Trans-Pacific Trade and the Intellectual Property Challenge

By | November 28, 2015


The IP provisions in the TPPA have been the source of some controversy, not only in Canada but in other countries. In Canada, some say these are responsive to corporate interests and will inhibit local innovation and entrepreneurship. The focus seems to be on the patent provisions in the Agreement, less so on the trademark and copyright parts.

While incorporating existing patent treaties into the TPPA, there is no doubt that the Agreement increases patent protection and enhances the monopoly rights of the patent owner. The question is whether those enhancements work to the benefit of Canadian innovators and inventors or detract from it and put Canada at disadvantage, mostly vis-à-vis the US, the most direct source of competition and aggressive litigation in the patent field.

In its October 5th summary of the TPPA IP provisions – before the actual text was available – the former Conservative government said that the TPP was “in-line” with Canada’s exiting patent regime and that all exceptions under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) will continue to be available “in line” with Canada’s existing laws.

Reading the actual TPP text, it can be seen that the patent provisions are among the most complex in the entire Agreement, comprising dozens of intricately woven articles, annexes and footnotes. It will be a challenge to apply these when the Agreement enters into force.

Where are the concerns focussed about the impact on Canadian innovation?

Data Exclusivity

The data exclusivity issue revolves around the right of a patent applicant to protect proprietary clinical data filed with its application and to prevent third parties having access to or using that data. There is a great deal of money at stake for both sides.

The concern centres on TPPA provisions on data exclusivity specifically directed to biologics – medicines, vaccines and the like based on sugars, proteins or nucleic acids, at the leading edge of pharmaceutical innovation. Some have argued that these data protections will stifle the development of biosimilar pharmaceuticals, causing drug price to increase over time.

Article 18.52 of the TPPA gives Parties two options for protecting such data: the first is to provide eight years of data protection; the second is less precise but allows parties to provide only five years of protection plus unspecified “other measures”, recognizing that “market circumstances also contribute to effective market protection to deliver a comparable outcome in the market”.

Canada currently allows eight years of data exclusivity for biologics. This aspect of the TPP seems correctly described as “in line” with Canadian law, as the Conservative government has said.

One particular concern voiced during the negotiations was that if the data exclusivity provisions were cast too broadly, they could be used to claim data protection for products that were merely derivative and not truly innovative, hence stifling competition. This concern may be covered off by a proviso to Article 18.52 which says no data protection is required for any pharmaceutical that is or contains a previously approved biologic.

Extension of Patent Terms

The second area of concern is about what’s called “patent term adjustment”, giving additional time for the patent to run where the marketing of the product encounters delays in regulatory approval. Those delays can, in effect, negate the value of the monopoly period available to the patent owner.

Article 18.46 of the TPPA requires Parties to extend the patent period if there are “unreasonable delays” in the issuance of a patent, defined as more than five years from the filing date or more three years from the request was for examination by the patent office, whichever is longer.

No time is specified in the TPPA for the length of that adjustment. Article 18.46 simply requires the adjustment to “compensate” for such delays. The Article does allow Parties to exclude in any adjustment period delays “not directly attributable” to the granting authority.

The purpose of Article 18.46 is to encourage Parties to weed out inefficiencies in the patent approval process and maintain as much as possible the integrity of the twenty-year patent term.

The extension provisions in Article 18.46 leave a fair degree of flexibility to the Party concerned. It’s not clear how any change to Canadian law to meet these provisions, if indeed required, would in itself stifle Canadian innovation.

Patent Litigation

The third area of concern has been n the so-called “patent linkage” issue. Patent linkages are laws that tie marketing authorization of a generic drug to the expiration of an existing patent, thereby denying market entry to less expensive medicines.

Linkage also allow patent owners to pursue action in the courts where a competing product seeks regulatory approval and the patent owner claims that the product infringes its existing patent.

Some say that because it allows, indeed encourages, patent litigation, patent linkage further delays cheaper generic drugs from reaching the market. Critics say it gives a license to patent owners to use the linkage option to forestall generic competition by resorting to endless infringement litigation.

Canada together with the US and Japan employs a patent linkage system. Before Health Canada can grant marketing approval to a generic version of a brand-name drug, the generic company must demonstrate that all relevant patents on the brand name product have expired.

TPPA Article 18.51 requires Parties to provide for patent linkages in the sense of “adequate time and opportunity” for a patent holder to pursue, prior to the marketing approval of a competing product, judicial or administrative proceedings for alleged infringement.

However, some have described this provision as merely “soft” linkage, because it requires notification of the competing application to the patent holder but doesn’t compel Parties to hold off granting marketing approval pending the outcome of any litigation.

While the issue of patent linkage is controversial and has many opponents, Article 18.51 does not likely require changes to Canada’s current patent linkage system. As the previous government said, these TPPA provisions seem generally in line with Canada’s existing patent laws.

As a result, it’s not clear how the Agreement in and of itself inhibits innovation in Canada. One possible argument may be that by becoming party to the TPPA, Canada would be preventing from amending those measures to remove patent linkage from regulatory approval.

Careful Evaluation

It will be up to the new Liberal government and any Parliamentary committee examining the TPPA to take a close look at these provisions and get the best expert advice to ensure that the TPPA doesn’t have detrimental impact on Canadian enterprise, innovation and entrepreneurship.

There are two main conclusions to all of this.

The first is that these issues will continue to be controversial in Canada, since all are part of Canadian law now, quite apart from what is in the TPPA.

The second is that, rather than focusing only on the impact in Canada, it is important to consider the benefits of increased patent protection the TPPA will give to Canadian patentees in foreign markets.