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08 December 2014
Historically, antitrust issues associated with the exercise of IP rights have been of lesser concern in Canada than in other jurisdictions, most notably the United States and Europe. Although the Competition Bureau published the IP Enforcement Guidelines in September 2000 – following the lead of the United States and Europe – there has since been relatively limited government enforcement of the Competition Act against conduct involving IP rights.
Recently, the bureau published further guidance regarding the interaction between competition law and IP rights. On September 18 2014 it published an update to the guidelines. Shortly thereafter, on September 23 2014, it released a white paper entitled "Patent Litigation Settlement Agreements: A Canadian Perspective".
The white paper stems from the bureau's stated interest in 'pay-for-delay' or 'reverse payment' settlements that arise in the context of pharmaceutical patent litigation and provides the bureau's preliminary views on how Canadian competition laws could apply to such settlements.
More generally, however, the release of the updated guidelines and white paper should serve as a warning that Canadian IP owners must be alert to potential antitrust issues when exercising their IP rights and entering into transactions involving those rights (eg, settlement agreements). The sections that follow review the relevant provisions of the Competition Act and how they may be applied to IP settlement agreements.
The enforcement provisions of the Competition Act distinguish between anti-competitive conduct involving:
The former is subject to the special remedies provision (Section 32) of the act, which the bureau applies infrequently in a relatively narrow range of circumstances. The latter is more routinely addressed under the general criminal and civil provisions of the act, which are briefly reviewed below.
Criminal conspiracies, agreements or arrangements: Section 45 of Competition Act
Section 45 of the act prohibits criminal conspiracies, agreements or arrangements between actual or potential competitors that constitute 'naked' restraints on competition not implemented in furtherance of legitimate collaboration (eg, price fixing, allocating markets or customers and restricting production output).
Violations are pursued in court and may be met with imprisonment and/or fines.
Civil provisions: Part VIII of Competition Act
Part VIII of the act addresses arrangements between actual or potential competitors falling short of criminal conspiracies, but which are nevertheless likely to lessen competition substantially in a relevant market.
With respect to settlement agreements, the most relevant provisions relate to civil agreements generally (Section 90.1), abuse of dominance (Section 79) and, to a lesser extent, exclusive dealing and tied selling (Section 77).
Violations of the civil provisions are addressed before the Competition Tribunal and may be met with orders prohibiting the implementation of the agreement or its specific anti-competitive terms, among other remedies.
With this review of the act in mind, the following representative terms of litigation settlement agreements could raise competition issues:
Competition issues are highly fact dependent and often complex. In the context of IP settlement agreements, careful consideration must be given to the parties, the nature of the market and the actual or potential effect of the agreement at issue.
For further information on this topic please contact Colin Ingram or Daniel Whalen at Smart & Biggar/Fetherstonhaugh by telephone (+1 613 232 2486), fax (+1 613 232 8440) or email (firstname.lastname@example.org or email@example.com).The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
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