On March 25, 2020, Parliament enacted Bill C-13, An Act respecting certain measures in response to COVID-19 (COVID-19 Emergency Response Act).1 As part of the government’s response to COVID-19, the Act amends numerous statutes including the Patent Act and the Food and Drugs Act. The amendments to the Patent Act effectively introduce compulsory licensing during the COVID-19 public health emergency.
The government’s ability to use patented inventions under the Patent Act has existed in various forms since 1869. Yet there are less than a dozen reported cases in which the government has exercised this ability, largely in the context of war or national defence.2
The current section 19 of the Patent Act originated in 1993. It provides that, on application by the Government of Canada or of a province, the Commissioner of Patents may authorize that government’s use of patented inventions. The Supreme Court of Canada has affirmed the government’s right to use patented inventions under section 19.3
As part of the federal government’s response to the COVID-19 pandemic, the government has amended the Act to add a new section 19.4, which is considerably broader than the existing provisions:
These provisions may significantly impact patentees. As set out above, the amendments give the Commissioner broad powers to authorize what is effectively a compulsory licence. Although patentees will be notified if an authorization for their patents is granted, the Government is not required to involve the patentee in advance of applying for authorization from the Commissioner.
Limitations on the Commissioner’s grant of authority. Although the Commissioner has broad power under the new section 19.4, there are important limitations. Most importantly, the Minister of Health must include a confirmation that the Chief Public Health Officer believes4 that there is a public health emergency that is a matter of national concern. Moreover, the authorization must be limited to “the extent necessary to respond to the public health emergency described in the application.”
Compensation. If an authorization under section 19.4 is granted for a patentee’s invention, the amendment gives broad power to the Commissioner to determine “adequate remuneration in the circumstances.” Although subsection 19.4(5) requires the Commissioner to take into account “the economic value of the authorization” and the extent to which the Government of Canada or other authorized person “makes, constructs, uses and sells the patentee’s patented invention,” the Commissioner has broad discretion in making this determination. It remains to be seen how “adequate remuneration” would compare to current market prices or whether the patentee will be able to provide input into this determination. It is noteworthy that, under the prior compulsory licensing regime (abolished in 1993), compensation was invariably set at 4 percent of the net selling price.5 This is consistent with compensation rates set by the Commissioner under section 19.6
Appeals. While section 19.2 of the Act specifies that any decision made by the Commissioner under section 19 or 19.1 is subject to appeal to the Federal Court (including a decision regarding compensation), that does not apply to the new section 19.4. Although a patentee may apply to the Federal Court for an order requiring the Government of Canada or any authorized person to cease making, constructing, using or selling the patented invention in a manner that is inconsistent with the authorization, there is no express right of appeal of the authorization itself. That said, presumably any making, construction, use or sale that is not necessary to respond to the identified public health emergency will be considered inconsistent with the authorization.
Time limits. The provision includes built-in time limits for any authorizations granted and for the operation of the provision as a whole. The effect of any authorization granted under section 19.4 expires the earlier of (i) one year after the authorization is granted or (ii) when the Minister of Health advises the Commissioner that the authorization is no longer necessary to respond to the public health emergency. Moreover, no authorizations under section 19.4 may be made after September 30, 2020.
At this point, it remains to be seen how the federal government plans to use the new section 19.4. While media reports suggest that the initial target may be patents covering medical devices, such as ventilators and face masks, the scope of the new provisions does not limit the type of patent that can be subject to the regime, provided that it is used to respond to the public health emergency described in the application.
Certain pharmaceutical companies have voluntarily given up their patent rights to allow other companies to produce their previously patented invention, increasing industry’s ability to respond to the demands of the COVID-19 pandemic. If other companies do not take the same steps, it is possible that the Government could rely on this new section of the Patent Act to obtain sufficient quantities of patented products at reduced prices.
1 See Bill C-13 here: https://www.parl.ca/LegisInfo/BillDetails.aspx?Language=E&billId=10710867.
2 See, e.g., The King v. Irving Air Chute,  S.C.R. 613; R. v. Canada (Secretary of State) (1953), 13 Fox Pat. C. 123 (S.C.C.); Pathfinder Camping Products Ltd., Re (1982), 65 C.P.R. (2d) 119 (Commissioner of Patents).
3 Formea Chemicals Ltd. v. Polymer Corp. Ltd.,  S.C.R. 754 at para. 40.
4 Note that a declaration under the federal Emergencies Act is not necessary
5 ICN Pharmaceuticals Inc. v. Canada (Patented Medicine Prices Review Board),  1 F.C. 32 (C.A.) at para. 6; I.C.N. Canada Ltd. v. American Home Products Corp. (1988), 19 C.P.R. (3d) 257 (F.C.A.) at para. 38.
6 See, e.g., Hings v. R. (1947), 7 Fox Pat. C. 81 (Commissioner of Patents) at para. 35; Pathfinder Camping Products Ltd., Re (1982), 65 C.P.R. (2d) 119 (Commissioner of Patents) at para. 15.
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