Innovator drug companies have been actively wooing generic drug-makers, to have a foot in the innovative and generic segments of the pharmaceutical landscape.

Hailed as the “hybrid model”, this strategy though, may not quite be the right way forward for the long term, observes Mr Murray Aitken, Senior Vice-President with IMS Health, a leading provider of market intelligence
to pharmaceutical and healthcare companies.

The hybrid model may be attractive today, he said, given that drug companies are faced with pricing and  regulatory pressures across different world markets. But it may not be good for the long term, Mr Aitken told Business Line, giving details from an IMS study that reveals an increased pick-up in branded innovative products after 2015 – as the “patent cliff” (where drugs go off-patent) is passed and research pipeline matures.

Off-patent loss-

Company heads will have to “manage” their hybrid models against the backdrop of the optimism that the market reveals in terms of innovative products driving growth, said Mr Sameer Savkur, IMS Managing Director, in India.

Generic medicines are not covered by patents, while innovative drugs enjoy patent-protection, or market exclusivity for 20 years. The next five years will see $ 94 billion impact from the loss of exclusivity, and a $ 89 billion impact from new launches. The next five years will see reduced impact of $ 66 billion due to loss of exclusivity, and an increase of $ 271 billion from the new products launched in the previous five years, the study said.

In the Indian market, the hybrid model is illustrated by Japanese innovative drug-maker Daiichi Sankyo's acquisition of generic drug company Ranbaxy or the more recent acquisition of Piramal Healthcare's domestic  formulations business by Abbott.

Optimistic-

Giving a “more optimistic than expected” outlook – the IMS study projects that the pharmaceutical industry is headed to clock $ 1 trillion in 2020, on the back of a renewed pipeline and growth in the pharma-emerging markets, among other things. The study also shows a healthy pipeline of products across 41 focus categories including oncology, diabetes and HIV, a contrast to the gloomy picture that industry often paints.

The Indian patent office yanked Pfizer's patent on the kidney cancer drug Sutent. The move was a victory for  local drugmakers Cipla and Natco Pharma, which legally protested Sutent's patent protection.

Pfizer plans to appeal the decision. But in doing so, it will join two of its Big Pharma brethren who've so far been unsuccessful. Bayer fought back when India forced it to license its cancer drug Nexavar to Natco, allowing the domestic drugmaker to launch a much cheaper copy. It was the Indian government's first compulsory license, allowed in certain circumstances under World Trade Organization rules.

And Novartis has been fighting for patent protection for its cancer fighter Glivec for years. The case wended its way to the country's Supreme Court.

A recent Federal Court decision highlighted the differences in prohibition proceedings under the Patented Medicines (Notice of Compliance) Regulations (the NOC Regulations) and impeachment actions under the Patent Act. It is yet another example of how every case is to be determined on the specific evidence adduced before the Court.

In Eli Lilly Canada Inc. v. Apotex Inc, the Court dismissed Eli Lilly's application under the NOC Regulations for an order prohibiting the Minister of Health (the Minister) from issuing a notice of compliance (NOC) to Apotex in respect of the medicine atomoxetine until after the expiry of the '735 Patent. However, the dismissal was based on mootness alone, as the Court would have allowed the application had it not invalidated the '735 Patent entirely in a related impeachment action brought by Novopharm. 
 
Proceedings under the NOC Regulations vs.  Actions under the Patent Act

In Canada, in order for a generic manufacturer to get approval to market a generic version of an existing drug product, it must file an abbreviated new drug submission (ANDS) with Health Canada demonstrating that
its product is bioequivalent to the innovator's previously approved drug product. If the Minister of Health (the Minister) is satisfied with the submission, she must issue a NOC allowing the generic drug to be marketed, but
only if the generic manufacturer has first "jumped the hurdles" of the NOC Regulations. 
 
In particular, the Minister is prohibited from issuing a NOC to a generic manufacturer, even if it has satisfied Health Canada as to the safety and efficacy of its drug, until the generic has addressed all of the patents listed against the innovator's drug product under the NOC Regulations. 
 
With respect to each patent listed on this "patent register", the generic must either accept that a NOC will not issue for its drug until the patent expires, or, if it seeks to enter the market before the patent expires, it must allege that the patent is not valid or that no product, use, dosage form or formulation claim of the patent will be infringed by the making, constructing, using or selling of its generic drug. Such allegations must be contained in a notice of allegation (NOA), which is served on the innovator, and includes a detailed statement of the legal and factual basis for the allegations. NOAs are required to be very detailed and are often well over 100 pages in length.

The innovator may apply to a Court within 45 days after being served with a NOA for an Order prohibiting the Minister from issuing a NOC until after the expiration of the patent(s) that are the subject of the NOA. This effectively freezes Ministerial action for 24 months unless the application is disposed of by the Court earlier. Such applications are supposed to be summary in nature, as they proceed by way of affidavits and out-of-court
cross-examinations, and hearings occur by way of lawyers presenting the evidence to a single judge of the Court. 
 
The innovator has the burden of proving that each of the generic's allegations of invalidity and non-infringement are not justified on a balance of probabilities. If the innovator does not meet its burden, the application is dismissed and the Minister is free to issue a NOC to the generic for its drug product. If the innovator successfully argues that the generic's allegations are not justified, then the Minister is prohibited from issuing a
NOC until the latest expiry date of the patents at issue. 
 
What is particularly interesting about this procedure is that (because of the supposed "summary nature" of such applications) the innovator's remedies under the NOC Regulations are in addition to its usual remedies for patent infringement under the Patent Act. In other words, a final decision on an application under the NOC Regulations does not prevent a subsequent action for infringement under the Patent Act, and the doctrine of res
judicata does not apply. Thus, the innovator is free (if its application was dismissed under the NOC Regulations) to effectively re-litigate the patent(s) at issue, meaning that the innovator gets a second "kick at the can" regarding the issues of infringement and validity. Similarly, a generic is free to commence an action under the Patent Act seeking impeachment of the patent(s) and/or a declaration of non-infringement even if the prohibition application was allowed. 
 
Unlike applications under the NOC Regulations, final determinations as to validity of a patent in the course of an action under the Patent Act are in rem, meaning the decision is applicable to the patent itself rather than just the parties in the litigation. Moreover, unlike applications under the NOC Regulations, actions under the Patent Act are subject to the full array of legal procedures, including documentary and oral discovery, expert reports, and live fact and expert witnesses before the Court. This generally means that much more significant evidence is placed before the Court in the trial of an action.
 
Novopharm's action against Eli Lilly to impeach the '735 Patent

As previously reported, Novopharm was successful in impeaching the '735 Patent, which claimed the use of the medicine atomoxetine for treating attention deficit hyperactivity disorder (ADHD) in three of its manifestations among all age groups (children, adolescents and adults). In particular, the judge accepted the evidence of Novopharm's experts going to the significant limitations of a study relied upon by Eli Lilly to establish  utility. The study's most critical shortcomings were related to its small sample size, the potential for imperfect patient blinding, and the limited study duration. 
 
The Court found that the study's reported results failed to demonstrate the critical utility of atomoxetine to treat ADHD in adults or children, and that utility had therefore not been demonstrated. Moreover, the Court found that the alleged invention in the '735 Patent was also not soundly predicted on the basis that the patent failed to disclose reference to the findings in the study in the patent disclosure.

Although the two cases were heard back-to-back by the same Federal Court judge, the decision in Novopharm's action was released before a decision was rendered in the Apotex application (discussed below).

Eli Lilly's application against Apotex under the NOC Regulations

Apotex had alleged in its NOA that the disclosure of the '735 Patent failed to provide any information, data or test results purporting to show that the administration of atomoxetine was safe and effective in the sense that treatment of ADHD would result. Apotex further alleged that the first clinical trials or experiments assessing the safety and efficacy of atomoxetine for treating ADHD were not conducted until after the filing of the priority
application. As a result, Apotex asserted that any results or data obtained from those trials could not have formed a sufficient factual basis or sound line of reasoning upon which a sound prediction could be made of the safety and efficacy of atomoxetine for treating ADHD. Alternatively, if the trials were sufficient for these purposes, Apotex alleged that Eli Lilly failed to disclose the results and data from those trials and experiments in the '735 Patent. Eli Lilly answered the NOA with a notice of application that alleged that it had established by virtue of studies that atomoxetine was useful for the treatment of ADHD (i.e. that it had demonstrated utility). 
 
When it came to presenting evidence, Apotex only framed its case around the issue of sound prediction and failed to provide any evidence contesting Eli Lilly's assertions of demonstrated utility. Eli Lilly responded
by producing the study report that was the subject of the Novopharm action. Apotex elected not to challenge this evidence on matters of substance. In particular, Apotex chose not to seek to file reply evidence or to cross-examine Eli Lilly's witnesses to challenge the study's reliability or sufficiency. The only evidence that Apotex put forward in response to the study was that the study and its data were not referenced in the '735 Patent. Apotex asserted that this was enough to put the issue of utility into play. 
 
The Court, however, disagreed. Where a patentee relies on demonstrated utility, its disclosure obligation is limited to the provision of a full description of the invention and the means to work it. It is only where the patentee relies upon a sound prediction of utility that it is required to disclose in the patent both the factual data on which the prediction is based and the line of reasoning to support it. Therefore, because Eli Lilly was relying upon an assertion of demonstrated utility, it was under no obligation to disclose the study or its
findings in the '735 Patent. 
 
As a result, Apotex's evidence, which simply pointed to the absence of proper disclosure in the '735 Patent, was not even capable of rebutting the statutory presumption of validity. As stated by the Court: I am accordingly bound on this record to reject Apotex's allegation of inutility  because it has failed to satisfy its initial evidentiary burden ... For this issue, the statutory presumption of validity prevails.

This is, of course, a surprising result in the face of my earlier finding in Novopharm Limited v. Eli Lilly and Company, 2010 FC 915, that the MGH Study was not sufficient to demonstrate utility. But in that case the
issue was addressed by the parties on the strength of considerable evidence that went to the merits of the MGH Study. Here, Apotex took a different approach and elected not to meet Lilly's assertion of demonstrated utility head-on. In the result, its allegation of inutility fails. 
 
In the result, the Court would have allowed Eli Lilly's application to prohibit the Minister from issuing a NOC to Apotex since Apotex's allegations were not justified. However, because of the intervening determination that the '735 Patent was invalid in the Novopharm action (an interim decision), Eli Lilly's application against Apotex was dismissed on the basis of mootness. Apotex was therefore still able to receive a NOC to market its generic version of atomoxetine.

On August 3, 2010, the Federal Court released reasons in Novo Nordisk Canada Inc. et al. v. Cobalt Pharmaceuticals Inc. et al. (2010 FC 746; "Novo Nordisk")) finding Cobalt's allegation of obviousness justified with respect to Canadian Patent No. 2,111,851. The patent covers repaglinide (an (S) enantiomer), its use for the treatment of Type 2 Diabetes, and processes to make it. 
 
Novo Nordisk is an important case both from legal development and commercial perspectives. The Federal Court has made clear that scientific knowledge evolved after 1987, the date considered by the Supreme
Court of Canada ("SCC") in Sanofi and that by 1991 it was the state of the art to separate and test enantiomers of racemic potential drugs. This decision refines the obvious-to-try test set out by the SCC and suggests a review of all enantiomer patents applied for in or after 1991.

The Decision in a Nutshell

The patent involved in this proceeding (the "851 Patent") essentially covers the enantiomer repaglinide. Repaglinide is sold under the brand name GLUCONORM".

Enantiomers are mirror image molecules that cannot be superimposed on each other (think of right and left hands). They are normally synthesized together, as a "racemate", and one cannot know how each of the two
enantiomers comprising the racemate (denoted (S) and (R)) will act in the body until it has actually been made and tested. Activity and toxicity can be different as between the racemate, the (S) enantiomer and the (R) enantiomer. 
 
Unlike other recent cases, the racemate comprising repaglinide was never approved or marketed as a drug product, although the racemate had been identified in a previous "genus" patent covering numerous
compounds, as well as a patent covering new solid forms of the racemate. Nonetheless, Cobalt alleged repaglinide to be obvious, and the 851 Patent to be invalid on this and other grounds. The Court agreed and
found the 851 Patent obvious to try.

This is only the second decision known to the author in which the Court found allegations of invalidity of an enantiomer patent justified.
 
Refining the Obvious-to-Try Test

In the Sanofi case, the SCC dealt with an enantiomer patent and in that context, set out the obvious to try analysis applied by the Court to repaglinide in this case. The obvious to try factors include asking whether it
is more or less self-evident that what is being tried (i.e. the invention) ought to work.
 
In answering this question, the SCC stated:

As I have observed earlier, Shore J. found that the skilled person would not know, before separating this particular racemate into its isomers and then testing the separated isomers, that the properties of the
dextro-rotatory isomer [(R) enantiomer] would be different from the properties of the racemate or the levo-rotatory [(S) enantiomer] isomer (para. 81).  Similarly, he found that the person skilled in the art would not know before trying the different salts in combination with the dextro-rotatory isomer what the bisulfate salt's beneficial properties would be (para. 82).

Just because there are known methods of separating a racemate into its isomers does not mean that a person skilled in the art would necessarily apply them. The fact that there are such known methods of separation
will be of no account if the evidence does not prove that it was more or less self-evident to try them. It is true that at the relevant time there was evidence that a skilled person would know that the properties of a racemate and its isomers might be different. However, a possibility of finding the invention is not enough. The invention must be self-evident from the prior art and common general knowledge in order to satisfy the "obvious to try" test. That is not the evidence in this case. 
 
At its broadest, this holding would mean that – in the case of an enantiomer or other selection patent – the discovery of advantageous properties could be the foundation of a valid patent, as long as the properties
were not predictable in the particular selection of compounds. Given that routinely-identified properties (such as toxicity, solubility, pharmacokinetic profile, etc.) are often unpredictable, it was unclear how this holding would be reconciled with previous jurisprudence suggesting that routine testing may not qualify as an inventive step.

Novo Nordisk addresses this seeming tension by clarifying that unpredictable but unsurprising properties are not necessarily a bar to a finding of obviousness.

The Court found that an enantiomer claim can be obvious even if the enantiomer's advantages were unknown. In addition, the Court held that it was impossible to predict what the differences in the pharmacokinetic profiles of enantiomers would be before actually separating and testing them. Nevertheless, as of 1991, it was known that these differences could well exist, and that it was, therefore, important to test for them.

The Court held Cobalt's allegation of obviousness justified even though the Court found that there was no clear preference for one enantiomer or the other expressed in the prior art, and that the advantages of the (S) enantiomer were not previously identified. The basis of this finding was that pharmacokinetic properties that differ between enantiomers would inevitably have been discovered as a result of testing that was a routine part of the state of the art in 1991.

The Evolution of Enantiomer Science

In addition to refining the obvious to try test, this decision should make all patentees ask the question: "Are enantiomers patentable after 1991?"

In Sanofi, the SCC found that as of 1987 there was little motivation to pursue enantiomers. The relevant date in Novo Nordisk is in 1991. The Federal Court found it clear on the evidence that by 1991:

• the world had evolved and it was now the state of the art to separate and test enantiomers;
• techniques for separating racemates into their isomers were generally known; and
• testing enantiomers for differences in pharmacokinetic properties was a routine matter.
 
The evidence in this case included the fact of an enantiomer policy approved in 1989 by Dr. Karl Thomae GmbH – the patent owner – which confirmed that "A forced move towards the development of enantiomer-pure active substances results out of the necessity to minimize development time and costs, as well as in order to comply with the current state of the art. The development of racemates will thus only still be justifiable in exceptional
circumstances".

This decision also highlights the importance of strong evidence of how drug development was actually undertaken at the relevant time. The Court specifically contrasted the evidence presented by Cobalt in this case to that presented in the recent Lundbeck case, where the evidence was found to be "appallingly thin". 
 
References:
 
1. Sanofi-Synthelabo Canada Inc. v. Apotex Inc., 2008 SCC 61.
2. Cobalt asserted a number of grounds of invalidity, though only the anticipation, obviousness and void pursuant to s. 53 of the Patent Act were dealt with by the Court, and only the obviousness ground was successful.
3. The first decision was with respect to the drug levofloxacin. Despite allegations of invalidity being found justified in the context of a NOC proceeding, the enantiomer patent was upheld as valid at trial and appeal.
4. Lundbeck Canada Inc. v. Canada (Minister of Health), 2009 FC 146.

On October 20, the Federal Court of Appeal put an end to the disparity in the jurisprudence surrounding whether a patentee could obtain a patent to a medicine subsequent to obtaining a patent to a process for producing the medicine by dismissing Bayer's appeal in the case of Bayer Schering Pharma Aktiengesellschaft v. The Attorney General of Canada. The case stems from May 2008, when the Commissioner of Patents refused to grant Bayer a patent to a pharmaceutical compound per se because a previous patent had already been issued
to it for the same compound when made by a particular process (product-by-process patent). After Bayer's appeal to the Federal Court was dismissed, it appealed to the Federal Court of Appeal.

Bayer argued that "obviousness-type" double-patenting didn't apply to the situation at hand. However, the Federal Court of Appeal disagreed and dismissed the appeal, stating that: There is nothing inventive or "patentably distinct" in a claim for a product that is the subject of a previous process-dependent patent. On the other hand, a process-dependent patent may be granted, even though a patent has already been issued for the
product itself, if the process claimed and described for making the product exhibits inventive ingenuity. 
 
... Consequently, the Commissioner correctly denied the Application on the ground of "obviousness" double patenting because the patent would have disclosed no new invention. For her to have granted a patent for the
compound would have improperly "evergreened" the parent patent, now expired, by creating a second monopoly in the use of the compound running from the date when the Application was approved.

This decision puts an end to any disparity in the jurisprudence, as the Federal Court of Appeal effectively overruled the decision in Aventis Pharma Inc. v. Mayne Pharma (Canada) Inc., 2005 FC 1183, 42 C.P.R.
(4th) 481, rev'd. on other grounds, 2008 FCA 21, 380 N.R. 35.

On December 9, 2010 the Federal Court of Appeal dismissed the appeals brought by Apotex Inc. and the Canadian Generic Pharmaceutical Association challenging the validity of the Data Protection Regulations (referred to as DPR in the decision). These regulations implement Canada's obligations under the North American Free Trade Agreement (NAFTA) and the World Trade Organization's Agreement on Trade-related Aspects of Intellectual Property (TRIPS). Eli Lilly Canada Inc., and Canada's Research-Based Pharmaceutical
Companies had intervened in the proceedings at the Federal Court, and were respondents in the appeal.

The appellants, in two separate proceedings, heard together at the Federal Court level, had challenged the Data Protection Regulations on a number of grounds, shortly after they came into force in 2006. The Federal Court decision, released on July 17, 2009, held that the regulations were valid as being within the regulatory authority under which they were created. The Federal Court also found that the regulations were within the constitutional authority of the federal government, as they fell within the federal Government's federal trade and commerce power. However, the Federal Court did not find that the regulations fell under the federal criminal law power.

In writing for the Federal Court of Appeal, Mr. Justice Nadon held that the Data Protection Regulations were properly within the authority of the Governor in Council, and were in clear accord with the enabling provision of the Food and Drugs Act. The Court held that "It is clear that the data which article 1711 of NAFTA and paragraph 3 of article 39 of TRIPS seek to protect is precisely the type of data in regard to which the DPR offers market protection, i.e. the data found in an innovator's NDS for an innovative drug." The regulations were held to be properly delegated by Parliament to the Governor in Council and held to be intra vires the Governor in Council.

In considering the constitutional issues, the Court of Appeal considered the purpose of the Data Protection Regulations, stating, at paragraph 114, that, "The true purpose of the DPR is not to balance the commercial interests of innovators and generic drug manufacturers, but rather to ensure that Canadians have reasonable access, at reasonable prices, to new safe and effective drugs. In other words, the Regulations as a whole encourage the research and development of new medicines that save lives, prevent diseases, heal and cure, and improve the health of Canadians, who can only benefit from the discovery and development of new medicines after the information and data generated in extensive pre-clinical and clinical trials demonstrate the "innovative drug's" safety and efficacy to the satisfaction of the Minister." 
 
In commenting on the purpose further, at paragraph 117, the Court held that, "The pith and substance of the DPR is to implement article 1711 of NAFTA and paragraph 3 of article 39 of TRIPS so as to encourage the development of new drugs, a valid public health and safety purpose." In considering the constitutionality of the regulations, the Court held that their enactment was a valid exercise of the federal criminal law power contained in subsection 91(27) of the Constitution Act. Having found the regulations valid under the criminal law power the court held that it need not consider whether the regulations may also be upheld under another head of federal power such as trade and commerce. The Court also commented that the Data Protection Regulations do not encroach on matters of provincial jurisdiction, since the provinces have no role whatsoever to play with respect to the approval of the safety and effectiveness of new drugs.

Canada and the European Union (EU) are negotiating an intellectual property (IP) agreement, as part of a broader free trade agreement, which may have great impact in the pharmaceutical and related industries. The  Comprehensive Economic and Trade Agreement (CETA) is potentially the most important Canadian IP treaty since the North American Free Trade Agreement (NAFTA).

Negotiations for trade deals differ from lobbying legislators, and results in areas such as data protection or patent term extension that could not be reached by legislation may be reached through treaty. The Canadian government, and perhaps the EU, are still open to submissions, and interested parties should consider communicating their interests before negotiators' positions crystallize. American companies should also consider whether the CETA will bolster their European competitors' legal and strategic position in Canada at their expense.

Intellectual Property and the Trade Negotiation Context

Different results from legislative change? Canada and the EU have been working towards the CETA since 2008. Preparatory documents clearly show both governments' intent that IP will be addressed in the final agreement.

The EU's initial negotiating position strongly supports its international pharmaceutical industry—primarily by requesting data protection and patent term extension—and has implications for the medical device and food
industries as well. Generally, the Europeans are requesting that Canada adopt European standards.

Calls for Canada to adopt patent term extension and enhanced data protection, including pressure from the United States and Europe, are hardly new. So what is different this time? Why might this process result in substantive change where past efforts have failed?

First, treaty negotiation is different from domestic lawmaking. Domestic legislative change is often marked by interest groups competing to negotiate trade-offs in respect of a specific issue through government officials or interested legislators. In the trade context, states are negotiating over a broad range of issues through trade officials.

Put simply, Canada could trade an agreement on IP that satisfies European interests in return for agreement in a separate area that advances Canadian interests. Also, trade officials may give a particular subject area less weight than the officials directly responsible for that area—i.e., a trade official may regard patent and pharmaceutical regulation as simply one area among many that he has to balance, while an official responsible for drug approval may regard pharmaceutical regulation as of fundamental importance. 
 
Interest groups still play a key role in the trade context by affecting—maybe even determining—what a state regards as its self-interest. In the past, industry representatives have sometimes been at the table with the trade officials during negotiations. However, the groups that influence a state's trade interests may be different from those that influence specific domestic issues. Years of building credibility, trust and influence with patent or pharmaceutical policy officials might be of little benefit when the key decision makers are trade officials. Trade officials' perceptions of domestic interests may differ from decision makers with responsibility for  specific fields, and trade officials may be less influenced by interest groups perceived as "foreign."

Second, this is a negotiation with the EU. The EU is much larger and more influential than other countries with which Canada has recently negotiated free trade agreements.

If past behavior is a guide, the EU will aggressively pursue the interests of its international pharmaceutical industry, and has the negotiating clout to move Canada towards its positions. For its part, Canada seems intent on securing a deal "deeper and broader" than NAFTA, and may be willing to make significant concessions to reach agreement.

Third, it is 2010. Europe will be seeking concessions taking the present system as the baseline for comparison. A concession by Canada that may have been politically unacceptable in the Canada-U.S. Free Trade Agreement (CUSFTA) and NAFTA negotiations in the late 1980's and early 1990's may now be just one of many topics to be negotiated.

What's on the Table— the Initial Negotiating Positions

A review of the draft chapter on IP reveals that the EU is interested in addressing the entire range of IP topics, from copyright, patents, trademarks and designs to standards for enforcement and border controls, while Canada has minimal demands. The following are the topics on the table of the greatest interest to the food and drug industry.

1) Data protection

This is likely to be a contentious topic, and is one of the few areas where Canada has submitted alternative drafting language to accompany the European proposals.

Canada's data protection regime was amended in 2006 to provide for effective data protection for innovative drugs—"a drug containing a new medicinal ingredient not previously approved in a drug by Health Canada and not a variation of a previously approved drug." The regime gives eight years of exclusivity, and for the first six years a generic is prevented from filing an abbreviated submission—" 6 plus 2" years of exclusivity.

The EU position is that data protection should apply to "data submitted for the purpose of obtaining an authorization to put a pharmaceutical product on the market." In other words, the EU position would eliminate the innovative drugs qualification, and grant data protection widely. Canada, in contrast, would limit data protection to "new chemical entities" where the origination of such data "involves considerable effort."

The EU also wants to extend Canada's data protection regime to 8+2 years rather than the present 6+2. Data protection is to be extended to 11 years if the holder of the basic authorization obtains another authorization
for new therapeutic indications of significant clinical benefit compared to existing therapies.

The Canadian position is that data protection should be a minimum of five years, and that "subject to this provision, there shall be no limitation on any Party to implement abbreviated approval procedures ... on the basis of bioequivalence and bioavailability studies." This would write into treaty a 1999 ruling of the Federal Court of Appeal allowing Health Canada to grant marketing approval for generics based on bioavailability and biosimilarity comparisons to the brand name drug within the data protection period as long as it does not explicitly "rely" on the protected data.

2) Patent term extension – supplementary protection certificates

Canada does not have patent term extension, whether tied to delays in granting patents or for delays in granting authorization for the marketing of pharmaceuticals. Unsurprisingly, the EU would like Canada to implement patent term extension, tied to marketing authorization, through the granting of "Supplementary Protection Certificates." Canada has suggested no relevant language.

Whatever one thinks of patent term extension, the proposed European mechanism seems unrealistic—an extension for "the period that elapses between the filing of the application for a patent and the first authorization to place the product" on the market minus five years (to a maximum of five years). This seems ill-suited for the Canadian context, where there have been cases where the marketing approval comes after the expiration of the first relevant patent. Without the addition of a mechanism to reflect the diligence of the patentee in pursuing marketing authorization, the proposed language seems to be a free pass for applicants to dawdle.

3) Right of Appeal for Innovative Pharmaceutical Companies from Patented Medicines (Notice of compliance) Proceedings

Canada has a patent linkage mechanism similar to the United States', where marketing authorization (a "Notice of Compliance" or NOC) is linked to relevant patents owned by the brand name company. Unlike in the United States, in Canada the proceeding to oppose the issue of an NOC is an application rather than an action, and a loss by the brand name company results in the immediate and irrevocable issuance of the NOC. As a result, while a generic company can always appeal from an NOC proceeding, a brand company effectively
cannot appeal—the NOC irrevocably issues upon a loss, and further proceedings are moot.

The European proposal would oblige Canada to "ensure that the patent holders and the manufacturers of generic medicines are treated in a fair and equitable way, including regarding their respective rights of appeal." Assuming this means that patent holders should have an effective appeal route, it implies that Canada modify its NOC procedures to either delay the issue of an NOC until all rights of appeal are exhausted or allow an NOC to be revoked if a decision favourable to the generic applicant is overturned on appeal.

4) Data Protection and Patent Term Extension for Plant Protection Products

The leaked EU negotiating position also seeks data protection and patent term extension for "plant protection products," a European term for active substances and preparations that protect plants or plant products against harmful organisms.

If a test or study report is necessary for the marketing authorization of the plant protection product, the EU would like a 10-year period of data protection to apply, starting at the date of first authorization in Canada, to be extended to 13 years for "low risk" plant protection products. Canada's position is to grant data protection for agricultural chemical products identically to pharmaceuticals. The EU and Canada's positions on patent term
extension are identical to that for pharmaceuticals.

5) Avoidance of Duplicative Testing

The EU proposals require rules to prevent duplicate safety or efficacy testing on vertebrate animals. Any applicant intending to perform such tests is required to verify that such tests have not already been performed, and if they have "the new applicant and the holder ... of the relevant authorizations shall make every effort to ensure that they share tests..." If no agreement is reached, the new applicant is still entitled to use the test data, but the holder of the authorization is entitled to "a fair share of the costs incurred by him."

6) Border Measures

An irritant in Canadian relations with the United States and Europe is Canadian border measures—measures designed to catch infringing goods at the border before they enter the stream of commerce. The EU is proposing language that would allow customs officials to detain goods suspected of infringing an IP right, either further to an application by a right-holder or on the customs authority's own initiative, even if such goods are merely in passage to another jurisdiction. For example, a drug or active ingredient brought ashore in Vancouver before shipping to the United States could be seized as potentially violating Canadian patent laws even if the product clearly does not infringe any United States law.

7) Right of Information

Rights-holders are often unable to trace counterfeit goods to their source or to detect where the goods have passed in commerce. The EU is proposing a "right of information" which is new to Canada and would provide a
valuable new tool for rights-holders seeking to eliminate counterfeit goods. 
 
This right would be applied against a person (a) who was found to be in possession of infringing goods or using infringing services or providing services used in infringing activities, or (b) a person indicated by a person under (a) to be involved in the production, manufacture or distribution of the goods or services. It obliges such a person to provide information on producers, manufacturers, distributors and previous holders of the goods or services as well as the intended wholesalers and retailers, and to disclose information on quantities and prices.

6) Geographical Indications

The EU proposes language to bolster protection for geographical indications― legal protections for marks that link products to a specific location of origin, such as Parma for ham or Champagne for sparkling wine. This is one of the few sections of the draft chapter that reveals sharp differences between the Canadian and European positions, with both parties submitting substantive language. The Canadian position is terse, affirming the parties' obligations under Trade- Related aspects of Intellectual Property Rights (TRIPs) Agreement and creating lists of European and Canadian products entitled to protection under geographical indications. The European position is several pages long, obliging the signatories to provide effective protection for geographical indications (including sections on rights of use, scope of protection and enforcement), and would establish an institution―a "joint committee"―to monitor compliance, share information and "intensifying their cooperation and dialogue on geographical indications."

7) A New Intellectual Property Institution

Finally, the EU has suggested the creation of a new institution (separate from that proposed under geographical indications) with a view to "supporting implementation of the commitments and obligations undertaken
under" the IP chapter.

With no details provided, this is clearly subject to further negotiation. However, international institutions designed to monitor compliance, exchange information and promote ongoing dialogue have played a critical role in shaping the development of laws, regulations and international cooperation. Such an institution has the potential for driving IP developments long into the future.

Implications, and Spillover to the United States

In the longer term, an EU/Canada free trade agreement may raise an interest in the United States to come to the table to protect American interests. For example, investor protection mechanisms in CETA could lead to American companies being disadvantaged in Canada compared to their European counterparts. The usual solution is either to conclude an EU/Canada/United States agreement or to amend NAFTA to reflect the contents of the CETA.

Negotiations are ongoing with the next round set for July 12–16, 2011. Although discussions are reported to be going surprisingly well, government officials have indicated that they are still interested in feedback from concerned parties, and public scrutiny and criticism of the agreement is just beginning to occur. Companies in the pharmaceutical, food and related industries should monitor developments, consider communicating their interests to responsible officials and be prepared to take advantage of anticipated legal changes if the negotiations progress towards a conclusion.