Canada: Competition Bureau Issues Draft Updated IP Enforcement Guidelines Addressing Pharma Patent Litigation Settlements, Standard Setting And Patent Trolls

Last Updated: June 17 2015
Article by Jonathan Bitran, Donald B. Houston and Dominic Thérien

Most Read Contributor in Canada, September 2018

Following an initial consultation process concluded last year, the Competition Bureau (Bureau) released draft revised Intellectual Property Enforcement Guidelines (IPEGs) for public consultation on June 9, 2015. These new draft IPEGs will not change the Bureau's general enforcement policy with respect to IP rights, but do provide additional guidance on its approach to: (i) pharmaceutical patent litigation settlements, (ii) standard essential patents, and (iii) patent assertion entities.

Pharmaceutical Patent Litigation Settlements

Last year, the Bureau released a controversial white paper, Patent Litigation Settlement Agreements: A Canadian Perspective, that outlined its preliminary views, which we analyzed. In a step in the right direction, the Bureau now confirms that, absent extraordinary circumstances, it will not pursue criminal investigations in regard to such settlements. Further, the Bureau provides more guidance on how it will evaluate such settlements under the civil provisions of the Competition Act (Act).

The Bureau divides pharmaceutical patent litigation settlements into three categories:

  1. "Entry-split" settlements with no payment to the generic: The Bureau says it will not review settlements where the parties agree to generic entry on a date before the expiry of the patent, provided that there is no other consideration paid or otherwise offered by the brand-name company to the generic.
  2. Settlements which include a payment to the generic: In such settlements, also euphemistically referred to as "reverse payment" or "pay for delay" settlements, the parties agree to generic entry on a date before the expiry of the patent, and the brand-name company also provides cash or other consideration to the generic.

    The Bureau says it will review such settlements under the civil provision for agreements between competitors, section 90.1, but may also investigate for joint dominance under section 79 which allows it to request an administrative monetary penalty of up to $10 million. In both cases, the Bureau will seek to determine whether the settlement will result in a substantial lessening of competition. In that regard, the Bureau says it will engage in the difficult task of assessing whether, "but-for" the settlement, the brand and generic products would have competed earlier than the generic entry date agreed upon under the settlement. This analysis will consider whether the payment from the brand-name, including in exchange for goods or services from the generic, is excessive and therefore likely for the purpose of delaying the generic's entry. In the most helpful part of the draft IPEGs, the Bureau confirms that it will likely not take action if the payment from the brand-name company is within a reasonable estimate of:

    • the fair market value of any goods or services provided by the generic firm;
    • the magnitude of the brand company's section 8 damages exposure under the Patented Medicines (Notice Of Compliance) Regulations; and
    • the brand company's expected remaining litigation costs absent settlement.
    The Bureau's analysis will also consider the likely impact on prices that would have resulted from earlier entry by the generic, and whether other potential generic suppliers were likely to enter the market.
  3. Settlements which could be subject to criminal review: The draft IPEGs indicate that the Bureau will crim inally investigate such settlements only "in limited circumstances":

    • First, the Bureau may conduct a criminal investigation when the parties agree that the generic will only enter beyond the expiry date of the brand-name's patent rights.
    • The Bureau says it would also conduct a criminal inquiry where it discovers evidence that the parties "nakedly" conspired to restrain trade (i.e., the settlement is a "sham"): for example, where the Bureau finds "convincing evidence" that both parties knew the patent was invalid, but nevertheless reached a settlement to allocate monopoly profits by delaying generic entry.

We encourage the Bureau to continue along this path to recognizing that bona fide settlements of patent litigation should never be the subject of criminal investigation. Overall, the draft IPEGs do provide more guidance to assess whether a settlement could be challenged by the Bureau. Given the Bureau's high level of interest in these settlements, it is likely to be only a matter of time before it takes some enforcement action in this area.

Standard Essential Patents

The Bureau recognizes the value of industry standards in setting benchmarks for performance and safety and to allow for the interoperability of devices made by different manufacturers. Once a standard is set, companies often make significant investments to comply, which can be undermined by patent holders of essential technology refusing to licence their patents. The Bureau says it will investigate the following conduct under the civil abuse of dominance provisions (section 79):

  • Patent "hold-up" or "patent ambush": The Bureau will investigate where a patent holder purposely conceals its patent to a Standard Development Organization (SDO) during the formation process of the industry standard, and then later asserts the undisclosed patent when access to its technology is required to implement the standard.
  • Reneging on a licensing commitment: A patent holder's decision to renege on a commitment to licence a patent under fair, reasonable and non-discriminatory (FRAND) terms could also be reviewed.
  • Seeking an injunction after making a licensing commitment: The Bureau may investigate where a patent holder makes a licensing commitment before its technology is adopted in a standard, and then seeks injunctions against firms that are "locked-in" to the standard. The IPEGs indicate that the Bureau will likely conclude that the seeking of an injunction is appropriate: (i) when a prospective licensee refuses to pay a royalty that is determined to be FRAND by a court or arbitrator; or (ii) when the prospective licensee does not engage in licensing negotiations.

The draft IPEGs take the position that such conduct amounts to "something more" than the mere exercise of patent rights, which may be pursued for abuse of dominance. The Bureau's reasoning is that these practices enable patent holders to enhance their market power beyond what is conferred on them by the patent by behaving dishonestly with SDOs, and then use that power to raise rivals' costs and exclude competitors that use the standard.

The Bureau also cautions competitors on the competition risks associated with the formation of SDOs at the "front end". In addition to warning about criminal price-fixing, the Bureau goes on to discuss concerns that may arise from the sharing of sensitive information and the joint setting of actual licensing terms. If a standard setting organization does not have strict controls on how such information is used and kept confidential from other members, it may risk a civil investigation under section 90.1 of the Act.

Patent Assertion Entities

Patent assertion entities (PAEs) acquire patents from innovating companies and then demand licensing fees from companies that are allegedly infringing their patents.

The draft revised IPEGs indicate that the Bureau may take action against PAEs under the civil or criminal misleading advertising provisions of the Act, including the new provisions introduced following the adoption of Canada's anti-spam legislation (CASL) for representations contained in emails or other electronic messages. The included example refers to a PAE sending thousands of notices to businesses demanding licensing fees and alleging it has poof of infringement. The Bureau says it would review such conduct to determine whether the PAE has, in fact, proof of infringement or is rather sending notices indiscriminately. In addition, the Bureau would have to be able to convince the Competition Tribunal or a court that these notices are representations "made to the public" within the meaning of sections 52 or 74.01(1)(a) of the Act.

* * * * *

The public consultation period on the draft IPEGs will end on August 10, 2015.

For more information on the evolution of the IPEGs, please see our articles discussing last year's release for public consultation (the first update to the IPEGs since 2000) and the results of that public consultation.

To view original article, please click here.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions