The Canadian Competition Bureau is in the midst of a two-stage
process to update its Intellectual Property Enforcement
Guidelines ("IPEGs"). The IPEGs describe the
Bureau's approach to the interface between competition law and
intellectual property rights, and its enforcement approach to
conduct involving the exercise of IP rights.
In April of last year, in the first stage of the amendment
process, the Bureau issued a draft "update" for public
consultation. While that update consisted primarily of
administrative revisions to reflect amendments to the Canadian
Competition Act since the IPEGs were issued in September
2000, certain substantive changes were also proposed relating to,
among other things, so-called "product switching"
strategies by innovator pharmaceutical companies.
In September 2014, the Bureau announced that the first stage of
the IPEG amendment process had come to an end, and it released an
update of its IPEGs (a copy of which can be found here).
A second, more substantive update (the "Stage 2
Update") is expected to be issued for public consultation this
Spring. The new update will centre on how Canadian
competition law could be applied by the Bureau in several areas,
including issues of particular importance to technology companies
and firms in patent-intensive industries; namely, those relating to
conduct involving standard essential patents ("SEPs")
(i.e., a patent that claims an invention that must be used
in order to conform to a standard adopted by a standard setting
organization ("SSO")) and the activities of patent
assertion entities ("PAEs") (i.e., companies
whose business model is asserting patents although they do not
manufacture or sell products or services related to such
Conduct involving SEPs and PAEs, and technology-related patent
issues, generally, have garnered antitrust attention in the U.S.
and EU for some time. The Bureau's only recently announced
interest in these issues is likely a reaction to, among other
things, an explosion of PAE activity in the U.S. (which has in some
cases targeted Canadian companies operating south of the border),
the entry of some PAEs in Canada, and, in the case of SEPs,
recognition of the importance of interoperability standards in
Conduct Involving SEPs
Currently, there is no administrative guidance in Canada
addressing potential competition concerns arising from and related
to SSOs and the standard setting process. The issues to be
addressed in the second stage of the IPEG amendment process will
likely include: (i) the circumstances in which the activities of
SSOs, including joint ex ante royalty discussions, could
raise issues under the Competition Act; (ii) whether a
failure to disclose patents essential to a standard or breaches by
an SEP owner of a voluntary commitment to license on
"F/RAND" (fair, reasonable and non-discriminatory) terms
to those implementing the standard could properly attract antitrust
liability; (iii) what royalty rates constitute F/RAND terms; and
(iv) whether competition law imposes any limits on the right of
owners of F/RAND-encumbered SEPs to seek injunctive relief when
their patents are allegedly infringed by implementers.
Conduct Involving PAEs
Like in the United States, there is a debate in Canada over the
effect of PAEs and whether competition law should be used to
regulate PAE activity. The Stage 2 Update is expected to provide
guidance on the circumstances in which conduct involving PAEs might
trigger scrutiny by the Bureau and under what provisions of the
Competition Act. In this regard, a key issue will likely
be the appropriate enforcement approach to the practice by certain
operating companies, known as "privateering", of
transferring patents to PAEs to increase their rivals' costs
through litigation and to evade F/RAND licensing commitments.
The Stage 2 Update expected later this Spring promises to raise
a number of important and novel (at least in Canada) issues at the
intersection of IP and competition law, and will define the
Bureau's enforcement approach to these issues for many years to
come. Companies that stand to be affected by the new
enforcement guidelines (e.g., firms in patent-intensive
industries, including computing, networking and communications) and
other stakeholders should give serious consideration to
participating in the ensuing public consultation process.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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