CETA: An Opportunity to Fix Canada's Broken Pharmaceutical Patent Linkage System

CETA: An Opportunity to Fix Canada's Broken Pharmaceutical Patent Linkage System

This is an excerpt from a paper by Adam Falconi, the recipient of the 2015 Barry D. Tomo Memorial Prize for best research paper on a subject related to industrial or intellectual property law.  The full paper will appear in the upcoming edition of the Intellectual Property Journal (IPJ).

In September of 2014 the consolidated text of the Comprehensive Economic and Trade Agreement (“CETA”) was released to the public. [1]  CETA is a landmark free trade agreement between Canada and the European Union that has been in negotiations since 2009. [2]  CETA has been touted by the Canadian Government as its “most ambitious trade agreement to date” and the agreement looks to have far-reaching effects on the economy through provisions covering everything from dairy tariffs to investor-state disputes. [3]  However, the issue that has attracted the most commentary and fierce debate throughout the CETA negotiations is the agreement’s potential impact on Canada’s pharmaceutical industry. This controversy was primarily due to the fact that the European Union had been putting pressure on the Canadian government during the CETA negotiations to allow for provisions that would strengthen its patent protection for pharmaceuticals,[4] despite the fact that according to some commentators, Canada already provides for some of the strongest amount of protection for pharmaceuticals in the world.[5]  Irrespective of this debate, the official consolidated CETA text contains two provisions that increase patent protection for pharmaceuticals in Canada through (1) the availability of patent term restoration for time lost in pharmaceutical regulatory processes,[6] and (2) the implementation of “equivalent and effective right of appeal” for all litigants that engage in a “linkage” mechanism where the granting of market authorization for pharmaceuticals is linked with patent protection.[7]

Although the implementation of patent term restoration is a relatively straightforward exercise, the addition of an “equivalent and effective right of appeal” for all litigants under Canada’s pharmaceutical linkage mechanism is a more contentious point. These changes were sought by the European Union due to the unique nature of Canada’s pharmaceutical patent linkage mechanism, the Patented Medicines (Notice of Compliance) Regulations (“PM(NOC) Regulations”),[8] which does not currently grant a brand manufacturer an effective right of appeal for adverse rulings. In addition, proceedings under the PM(NOC) Regulations are not a final determination of the issues of patent infringement or validity and therefore often lead to the dual litigation of these same issues under the Patent Act. The need to remedy this situation has also been recognized by the CETA agreement and it has been agreed that changes to Canada’s linkage mechanisms through the CETA agreement will “give scope for Canada to end the practice of dual litigation [of pharmaceutical patents]”.[9]  Although Parliament has signaled that Canada’s linkage mechanism are here to stay,[10] there is no indication of how amendments to Canada’s PM(NOC) Regulations can lead to equivalent and effective rights of appeal being available to all litigants and an end to dual pharmaceutical litigation (“the CETA goals”). The complex nature of Canada’s pharmaceutical regulatory and patent framework makes changes to the system difficult, and it is apparent that there are no simple amendments that will be able to easily accomplish the CETA goals.

This paper suggests that Canada’s pharmaceutical linkage mechanism that is provided by the current PM(NOC) Regulations is in need of major reform, and the implementation of the CETA goals offers the perfect opportunity to enact changes that will allow the system to better achieve that balance between enforcing patent rights and ensuring that generic drug products enter the market as soon as possible that Parliament intended when enacting the PM(NOC) Regulations.[11]  Two major changes to the PM(NOC) Regulations will be proposed in order to accomplish these objectives: (1) Changing the nature of proceedings under the PM(NOC) Regulations to a full adjudication of rights between the parties, and (2) Amending provisions that allow for generic manufacturers to be more fairly compensated for damages caused by being wrongly kept off the market due to the PM(NOC) Regulations. These amendments will remove some of the numerous inefficiencies and imbalances present in the current PM(NOC) Regulations and will allow for provisions that both disincentivize the abuse of the proceedings and provide rewards for the successful challenge of invalid or non-infringing patents which leads to the early market entry of generic drugs.

The purpose of this paper is two-fold. I will first present a critical analysis of Canada’s current pharmaceutical linkage mechanism in order to illustrate the necessity of its reform. I will then propose changes to the PM(NOC) Regulations that accomplish the CETA goals and at the same time lead to a more optimal pharmaceutical linkage system. In an effort to achieve these purposes, I will proceed in the following way: (i) first, I will provide a brief overview of Canada’s pharmaceutical regulatory and patent regime; (ii) second, I will set out the goals of a pharmaceutical linkage system and present a critical analysis Canada’s current system; (iii), finally, I will propose amendments which I believe incorporate the CETA goals and produce a more optimal patent linkage system in Canada.


Adam Falconi is a graduate of Osgoode Hall Law School.  This paper was submitted by Adam as his major research paper assignment for Osgoode's Intellectual Property Law & Technology Intensive Program ("IP Intensive").   Adam received the Barry D. Tomo Memorial Prize for his research paper.  The prize was established in 1986 in memory of the late Barry D. Torno, who for many years was a leading practitioner in the field of entertainment law. The annual income from a fund contributed by his friends and associates is awarded to the student who submits the best research paper each year on a subject related to Industrial or Intellectual Property Law.



[1] Government of Canada, “Canada-European Union: Comprehensive Economic and Trade Agreement (CETA) Consolidated Text”, online: Foreign Affairs, Trade and Development Canada <http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/text-texte/toc-tdm.aspx?lang=eng> [CETA Text].

[2] Stephen Harper, Prime Minister of Canada, “Declaration by the Prime Minister of Canada and the Presidents of the European Council and European Commission – a new era in Canada/EU relations”, Office of the Prime Minister online: <http://www.pm.gc.ca/eng/news/2014/09/26/declaration-prime-minister-canada-and-presidents-european-council-and-european#sthash.gQkn1oL9.dpuf> .

[3] Government of Canada, “Canada-European Union: Comprehensive Economic and Trade Agreement (CETA)”, online: Foreign Affairs, Trade and Development Canada < http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/ceta-aecg/index.aspx?lang=eng>.

[4] Paul Grootendorst & Aidan Hollis, “The Canada-European Union Comprehensive Economic & Trade Agreement, An Economic Impact Assessment of Proposed Pharmaceutical Intellectual Property Provisions” (February 7, 2011) online: Canadian Generics < http://www.canadiangenerics.ca/en/news/submissions_studies.asp >.

[5] Edward M Iacobucci, “Innovation for a Better Tomorrow: A Critique,” May 30, 2011, online: Canadian Generics
<http://www.canadiangenerics.ca/en/news/docs/05.30.11%20Innovation%20for%20a%20Better%20Tomorrow%20-%20A%20Critique_FINAL.pdf> [Iacobucci].

[6] CETA Text, supra note 1 at Chapter 22 Article 9.2.

[7] Ibid at Chapter 22 Article 9 bis.

[8]  SOR/93-133 [PM(NOC) Regulations].

[9] Government of Canada, "Technical Summary of Final Negotiated Outcomes, Canada-European Union Comprehensive Economic and Trade Agreement, Agreement-in-Principle", Canada Action Plan online:  http://www.actionplan.gc.ca/sites/default/files/pdfs/ceta-technicalsummary.pdf at page 19. [Agreement in Principle].

[10] Due to the fact that provisions addressing a pharmaceutical linkage system are contained in the CETA text and Canada is the only party to the agreement that currently has a pharmaceutical linkage system, it seems very unlikely that Parliament would dissolve its linkage system and make these extensively negotiated provisions moot.

[11] Regulatory Impact Analysis Statement, (1998) 132 C Gaz 7 II 923 at pg 1058 [RIAS 1998].