This is part 2 in our multiple part series examining Bolar and Bolar-like exemptions in U.S. as well as in a number of foreign jurisdictions.  Part 1, the Bolar Exemption in the U.S., can be found here.

Exemptions to Patent Infringement for Research under Canadian law

Canada provides both a statutory and common law exemption to patent infringement.

Statutory exemption

The statutory exemption to patent infringement is found in Section 55.2(1) of the Canadian Patent Act which states that:

It is not an infringement of a patent for any person to make, construct, use or sell the patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada, a province or a country other than Canada that regulates the manufacture, construction, use or sale of any product.

Generally, Section 55.2(1) pertains to activities “reasonably” related to the development and submission of information required by a regulatory body (such as Health Canada, which is similar to the U.S. FDA).  As in the U.S., the information does not necessarily have to be actually submitted to the regulator.  While this provision relates to regulatory approval for inventions in any area of technology (not just pharmaceuticals), much of the case law has evolved in the pharmaceutical area involving generic drugs.  However, a recent Federal Circuit decision in Eurocopter v. Bell Helicopter Textron Canada Ltee, 2012 FC 112, aff’d 2013 FCA 219 (Eurocopter), involving Canadian Patent 2,207,787 for a skid-type helicopter landing gear, considered Section 55.2(1) to be potentially applicable in a mechanical device case involving two competitors developing helicopter landing gear.  However, the defendant’s (Bell’s) argument failed because the evidence showed that its landing gear was used for commercial purposes in addition to regulatory testing.  Finally, it is also important to note that Section 55.2(1) relates to information that may be required by a regulatory body not only in Canada, but anywhere in the world.

Common law exemption

Under the common law exemption, an experimental user who does not have a license to a patent but is conducting bona fide experiments with the patented invention is not considered to be an infringer.  Examples of bona fide experiments that have been held not to constitute an infringement include making a patented substance, not for profit, but to establish that quality product could be manufactured according to the description disclosed in a patent.

The seminal case involving the common law exemption to patent infringement is the Supreme Court decision in Micro Chemicals Ltd. v. Smith Kline & French Inter-American Corp. (1971), 2 C.P.R. (2d) 193 (SCC) (Micro Chemicals).  In March 1965, Micro Chemicals Ltd. (Micro) applied to the Commissioner of Patents under Section 41(3) of the Canadian Patent Act for a compulsory license to make and sell the antipsychotic drug trifluoperazine under Canadian Patent No. 612204 (the ‘204 patent) owned by Smith Kline & French Inter-American Corp. (Smith Kline).  On June 21, 1966, Micro was granted a non-exclusive license to carry out the patented process in Canada in its own establishment for the purpose of preparing and selling the drug product.  In May 1968, Smith Kline brought an action against Micro alleging patent infringement of the ‘204 patent from and after January 10, 1961.  The alleged infringements were broken down into four periods:

1. Actions of Micro prior to March 25, 1965 (before the date of the application for the compulsory license) during which Micro confirmed that it could satisfactorily produce the product on a commercial basis using the patented process;

2. Actions of Micro between November 1, 1965 and January 22, 1966, during which experimental batches were prepared;

3. Actions of Micro (and two other defendants) between January 25, 1966 and June 21, 1966, consisting of transfers of the material from Micro to Gryphon Laboratories Ltd. (Gryphon) and the manufacture of tablets by Gryphon and the activities of another laboratory (Paul Maney Laboratories (Paul Maney)); and

4. Actions of Micro, Gryphon and Paul Maney (collectively, the Defendants) between June 21, 1966 and February 3, 1967.

The lower court found that Micro’s activities prior to January 22, 1966 constituted an infringement because they were not carried out for the purpose of improving the process but instead to enable Micro to produce the product commercially as soon as the license could be obtained. The Supreme Court reversed holding that Micro’s activities during this period did not constitute infringement. Specifically, the Court stated on pages 518-519 that:

I will now deal with the appeal in the infringement action.  Walsh J. in his judgment, being of the view that the alleged infringements broke down into four periods, dealt with the four periods accordingly.  He saw the period prior to March 25, 1965, as differing form the period between November 1, 1965, and January 22, 1966, and dealt with these two periods separately. I am unable to see any difference in principle in what was done between these two periods. It is significant that Walsh J. found that the small amount of trifluoperazine produced prior to January 22, 1966, was put in bottles and kept for Micro and never entered into commerce and no damage was suffered by respondent and no profits made by Micro, but nevertheless he found that there had been an infringement.  In my view he was in error in holding as he did that an experimental user without a license in the course of bona fide experiments with a patented article is in law and infringer (emphasis added).

Cases involving the Statutory Exemption

Similar to the U.S., a broad interpretation of the statutory exemption has been adopted by the Canadian courts as illustrated in the decision of the Federal Court in the patent infringement action between Merck and AstraZeneca v. Apotex, 2006 FC 524 (Merck).  The Merck case involved Canadian Patent No. 1,275,350 (the ‘350 patent) covering the drug lisinopril.   Although Apotex admitted infringement, it raised four defenses involving certain quantities of the product.  Although the Court rejected several of the defenses, some activities exempted in view of section 55.2(1) of the Patent Act.

Specifically, the Court found that quantities of lisinopril used by Apotex for purposes of obtaining regulatory approval were exempt, including those that had not been referenced in the submissions but were reasonably related to that purpose. Additionally, the Court found that material routinely taken by Apotex as samples from incoming raw material and of finished products stored in the event that they were required for future reference by the government, were also exempt.

Finally, the Court found that Apotex’s use of lisinopril in ongoing research and development in pursuit of alternative formulations and techniques for making tablets fell within the “fair dealing” exemption to patent infringement (an apparent reference to the common law exemption, since Canada has not statutory exemption for “fair dealing”).  However, the Court noted that, “…once the user had proceeded beyond the experimental and testing phase and has taken steps to manufacture, promote and sell the product, the fair dealing exception no longer applies”.

Interestingly, with respect to the common law exemption, the Court disagreed with Merck’s arguments that the exemption defined in Micro Chemicals no longer applied after Canada’s compulsory licensing regime was repealed, stating that:

I reject this assertion that the Micro Chemicals exception is limited and only applies as an adjunct to the grant of compulsory licenses…In my analysis, all that is required is that the infringing product was made merely by way of bona fide experiment, and not with the intention of selling and making use of the product in the commercial market.

Recent Court decisions in Canada make it clear that the use and status of any experimental samples must be carefully documented in the event it later becomes necessary to establish that the samples were not destined for commerce (and perhaps were destroyed).  For example, in Apotex Inc. v. Sanofi-Aventis, 2013 FCA 186, Apotex was unable to produce records showing the destruction of disputed lots of the drug clopidogrel that it had developed for regulatory purposes. Due to this lack of evidence, the Court held that Apotex had not demonstrated that the experimental and statutory exemption applied to those lots.  In contrast, in Teva Canada Ltd. and Apotex v. Novartis AG, 2013 FC 141 (Teva), Apotex presented evidence of careful documentation of all of its test imatinib while also providing to the Court an undertaking that any inventory of imatinib remaining after completion of the regulatory process would be destroyed.  In Teva, although the leftover (or inventory) imatinib was not covered under the broad interpretation of Section 55.2(1), it could be retained subject to the undertaking that it would be destroyed once the product reached its expiration date.

We are not aware of any cases in Canada involving Section 55.2(1) in the context of alleged infringement by innovative drug development or involving the use of patented research tools.  Although there is some uncertainty in this area, Section 55.2(1) should have some applicability in these areas given the Federal Circuit’s recent decision in Eurocopter.

Noel Courage also contributed to this article.

Part 1 - Understanding Bolar and Bolar-Like Exceptions in U.S. and Abroad