In nearly identical decisions released on May 27, 2014,
Sandoz Canada Inc v Canada, 2014 FC 501 (Sandoz) and
ratiopharm Inc v Canada, 2014 FC 502 (ratiopharm), the Federal
Court of Canada held that some licensees of patents relating to
medicines are not subject to the jurisdiction of the Patented
Medicines Prices Review Board (PMPRB or Board), including its
powers to regulate drug prices. These decisions, which may be
appealed to the Federal Court of Appeal, mark a retreat from the
courts' expansive views about the jurisdiction of the
The PMPRB is the quasi-judicial body established by Parliament
to monitor and control the price of patented medicines in Canada.
In 2008, it initiated a proceeding against ratiopharm, alleging
that it sold an authorized generic salbutamol drug product (ratio
HFA) at excessive prices. Separately, in 2010, the
PMPRB started a proceeding against Sandoz, a wholly-owned
subsidiary of a well-known pharmaceutical patentee (Novartis AG),
on the ground that Sandoz was required to file pricing information
with the Board, as if it were a patentee under section 79(1) of the
Patent Act, RSC 1985, c P-4.
In Sandoz and ratiopharm, each company filed
an application for judicial review of the PMPRB's definition of
"patentee" under section 79 of the Patent Act.
The relevant part of this section reads as follows:
"patentee," in respect of an invention pertaining to a
medicine, means the person for the time being entitled to the
benefit of the patent for that invention and includes, where any
other person is entitled to exercise any rights in relation to that
patent [ . . . ] that other person in respect of those rights;
In both cases, the Federal Court concluded that the PMPRB's
definition of "patentee" was unreasonable. Citing a
Supreme Court of Canada precedent, the Federal Court emphasized
that the PMPRB's paramount responsibility was to ensure that:
"the monopoly that accompanies the granting of a
patent is not abused to the financial detriment of Canadian
patients." On this basis, the Court held that: "the
Board should confine its role to reviewing prices charged by patent
holders, who benefit from a time-limited monopoly..."
(Sandoz at para. 20; ratiopharm at para. 15). The
Court went on to reason that:
Generally speaking, generic companies either help create or join
a competitive marketplace, which helps keep the costs of patented
medicines down. Reviewing the prices charged by generic companies
who hold no patents and no monopolies, on its face, appears to be
beyond the Board's mandate [Sandoz at para. 26;
ratiopharm at para. 21]
The Federal Court noted that, while Parliament can regulate
patents for invention, "it has no overall jurisdiction to
regulate the price of generic versions of patented medicines"
(Sandoz at para. 21; ratiopharm at para. 16).
Thus, the definition of "patentee" should take into
account the limits of the federal government's constitutional
jurisdiction. In addition, the Court observed that the federal
jurisdiction is confined to regulating "factory-gate"
pricing (i.e., those prices charged by a patent holder to
its first purchaser). Here, the factory-gate prices were the prices
paid by Sandoz and ratiopharm to acquire the drugs – not the
price at which they eventually sold them to distributors,
pharmacies or the general public.
Therefore, the Federal Court concluded that the mere fact that a
generic company, including a patentee's subsidiary, sells a
version of a patented medicine under license is insufficient to
bring it within the definition of "patentee"
(Sandoz at para. 25, ratiopharm at para. 20).
Rather, the Court focused its reasoning on whether Sandoz and
ratiopharm could be said to wield monopoly power. As neither did
so, the Court concluded that they were not "patentees"
over whom the Board had jurisdiction.
The Sandoz and ratiopharm decisions may still
be appealed. If they stand, however, they will mark a shift in the
courts' view about the jurisdiction of the PMPRB.
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A recent Saskatchewan Court of Queen's Bench decision allowed a court-appointed receiver to sell and transfer intellectual property rights free and clear of encumbrances, finding that a license to use improvements of an invention was a contractual interest and not a property interest.
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