Canada's Competition Bureau is in the process of updating their Intellectual Property Enforcement Guidelines (IPEGs) for the first time since 2000. On April 2, 2014, the Competition Bureau released a draft update1 of its IPEGs for public review.
In general, the IPEGs state that a firm must engage in anti-competitive conduct that creates, enhances or maintains market power to violate the Competition Act. The circumstances in which the Bureau may apply the Competition Act to conduct involving IP or IP rights fall into two broad categories: 1) those involving something more than the mere exercise of the IP right, and 2) those involving the mere exercise of the IP right and nothing else.
The Competition Bureau recognizes that the unilateral exercise of the IP right to exclude does not violate the general provisions of the Competition Act no matter to what degree competition is affected. To hold otherwise could effectively nullify IP rights, impair or remove the economic, cultural, social and educational benefits created by them and be inconsistent with the Bureau's underlying view that IP and competition law are generally complementary.
However, the Attorney General of Canada may initiate a proceeding pursuant to section 32 of the Competition Act, even if the action under investigation involved the mere exercise of an IP right. Section 32 is a under the special remedies part of the Competition Act, and requires proof of undue restraint of trade or lessened competition. The Competition Bureau expects that such an enforcement action would be required only in certain narrowly defined circumstances, by using a two-part analysis:
In the first step, the Competition Bureau establishes that i) the holder of the IP is dominant in the relevant market and ii) the IP is an essential input or resource for firms participating in the relevant market.
In the second step, the Competition Bureau establishes that invoking a special remedy against the IP right holder would not adversely alter the incentives to invest in research and development in the economy. This step is satisfied if the refusal to license the IP is stifling further innovation.
If all of the above factors are present, then the Competition Bureau would conclude that incentives to invest in research and development have been harmed by the refusal and a special remedy would help realign these incentives with the public interest in greater competition. Nonetheless, the Competition Bureau recognizes that all three factors would be satisfied only in very rare circumstances.
The draft IPEGs were released on the same day as a new Memorandum of Understanding (MOU) between the Competition Bureau and the Intellectual Property Office.2 This MOU provides that where possible and subject to their respective confidentiality obligations, the two groups will:
1. consult with each other on enforcement guidelines or policy documents that may have a bearing on the other Participant's mandate;
2. examine the potential referral of competition concerns from CIPO to the Bureau that arise from IP rights;
3. participate in knowledge transfer sessions to increase expertise in areas of mutual interest;
4. participate in collaborative discussions relating to IP issues and their impact on competition as well as on Canadian intellectual property and competition laws;
5. share information related to best practices and lessons learned on dealing with marketplace agency counterparts in different jurisdictions;
6. share information on best practices pertaining to respective enforcement and IP activities, training, information technology and accommodation;
7. develop an employee exchange program, where the Participants will host an employee from the other for a period of 6 to 12 months;
8. cooperate on the organization of a joint workshop on the role of competition policy and intellectual property rights; and,
9. meet annually (or semi-annually, if necessary) at the senior management level to discuss the items enumerated above and to explore further opportunities for cooperation and collaboration.
The Competition Bureau did provide time for further input as a part of the public review process, and so we will have to wait and see the final IPEGs to determine if this review process yields any significant changes that would impact life science companies working in Canada.
Footnotes
1 http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03715.html
2 http://www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03709.html
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.
