Article by Sheldon Burshtein, ©2005 Blake, Cassels & Graydon LLP
This article was originally published in Blakes Bulletin on Intellectual Property, October 2005.
Significant research and development is conducted in Canada, especially in the biotechnology and pharmaceutical industries. Therefore, there has been much interest in a recent United States decision on experimental activity in the context of potential liability for patent infringement and the corresponding position in Canada.
United States Decision
In a much anticipated decision, the United States Supreme Court held that the use of a patented compound in preclinical studies is exempt from patent infringement where there is a reasonable basis for believing that the compound could be the subject of a regulatory filing to the United States Food and Drug Administration (USFDA) or where the experiment may produce information for use in a USFDA submission: Merck v. Integra Lifesciences. Merck funded research by the Scripps Research Institute on potential anti-cancer drugs, some of the most promising of which made use of a peptide sequence that Merck supplied but which had been patented by Integra. Tests identified one of these drugs as a useful anti-cancer medicine that appeared to be worth testing on humans. When Merck sought approval from the USFDA, Integra sued Merck and the researchers for patent infringement.
Under United States law, any person who makes, uses or sells a patented product without authorization is ordinarily liable for infringement, but it is not infringement to make or use a patented invention "solely for uses reasonably related to the development and submission of information under a federal law which regulates the manufacture, use or sale of drugs or veterinary biological products". A person who conducts research on new drugs must provide experimental data to the USFDA to obtain approval to perform clinical tests of the drug on humans. If such clinical tests are successful, approval must then be sought from the USFDA to make and market the drug in the United States.
The United States Supreme Court held that use of a patented compound in research does not constitute patent infringement, at least where the researcher has a reasonable basis for believing that the compound may work, through a particular biological process, to produce a particular physiological effect, and uses the compound in research that, if successful, would be appropriate to include in a submission to the USFDA. The exempt activity need not be related to safety, but may also be directed to other areas of inquiry, such as efficacy, toxicology or pharmacological, pharmacokinetic or biological properties. The activity may be exempt even if the results of the research are never included in a USFDA submission. The ruling creates a fact-based standard that requires courts to determine whether a person reasonably believes that its research is relevant to seeking USFDA approval. The Court remanded the case for a determination of whether the research in this case satisfied the legal standard.
However, the Court said that the exemption does not apply to all experimental activity. Specifically, the Court held that basic research on a compound, performed without a particular reasonable belief that the compound will cause a particular physiological effect that the research is meant to induce, is not necessarily related to the development and submission of information to the USFDA. The Court expressly declined to express a view as to whether the exemption applies to the use of patented research tools in the development of information for the regulatory process.
In 1993, the Canadian Patent Act (the Act) was amended to include a statutory exemption from infringement which is almost identical to that of the United States law. The Act provides that it is not infringement to make, use or sell a patented invention "solely for uses reasonably related to the development and submission of information required under the law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product". The wording "solely for uses reasonably related to the development and submission of information under ... law" is identical to that in the United States legislation, so the holding and other comments in the Merck decision may be equally applicable in Canada. It is worth noting that, unlike the United States exemption, the Canadian exemption is not limited to drugs and is also available for research in Canada for a submission to a foreign regulatory agency, such as the USFDA.
The Canadian provision goes on to say that the statutory exemption does not affect any exception to a patent right that exists at law in respect of acts done: (i) privately and on a non-commercial scale; (ii) for a non-commercial purpose; or (iii) in respect of any use, manufacture or sale of the patented invention solely for the purpose of experiments that relate to the subject matter of the patent. This merely codifies the pre-existing judicial exception for experimental use.
The leading decision on the judicial exemption is that of the Supreme Court of Canada in Micro Chemicals v. Smith Kline & French Inter-American Corp. Micro Chemicals arose in the context of an application for a compulsory licence under a drug patent. Prior to the grant of the license, Micro made a small amount of the drug to enable it to state in its compulsory license application that it had made, and was capable of making, the product by the patented process, as was then required by the Act. Then, Micro made several batches of the product to explore the procedure and conditions of manufacture, to get increased yields, and to establish that it could produce the product economically.
The Supreme Court of Canada held that, in this activity, Micro’s activities during both of these periods were within the judicial experimental use exception. Even though Micro’s experiments were carried out, not for the purpose of improving the process, but to enable Micro to produce the patented substance commercially as soon as the compulsory license could be obtained, they did not constitute infringement. The use Micro made of the patented substance was not for profit, but to establish that it could manufacture a quality product in accordance with the specification. Such experimentation and preparation is not an infringement.
The Supreme Court focused on the fact that, in this activity, Micro was not making the patented substance for commercial production and sale, but rather was acting prudently to establish whether it could manufacture a quality product in accordance with the specification of the patent. Consequently, it appears that, to qualify under the common law experimental use doctrine in Canada, it is the purpose for which the experimental use is conducted that is determinative. Micro’s subsequent commercial activities conducted prior to settlement of the terms of the license were not exempt.
In more recent decisions, it has been held that, where use of the invention does not proceed beyond the experimental and testing phrase, the activity is not an infringing use. Until a person, at some stage of its product development, decides to finalize a particular product and takes steps to manufacture, promote and sell it, use of a patented invention does not constitute patent infringement.
Therefore, in Canada, neither the use of a patented product or process to obtain information to be used for a regulatory approval process, nor the use, manufacture or sale of a patented product or process solely for the purpose of experimental or testing activity prior to finalization of a commercial product for manufacture, promotion or sale is an infringing use. The Canadian exemption appears to extend to basic research.
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.