power to compel sharing and regulate its scope, there is no need to invoke the doctrine.208 Further, the Supreme Court expressed its disfavour for compelling persons, even monopolies, to share their advantage, noting that such compulsion may lessen incentives to invest, require courts to act as centralized planners, and may even facilitate collusion between competitors.209 This decision indicates a trend towards a refusal to impose positive duties on firms in the antitrust context.210
However, cases in the E.U. have firmly held that the essential facilities doctrine can be invoked in situations involving IPRs.211 These cases have laid down the following conditions to determine whether "exceptional circumstances" have resulted in abusive conduct arising from an exclusive IP right:
the access must be essential to carrying on the business – a mere economic difficulty is insufficient;
the refusal of access to the IP right must be likely to prevent all competition in the secondary market;
the refusal cannot be objectively justified;212
the refusal is preventing the emergence of new products or services that the IP owner does not offer and for which there is potential consumer demand.
Potential Area for Academic Study:
Examine the role of competition policy in ensuring access to 'essential facilities'. In the context of the diverging U.S. and European approaches to this issue, it would be relevant to examine the role that competition policy should play to ensure access to technology and other "essential facilities" particularly in the context of a smaller economy such as Canada. The study could focus on whether essential facilities questions are most appropriately dealt with through the application of IP laws, the CA or industry-specific regulation (e.g., in the telecommunications or pharmaceuticals industry).
3. Joint Ventures and Strategic Alliances
Firms may enter into joint ventures or strategic alliances ("JVs") involving sharing of existing or future IPRs, for a number of reasons including to: (i) allow firms with complementary technologies or skills to attain synergies; (ii) give rise to efficiencies of scale and scope both in conducting R&D and in production and marketing; (iii) allow participants to spread the risk of failure of untested technologies; or (iv) promote the incentive to innovate by bringing together potential free-riders.213 At the same time, JVs also cause competition concerns since they may: (i) increase concentration in a market; (ii) facilitate collusion among competitors; or (iii) otherwise reduce competition among participants by reducing the incentive to innovate and by stifling R&D diversity.
In Canada, JVs may be analyzed under a number of provisions of the CA. JVs may be considered under the CA's merger review provisions,214 as a possible joint abuse of dominance215 or as a conspiracy.216 Example 7 in the IPEGs involves the formation of a JV between two firms that results in the creation of a new technology that is dependent on an IP input in which the participants of the JV together already have a dominant position and which, pursuant to the JV, they refuse to license to a firm that has developed a rival technology. The IPEGs point out that the Bureau may choose to examine such a situation either under the merger review provisions of the CA or as an abuse of dominant position. In this context (the formation of a JV), the IPEGs note that the Bureau will determine the relevant market, consider barriers to entry and evidence of market power, demonstrate a substantial lessening or prevention of competition, and assess business justifications and efficiency rationales. In cases where the JV is already in operation and any anti-competitive harm has already taken place, the Bureau may analyze the JV pursuant to the criminal conspiracy provisions.217
Proposed Area for Academic Study:
Effect of Competition Policy Towards R&D Joint Ventures. A study could examine the combined effect of Canada's competition law and IP law regimes as they apply to R&D JVs. For instance, does the operation of these two regimes adequately promote a fruitful R&D infrastructure and position Canada for growth in this area, without overly inhibiting competition to the detriment of consumers? The study could consider whether, in particular, innovation in IP related industries such as the pharmaceutical and high-tech industries, is promoted by through JVs. Analysis of such JVs requires consideration of the effect on R&D, on competition in the product markets where the JV participants are current competitors, and on competition in the future product markets that may arise as a result of the R&D by the JV.
4. Litigation Settlements
IP owners or licensees could potentially use IPRs to lessen or prevent competition by entering into settlements with competitors or would-be competitors in connection with the enforcement of their IPRs. In the context of patent disputes, litigation settlements over actual or alleged patent infringement may also bring about anti-competitive effects.
Litigation settlements are not covered by any particular set of laws. They are private arrangements between litigants to a dispute, but may potentially result in market allocation and other anti-competitive effects. Moreover, counterpoised with the need to prevent anti-competitive behaviour is the judiciary's desire to encourage settlement of litigation over protracted disputes which may cause further monetary and social damages. It is not always a simple task to balance these interests.
Some of the possible anti-competitive effects of litigation settlements involving IPRs are:
Exclusive licenses and restrictive licences – the patent owner agrees to license rights under the patent to the opposing party and possibly third parties, but where the license contains restrictions such as defining a narrow geographical area in which the licence may be exploited or provisions restricting licensees from entering non-infringing product markets.
Cross-licences and patent pooling – two or more parties agree to license IP to one another, or to pool their individual patents. Although these arrangements may be pro-competitive (arising from integration of complementary technology and reduction of transactions costs), they can also create price-setting structures, coordinated output restrictions or illegal tying arrangements.
Rever se payments – arrangements whereby one party agrees to a restrictive or delayed license, and in return the other party agrees to pay a substantial amount, possibly higher than the cost of the restriction or delay, to the other party. In these arrangements the delay in the competitor entering the market is greater with the payment than without, and as such there may be an anti-competitive effect because of the extended delay.
Payments not to market – one party receives a payment in exchange for a commitment not to enter the market. In the U.S., the FTCs has in the past commenced investigations into such agreements in the pharmaceutical industry.218 Such payments may, for example, result in the delay in entry of the generic manufacturer into the market, while the prices of the drugs for the consumer remain as set by the brand manufacturer.
The IPEGs, CA and case law are relatively silent on the aspect of litigation settlements. However, the U.S. IP Guidelines state that, in most cases, restraints in IP licensing arrangements are evaluated under the rule of reason approach,219 but in some cases, where the anti-competitive effect is plain, they may be treated as unlawful per se.220 Further, the U.S. IP Guidelines contain analysis and direction regarding specific provisions in litigation settlements, such as cross-licensing, pooling arrangements, grant-backs, and exclusive dealing.221
It should be noted, however, that U.S. courts appear to be moving away from both a rule of reason or per se analysis of litigation settlements. In Schering-Plough, Schering entered two litigation settlements with parties who were applying for generic licenses under the Hatch-Waxman Act.222 The settlements provided that the two parties would delay entrance into the market, and in return, Schering made reverse payments. The FTCs found that, had the reverse payments not been made, the parties could have entered the market earlier than under the terms of the settlements, and as such, the settlements were anti-competitive. The Circuit Court reversed the FTCs ruling, finding that the mere existence of a reverse payment is not anti-competitive per se. Parties settle litigation based on perceived risk, and so long as the compromise of the parties is reasonable, and falls within the scope of patent protection, they will not be anti-competitive. Although in the past U.S. courts only considered whether the litigation settlement had anti-competitive effects, more recent cases appear to examine: (i) the scope of the exclusionary potential of the patent; (ii) the extent to which the agreements exceed that scope; and (iii) the resulting anti-competitive effects.223 Further, this approach considers the social welfare aspects of settlement in the litigation process,224 and reflects the recognition that a patent is intended to provide the right to grant licences as an element of the right to exclude others from using that IP.225
Proposed Area for Academic Study:
Research on benefits of litigation settlements and areas of concern from a competition perspective. A more detailed examination is required on the benefits of litigation settlements in the context of IPRs and their impact on competition policy. This could include an examination of aspects such as the use of restrictive licensing, cross-licensing, patent pooling and reverse payments in litigation settlements and the potential application of existing provisions of the CA including Sections 32, 79 and 45.
1. Compulsory Licensing
Competition authorities have to decide between behavioural and structural remedies when fashioning a remedy in situations where a business abuses its dominant position or proposes a merger that is likely to prevent or lessen competition substantially. Historically, the Tribunal has identified selectivity in licensing as being fundamental to the rationale underlying the protection of IPRs, and accordingly, has demonstrated a reluctance to interfere with the mere exercise of such rights by ordering compulsory licensing as a remedy.226
Compulsory licensing is an exceptional remedy that requires the balancing of interests of protecting IPRs relative to the public interest in having greater competition in the particular market under consideration. Although under the CA only Section 32 expressly provides for compulsory licensing as a possible remedy, the IPEGs recognize that conduct which goes beyond the unilateral refusal to grant access to IP could warrant enforcement action under other provisions of the CA.227 For instance, the IPEGs point out that, if a person acquires market power by systematically purchasing a controlling collection of IPRs and then refuses to license the rights to others, thereby substantially lessening or preventing competition in markets associated with the IPRs, the Bureau could view the acquisition of such rights as anti-competitive and review the matter under either Section 79 (abuse of dominance) or Section 92 (mergers) of the CA.228
The abuse of dominant position provisions229 require that, in exercising its discretion to order remedial relief, the Tribunal must be persuaded that a dominant party has engaged in a practice of anti-competitive acts which has caused or is likely to cause a substantial lessening of competition. If the Tribunal finds that there has been an abuse of dominant position in a market, it can make an order prohibiting the dominant party from engaging in similar conduct in the future and make other orders necessary to restore competition.
The Tribunal in Tele-Direct considered allegations of abuse of dominance relating to the licensing of trade-marks. The Tribunal found that while the trade-marks Act allows trade-mark owners to decide to whom and under what terms they will license their trade-marks, neither the trade-marks Act nor the CA authorizes the misuse of trade-marks beyond the mere exercise of statutory rights.230 While refusing to order compulsory licensing in Tele-Direct, the Tribunal has expressly approved the licensing of trade-marks in two cases decided on consent: Interac231 and AGT Directory.232 In Interac, the charter members of an electronic banking network were alleged to have engaged in a series of anti-competitive acts that resulted in the restriction of access to the shared electronic network services market, a lack of competition in pricing, and a lack of innovation. To ensure competition, the consent order required members to provide a "commercially reasonable trade-mark license without charge upon request to any member participating in the shared services that use the trade marks."233 In AGT Directory, members of an unincorporated association of Canadian Yellow Pages publishers were alleged to have engaged in certain anti-competitive acts associated with the sale of national advertising in the YELLOW PAGES telephone directories. In this case the consent order prohibited unreasonable refusals to licence the YELLOW PAGES trade-marks for the purposes of selling advertisements in YELLOW PAGES telephone directories, provided that the licensees entered into and maintained commercially reasonable standard form trade-mark licences.234
The merger provisions of the CA235 stipulate that, if a merger or proposed merger prevents or lessens, or is likely to prevent or lessen, competition substantially, the Tribunal may make certain remedial orders. In the case of completed mergers, the Tribunal is permitted to order a complete or partial divestiture, or such alterative orders, as may be agreeable to the parties against whom such orders are made.236 In the case of proposed mergers, the Tribunal may prohibit completely or partially the proposed merger, issue an order preventing certain conduct, or upon consent of the parties involved, issue an order requiring a person to take certain actions.237
The Bureau's recent Draft Information Bulletin on Merger Remedies in Canada238 specifically lists licensing of IP as a potential quasi-structural remedy, available in appropriate situations as an alternative to divestiture. In practice, the Commission has in the past used licensing of IP as a remedy in merger cases. For example, in Commissioner of Competition v. Bayer AG,239 a consent order was entered into regarding the proposed acquisition of Aventis CropScience Holding S.A. by Bayer AG (two of the largest multinational corporations engaged in the crop protection business). As a result of the Bureau's review, Bayer AG agreed to divest certain designated assets and grant an irrevocable, assignable, non-exclusive licence of certain IP relating primarily to its iprodione canola seed treatment business in Canada.
In the U.S., an example of a compulsory license for IP is the FTC's 'Decision and Order' concerning the merger between Ciba-Geigy and Sandoz into Novartis.240 The FTC concluded that the merger would violate U.S. antitrust laws since Ciba-Geigy Ltd. and Sandoz Ltd. were current or potential competitors for several products. The FTC required divestiture of several products, ordered compulsory licenses of IPRs for a number of other healthcare inventions and required the new merged entity to grant non-exclusive licenses to all requesters for patent and other rights to certain products.
Proposed Areas for Academic Study:
Examining the merits of compulsory licensing as a remedy. Compulsory licensing of IPRs is generally regarded as an extraordinary remedy that is to be used sparingly.241 It would be useful to undertake a detailed examination of the merits and demerits of using compulsory licensing as a remedy. For instance, compulsory licensing may have a negative impact on the incentive to innovate as it may reduce the ability of the innovator to exclude others and thereby decrease the returns expected from innovation, resulting in a free-rider situation. Further, the impact on consumers needs to be considered to determine if monopoly-sharing based on compulsory licensing does in fact lead to price and/or product improvement. For instance, only compulsory licensing to parties seeking to develop products with different characteristics, to improve performance or to service unsatisfied demand,242 may enhance consumer welfare in the short term and/or the long term. Finally, the study could consider whether courts and competition authorities have the requisite abilities to decide whether a facility is truly non-replicable or merely a competitive advantage.243 Indeed, the U.S. courts have recognized the inappropriateness of and lack of ability of courts to perform the oversight function that may often be involved in with compulsory licensing. 244
The interaction between compulsory licensing under the Patent Act and the < em>CA. Apart from the CA, the Patent Act and Copyright Act also provides for compulsory licensing as a remedy.245 The interaction between the remedies available under these statutes is worthy of further study. For instance, are there potential situations where the remedy may be available under one legislation but not under another? Will that give rise to a conflict between the Patent Act and the CA? In addition, the impact of Canada's international treaty obligation, such as those arising under Art. 31 of TRIPS should be considered.
Jurisdictional Independence and Comity
a. Comity and Deference
Comity is a doctrine under which, in order to avoid conflict, a judicial tribunal or governmental authority of a sovereign state considers the important interests of another sovereign state when exercising its jurisdiction over a particular matter. The doctrine has been recognized by courts both in Canada and abroad.246
In the context of competition law, Canada has entered into a number of bilateral cooperation agreements that incorporate both the principles of "positive comity", under which a party agrees to invoke its competition laws, conduct necessary investigation and take appropriate action at the request of the other party; and "negative comity" or "avoidance of conflict" provisions, under which the parties agree to give careful consideration – which could potentially include refraining from taking any action - to each others' interests throughout all phases of competition enforcement activities.247
Such agreements that result in greater cooperation and coordination between competition authorities provide a number of benefits to businesses, such as reducing the likelihood of contradictory outcomes in different jurisdictions when a cross-jurisdictional merger is involved, and providing greater certainty with regard to planning transactions and investments. In addition, the competition authorities benefit from sharing of information that leads to more informed decisions, and saving of resources by avoiding duplication of investigation.
Where IPRs, which by definition are national or, in the case of Europe, regional, are involved in cross-jurisdictional activities, cooperation and coordination between competition authorities is even more important to ensure that different jurisdictions not only do not require contradictory remedies, such as only one jurisdiction requiring certain IPRs to be licensed, but also that they do not adopt divergent remedies such as different jurisdictions requiring different IPRs to be licensed, or for one jurisdiction to require divestiture of a business and for another to find that licensing of certain IPRs is sufficient to address competition concerns. Applying principles of comity and deference can result in avoiding any chilling effect on innovation because of different products having to encapsulate different IPRs in different jurisdictions arising from divergent remedies, and allows technology companies to attain greater efficiencies by ensuring that their IPRs are treated similarly across jurisdictions. At the same time, regard must be had to the fact that IPRs may differ in their scope and degree of protection across different jurisdictions. For instance, for the same product, the scope and term of the patent granted in the U.S. may differ from the scope and term of the patent granted in Canada.
There have been a number of recent instances of cooperation and coordination among competition authorities, particularly in instances of cross-jurisdictional merger reviews, where IPRs were involved.248 For instance, in the Bayer/Aventis CropScience merger of 2002, the U.S. FTCs, the European Commission and the Bureau coordinated the remedies that were to be accepted to permit the merger to occur. While some remedies were jurisdiction specific,249 others were divestitures taken on a world-wide basis.250 With regard to the IPRs involved in the businesses to be divested on a world-wide basis, the three competition authorities consulted closely to devise consistent obligations resulting in divestiture of all IPRs relating primarily to the divested business, licensing of the IPRs that related, but not primarily, to the divested business to the acquirer, and a broad immunity from infringement claims to the acquirer of the business for making or selling the product anywhere in the world. The result was a consistent divestiture requirement ensuring that the IPRs involved were dealt with in the same manner across all jurisdictions, thus resulting in the creation of a worldwide competitor to the merger entity in the market of concern, allowing the merger to proceed.251
Similarly, in the Hoechst/Rhone-Poulenc merger in 1999 and the Sanofi-Synthelabo/Aventis merger of 2004, the U.S. and E.U. competition authorities cooperated to require the parties to divest the IPRs relating to the same product, and further, the divestiture was made to the same acquirer in both jurisdictions. In addition, in the Hoechst/Rhone-Poulenc merger the authorities also ensured that the same divestiture trustee was appointed for both jurisdictions, to ensure that a uniform result would be achieved.
On the other hand, there have been instances of results – in the GE/Honeywell merger, while U.S. competition authorities approved the merger, the E.U. authorities blocked the merger, and a satisfactory merger remedy could not be achieved. More recently, in the abuse of dominance investigation of Microsoft, the results were quite divergent (see below).
3. Divergent Decisions by the U.S. and E.U. in Microsoft
The most recent case involving the interface between IP and competition law that has grabbed media attention worldwide is Microsoft.252 The Microsoft case brought to the fore the contrasting approaches adopted by the E.U. and the U.S. in relation to IP and competition. In the Microsoft case, the remedy adopted by the U.S. was focused on the particular conduct at issue, and sought to enhance choice. It also aimed at removing perceived barriers to competition while, at the same time, seeking to preserve the value of Microsoft's IPRs and the benefits of new technology (and long-term consumer welfare) that IPRs are designed to achieve.
In the U.S., Microsoft was able to enter a settlement with the U.S. Department of Justice, prohibiting Microsoft from retaliating against computer manufacturers, allowing customers to remove icons from some Microsoft features, and requiring Microsoft to disclose some technical data and restrict some of its business practices.253 Requests for stricter remedies were rejected by the Federal District Court.254 In contrast, the European Commission imposed a 467 million euro fine on Microsoft, and provided other remedies such as requiring Microsoft to begin offering PC makers a version of Windows unbundled from media player within 90 days, and within 120 days to disclose certain interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers.255 The remedy fashioned by the European Commission involves Microsoft having to produce a separate European version of its Windows program that would not include the media player, and involves greater sharing of IPRs than the settlement with the U.S. authorities contemplates.
In its November 2002 decision in Microsoft, the U.S. District Court (DC Circuit) essentially said that, in proposing a remedy requiring Microsoft to distribute the Java platform with Windows, Sun Microsystems was trying to give itself an artificial market advantage through the antitrust process which would place it on an equal footing with Microsoft, notwithstanding that Sun did not deserve to be on an equal footing.
By contrast, the EC's remedy was far more interventionist. The EC focused its remedy on seeking to have a competitor placed on equal footing to Microsoft, regardless of whether or not that competitor would have achieved that status on its own in the absence of the alleged abusive conduct. The approach adopted by the EC may be expected to have a significant impact on market dynamics and to reduce the incentives for research and development that are essential to global economic growth. In discussing the EC decision in Microsoft, Hewitt Pate, Assistant Attorney General for Antitrust, U.S. DOJ, stated:
The EC has today pursued a different enforcement approach by imposing a "code removal" remedy to resolve its media player concerns. The U.S. experience tells us that the best antitrust remedies eliminate impediments to the healthy functioning of competitive markets without hindering successful competitors or imposing burdens on third parties, which may result from the EC's remedy.
Sound antitrust policy must avoid chilling innovation and competition even by "dominant" companies. A contrary approach risks protecting competitors, not competition, in ways that may ultimately harm innovation and the consumers that benefit from it. It is significant that the U.S. district court considered and rejected a similar remedy in the U.S. litigation.256
A related principle is that, to the extent possible, any remedy should be "technology neutral", in that it does not affect the market for a particular technology, nor does it affect the incentives to innovate and develop future technologies, other than affecting incentives through the elimination of any anti-competitive conduct and, to the extent possible, the impact of previous anti-competitive conduct on the market place. This is consistent with the principle that competition law and policy should promote competition, not the interests of particular competitors.257
The remedy imposed by the U.S. courts in resolution of the U.S. Department of Justice's concerns satisfies the objectives of promoting efficiency and consumer welfare while protecting innovation, respecting IPRs, and generally facilitating entry by other market participants. By contrast, the EC decision, in imposing a code removal remedy, runs directly contrary to these objectives by hindering competitors that have been successful through investment in R&D, human capital and creativity, and artificially promoting a subset of those that have been less successful at innovation. Imposing liability on the basis of the success of a product and designing a remedy to counter that success protects competitors rather than competition, in a manner that is likely to stifle innovation and harm consumers. This not only defeats the long-term goal of dynamic economic efficiency that is becoming an increasingly important consideration in competition policy, but also would defeat the very purpose of protecting IPRs.
The principle that the interests of a particular competitor should not be the focus in addressing the IP owner's alleged anti-competitive conduct also reflects and encompasses the accepted and respected international competition and trade norms of non-discrimination and procedural fairness in the application of a state's laws, particularly with respect to "national champions".258
IV. Time for a Review of the Application of the Competition Act to IP and the Treatment of the IP/Competition Law Interface Under the IPEGs?
Achieving a fair and effective balance between IPRs and competition policy has never been more important. While not limited to rapidly changing technology markets, the issues at hand are even more acute when the cases involve parallel proceedings in relation to those types of markets. The risk of unnecessarily chilling innovation and resulting dynamic efficiency gains is inherent in these situations. This means that finding a sensible normative balance is a real challenge that should be on the "front burner" of competition authorities' agendas – both in the domestic and international context.259 With this in mind, this Section discusses whether it is ripe to reconsider the application of the CA to IPRs and/or the treatment of the interface between competition law and IP under the IPEGs.
A. Review of Sections 19 and 65 of the Patent Act and Section 32 of the CA
The three principal legislative provisions designed to offer a form of remedy against misuses of exclusive rights granted by the grant of a valid patent (or other IPR) are Sections 19 and 65 of the Patent Act and Section 32 of the CA.260 The so-called "compulsory licensing" provisions of the Patent Act have undergone significant change over the years. For instance, compulsory licensing for pharmaceutical products was first introduced in Canada in 1923, and the use of compulsory licenses particularly in relation to pharmaceutical products was encouraged.261 In 1969 amendments were made to the Patent Act in order to extend the scope and availability of compulsory licenses to allow someone other than the patent holder to not only manufacture the medicines within Canada but also to import medicines.262 A number of challenges to these amendments resulted in courts repeatedly rejecting claims that these provisions fall outside the legislative jurisdiction of the federal government or offend provisions on property rights, liberty, or equality in either the Canadian Bill of Rights or the Canadian Charter of Rights and Freedoms.263 In anticipation of the free trade agreements entered into by Canada, in the late 1980's there was a shift away from compulsory licensing of pharmaceutical products because of the restriction against industry specific treatment to control the pricing of patented medicines.264 In 1993 further amendments were made to thePatent Act as a result of Canada entering to a number of international treaties, such as the Canada-U.S. Free Trade Agreement, NAFTA and TRIPS.265 These amendments abolished the compulsory licensing regime for drugs.266 To balance first the limitation (in 1982) and then the elimination (in 1993) of the pharmaceutical compulsory licensing regime, the Patented Medicines Prices Review Board was created.267 The current legislative regime that governs compulsory licensing comprises of Sections 19 and 65 of the Patent Act, and Section 32 of the CA, as discussed below.
1. Section 65 of the Patent Act
Subsection 65(1) of the Patent Act provides that any person interested, or the Attorney General of Canada, may after three years from the date of the grant of a patent apply for relief alleging that there has been an "abuse of exclusive rights" under a patent. Section 65(2) provides a list of four circumstances under which the exclusive rights under a patent are deemed to have been abused:
- if the demand for the patented article is not being met to an adequate extent and on reasonable terms;
- if the trade or industry of Canada, the trade of any person or class of persons trading in Canada, or the establishment of any new trade or industry in Canada, is prejudiced, and it is in the public interest that a licence or licences be granted;
- if any trade or industry in Canada, or any person or class of persons engaged therein, is unfairly prejudiced by the conditions attached by the patentee to the purchase, hire, licence or use of the patented article or to the using or working of the patented process; or
- if it is shown that the patent has been utilized by the patentee so as unfairly to prejudice in Canada the manufacture, use or sale of any materials.
It is relevant to note that two of the circumstances of abuse relating to not working an invention locally within Canada. were repealed in 1996 following the adoption of the NAFTA.268 Similarly, the Patent Act provisions relating to compulsory licensing of drugs that were first introduced in 1969, were deleted in 1993 as a consequence of NAFTA requirements.269 These instances demonstrate the influence of international treaties on the domestic IP system, and suggest that limitations arising from Canada's international obligations relating to IP would have to be taken into account when considering any modification of the IP regime.
There is a inherent balance that Section 65 (and related provisions of the Patent Act) seeks to strike between the rights of the patentee and the rights of would-be applicants to receive licenses in the case of abusive conduct. In particular, while the powers of the Commissioner of Patents, where an abuse of the exclusive rights under a patent is found, are wide ranging under Subsection 66(1) of the Patent Act, Subsection 66(4) also provides a number of considerations in favour of the patentee to guide the Commissioner.
Under Subsection 66(1), the Commissioner may: (i) order the grant to the applicant of a license on such terms as the Commissioner may think expedient; (ii) order the grant of licenses to the applicant and to such of its customers on such terms as the Commissioner may think expedient where the patent has prejudiced the manufacture, use or sale of any materials; (iii) order the patent to be revoked; or (iv) refuse the application (and dispose of any question as to costs). Under Subsection 66(4), however, the Commissioner of Patents shall, in settling the terms of a licence granted under Subsection 66(1), endeavour to secure: "the widest possible use of the invention ... consistent with the patentee deriving a reasonable advantage from his patent rights" and "the maximum advantage consistent with the invention being worked by the licensee at a reasonable profit in Canada."
There have been very few decided cases that raise issues under Section 65 of the Patent Act since the 1993 amendments.270 The most recent case of note is Torpharm Inc. v. Canada (Commissioner of Patents)271 where the Federal Court had a rare opportunity to consider an application under Section 65 of the Patent Act. Torpharm had approached the patent owner Merck & Co. for a license in relation to a particular bulk drug in order to produce tablets that it would then only export out of Canada and not sell within the country. Merck & Co. refused to grant a license, prompting Torpharm to bring an application under Section 65 before the Commissioner of Patents who concluded that Torpharm had not made out a prima facie case for relief. Torpharm appealed this decision to the Federal Court. The Federal Court, while remitting the case back to the Commissioner of Patents to conduct a more substantive investigation, held, among other things, that Subsection 65(2)(d) requires a detailed examination of the reasonableness of the terms of the license proposed by the licensee.272
From a doctrinal point of view, however, the most significant aspect of the Torpharm case is that the Federal Court held that the enumerated grounds for "abuse" of a patent under section 65(2) were not exhaustive because the subsection is merely a "deeming provision listing particular circumstances set out therein which are to be considered to constitute abuse whether or not those circumstances would appear to fall within the general terms of [Subsection] 65(1)."
This leaves open the possibility that "abuse of the exclusive rights" granted under a patent could encompass a number of elements other than those specifically listed under Subsection 65(2) so long as they are consistent with the overall provision. In this regard, the Patent Act, in theory at least, permits consideration of competition law and policy principles in the context of whether or not there has been an abuse of a patent by a patent-holder. This potentially points toward a further interface between the Patent Act and the principles embodied in the CA (e.g., the abuse of dominance provisions under Sections 78 and 79).
Given this interpretation of Subsection 65(2), and the relatively few decided cases under the current Section 65, it would appear to be unnecessary, at this time, to amend the text of Section 65 in order to explicitly include anti-competitive licensing practices and/or other competition principles (e.g., essential facilities).
2. Section 19 of the Patent Act
Section 19 of the Patent Act permits the Commissioner of Patents to authorize the use of a patented invention by the Government of Canada or the government of a province. The Patent Act specifies certain principles and conditions that the Commissioner must take into account before authorizing such use:
§ the scope and duration of the use by the government should be limited to the purpose for which the use is authorized;
§ the authorized use should be non-exclusive;
§ any use should be authorized predominantly to supply the domestic market;
§ the applicant must have made efforts to obtain a license on reasonable commercial terms and conditions;
The Patent Act further requires the government to pay the patentee an "adequate remuneration" that would take into account the "economic value of the authorization."273 While Section 19 of the Patent Act has been invoked a few times prior to the 1993 amendments to the Patent Act as a consequence of Canada's international treaty obligations,274 Section 19 appears to have a very different policy objective as compared to Section 65 of the Patent Act and Section 32 of the CA, since it is focused more on protecting public concerns especially in times of emergencies. Indeed, the last time there was discussion of the potential use of Section 19 was when the Government of Canada was trying to ensure that it had adequate supplies of Ciprofloxacin, the drug used to treat Anthrax, in the wake of an Anthrax scare in the U.S.275
3. Section 32 of the Competition Act
Section 32 was initially enacted in 1910 and is now found in the "Special Remedies" Part (Part IV) of the CA. It gives t he Federal Court the power, on application by the Attorney General, to make remedial orders if it finds that a company has used the exclusive rights and privileges conferred by a patent, trade-mark, copyright or registered integrated circuit topography to unduly restrain trade or lessen competition.276 Among other things, a remedial order may include an order declaring void, in whole or in part, any agreement, arrangement or licence relating to the challenged use of the IPR. Remedial orders can also restrain the exercise of rights under such agreements, require compulsory licensing, revoke a patent, direct that the registration of a trade-mark or an integrated circuit topography be expunged, or contain mandatory provisions. Although the remedial powers under Section 32 are broad, only the Attorney General can initiate proceedings.
There has been a dearth of judicial (and, presumably, administrative) activity concerning Section 32. Indeed, there is no contested case that has ever been brought to a trial under this Section in the 70 years that have since intervened.277 In at least one instance, tied selling has given rise to a claim under Section 32 of the CA.278 In this case, the licensee used patented machines that extracted polyethylene film from resin and was required to purchase resin from the licensor and a particular group of suppliers. The licensor, Union Carbide, entered a settlement agreeing to abandon this practice.
Although Section 32 remains in the CA, it has not been employed other than in a few instances. Given that other provisions of the CA may also be relied upon to deal with anti-competitive conduct involving IPRs, the utility of Section 32 may need to be reviewed.
B. Review of Specific Provisions of the Competition Act and the Bureau's IPEGs
At this time, based on the discussion contained in this paper, in our view a full scale review is probably not warranted. In our views, efforts would be devoted more usefully to the areas for proposed academic study identified in Sections II and III above. We do, however, suggest that the Bureau may want to consider proposing elaborations or clarifications to a number of specific provisions in the CA and various aspects of the IPEGs. Suggestions in this regard are contained in the attached chart:
|Tying||Clarification of the meaning of "technological relationship" in cases involving cabbr IP in Section 77(4)(b) of the CA||The meaning of the term "technological relationship" in Section 77(4)(b) of the CA could be clarified in the context of its application to IPRs, particularly in light of the issues that arose in Microsoft.|
|Essential Facilities||Elaboration of Canadian approach to essential facilities||The IPEGs state that one of the conditions for the application of the special remedies under Section 32 of the CA is that "the IP must be an essential input … that is, the refusal to allow others to use the IP prevents other firms from effectively competing in the relevant market". However, further guidance or elaboration would be useful, particularly in light of the diverging approaches taken by the U.S. and European agencies concerning the essential facilities doctrine.|
|Essential Facilities||Objective justification defence||The IPEGs do not consider whether IP owners should have the opportunity to demonstrate that they have an objective justification for not licensing the IP. Such objective justifications may be technical or economic, such as that the firm seeking the license is a bad debtor or that it does not have the technical capability to effectively use the IP.|
|Essential Facilities||Weighing pro-competitive and anti-competitive effects||Though the IPEGs suggest that the Bureau would consider the effect of granting a license on the incentive to innovate, there is no clear requirement to weigh other pro and anti-competitive effects of requiring an IP owner to grant a license. For instance, refusal to license an IP may result in poorer quality of service and lessen competition in complimentary products.|
|Joint Ventures||Market definition||Currently, neither the CA nor the IPEGs suggest any special treatment for JVs regarding market definition. However, in the context of JVs involving R&D collaboration and sharing of IPRs, the issue of market definition deserves special attention since JVs are likely to create a new product for which there is no existing market. In such circumstances, while the IPEGs have appropriately declined to adopt the "innovation market" approach incorporated in the U.S. IP Guidelines,279 the IPEGs may require greater clarification with respect to market definition in such cases.|
|Litigation Settlements||Elaboration on litigation settlements||The IPEGs do not provide significant guidance as to whether, and if so when, arrangements in litigation settlements will come under scrutiny of the Bureau. Such guidance could be provided in the IPEGs. Analysis of licensing agreements specifically, as well as other provisions such as reverse payments should also be considered.|
1 Calvin S. Goldman, Richard F.D. Corley and Crystal L. Witterick, A Canadian Perspective on Intellectual Property Rights and Competition Policy: Striving for Balance and Related Comity Considerations, paper presented at the 31st Annual Conference on International Antitrust Law & Policy, Fordham Corporate Law Institute, October 2004 at p. 7.
2 An Act for the Encouragement of Learning, by vesting the Copies of Printed Books in the Authors or Purchasers of such Copies, during the Times therein mentioned, 1709 (U.K.), 8 Anne, c. 19.
4 Myra A. Tawfik, Copyright as Droit d'auteur, undated, Centre for Innovation Law and Policy, University of Toronto.
5Id. See also Tele-Direct (Publications) Inc v. American Business Information Inc,  2 FC 22 (FCA) and Théberge v. Galerie d'Art du Petit Champlain,  SCC 34 at para 62.
6 Royal Commission on Patents, Copyright and Industrial Designs, Reports on Copyright (Ottawa: Queen's Printer, 1957) at 7 and also at Report on Patents of Invention (Ottawa: Queen's Printer, 1960) at 5.
7 RS.C. 1985, c. P-4, as amended (hereinafter " Patent Act").
8 R.S.C. 1985, c. C-42, as amended (hereinafter "Copyright Act").
9R.S.C. 1985, c. T-13, as amended (hereinafter "trade-marks Act)".
10 R.S.C. 1985, c.I-9, as amended (hereinafter "Industrial Design Act").
11 S.C. 1990, c. 37, as amended (hereinafter "Integrated Circuit Topography Act").
12 S.C. 1990, c. 20, as amended (hereinafter "Plant Breeders' Rights Act).
13 A Market for Ideas, The Economist, 22 Oct. 2005, p. 3.
14 Section 2, Patent Act.
15 See David Vaver, Intellectual Property Law (Concord: Irwin Law, 1996) at 113.
16 See Kirkbi AG v. Ritvik Holdings Inc., 2005 SCC 65 at para 38 (hereinafter the "Lego case"). See also, The Economist, supra, n. 13 at p. 5.
17 See Section 1.1, CA: "The purpose of this Act is to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy...". See also Goldman, Corley and Witterick, supra, n. 1.
18 Part 1, IPEGs.
19 Sections 42 and 44, Patent Act.
20 See Sections 10 and 55(2), Patent Act.
21  2 F.C.R. 290 (F.C.A.).
22 R.S.C. 1985, c.C-34, as amended (hereinafter the "CA" or the "Act").
23 See Sections 3, 15, 18, 21 and 26, Copyright Act.
24 CCH v. Law Society of Upper Canada,  1 S.C.R. 339.
25 David Vaver, supra, n. 15 at p. 41.
26 Indeed, it could be argued that copyright protection is inherently pro-competitive in that it encourages people to express the same idea in a manner that has not already been done, in order to avoid any allegations of infringement. Since there is no requirement of novelty for a copyright, this in turn promotes innovation.
27 See, for example, BMG Canada Inc. v. John Doe, 2005 FCA 193; Society of Composers, Authors and Music Publishers of Canada v. Canadian Association of Internet Providers, 2004 SCC 45.
28 Robertson v. Thomson Corp. (2004), 243 D.L.R. (4th) 257 (Ont. C.A.) under appeal to the Supreme Court.
29 See David Vaver, supra, n. 15 at pp. 188-89.
30 Lego case, supra, n. 16 at para 42.
31 Subsection 7(b), trade-marks Act.
32 Canada (Director of Investigation and Research) v. NutraSweet Co., (1990), 32 C.P.R. (2d) 1 (C.T.) ("Nutrasweet").
33 Id. at 100.
34 Canada (Director of Investigation and Research) v. Tele-Direct (Publications) Inc., (1997) 73 C.P.R. (3d) 1 (Comp. Trib.) "Tele-Direct").
35Lego case, supra, n. 16at para 44.
36 See Section 13(2), trade-marks Act. See also Lego case, supra, n. 16 at paras 43 and 58.
37Lego case, supra, n. 16 at para 39.
38 Section 2, Industrial Design Act
39 Section 5.1, Industrial Design Act.
40 As of 1999, there were only 38 registrations under the legislation. See Press Release, Report to Parliament on Review of the Integrated Circuit Topography Act.
41 A Trade Secrets Protection Act had been proposed by the Institute of Law Research and R eform, Edmonton, Alber ta and a Federal-Provincial Working Party, Trade Secrets, (Report No. 46, July 1986). The Uniform Law Conference of Canada has also developed a Uniform Trade Secrets Act. However, there is currently no provincial or national legislation on trade-secrets.
42 See LAC Minerals Ltd. v. International Corona Resources Ltd.,  2 S.C.R. 574. In Quebec, trade-secrets are protected under the Quebec Civil Code: Ghaly Elia Gideon and Gideochem Inc. v. Tri-Tex Co. Inc.  R.J.Q. 2324 (C.A.).
43 OECD, Interim Report on Convergence of Competition Policies, OECD/GD (94) 64, Areas of Convergence in Competition Policy and Law, Annex at ¶ 4.
44 See for example, Antitrust and Competitiveness: Efficiencies, Failing Firms, and the World Arena, Statement by Eleanor M. Fox before the Global And Innovation-Based Competition Hearings Before The Federal Trade Commission (December 13, 1994).
45 See remarks of Deborah Platt Majoras when she was the Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice, GE-Honeywell: The U.S. Decision, before the Antitrust Law Section State Bar of Georgia, November 29, 2001. See also Draft Commentaries to Possible Elements for Articles of a Model Law or Laws, United Nations Conference on Trade and Development, prepared as a background document by the UNCTAD Secretariat, 21 August 1995.
46 The careful balancing of objectives was an important theme in a number of public statements made by a former Director of Investigation and Research during the first three years after the introduction in 1986 of the new CA. e.g., see C.S. Goldman, New Developments in the Enforcement of Canadian Competition Law, Address to the Law Society of Upper Canada, September 26, 1986; C.S. Goldman, The New Merger Provisions of the CA of Canada Fordham Corporate Law Institute, New York, October 22-23, 1987; C.S. Goldman, Merger Review in Canada: Twenty Months of Experience Under the CA, Address to the Canadian Bar Association, February 16,1988; C.S. Goldman, Merger Review Under Canadian Competition Law: The Quest for Balance, Address to the Canadian Bar Association, August 23, 1989.
47 See: Sections 45, 79 and 92 of the Act.
48 See: Section 79(4) of the Act.
49 See: Sections 86 and 96 of the Act.
50 Section 61(1) does not include plant breeders' rights among the IPRs it mentions.
51 Goldman, Corley and Witterick, supra, n. 1 at p. 8.
52 R.S.C. 1985, C-34, s. 93(g).
53 The requirement that IPRs be protected in order to provide an incentive for the development of valuable works has been accorded global recognition in treaties such as the World Intellectual Property Organisation (WIPO) treaties and the WTO treaty concerning Trade-Related Aspects of Intellectual Property (TRIPS). Canada, as a member of WIPO and signatory to many of the international treaties, including TRIPS, has enacted the Patent Act, Copyright Act, Trade-Marks Act, Industrial Design Act, Integrated Circuit Topography Act and other laws to protect IP and the rights of inventors and creators to benefit from their ideas and innovations.
54 IPEGs, Preface.
55 IPEGs, para 1.
56 IPEGs, para 4.1.
57 Tele-Direct, supra, n. 34; Canada (Director of Investigation and Research) v. Warner Music Canada Ltd. (1997), 78 C.P.R. (3d) 221 (Comp. Trib.).
58 Members of the Blakes Intellectual Property Group participated in these consultative meetings.
59 IPEGs, para 4.2.1.
60 It is noteworthy that the two drafts of the Guidelines that were circulated for comment were significantly less clear regarding the circumstances in which conduct involving only the mere exercise of IPRs might be challenged. For example, the earlier drafts articulated additional conditions that would have led to complicated and questionable assessments by the Bureau, such as a balancing of the risk incurred and innovative effort expended by the innovator against the market power sustained by the IP, an evaluation of whether the cost to the innovator to create the IP was insignificant, and a calculation of the value of the IP.
61 IPEGs, para 4.1.
62 IPEGs, para 5.1.
65 IPEGs, para 5.4.
68 See Sheila F. Anthony, Antitrust and Intellectual Property Law: From Adversaries to Partners, 28(1) AIPLA Quarterly Journal (2000) 1, citing Crown Die & Tool Co. v. Nye Tool & Mach. Works, 261 U.S. 24, 37 (1923).
69 324 U.S. 806 (1945).
70 In relation to patent misuse, see Morton Salt v. Suppiger, (1942) 314 U.S. 488 ("Morton Salt"). In relation to copyright misuse, see Lasercomb America v. Reynolds, 911 F.F.2d 970 (4th Cir. 1990).
71 See U.S. Philips Corp. v. ITC, 424 F.3d 1179 (Fed. Cir., 2005).
72 Patent Act, 35 U.S.C. § 271(d), amendment introduced by Patent Reform Act of 1988.
73 See United States v. Line Material Co., 333 U.S. 287, 308 (1948), where the Supreme Court held that the possession of a valid patent does not give the patentee any exemption from the provisions of the Sherman Act beyond the limits of the patent monopoly.
74 Anthony, supra, n. 68 at 4, citing the DOJ's policy in the 1970's of regarding as suspect certain specified types of conduct that involved IPRs.
75 897 F.2d 1572, 1576 (Fed. Cir. 1990).
76 U.S. IP Guidelines, ¶1.0.
77 U.S. IP Guidelines, ¶3.4. In a limited number of situations such as those involving price-fixing, output restraint, and market division among horizontal competitors where the restraints nature and effect are plainly anti-competitive, the U.S. IP Guidelines note that the enforcement agencies may adopt a per se approach without requiring the above conditions to be fulfilled.
78 Federal Trade Commission, To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy, October 2003 at p.5.
79 United States v. Microsoft, 253 F.3d 34, 63 (D.C. Cir. 2001).
80 No. 04-1329, 2005 (U.S.S.C.), Decided 1 March 2006.
81 See the Antitrust Modernization Committee ("AMC") List of Study Groups. The AMC is expected to submit its final report in 2007.
82 Articles 8(2), 30 and 31, TRIPS.
83 Article 40, TRIPS.
84 More recently, the debate in the context of TRIPS has been with relation to compulsory licensing and access to medicines. At the 2001 WTO Ministerial Conference held in Doha, a "Declaration on the TRIPS Agreement and Public Health" was issued that recognized that WTO members with insufficient manufacturing capabilities may face difficulties in making effective use of the compulsory licensing provisions under TRIPS, and instructed the WTO Council on TRIPS to find an expeditious solution to this issue. On 6 December 2005 the WTO General Council approved the amendment of TRIPS to permit countries to use compulsory licensing for pharmaceutical products even when the products are meant primarily for export. See Members OK Amendment To Make Health Flexibility Permanent. Consequently, Canada has enacted amendments to the Patent Act to give effect to this provision of TRIPS: An Act to Amend the Patent Act and the Food & Drugs Act (The Jean Chrétien Pledge to Africa), S.C. 2004, c.23.
86 OECD, Competition Policy and IPRs, DAFFK/CLP(98)18 (16 Sept. 1998). See also OECD, Interim Report on Convergence of Competition Policies, OECD/GD (94) 64 (June 1994).
87 See Carl Shapiro, Competition Policy and Innovation, DSTI.DOC(2002)11 (2002).
88 UNCTAD Secretariat, Competition Policy and the Exercise of IPRs, TD/RBP/CONF.5/6 (11 August 2000). This Report was reviewed and further revised in 2001 and 2002. See Competition Policy and the Exercise of Intellectual Properly Rights: Revised Report by the UNCTAD Secretariat, TD/B/COM.2/CLP/22 (May 8, 2001); and Competition Policy and the Exercise of IPRs: Revised Report by the U NCTAD abbr> Secretariat , TD/B/COM.2/CLP/22/Rev.l (Apr. 19, 2002).
89 Id. at 19.
90 See for instance, RBM Equipment Ltd. v. Philips Electronics Industries, (1973), 9 C.P.R. (2d) 50 (F.C.A.); Amoco Can. Petroleum Co. Ltd. v. Texaco Exploration Can. Ltd.,  1 F.C. 258 (F.C.T.D.); Procter & Gamble v. Kimberly-Clark of Canada Ltd. (1990), 29 C.P.R. (3d) 545 (F.C.A.); Eli Lilly and Co. v. novopharm Ltd. (1996), 68 C.P.R. (3d) 254 (F.C.T.D.).
91 2004 FC 1445 (F.C.T.D.).
92 The Court followed the decision in Molnlycke AB v. Kimberly-Clark of Canada Ltd. et al. (1991), 36 C.P.R. (3d) 493 (F.C.A.) in this regard.
93 Eli Lilly and Co. v. Apotex Inc., 2004 FC 1445 (F.C.T.D.) at para 21.
94 Eli Lilly and Co. v. Apotex Inc., 2004 FC 1445 (F.C.T.D.) at para 23.
95 Apotex Inc. v. Eli Lilly and Co., 2005 FCA 361 (Nov. 2, 2005) at para 21.
96 Id. at para 22.
97 Id. at para 28.
98 Id. at para 14.
99 Supra, n. 14.
100 Id.at para 6.
101 Id. at para 38.
102 Id. at para 39.
103 Id.at para 40.
104 Id.at para 44.
105 Id.at para 54.
106 Id.at para 61.
107 Patent pooling may also sometimes be referred to as "package licensing".
108 A patent pool could also give rise to other anti-competitive effects such as price fixing. See In re Summit Technology Inc. & VISX Inc., No. 9286 (FTCs 24 Mar. 1998).
109 See Example 6, IPEGs.
110 ¶ 5.5, U.S. IP Guidelines.
112 See In re Summit Technology Inc. & VISX Inc., No. 9286 (FTCs 24 Mar. 1998)
113 See MPEG-2, Business Review Letter, 1997 DOJBRL LEXIS 14 (D.O.J. June 26, 1997); and U.S. Philips Corporation v. International Trade Commission, Case No. 04-1361 (Fed. Cir. Sept 21, 2005). The Philips case did not involve an antitrust claim, but rather a claim that tying of "essential" patents (for which there are no commercially feasible alternatives) and "non-essential" patents amounts to patent misuse under common law. The court did however note that antitrust law principles are analogous.
114 The term "Standards Development Organisations" can be used interchangeably with SSO's.
115 The Administrative Law Judge dismissed the FTC's complaint. However, an appeal is now pending before the FTC's Commissioner.
116 See In the Matter of Rambus Inc., Dkt. No. 9302 FTCs ALJ) 14 February 2004. The complaint by the FTCs was probably triggered by a case involving a patent allegation by Rambus against Infineon Technologies A.G. where Infineon alleged fraud on behalf of Rambus in participating in JEDEC. See Rambus, Inc. v. Infineon Technologies, A.G., 164 F.Supp. 2d 743 (E.D. Va. 2001), rev'd, 318 F.3d 1081 (Fed. Cir. 2003). The European Commission is also conducting an investigation against Rambus, Inc. on allegations of patent ambush. See also In re Dell Computer Corporation, 1999 FTCs LEXIS 149 (July 28, 1999), where the FTCs alleged that Dell mislead the Video Electronics Standards Association about the existence of its patents though it participated in the formation of an industry standard and subsequently sought to enforce its patents. Dell entered into a consent decree with the FTCs. The European Commission has also recently commenced an investigation of its main telecommunications standards agency – the European Telecommunications Standards Institute (ETSI) – on allegations that ETSI's regulations may permit companies to indulge in patent ambush.
117 Id; In the Matter of Rambus Incorporated, Dkt. No. 9302 (FTCs) (appeal from FTCs ALJ decision).
118 15 U.S.C. § 2.
119 The Noerr-Pennington doctrine, derived from a series of U.S. Supreme Court cases, provides immunity to bona fide efforts to petition for government action and influence the legislative process. See Eastern R. Conference v. Noerr Motors (1961) 365 U.S. 117 (Sup. Ct.); and United Mine Workers v. Pennington (1965) 381 U.S. 657 (Sup. Ct.). See also California Motor Transport Co. v. Trucking Unlimited (1978) 404 U.S. 508 (Sup. Ct.) (explaining the "sham exception" to the doctrine).
120 In the matter of Unocal, Dkt. No. 9305 (FTCs) 7 July 2004.
121 This touches upon the question of how the Noerr-Pennington doctrine should be applied in Canada on the basis that participation in government sponsored SSO's are quasi-judicial bodies, and representation before such bodies is nothing more than an attempt to influence legislative policy.
122 See Competition Bureau Information Notice and Backgrounder, Competition Bureau Responds to Complaint Over Alleged Misuse of Canada's Drug Patent Rules, February 27, 2004.
124 See Federal Trade Commission Press Release, FTCs Charges Bristol-Myers Squibb with Pattern of Abusing Government Processes to Stifle Generic Commission, March 7, 2003.
125 In the Canadian context, there have been a number of cases based on similar allegations of "improper listing". See, for example, AstraZeneca v. Apotex & Canada (Minister of Health), 2004 FC 44 (FCTD); Pfizer v. Apotex & Canada (Minister of Health), 2003 FC 1428 (FCTD); Hoffman-LaRoche Ltd. v. Minister of Health et al, 2005 FCA 140 and AstraZeneca v. Minister of Health et al, 2005 FCA 175.
126 See Health Canada/Industry Canada Press Release, Government of Canada Proposes Amendments to Intellectual property Rules for Pharmaceuticals, 13 December 2004. However, it is not clear if and when these proposed amendments will be placed before Parliament.
127 See, for example, Apotex Inc. v. Eli Lilly & Co. (2001), 13 C.P.R. (4th) 78 (FCTD) affd 2002 FCA 389; Apotex Inc. v. Eli Lilly & Co. (2001), 15 C.P.R. (4th) 129 (FCTD) affd (2002), 22 C.P.R. (4th) 19 (FCA); Apotex Inc. v. Syntex Pharmaceuticals International Ltd. (2001), 16 C.P.R. (4th) 473 (FCTD affd 224 FTR (160) (FCA); Apotex Inc. v. Merck & Co. Inc., 2004 FC 314 (FCTD).
128 Patent Act, Sections 79 – 102.
129 For example, in Ontario see the Drug Interchangeability and Dispensing Fee Act, R.S.O. 1990, Chapter P. 23.
130 The term "pseudo-generics" is also sometimes used.
131 See Federal Drug Administration News Release, FDA Supports Broader Access to Lower Priced Drugs, July 2, 2004. It may be noted that there is no equivalent provision providing for an exclusivity period under Canadian law.
132 See Aidan Hollis The Anti-Competitive Effects of Brand-Controlled 'Pseudo-Generics' in the Canadian Pharmaceutical Market, 29(1) Canadian Public Policy (2003) 21 at 23. See also Comment of Apotex Corp. in Support of Citizen Petition Docket No. 2004P-0075/CP1, filed by Apotex Corp. in support of Mylan Pharmaceuticals Inc.'s citizen petition before the FDA.
133 See Apotex v. Hoffman La-Roche et al, Docket C33172, December 14, 2000 (Ont. C.A.), where the court held that a claim that such a representation violated Section 52 of the CA was not plain and obvious to fail and therefore could not be struck.
134 Hollis, supra, n. 132 at p.29.
135 FTC's Congressional Budget Justification Fiscal Year 2007 at 13 Feb 6, 2006.
136 Hollis, supra, n. 132 at p.21.
137 418 F.3d 1282 (Fed. Cir. Aug. 2, 2005). See also NTP, Inc. v. Research in Motion, Ltd., 392 F.3d 1336 (Fed. Cir. Dec. 14, 2005).
139 Brief Amicus Curiae of the Government of Canada in Support of the Request for Rehearing En Banc Made in the Combined Petition by Research in Motion, Ltd. For Panel Rehearing and Rehearing En Banc, 13 January 2005. The Court denied the motion to hear the matter en banc and instead granted a petition for rehearing that resulted in the August 2005 decision: 418 F.3d 1282 (Fed. Cir. Aug. 2, 2005).
141 See Research in Motion v. NTP, Dkt. No. 05-763 (U.S.S.C.).
142 While this terminology is not used in the Copyright Act, it is a useful, if not completely accurate, taxonomy for categorizing copyright collectives under Canadian law. It must also be noted that there are other collective organizations that at least theoretically operate outside of the schemes created by the Copyright Act.
143 Sections 67 and 67.1, Copyright Act.
144 Part VIII, Copyright Act.
145 Subsection 67.1(4) and Subsection 83(12), Copyright Act.
146 See Sections 70.1 to 70.6 and Section 70.12, Copyright Act.
147 Subsections 70.2 to 70.4, Copyright Act.
148 The European Commission has recently sent to the International Confederation of Societies of Authors and Composers (CISAC) and its individual national collecting society members a Statement of Objections alleging that: (i) the membership restrictions which oblige authors to transfer their rights only to their own national collecting society (whatever the subsequent exploitations of the rights); (ii) the territorial restrictions, which oblige commercial users to obtain a license only from the domestic collecting society and limited to the domestic territory, and (iii) the network effects of the agreements infringe the European Communities rules prohibiting restrictive trade practices. See the European Commission Press Release, Commission Sends Statement of Objections to International Confederation of Societies of Authors and Composers (CISAC) and its EEA Members, MEMO/06/63, dated February 7, 2006.
149 For instance, see SOCAN v. Canadian Association of Internet Providers, 2004 SCC 45 for a discussion of certain issues relating to transmission of copyrighted material over the internet.
150 See Industry Canada, Supporting Culture and Innovation: Report on the Provisions and Operation of the Copyright Act, October 2002.
151 This would seem to exclude any agreement by a collective that is subject to the compulsory tariff provisions described above.
152 Section 70.5(3), Copyright Act.
153 Section 70.5(4) and (5), Copyright Act.
154 The relationship between IPRs and the regulated conduct defence is discussed in greater detail in Section II.C.1.
155 For instance, SOCAN has submitted a tariff proposal requiring websites that communicate music to the public whether for downloads or as part of an online game or webcast to pay royalties. Similarly, SODRAC and CMRRA have proposed new tariffs to cover reproduction rights associated with online music. See generally the list of upcoming tariff hearings before the Copyright Board.
156 Canada has signed (though not yet ratified) the World Intellectual Property Organizations (WIPO) Copyright Treaty, and the WIPO Performances and Phonograms Treaty, both of which contain provisions relating to technological measures to protect copyrighted works. The Government had introduced Bill C-60 as part of the process of amending Canadian copyright legislation in order to be able to ratify the WIPO treaties.
157 Section 9, trade-marks Act.
158 Sections 9(n) and 12 (f), trade-marks Act.
159 Section 9(n), trade-marks Act. The entity merely has to demonstrate that it is a "public authority".
160 Assn. of Architects (Ontario) v. Assn. of Architectural Technologists (Ontario),  1 F.C. 331 (F.C.A.); College of Chiropodists of Ontario v. Canadian Podiatric Medical Association, 2004 FC 1774 (F.C.T.D.). See also Public Authority Status under Sub-paragraph 9(1)(n)(iii), CIPO Practice Notice, October 10, 2002, which states that '[t]he Registrar of trade-marks will require evidence of public authority status on every request to publish an official mark."
161 See for e.g. Registrar of Trade Marks v. Canadian Olympic Assn,  1 F.C. 692 (F.C.A.); Canadian Olympic Association v. Konica, (1991), 19 C.P.R. (3d) 400 (F.C.A.); Canada Post Corp. v. Post Office,  2 F.C. 63 (F.C.T.D.); Canada Post Corp. v. United States Postal Service,  F.C. 1630 (F.C.T.D.).
162 United Parcel Service of America, Inc. v. Government of Canada, Arbitration Proceeding. All the relevant documents relating to the arbitration proceeding.
163 In this context, see Federal Business Development Bank (FBDB) v. C.B. Media Ltd. (1991), 37 C.P.R. (3d) 119 (F.C.T.D.). The FBDB had obtained an official mark for PROFITS in association with, inter alia, business publications, and alleged that C.B. Media had infringed its mark by using the word PROFIT in relation to a business magazine. FBDB had sought an injunction restraining C.B. Media from using the word till its trade-mark infringement action was heard. The court in refusing to grant the injunction noted that the allegation that FBDB was using its official mark not directly in support of its mandate as a Crown Corporation, but for a sideline business activity, was a serious issue that could only be resolved at trial.
164 Canada Post Corp. v. United States Postal Service,  F.C. 1630 (F.C.T.D.).
165 See the letter from industry participants to the Premiers and the Prime Minister, 7 October 2004; see also NWT and Nunavut Chamber of Mines, The Mining Association of Canada, The Prospectors and Developers Association of Canada, National Diamond Strategy: An Industry Response, March 2004 at p. 21.
167 See Section 2.1, CA.
168 See Attorney General of Canada v. Law Society of British Columbia,  2 S.C.R. 307 (SCC). See also Competition Bureau, Draft Technical Bulletin on Regulated Conduct, November 2005.
169 See Reference Re: The Farm Products Marketing Act,  1 S.C.R. 198; R. v. Can. Breweries Ltd.,  O.R. 601; Industrial Milk Producers Association v. B.C. Milk Board, (1998), 47 D.L.R. (4th) 710 (F.C.)
170 Garland v. Consumers' Gas Co.,  S.C.C. 25. It must be noted that this case did not involve an action under the CA. The Supreme Court suggested that the word "unduly" and the phrase "in the public interest" are instances of such leeway language.
171 There are numerous definitions of Open Source Software. For instance, see the definition of the Open Source Initiative.
172 See An Open Secret, The Economist, 22 Oct. 2005, p. 12.
173 Street Bank & Trust Co. v. Signal Financial Group, Inc. 149 F.3d 1368 (Fed. Cir. 1998) cert denied 119 S. Ct. 851 (1999).
174 See Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343 (U.S. Ct of App. Fed. Cir. 2001).
175 See Schlumberger Canada Ltd. v. Canada (Commissioner of Patents ) (1981), 56 C.P.R. (2d) 204 (F.C.T.D.); Re Patent Application No. 564,175 (1999), 6 C.P.R. 4th 385 (Patent Appeal Board).
176 Article 27.1, TRIPS.
177 See Section III.A.1 below for a detailed discussion on tying.
178 Brulotte v. Thys Co., 379 U.S. 29 (1964). The Court of Appeal for the Seventh Circuit has recently applied this decision, though it raised significant doubts about its continued validity: see Scheiber v. Dolby Labs., Inc., 293 F.3d 1014 (7th Cir. 2002), cert. denied, 123 S.Ct. 853, January 2003.
179 Culzean Inventions Ltd. v. Midwestern Broom Co. Ltd. et al, 82 C.P.R. (2d) 175 (Sask. Q.B.).
180 Tele-Direct, supra, n. 34 at 105.
181 R.S.C. 1985, c. C-34.
182 See Tele-Direct, supra, n. 34.
183 The Tribunal in Tele-Direct indicated that determining whether the products can be supplied efficiently involved examining if providing the products separately would result in higher costs that would outweigh the benefits to those who want them separately.
184 Nutrasweet, supra,n. 32 at 35.
185 Neither of these terms are defined under the Act. The Tribunal in Tele-Direct indicated that if a firm has market power, it fulfils this requirement.
186 Substantial lessening of competition occurs where the anti-competitive act creates, preserves or enhances market power. See Nutrasweet, supra, n. 32 at 55.
187 Section 77(4)(b), CA.
188 However, see Hatton v. Copeland-Chatterson Co. (1906), 37 S.C.R. 651 where the Supreme Court of Canada held that a situation where a patentee sold his patented binder on the condition that the sheets for the binder were also to be purchased from the patentee did not violate the Patent Act, R.S.C. c. 61.
189 See footnote 12 in ¶4.1, IPEGs.
190 See para 5.4, IPEGs.
191 Nutrasweet, supra, n. 32 at 100.
192 Tied selling gave rise to a claim under Section 32 of the CA in R v. Union Carbide Canada Limited, Exchequer Court of Canada, Court No. B-1979, Information filed October 12, 1967, Minutes of Settlement filed December 12, 1969, where the licensee used patented machines that extracted polyethylene film from resin and was required to purchase resin from the licensor and a particular group of suppliers. The licensor, Union Carbide, entered into a settlement agreeing to abandon this practice.
193 Specifically, para 5.3 of the IPEGs lists the following circumstances under which the authorities will likely challenge a tying arrangement: (1) the seller has market power in the tying product; (2) the arrangement has an adverse effect on competition in the relevant market for the tied product; and (3) efficiency justifications for the arrangements do not outweigh the anti-competitive effects. These conditions are substantially similar to those required in Canada with respect to a tied sale: see Section 77, CA.
194 See Jefferson Parish Hosp. Dist. No. 2 v. Hyde, 466 US 2 (1984) (Sup. Ct.). However, the Supreme Court narrowed the scope of the per se prohibition from that previously articulated by International Salt Co. v. United States, 332 U.S. 392, 396 (1947) (Sup. Ct.) by requiring demonstration of market power and adding an efficiency analysis. It was this modified test that was adopted by the Competition Tribunal in Tele-Direct.
195 United States v. Microsoft Corp., 253 F.3d 34 (DC Cir. 2001) (Ct. of App.).
196 Under the "rule of reason" approach, instead of showing market power, one must show: (1) the tying arrangement has an actual anti-competitive effect by reducing competition in the tied product; and (2) there is no valid business justification.
197 See Jonathan M. Jacobson and Abid Qureshi, Did the Per Se Rule on Tying Survive 'Microsoft'?, New York Law Journal, August 14, 2001.
198 Para 4.1, IPEGs.
199 Independent Ink, Inc. v. Illinois Tool Work s, Inc, 396 F.3d 1342 ( Fed. Cir. 2005). p>
200 ¶ 5.3, U.S. IP Guidelines. The CAFC noted that Supreme Court decisions in International Salt Co. v. United States, 332 U.S. 392 (1947), and United States v. Loew's. Inc., 371 U.S. 38 (1962) were binding precedent for the presumption that an IP right confers market power on its owner, and the U.S. IP Guidelines do not affect the validity of these decisions: see 396 F.3d 1342 (Fed. Cir. 2005) footnote 10 at p. 13.
201 See Tanaka v. Univ. of So. Cal., 252 F.3d 1059, 1063 (9th Cir. 2001); Forro Precision, Inc. v. Int'l Bus. Machs.Corp., 673 F.2d 1045, 1052 (9th Cir. 1982).
202 Illinois Tool Works, Inc. v. Independent Ink, Inc., Dkt. No. 04-1329 (U.S.S.C.), Decided March 1, 2006.
203 (1995), 64 C.P.R. (3d) 216 (Comp. Trib.).
204 See also the observations of the Restrictive Trade Practices Commission ("RTPC") in a 1986 report on the Canadian petroleum industry, where relying on U.S. case law definitions of "essential facilities", the RTPC concluded that refineries and large terminals in the Canadian petroleum industry were essential facilities: The Restrictive Trade Practices Commission, Competition in the Canadian Petroleum Industry, Supply and Services Canada, 1986 at 451. See also the decision of the Canadian Radio-television and Telecommunications Commission ("CRTC") in Local Competition, Telecom Decision CRTC 97-8, 1 May 1997, where the CRTC concluded that certain telecommunication services and facility components were essential facilities, and ordered the incumbent local exchange carriers to unbundle these essential facilities from its product offerings.
205 Para 4.2.1, IPEGs. See also Apotex Inc. v. Eli Lilly and Company, 2005 FCA 361.
206 Para 4.2.2, IPEGs.
207 See Verizon v. Law Offices of Curtis v. Trinko, 540 U.S. 398 (2004) (Sup. Ct.) ("Trinko") where the court pointed out that the doctrine was developed by lower courts, and has at no point been recognized by the Supreme Court.
208 Id. See also NYMEX v. Intercontinental Exchange, 323 F.Supp.2d 559 (S.D.N.Y. 2004) at 568 where the District Court of New York held that the essential facilities doctrine could not be invoked because the sector under consideration was regulated (by the Commodities Future Trading Commission).
209 Trinko, supra, n. 207 at pp. 411-15.
210 See Eleanor M. Fox, A Tale of Two Jurisdictions and an Orphan Case: Antitrust, Intellectual Property, and Refusals to Deal, 28 Fordham Int'l L.J. 952 (2005) at 965.
211 IMS Health v. NDC Health  ECR I-5039; Bronner v. Mediaprint  ECR I-7791; RTE et al. v. Commission, ("Magill II")  ECR I-743.
212 Merely owning an IP right and refusing to license it is not an objective justification, rather an analysis of whether the incentives to innovate outweigh the listed "exceptional circumstances" is required: EC Commission v. Microsoft, COMP/C-3/37.79 (Commission Decision), 24 March 2004. See also Microsoft Corp v. European Commission, T-201/04 R, 22 December 2004.
213 It may often not be possible to protect innovations solely through IP. A great deal of know-how is not capable of IP protection, and products that are protected by IP are susceptible to lawful imitation through reverse engineering. Free-riders may be able to benefit from a rival firm's R&D expenditures, resulting in reduction of incentives to innovate. A JV that brings together such potential free-riders may thus reduce the harm caused by "leaky" or inadequate IP protection.
214 See Sections 92 and 110(5), CA and the exemptions for JVs under ss. 95 and 112, CA.
215 Director of Investigation and Research v. Bank of Montreal, et al. (1996), 68 C.P.R. (3d) 527 (Comp. Trib.) (hereinafter "Interac").
216 Section 45, CA. See R. v. Nova Scotia Pharmaceutical Society,  2 SCR 606 (Sup. Ct.).
217 See para 3.2.1, Competition Bureau Information Bulletin, Strategic Alliances, November 1995.
218 See Abbott Laboratories, No. C-3945 (May 22, 2000) (consent order); Hoechst Marion Roussel, Inc., No. 9293 (May 8, 2001) (consent order). See also Federal Trade Commission, Generic Drug Entry Prior to Patent Expiration: An FTCs Study, July 2002; the Bureau of Competition, Summary of Agreements Filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 in FY 2004.
219 U.S. IP Guidelines, ¶3.4 states, "general approach in analyzing a licensing restraint under the rule of reason is to inquire whether the restraint is likely to have anti-competitive effects and, if so, whether the restraint is reasonably necessary to achieve pro-competitive benefits that outweigh those anti-competitive effects."
220 U.S. IP Guidelines, ¶3.4 states, "the courts conclude that a restraint's 'nature and necessary effect are so plainly anti-competitive' that it should be treated as unlawful per se, without an elaborate inquiry into the restraint's likely competitive effect," such as price-fixing, output restraints, and market division among horizontal competitors, as well as certain group boycotts and resale price maintenance.
221 U.S. IP Guidelines, pp. 27-31.
222 Shering-Plough Corporation v. FTCs, 402 F.3d 1056 at 1066-7 (11th Cir. 2005) ("Shering-Plough"). The decision is being appealed to the U.S. Supreme Court.
223 United States v. New Wrinkle, 342 U.S. 371 (1952) where, as part of a litigation settlement, three patent holders incorporated a new company, assigned their patents to it, and in return the new company merely licensed the patents back to the three companies. The arrangement was to restrict distribution and fix prices in the market. The U.S. Supreme Court found that "[p]atents give no protection from the prohibitions of the Sherman Act to such activities, as here, in the scheme to restrain."
United States v. Singer, 374 U.S. 174 (1963) where Singer entered into non-exclusive, royalty free, world-wide cross-license agreements with international competitors to exclude Japanese competition from the American market. The Trial Judge found that the agreements were to prevent litigation. However, the U.S. Supreme Court found that the effect and the underlying circumstances of the agreements were to conspire to prevent Japanese competition, and therefore infringed the Sherman Act.
Duplan Corp. v. Deering Miliken Inc., 444 F. Supp. 648 (D S.C. 1977), aff'd 594 F.2d 979 (4th Cir. 1979), where the defendants were exclusive licence holders through a litigation settlement. As to the vertical conspiracy claims, the court concluded that there was no exhaustion of the patent monopoly giving plaintiffs an implied license, the license grant-back clause did not offend the antitrust laws, and neither the price-fixing nor the tying charges were proved. As to the horizontal conspiracy claims, direct and circumstantial proof supported a finding that a settlement agreement resulted in monopolization and liability for damages the Sherman Act. Defendants violated the doctrine of misuse of patents by engaging in deceptive business practices with respect to their licensing program, rendering their infringement claims ineffective.
224 Schering-Plough, supra, n. 222 at 1072-3.
225 Schering-Plough, supra, n. 222 at 1067.
226 Goldman, Corley and Witterick, supra, n. 1 at 13.
227 Para 4.2.1, IPEGs.
228 The Patent Act provides for compulsory licensing as a remedy under certain situations where there has been an abuse of the exclusive rights granted under the Act. See s. 65 and s. 66, Patent Act. Application of these provisions is limited to any time after the expiration of three years from the date of the grant of a patent.
229 See Sections 78 and 79 of the CA.
230 See s. 79(5): For the purpose of this Section, an act engaged in pursuant only to the exercise of any right or enjoyment of any interest derived under the Copyright Act, Industrial Design Act, Integrated Circuit Topography Act, Patent Act, trade-marks Act or any other Act of Parliament pertaining to intellectual or industrial property is not an anti-competitive act. See, Goldman, Corley and Witterick, supra, n.1 at 15. It must be noted that trade-marks may also be protected by virtue of common law (see Section I.A.1.c above).
231 Interac, supra, n. 215.
232 Director of Investigation and Research v. AGT Directory Limited, et al.  C.C.T.D. No. 24, Trib. Dec. No. CT 9402/19.
233 See consent order at page 16.
234 Goldman, Corley and Witterick, supra, n. 1 at 16.
235 See Sections 91 and 92 of the CA.
236 Robert S. Nozick, The 2006 Annotated CA (Toronto: Thomson Carswell, 2006), commentary to s. 92 at p. 236.
238 Competition Bureau, Draft Information Bulletin on Merger Remedies in Canada, October 2005
239 2002 Comp. Trib. 29.
241 For instance the Draft Merger Remedies Bulletin states that licensing of IP will be available as a remedy under some "limited circumstances": see supra, n. 238 at 12.
242 For instance, demand in a downstream market.
243 See Robert O'Donoghue, Refusal to Deal, paper presented at The Regulatory Policy Institute's annual Competition Policy Conference held at Harris Manchester College, Oxford (July 11 and 12, 2005) at 6.
244 See Trinko, supra, n. 207.
245 Section 65, Patent Act.
246 For instance, in Canada see Hunt v. T&N p.l.c.  S.C.R. 289, and Tolofson v. Jensen  S.C.R. 1022; and in the U.S. see Hoffman-LaRoche Ltd. v. Empagran S.A., 124 S.Ct. 2359 (2004), but see Intel Corp. v. Advanced Micro Devices, Inc. 542 U.S., 124 S.Ct. 2466 (2004).
247 See Agreement between the Government of Canada and the Government of Japan concerning Cooperation on Anti-competitive Activities, 2005; Agreement between the Government of Canada and the Government of the United States of America on the Application of Positive Comity Principles to the Enforcement of their Competition Laws, 2004; U.S./Canada Agreement Regarding the Application of their Competition and Deceptive Marketing Practices Laws, 1995; Agreement between the Government of Canada and the European Communities Regarding the Application of their Competition Laws, 2003; Cooperation Arrangement Between the Commissioner of Competition (Canada) and Her Majesty's Secretary of State for Trade and Industry and the Office of Fair Trading in the United Kingdom Regarding the Application of their Competition and Consumer Laws, 2003; Memorandum of Understanding Between the Commissioner of Competition (Canada) and the Fiscal Nacional Economico (Chile) Regarding the Application of their Competition Laws, 2001; Agreement between the Government of Canada and the Government of the United Mexican States Regarding the Application of their Competition Laws, 2001; Cooperation Arrangement Between the Commissioner of Competition (Canada), the Australian Competition and Consumer Commission and the New Zealand Commerce Commission Regarding the Application of their Competition and Consumer Laws, 2000. All the above agreements are available here
248 Other instances of cooperation between competition authorities include the Oracle/Peoplesoft, Sony/BMG, Air France/KLM, Sygenta/Advanta, Air Liquide/Messer, Agfa/Lastra, Magna/NVC, and Microsoft/Time Warner/Contentguard mergers. See European Commission, Report on Competition Policy 2004, p. 187.
249 For instance, the Canadian Competition Bureau and the FTCs obtained different remedies with respect to the "cotton harvest aids" and "herbicides" product markets.
250 For instance, in the market for certain insecticides, the Canadian, U.S. and European authorities had similar concerns with regard to acquisition of market power as a result of the merger. All the three authorities cooperated to ensure that the same remedy – of requiring Bayer to divest Aventis CropScience's worldwide acetamiprid and fipronil businesses subject to certain territorial exclusions – was adopted by all the jurisdictions involved.
251 See United States Delegation to Working Party No. 3 of the OECD Directorate for Financial and Enterprise Affairs Competition Committee, Roundtable Discussion on Cross-Boarder Remedies in Merger Review, 9 February 2005, DAF/COMP/WP3/WD(2005)7.
252 In the U.S. see United States v. Microsoft, 231 F. Supp. 2d 144 (D.D.C. 2002); and in the E.U. see Commission v. Microsoft, COMP/C-3/37.792 (Commission Decision), 24 March 2004.
253 United States v. Microsoft Corp., 253 F. 3d 34, 232 (D.C. Cir. 2001).
254 United States v. Microsoft Corp., 231 F. Supp. 2d 144 (D.D.C. 2002).
255 Commission v. Microsoft, COMP/C-3/37.792 (Commission Decision), 24 March 2004. A request for a stay of the order was rejected by the European Court of First Instance in Microsoft Corp. v. European Commission, T-201/04 R, 22 December 2004. A separate appeal of the European Commission's decision is pending before the European Court of Justice.
256 Assistant Attorney General for Antitrust, R. Hewitt Pate Issues Statement on the EC's Decision in its Microsoft Investigation, U.S. Department of Justice Press Release (24 March 2004). For further discussion of the Microsoft case by Mr. Pate, see R. Hewitt Pate, Assistant Attorney General, Antitrust Division U.S. DOJ Roundtable conference with enforcement officials presented at the American Bar Association, Section of Antitrust Law, Spring Meeting (Washington DC, April 2, 2004).
257 Goldman, Corley and Witterick, supra, n. 1 at 12.
258 Both the ICN and the WTO have endorsed the principles of non-discrimination and procedural fairness. The ICN's Guiding Principles For Merger Notification and Review include non-discrimination on the basis of nationality and procedural fairness. The structure of the WTO is similarly based on these principles. For example, the Agreement on Trade-Related Aspects of IPRs ("TRIPS") provides that WTO Members shall accord the treatment provided for in TRIPS to the nationals of other Members. Article 3 of TRIPS embodies the national treatment principle, providing that each Member shall accord to the nationals of other Members treatment no less favourable than that it accords to its own nationals with regard to the protection of IP. Further, Article 4, Most-Favoured-Nation Treatment, provides that, "with regard to the protection of intellectual property, any advantage, favour, privilege or immunity granted by a Member to the nationals of any other country shall be accorded immediately and unconditionally to the nationals of all other Members".
259 Goldman, Corley and Witterick, supra, n. 1 at 31-32.
260 In relation to copyrights, Sub-section 77(1) permits the Copyright Board to grant a license to use a published work, a fixation of a performer's performance, a published sound recording, or a fixation of a communication signal if the owner of the copyright cannot be located and the applicant for the license has made reasonable efforts to locate the owner. Such licenses are non-exclusive and subject to the terms and conditions that the Copyright Board may establish (Section 77(2)). As such, since such compulsory licenses are not likely to raise any competition concerns and are in fact beneficial to the public interest by ensuring access to copyrighted work to the public where it otherwise would not have been available, this provision is not considered further in this paper. In addition, it should be noted that Section 8 of the Copyright Act that provided for a limited compulsory licence relating to the reproduction of works after the death of author was repealed in 1994 (S.C. 1993, c. 44, s. 59). Similarly, Section 15 of the Copyright Act which had provided that a compulsory license could be granted in situations where, after the death of the author of a work that had been published or performed in public the owner of the copyright refused to publish it or allow the reproduction of the work or refused to allow the performance of the work in public, was also repealed in 1994 (S.C. 1993, c. 44, s. 62). Finally, Section 16 of the Copyright Act that had provided for a system of compulsory licensing under which a person could, under certain circumstances, apply for a licence to print and publish in Canada any book in which copyright subsisted was also repealed (S.C. 1994, c. 47). These sections were likely repealed because they had hardly ever been invoked and also because they were in violation of Canada's international obligations: see John McKeown (ed.) Fox on Canadian Law of Copyright and Industrial Design (Toronto: Thomson Carswell, 2005) at pp. 19-31.
261 Patent Act, S.C. 1923, c 23, s 17. Section 41(4) of the 1923 Act stated that the Commissioner of Patents "shall" grant a compulsory licence to an applicant in the absence of "good reason not to grant such a licence". See also Hoffman-LaRoche Ltd v. LD Craig Ltd, Bell-Craig Pharmaceuticals Division,  SCR 313, (1966), 48 CPR 137 (S.C.C.).
262 Act to Amend the Patent Act, the Trade Marks Act and the Food and Drugs Act, SC 1968-69, c 49. See also ICN Pharmaceuticals, Inc. and ICN Canada Ltd. v. The Patented Medicine Prices Review Board et al,  1 F.C. 32 (F.C.A.) citing the following instances of such judicial interpretation: Wellcome Foundation Ltd. v. Apotex Inc. (1991), 39 CPR (3d) 289 (F.C.T.D.); Parke, Davis & Co v. Fine Chemicals of Canada Ltd,  SCR 219; Merck & Co Inc v. S &U Chemicals Ltd (1971), 65 CPR 99 (Ex Ct).
263 Smith, Kline & French Laboratories v. Attorney General of Canada, (1985), 7 CPR (3d) 145,  1 FC 274 (F.C.T.D.), affirmed (1986), 12 CPR (3d) 85,  2 FC 359 (F.C.A.), leave to appeal denied SCC Bulletin 1987, at 566,  SCCA No 72 (S.C.C.); American Home Products Corporation v. Commissioner of Patents and ICN Canada Ltd (1983), 71 CPR (2d) 9 (F.C.A.); Lilly v. S & U Chemicals Ltd (1973), 9 CPR (2d) 17; American Home Products Corp v. Commissioner of Patents (1970), 62 CPR 155 (Ont. C.A.). For a review of numerous cases regarding Canada's provisions on compulsory licensing up to 1985, see Pfizer Inc v. Genpharm Inc et al (1985), 8 CPR (3d) 68 (F.C.T.D.).
264 For instance see Patent Act, Sections 79 – 102. See also An Act to amend the Patent Act and to provide for certain matters in relation thereto, SC 1987, c 41 (Bill C-22). See also Novopharm Ltd v. GD Searle & Co (1991), 40 CPR 3d 56.
265 See Patent Act Amendment Act, 1992, SC 1993, c 2 (Bill C-91).
266 Recently the Parliament passed the Act to Amend the Patent Act and the Food & Drugs Act (The Jean Chrétien Pledge to Africa Act), S.C. 2004, c. 23 that allows a limited form of compulsory licensing in order to permit export of patented drugs to developing countries under certain circumstances. This amendment was pursuant to a WTO General Council decision of 30 August 2003: WTO, Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health. See Mark D. Penner and Prakash Narayanan, Amendments to the Canadian Patent Act to Address Drug Access: Is Help on the Way?, 60(3) FDLJ 2005 at 459.
267 See Section 91, Patent Act.
268 See Patent Act Amendment Act (effective 1 October 1996)S.C. 1993, c. 44, s. 196(1) repealing SubSections 65(2)(a) and (b) of the 1985 Patent Act).
270 There is one relatively recent case, Puckhandler Inc. v. BADS Industries (1998) 81 C..P.R. (3d) 261 where the demand for the patented article in Canada was not being met at all and a non-exclusive licence was granted to the applicant. There have been cases prior to the 1993 amendments. See for instance, Sarco Co. Inc. v. Sarco Canada Ltd.,  2 Ex. C.R. 190; Re E.C. Walker & Sons Ltd. (1953), 13 Fox. Pat. C. 190; Rodi v. Wienenberger AG v. Metalliflex Ltd.,  Ex. C.R. 232; Mackay Specialities Inc. v. Proctor & Gamble Co. (1981), 60 C.P.R. (2d) 96.
271  4 F.C.R. 29 (F.C.).
272 Id. at para 34. See also s. 65(2)(d), Patent Act.
273 Subsection 19(4), Patent Act.
274 For instance, see R. v. Irving Air Chute Inc.,  S.C.R. 613 (S.C.C.); Formea Chemicals Ltd. v. Polymer Corporation Ltd.,  38 Fox. Pat. C. 116, 125 (S.C.C.).
275 Bayer Inc. owns the patent for Ciprofloxacin. The Government of Canada contacted Bayer and also a generic manufacturer Apotex. Section 19 was not invoked, and finally the Government entered into agreements with both Bayer and Apotex. See, Health Canada, Government of Canada, Health Canada and Bayer Inc. Confirm Supply Agreement for Ciprofloxacin Hydrochloride.
276 It is noteworthy that Section 32 does not cover industrial designs and plant breeders' rights.
277 See Warren Grover, Q.C., The Interface of Biotechnology Patents and Competition Law, prepared for The Canadian Biotechnology Advisory Committee Project Steering Committee on Intellectual Property and the Patenting of Higher Life Forms, February 2001.
278 R v. Union Carbide Canada Limited, Exchequer Court of Canada, Court No. B-1979, Information filed October 12, 1967, Minutes of Settlement filed December 12, 1969.
279 In the U.S., in the context of defining the relevant market affected by a collaboration among competitors, both the Antitrust Guidelines for Collaborations Among Competitors and the U.S. IP Guidelines point to the consideration of a separate "technology market" that consists of the IP and its close substitutes, and where the agreement involves collaboration in R&D, an "innovation market" that consists of the R&D directed to particular new or improved products and the close substitutes for that R&D. See ¶ 3.32(b) and 3.32(c), Antitrust Guidelines for Collaborations Among Competitors; ¶ 3.2.2 and 3.3.3, U.S. IP Guidelines.
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