Canada: The Interface Between IP Law And The Competition Act

In today's knowledge-based economy, a firm's competitive position is largely dependent upon its ability to stay on top of, and benefit from, rapid technological changes. In many cases, these changes create economic, cultural, social and educational opportunities for firms to put ideas to work in innovative ways that increase productivity and create employment and wealth. It is therefore not surprising that governments, policymakers and antitrust agencies have recognized the significance of technological change to economic efficiency1 and the importance of promoting and protecting the intellectual property ("IP") rights that in many cases are driving such change.2 Canada's commitment to promoting and protecting IP rights is, for example, reflected in the Patent Act,3 the Copyright Act,4 the Trade-Marks Act,5 the Industrial Design Act6 and the Integrated Circuit Topography Act.7 In addition, Canada is a member of the World Intellectual Property Organization and a signatory to many international treaties concerning the recognition and enforcement of IP rights, including the World Trade Organization treaty concerning Trade-Related Aspects of Intellectual Property ("TRIPS").

IP laws and competition laws are complementary instruments of government policy that share a common objective, namely the promotion of an efficient economy. IP laws establish enforceable property rights for the creators of new products which allow the owners of the IP to unilaterally exclude others from using the property, thereby providing incentives for owners to invest in creating and developing new products. At the same time, however, as Canada's Supreme Court has stated, at the root of IP law "lies a concern to avoid overextending monopoly rights on the products themselves and impeding competition".8

Similarly, competition laws are designed to protect against unreasonable restraints of trade that create, maintain or enhance market power or otherwise harm vigorous rivalry among firms. However, in doing so, competition laws recognize the role of innovation in strengthening competition in particular markets for goods and services and the importance of IP rights in fostering such innovation. The challenge in enforcing competition laws in relation to IP rights is to avoid interfering with the legitimate exercise of those rights. An over-zealous approach to antitrust enforcement would impede innovation and have a chilling effect on the rate of technological advancement, which would undoubtedly have a serious impact on the competitiveness of the Canadian economy.

In a speech in 2006, the Commissioner of Competition summarized the complementary roles of IP and competition law as follows:

Continual innovation is both one of the hallmarks of competition, and an important source of competition in the market place. To the extent that a strong and effective intellectual property framework contributes to this innovation, it supports competition. And to the extent that competition stimulates innovation, it clearly contributes to the development of intellectual property.9

In May 2007, the Competition Bureau sponsored a symposium on the interface between competition and IP which included presentations on (1) the collective management of copyrights, (2) the effects of authorized generics on Canadian drug prices, (3) compulsory licensing, and (4) tying and IP rights. It is currently anticipated that the papers from this conference will be published in a book to be released in August or September 2008.

Also in 2007, the Antitrust Division of the U.S. Department of Justice (the "U.S. DOJ") and the Federal Trade Commission (the "FTC") issued a detailed report on antitrust enforcement and IP rights following a series of hearings which began in February 2002.10

With the foregoing background in mind, Part I of this paper discusses the interface between IP rights (including IP licensing) and competition policy in Canada, reviewing the key relevant provisions and cases. Part II highlights several emerging issues, such as compulsory licensing, cross-licensing and standard-setting misconduct. Given that the Canadian case law is sparse on some of these topics, where necessary, this paper considers developments in other jurisdictions, such as the U.S. and Europe. It is important to recognize, however, that the relevant law in these other jurisdictions may also be unsettled in certain respects and that other jurisdictions may strike a different balance between IP and competition laws.


The Commissioner's approach to dealing with the competition issues raised by conduct involving IP is articulated in the Bureau's Intellectual Property Enforcement Guidelines (the "IP Guidelines"), which were released in September 2000.11 Among other things, the IP Guidelines state that IP laws and competition laws work together to promote an efficient economy; that the Competition Act (the "Act")12 generally applies to conduct involving IP in the same way that it applies to conduct involving other forms of property; and that the exercise of an IP right is not necessarily anti-competitive.13 Moreover, the IP Guidelines state that while IP has important characteristics that distinguish it from other forms of property, the Commissioner nevertheless applies the same analytical framework to conduct involving IP that she applies to other forms of property.14

The circumstances in which the Commissioner will apply the Act to anti-competitive conduct involving IP rights fall into two broad categories, namely (a) anti-competitive conduct that involves something more than the "mere exercise" of an IP right and (b) the "mere exercise" of an IP right and nothing else.15 In the former case, the Commissioner may proceed under one or more of the "general" provisions of the Act, such as the abuse of dominance, refusal to deal, conspiracy, or price maintenance provisions. In the case of a "mere exercise" of IP rights, the IP Guidelines state that the Commissioner will consider referring the matter to the Attorney General of Canada (the "Attorney General"), who may commence proceedings under section 32 of the Act. Section 32 provides for special remedies where an IP right has been used to prevent or lessen competition unduly, although no application has been made under that section in more than 30 years. For these purposes, the Commissioner defines the "mere exercise" of an IP right as the exercise of the owner's right to unilaterally exclude others from using the IP right or to decide whether to use or not use the IP right itself.16

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* John Bodrug is a partner in the Davies Competition and Foreign Investment Review Group. Portions of this paper are based on "Competition Law in the IP Licensing Arena: What You Need to Know", George Addy, Mark Katz and Elisa Kearney, Davies Ward Phillips & Vineberg LLP, November 2006.

1 For example, the Commissioner of Competition (the "Commissioner") has stated that "the acceleration of technological change ... [is] having a significant impact on [the Canadian] economy and on [Canada's] ability to compete": S. Scott, "Competition in a Dynamic Marketplace" (Speaking Notes for Address to the Canadian Bar Association Annual Conference on Competition Law, September 23, 2004) at 3, available at The Commissioner also stated that "[i]f we wish to ensure effective enforcement of the [Competition Act] ... we will have to stay on top of technological change" and that "we must ensure that the Competition Bureau [(the "Bureau")] remains flexible enough to absorb the implications of the changing environment and rigorous enough to determine which changes are meaningful": id. at 4. See also G. F. Masoudi, "Intellectual Property and Competition: Four Principles for Encouraging Innovation" (U.S. Department of Justice address to the Digital Americas Meeting, Sao Paolo, Brazil, April 11, 2006), available at:

2 See, for example, G. Addy, "Competition Policy and Intellectual Property Rights: Complementary Framework Policies for a Dynamic Market" (Address to the XXXVIth World Congress of the AIPPI, June 29, 1995) at 1, available at, in which former Director of Investigation and Research (the "Director") Addy noted as follows:

[IP] rights... including patents, trade-marks, copyrights, registered industrial designs and integrated circuit topographies, are a key factor in fostering innovation and growth in today's economy. Such rights provide vital incentives for research and development leading to new products and production processes. By promoting innovation, [IP] rights also serve to strengthen competition in particular markets for goods and services.

(On March 18, 1999, the "Director of Investigation and Research" became known as the "Commissioner of Competition". The terms "Director" and "Commissioner" are used interchangeably in this paper.) See also Department of Justice and Federal Trade Commission, Antitrust Guidelines for the Licensing of Intellectual Property (1995) at § 1, reprinted in 4 Trade Reg. Rep. (CCH) at § 13,132 and available at (the "U.S. IP Guidelines"), which provide as follows:

The intellectual property laws provide incentives for innovation and its dissemination and commercialization by establishing enforceable property rights for the creators of new and useful products, more efficient processes, and original works of expression. In the absence of intellectual property rights, imitators could more rapidly exploit the efforts of innovators and investors without compensation. Rapid imitation would reduce thecommercial value of innovation and erode incentives to invest, ultimately to the detriment of consumers. The antitrust laws promote innovation and consumer welfare by prohibiting certain actions that may harm competition with respect to either existing or new ways of serving consumers.

3 R.S.C. 1985, c. P-4, as amended, available at

4 R.S.C. 1985, c. C-42, as amended, available at

5 R.S.C. 1985, c. T-13, as amended, available at

6 R.S.C. 1985, c. I-9, as amended, available at

7 S.C. 1990, c. 37, as amended, available at

8 Kirkbi AG v. Ritvik Holdings Inc., [2005] 3 S.C.R. 302 at para. 52.

9 S. Scott, "Aristotle and the 'Just Right' Policies" (Address to the Intellectual Property Institute of Canada 40th Spring Meeting, April 24, 2006), available at See also Gwill Allen and Alan Gunderson, Competition Bureau, "Innovation and Competition Policy: An Economic Perspective", paper presented to the Canadian Bar Association National Competition Law Section Annual Fall Conference, October 11-12, 2007 at 16 where the authors describe the Bureau's decision not to "fine tune" its approach to intellectual property by applying the Competition Act relatively more stringently in areas where IP rights provide strong enforcement.

10 U.S. Department of Justice and Federal Trade Commission, "Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition", April 2007 available at:

11 Competition Bureau, Intellectual Property Enforcement Guidelines (Ottawa: Supply and Services Canada, September 2000), available at See also R.D. Anderson, S.D. Khosla and M.F. Ronayne, "The Competition Policy Treatment of Intellectual Property Rights in Canada: Retrospect and Prospect", in R.S. Khemani and W.T. Stanbury, eds., Canadian Competition Law and Policy at the Centenary (Halifax: Institute for Research on Public Policy, 1991) 497.

12 R.S.C. 1985, c. C-34, as amended, available at

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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