Proposed new regulations for PMNOC proceedings and CSPs

On July 15 2017 the government published proposed new regulations to change the procedure under the Patented Medicines (Notice of Compliance) Regulations (PMNOC Regulations) to fundamentally change the process from a paper-based court application to a full-blown patent infringement or validity trial, complete with documentary and oral discoveries and live testimony at trial. These new regulations could come into effect as soon as September 21 2017. This elimination of summary proceedings is consistent with the US Orange Book regime under Hatch-Waxman.

Like an animal designed by committee, the existing PMNOC regime is oddly eccentric and unpopular with all parties concerned. The court had only a paper record on which to decide often complicated technical evidence. The burden of proof was on the innovator (the first person or patent owner) to prove that the allegations of non-infringement and invalidity made by the generic (second person) in the notice of allegation were not justified. Appeals by innovators from unsuccessful applications were moot, because the notice of compliance had already been issued. An unsuccessful application was often followed by a patent infringement and validity lawsuit, resulting in the duplication of efforts by the parties and the court.

By agreeing to the Canada-EU Comprehensive Economic and Trade Agreement (CETA), Canada committed to providing full appeal rights under the regulations that linked the approval of generic medicines to the protection of patent rights. That commitment necessitated replacing the PMNOC court application with a single, fast-track patent infringement or validity trial.

The proposed regulations will place a greater burden on the parties and the court to have the patent infringement or validity trial proceed to a decision within the 24-month timeframe. Wisely, the proposed regulations provide a limited number of procedural rules and otherwise leave most procedural matters to be dealt with by the court in order to evolve procedural solutions as experience develops.

Timeframe retained
The proposed regulations would continue the existing practice of barring the minister of health for up to 24 months from issuing a notice of compliance. The requirement that the PMNOC action be disposed of within 24 months of commencement of the litigation is also retained. From a Canadian perspective, this would be a ‘fast track’ to trial.

The first person or the patent owner can sue a second person for patent infringement on the basis of the second person's regulatory submission or supplement. The second person can defend the action and commence a counterclaim to invalidate the patent. The question of whether the minister of health should be prohibited from issuing a notice of compliance will no longer be an issue. The burdens of proof under the new regime would be consistent with those of traditional patent litigation. The proposed regulations would deem a second person to be an ‘interested person’ who could commence invalidity proceedings.

Under the proposed regulations, any claim in a patent included on the Patent Register could be addressed and PMNOC proceedings would no longer be limited to claims for the medicinal ingredient or the formulation, dosage form or use of the medicinal ingredient.

Joinder of other causes of action would be limited. All actions alleging infringement of a patent that could not be litigated under the regulations cannot be joined. Joinder would be possible for separate actions brought by a first person and a patent owner in response to the same notice of allegation, and for separate actions brought in response to multiple notices of allegation that address different patents but relate to the same submission. Patents that could have been litigated in respect of the patent listed on the Patent Register and addressed in a notice of compliance will be prohibited from being litigated afterwards unless the first person or patent owner did not have a reasonable basis for bringing an action under the regulations within the prescribed period.

Pleadings
Under the proposed regulations, a second person would still have to serve a notice of allegation on a first person, but greater detail would have to be provided as to invalidity allegations. A second person would have to provide a detailed legal and factual basis for any allegation of invalidity, along with electronic copies of any document relied on in support of the allegation. The second person may ask for and be provided with contact information for any inventor and may request laboratory notebooks, research reports or other documents relevant to establishing the existence of a particular property, advantage or use asserted by the second person to form part of the invention as of the filing date of the application for the patent. The provision of contact information of former employees may put an innovator at risk of breaching European privacy laws.

With respect to non-infringement allegations, the second person must serve, along with the notice of allegation, any portions of its submission or supplement that could be relevant for determining whether a listed patent would be infringed. This will permit a first person or patent owner to determine whether they believe a listed patent will be infringed. A first person or patent owner may move for production of further portions of the submission or supplement after commencing a proceeding.

Confidentiality
Because some of the documents are produced before the discovery process begins, the proposed regulations allow for a party producing such documents to impose reasonable rules for maintaining their confidentiality, as between the parties. With respect to the court's handling of such documents, it can either adopt the rules designed by the parties or create its own conditions, as it considers just.

Case management
The regulatory impact analysis statement says that “[early] and active case management will help contribute to the timely resolution of proceedings”. That is an understatement. Having a pharmaceutical patent case go to trial and be decided within 24 months will require aggressive case management and cooperation between the parties. Parties and their counsel will be required to act diligently in carrying out their obligations under the proposed regulations and to cooperate reasonably in expediting any infringement action. Failure to do so may result in cost sanctions and the shortening or extension of the 24-month period during which the minister is prohibited from issuing a notice of compliance.

The regulations propose case management for all cases brought under them. A case management conference would be convened shortly after a proceeding is commenced to discuss the following:

• scheduling;
• compliance with obligations to provide documents and information;
• confidentiality rules;
• whether a sample of the generic product is needed for testing;
• how claim charts can best be used to expedite resolution;
• timing and service of expert evidence; and
• the most efficient and effective means of educating the court about scientific or technological matters.

Interlocutory orders could be appealed, but only to the Federal Court of Appeal, with leave.

Damages
The proposed regulations would continue to allow a second person to seek compensation for losses suffered during the period they were kept off the market as a result of an unsuccessful or discontinued proceeding. All plaintiffs would be made jointly and severally liable for losses suffered by the second person starting after the later of either the date of service of the notice of allegation or the date when the notice of compliance would have issued in the absence of the regulations. Liability would no longer be limited to losses suffered before a specified end date.

Transitional provisions
The proposed regulations would come into force on the day Section 59 of the CETA comes into force (currently set for September 21 2017) and would apply to any matters other than those that arose or would arise in relation to a notice of allegation that was served before that date.

Input to government
Interested persons had until July 31 2017 to make representations on the proposed regulations.

Certificates of supplementary protection
Additional regulations adopt a patent term extension of up to two years under a certificate of supplementary protection (CSP), which is analogous to a European supplementary protection certificate.

A CSP extends the term of an eligible pharmaceutical patent by the difference between the date of the filing of the application for the patent and the date of issuance of the authorisation for sale (notice of compliance), reduced by five years and capped at two years. Patents relating to human and veterinary drugs are eligible. In addition to other timing requirements, CSPs can only be granted for medicines for which regulatory approval in Canada has been granted and within a prescribed time of applying to do so in another jurisdiction if Canada was not the first country in which approval was sought. There are also provisions designed to preclude CSPs for variations of medicines for which regulatory approval has been previously granted (eg, enantiomers or formulations), and there can be only one CSP for a medicine. Pure process patent claims are not eligible.

CSPs will be administered by the minister of health. The Patent Act had previously been amended to facilitate the framework for CSPs. As with the proposed regulations, interested parties had until July 31 2017 to provide comment.