Canada: Canada Proposes Patent Act Amendments to Allow Export of Patented Drugs to Developing Countries

This article was originally published in Blakes Bulletin on Intellectual Property - December 2003


As of World AIDS Day on December 1st, 2003, HIV/AIDS remains a world health emergency. Despite the existence of treatment, the vast majority of those infected with HIV do not have access to the pharmaceutical compounds or drugs available in many developed countries such as Canada and the United States. One reason for this, according to The Joint United Nations Programme on HIV/AIDS, is that 95% of those infected with HIV live in developing countries. Similarly, many other infectious diseases, such as malaria and tuberculosis, continue to present significant public health problems in developing countries, despite the availability of treatment in the developed world.

In view of this, and prompted by a recent decision of the World Trade Organization ("WTO"), the Canadian government, in an apparent first among developed countries, recently introduced Bill C-56 which contains amendments to the Patent Act and Food & Drug Act that could allow Canadian manufacturers to export patented drugs to developing countries.

In 2001, the WTO declared that the Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS") should not prevent countries from taking measures to protect public health. According to the WTO, TRIPS "can and should be interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and, in particular, to promote access to medicines for all." While TRIPS provides for compulsory licensing of patented drugs, any such compulsory license "… shall be authorized predominantly for the supply of the domestic market of the Member…". This presents difficulties for those developing countries that have no or insufficient manufacturing capacities in the pharmaceutical sector. In an attempt to address this, the General Council of the WTO issued a decision on August 30th, 2003, allowing drug manufacturers in developed countries, despite other persons having patent protection surrounding such pharmaceutical compounds in those countries, to manufacture such compounds and export them to the developing world.

Proposed Amendments

The recently proposed amendments in Bill C-56 would provide a mechanism whereby a Canadian pharmaceutical manufacturer could apply for and be granted a non-exclusive, non-transferable "authorization" for two years, subject to renewal, to use the subject matter of a Canadian patent solely for the purposes of manufacturing a drug and exporting that drug to an identified country. More specifically, the amendments propose that should a Canadian manufacturer ("Applicant") wish to obtain such authorization, it first must apply for and notify the Commissioner of Patents ("Commissioner") of the drug to be exported, the quantity of the drug intended to be manufactured, the patent owner ("patentee") and the patent number for each patented invention to which the drug named in the application for authorization relates, the name of the country to which the drug is intended to be exported ("Import Country") and the terms and conditions under which the drug is to be manufactured and sold for export.

In addition to the information provided above, the Applicant must produce a certified copy of the Import Country’s written notice provided to the government of Canada or pursuant to TRIPS of its need for the drug. The Applicant must also either declare that the drug to which the application relates is not patented in the Import Country, or submit evidence that the Import Country has granted or intends to grant a compulsory licence for the drug. Depending on which Import Country is to be involved, the application may also need to state that the Import Country has no or insufficient pharmaceutical manufacturing capacity for the production of the drug and/or that the Import Country is faced with a national emergency or other circumstances of extreme urgency.

Upon receipt of the application, the Commissioner must send a copy of the application to any patentees listed therein, whereby each patentee is given a "right of first refusal". Each patentee then has 30 days to provide the Commissioner with a declaration stating that the patentee, or its agent, will either supply the drug to the Import Country on terms and conditions that are no less favourable than those referred to in the application or, subject to the payment of a royalty, grant the Applicant a right to use the subject matter of the relevant patent so that the drug can be manufactured and sold for export as set out in the application.

If the patentee does not provide a declaration as noted above, the Commissioner shall authorize the use of the patented invention solely for the manufacture and export of the drug, provided that the Canadian Minister of Health (the "Minister") has notified the Commissioner that the version of the drug named in the application meets the requirements of the Food & Drug Act and its regulations. More importantly, the Minister must also notify the Commissioner that the marking, embossing, labelling and packaging of the drug to be exported pursuant to the authorization distinguishes that exported version from the version of the pharmaceutical product marketed in Canada.

Upon receipt of the authorization, the Applicant must pay the patentee a royalty in an amount equal to two per cent of the value of the pharmaceutical products exported under the authorization or, if there is more than one patentee, to each patentee within the prescribed time, a royalty in an amount equal to two per cent of the value of the pharmaceutical products exported under the authorization divided by the number of patentees.

Before exporting a drug manufactured pursuant to the above noted authorization, the Applicant must establish a website that discloses the drug to be exported, the name of the Import Country to which the drug is to be exported, the quantity of the drug that is authorized to be manufactured and sold for export and the exported version’s "distinguishing features". The effect of this novel provision remains to be seen.

Following the Commissioner granting such an authorization, the patentee may apply to the Federal Court for an order terminating the authorization if the patentee establishes any of the following: One. The application for the authorization contained any material information that is inaccurate. Two. The Applicant failed to establish the website noted above or to disclose the required information. Three. The Applicant has failed to pay, within the required time, any royalty required to be paid as a result of the authorization. Four. The drug exported to the Import Country pursuant to the authorization has been, with the knowledge of the Applicant, re-exported in a manner that is contrary to the General Council Decision and in quantities that are significant, considering the quantities originally exported.


Industry groups that represent both Canada’s research-based and generic pharmaceutical industry have commented that the proposed amendments are a first step in addressing the drug supply of developing countries. Bill C-56 appears to have support from all of the Canadian political parties represented in the House of Commons. However, the prorogation of the House of Commons on November 12, 2003, shortly after Bill C-56 was presented, makes the future of these proposed amendments uncertain. For the amendments to be passed into law, they must be submitted in the form of a new Bill, upon the resumption of Parliament. It is therefore not clear whether the proposed amendments will become law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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