Breathing Life into the August 30th Agreement
By Geoff Blackie
INTRODUCTION & APPROACH
I was recently giving a talk at a local area high school with two other law students
on various human rights law issues. I was addressing HIV and AIDS in Africa, and
thought to begin with some questions followed by statistics to shock. However, their
answers regarding the number of infected in Africa, national infection rates and the
number of orphans as a result of HIV/AIDS were higher than current statistics. For
many, the scale of the problem is well-known (or even slightly exaggerated). Still the
problem persists, infection rates are on the rise and deaths continue at an unprecedented
rate with disastrous effects on the infrastructure of those societies.1
The battle against HIV/AIDS is fought by a number of dedicated individuals on
many fronts. HIV/AIDS is an equality issue, a prevention issue, a debt relief issue, a
poverty issue and an intellectual property issue. In 2003, the August 30th Agreement (the
Agreement) brought changes to the World Trade Organization’s (WTO) Agreement on
Trade Related Intellectual Property Rights (TRIPs). The Agreement allowed for, inter
alia, importing nations to issue compulsory licenses for essential HIV/AIDS medications.
Canada was the first developed country to announce that it would implement domestic
legislation to allow for the issuance of compulsory licenses. Last year, on May 14th, the
Jean Chrétien Pledge to Africa Act (Bill C-9) received Royal Assent.2 Despite these
important developments on the intellectual property front, all is quiet; not a single pill has
reached a developing nation using the August 30th Agreement.
This paper’s central concern is how to utilize the August 30th Agreement; thus,
the focus is on compulsory licenses for export. I shall first describe the concerns and
actions that precipitated the Agreement. In the second section, I consider the TRIPs
members that have signified intent to implement domestic legislation and are at different
stages of the process. In the third section, I critically examine the Canadian legislation
with reference to others models to answer the following questions: (1) How were central
issues addressed and could the legislation have been better constructed to ensure success?
(2) What steps are currently underway to gain a compulsory licence? (3) Can compulsory
licensing systems in developed countries, specifically Canada, work?
I. CONCERNS & ACTIONS RESULTING IN THE AUGUST 30TH AGREEMENT
The African Pandemic and Access to Essential Medicines:
1
In Botswana and Swaziland the infection rate is nearly 40% (see the Clinton Foundation available at
http://www.clintonfoundation.org/aids-globalcrisis.htm (last visited April 13, 2005). UNICEF estimates
the number of orphans die to HIV/AIDS at 14 million see http://unicef.org/aids/index.html (last visited
April 13, 2005). See Appendix A for the amendments.
2
Despite have received Royal Assent the amendments are not in force until all the companion legislation is
in place. This has not yet been done. The amendments can be found at http://laws.justice.gc.ca/en/p4/notinforce.html. Note, the legislation available on Hansard is not the final version of the legislation
Unfortunately, the crisis in Africa requires little introduction but much action. In
Africa only 12%, or 700,000 of those infected, are receiving required treatment.
Moreover, infections are rising more quickly than number receiving treatment.3 On
World AIDS Day in 2003, the WHO released a plan to treat 3 million people in
developing and transitional countries by the end of 2005 (the “3 by 5 initiative”).
According to a Medicine Sans Frontier (MSF) press release, between July 2004 and
January 2005 only 264,000 new patients were able to benefit from ARV treatment.4
The WHO recognized the importance of access to essential medicines in 1991 and
was again a central concern within the WHO at the 2000 International AIDS Conference
in Durban. At that time, few expected that ARVs could be made available to the poor in
developing nations. Drug prices were simply too high; costs exceeded $10,000 per
patient per year for first line treatments.5 Even in 2002 no one in the developing world
had received ARVs through official donor support.6 As Kevin Outterson asserted,
“precious years were lost because the drugs were too expensive for the developing world,
and they were too expensive because of patent protection and fears of arbitrage.”7
However, in February 2001 an Indian generic company, Cipla, announced “the
price heard around the world.”8 Cipla offered a standard package of ARVs for $350/year
to NGOs and $600/year to governments in Africa. As additional Indian generic
producers began producing the same drugs, prices continued to fall. By 2004 fixed dose
combination medicine (FDCs)9 were available for less that $140/year and were mostly
provided by four generic producers – three in India and one in South Africa.10 MSF is
able to treat 25,000 patients only because the prices are a fraction of the prices in
developed countries.11 Accordingly, the number of patients treated has risen
dramatically, but remains drastically inadequate.
The Debates: Life, Property and Innovation:
See Medicine Sans Frontier (MSF) Press Release, “Global AIDS treatment efforts not on track” January
28, 2005 at http://www.msf.org/content/page.cfm?articleid=62168E79-1C22-4E97-8734B6F41C624CEA.
4
ibid.
5
When a patient is treated with ARVs the virus eventually develops immunity to the treatment. At this
point there is a shift to second line ARVs that attack the virus in a different way.
6
Kevin Outterson Pharmaceutical Arbitrage: Balancing Access and Innovation in International Prescription
Drug Markets 5 Yale J. Health Pol, L. & Ethics 193 t 255-256.
7
Ibid at 256-257.
8
Brook Baker, “Arthritic Flexibilities for Accessing Medicines: Analysis of WTO Action Regarding
Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health” 14 Ind. Int'l & Comp. L.
Rev. 613 at 615.
9
Essentially, FDCs combine various treatments into one pill. The most popular combination for first line
treatment is a combination of Zidovudine (AZT), Lamivudine, and Nevirapine. FDCs minimize shipment
and transport costs and, more importantly, greatly increase chances of compliance. It is much easier to
remember to take one pill twice/day than a number of different pills at various points throughout the day.
If the medication is not taken correctly there is a greater chance the virus will mutate more quickly.
10
The quality of the generic productions was assured through the WHO’s new pre-qualification program.
See Baker supra note 7 at 615.
11
MSF supra note 2.
3
Professor Bryan Mercurio asserts that the debate between access to essential
medicines and patent rights received global attention in 2000 when several
pharmaceutical companies challenged the legality of South African legislation designed
to allow for compulsory licenses of patented medicines. Simultaneously the US initiated
WTO procedures challenging the legality of Brazil’s compulsory license system. Both
the patent holders and the US, who supported the pharmaceutical companies, where
bombarded with negative publicity. Largely as a result, the claims were dropped.12
Generally, increasing access to essential medicines is dependant on their prices.
With finite funding, more ARVs can be bought and more money spent on developing the
infrastructures to distribute the drugs. A number of methods have been used to reduce
costs including: voluntary licensing, compulsory licensing, differential pricing, and bulk
procurement.13
Domestic legislation that allows generic production of pharmaceuticals has played
a central role in reducing costs. First, once generic companies are able to produce the
drugs, the patent holder no longer holds a monopoly and prices necessarily drop closer to
the manufacturing costs (see table 1 below). Second, a legitimate threat by a government
to issue a compulsory license and allow generic production often provides the patent
holder with an incentive to significantly reduce prices or allow a voluntary license on
more favourable terms. While this happened in Brazil and South Africa, it is not unique
to the developing world. When fears of an anthrax attack mounted in the United States
government, it used the threat of a compulsory license to entice Bayer to provide Cipro at
a greatly reduced cost.14
Bryan C. Mercurio, “Trips, Patents, and Access to Life-Saving Drugs in the Developing World” 8 Marq.
Intell. Prop. L. Rev. 211 at 224.
13
The paper will focus on the attempts to make exporting under compulsory licenses viable. For more see
Outterson supra note 5 who argues that differential pricing can allow for greatly reduced prices while still
providing patent holders to make substantial gains.
14
Mercurio supra note 11 at 224.
12
TABLE 1: Effects of Generic Competition on ARV Prices15
Third, generic producers are able to provide essential medicines in forms that allow
improved compliance with the required treatment regiment (e.g. FDCs). This is not an
option in developed countries when different parties hold the patents to the drugs in the
FDCs and empirically have demonstrated a lack of sufficient interest to cross-patent.
The TRIPS Agreement is the international standard for protecting intellectual
property rights and has drawn scorn from many developing countries.16 It became a
central issue at the Doha during the Fourth WTO Ministerial Conference in 2001. To this
extent, paragraph 4 of the Doha Declaration (the Declaration) asserted:
We agree that the TRIPS Agreement does not and should not prevent members
from taking measures to protect public health. Accordingly, while reiterating our
commitment to the TRIPS Agreement, we affirm that the Agreement can and
should be interpreted and implemented in a manner supportive of WTO
members' right to protect public health and, in particular, to promote access to
medicines for all.17
Paragraph 5(b) of the Declaration asserts the right of members to issue compulsory
licenses for medicines to protect public health, “and the freedom to determine the
This table was presented to the European Parliament in an MSF presentation by Ellen ‘t Hoen. It is
available at msf.org.
16
See for example Michael Trebilcock who criticizes TRIPS for failing to recognize differences in
comparative advantage vis a vis innovation and imitation. Michael Trebilcock and Robert Howse, The
Regulation of International Trade (2d ed) (New York: Routledge, 1998) at 308.
17
Doha Declaration on the TRIPS Agreement and Public Health WT/MIN(01)/DEC/2, 20 November 2001,
paragraph 4 at http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm
15
grounds upon which such licences are granted.”18 Paragraph 6 then recognizes the
inadequacy of this solution for members who do not possess a manufacturing capacity in
the pharmaceutical sector. It also instructed the Council on TRIPS to report a solution to
the General Council by the end of 2002.19
The August 30th Agreement – The floor for compulsory licenses
A solution to the paragraph 6 dilemma was not reached until August 30th, 2003.
The responses have been mixed. Baker asserts that the current international regime
should be “a floor and a ceiling.”20 He argues that developing countries should abandon
the August 30th Agreement and return to a simplified process under Article 30 of the
TRIPS Agreement. While an important consideration, this paper will focus on the
potential within the legal framework created by the August 30th Agreement.
The August 30th Agreement21 generated a list of eleven possible steps that an
importing country must initiate for the issuance of a compulsory licence, this includes22:
(1) The importing country must seek a voluntary license on commercially reasonable
terms for a reasonable period of time.
(2) If the importing country is not successful in obtaining a voluntary license, it must to
apply to the WTO for a compulsory license.
(3) If the compulsory license is for import, the importing country must assess its generic
industry's capacity to produce the medicine locally.
(4) If capacity insufficient, it must notify and explain to the TRIPS Council its decision
to import.
(5) The importing country must notify a potential exporter.
(6) The exporter must also attempt to obtain a voluntary license on commercially
reasonable terms for a reasonable period of time.
18
ibid at paragraph 5.
ibid at paragraph 6. For a more detailed discussion of the Doha Declaration and the approach to the
August 30th Agreement see Baker supra note 7 at 623-625. For a further discussion the role of IP laws in
low income countries see Jean Lanjouw and Alan Sykes who support the enactment of IP laws in low
income countries to encourage development in local markets for treating neglected diseases. A further
concern is how to develop local markets for treating neglected diseases, addressed in Outterson supra note
5.
20
Baker supra note 7 at 618.
21
Implementation of Paragraph 6 of the Doha Declaration on the TRIPS and public health, Decision of the
General Council of 30 August 2003, WT/L/540 1 September 2003 available at
http://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm; for brief description see Yolanda Taylor
(ed.), Battling HIV/AIDS: A Decision Maker’s Guide to Procurement of Medicines and Related Supplies
(New York: The World Bank, 2004) at 121-125.
22
For similar lists see Correa infra note 95 at 401 and Anthony P. Valach, Jr. “Trips: Protecting the Rights
of Patent Holders and Addressing Public Health Issues in Developing Countries” 4 Chi.-Kent J. Intell. Prop
156 at 167-169.
19
(7) The exporter must then seek a compulsory license from its own government on a
single-supply basis.
(8) The exporter will need to achieve product registration and prove bio-equivalence (as
required by domestic law). This requires studies regarding toxicity and efficacy
(unless access to the initial data from the original studies is granted with the
compulsory license)
(9) The exporter must determine the adequate royalty based on standards of
reasonableness in the importing country.
(10)
The exporter must investigate pill size, shape, colour, labelling, and packaging of
the patent-holder's product in the importing country and differentiate its new product
in all respects, provided the measures taken are not too costly
(11)
Before shipment a website must be created, posting information about the
quantities supplied and the distinguishing features of the product.
In addition to the above specifics, the motivation behind the whole process must
be non-commercial in nature. The General Council Chairperson’s Statement released
with the decision asserted that the “system that will be established by the Decision should
be used in good faith to protect public health and, without prejudice to paragraph 6 of the
Decision, not be an instrument to pursue industrial or commercial policy objectives”.23
Questions remain about how this restriction impinges upon the ability of generic
producers to make profits. Originally, the US had tried to limit the motivations to
“humanitarian” only. However, preceding public outcries, the Chairperson’s statement
was left more ambiguous.
Some of the above processes do not create substantial burdens; others do.24
Fellmeth sees the central problem being that “developers must undertake the laborious
and time-consuming task of obtaining marketing approval from the government agencies
charged with protecting public health.”25 Essentially, the largest hurdle will not be
imposed by the international system, but by the rigorous hurdles in domestic exporter
legislation. As such, the domestic government has a crucial role to ensure that a
legislative scheme allowing for the issuance of compulsory licenses for export works.
II. LEGAL INITIATIVES TO IMPLEMENT THE AUGUST 30TH AGREEMENT
The General Council Chairperson’s Statement available at
http://www.wto.org/english/news_e/news03_e/trips_stat_28aug03_e.htm
24
The above list, and numerous variations of this list, all seem to assume that the motivation for a
compulsory license will be initiated in the importing country. This need not be the case as will be
addressed below.
25
Aaron Xavier Fellmeth Secrecy, Monopoly, and Access to Pharmaceuticals in International Trade Law:
Protection of Marketing Approval Data Under the TRIPS Agreement 45 Harv. Int'l L.J. 443 at 445.
23
Since August 30th, 2003 a number of developed countries have taken steps to
implement the Agreement. Presently, only Canada, Norway, the Netherlands and, just
recently, India have passed legislation. Others are currently pursuing and evaluating
potential legislation. This section of the paper will provide an analysis of what
legislation does exist and what other frameworks are being proposed.
Canada:
Canada was one of the first to initiate legislation to take advantage of the August
30th agreement. Proposed legislation was introduced as Bill-56 in early November 2003,
and was well received by many NGOs and generic pharmaceutical producers in
Canada.26 Following extensive debate and consultation with various parties, the Jean
Chrétien Pledge to Africa Act (Bill C-9) received Royal Assent on May 14, 2004.27 The
legislation will take effect once all the companion legislation is passed. It was rumoured
this would occur in January 2005; this was not the case. As of yet, there is little word as
to when the regulations will be in place and the legislation will be in effect.
The Canadian legislation is a product of compromise between the various
stakeholders. Bill C-9, unfortunately, uses the August 30th Agreement as a floor and
builds upwards. Its purpose is clear; section 21.01 lays out the goal of the legislation: “to
facilitate access to pharmaceutical products to address public health problems afflicting
many developing, and least developed countries, especially those resulting from
HIV/AIDS, tuberculosis, malaria and other epidemics.”28
The legislation has a series of schedules. Schedule 1 is a list of patented drugs
that can be produced under compulsory licenses. For the most part, the list is the WHO’s
list of essential medicines that are patented in Canada. Schedules 2-4, respectively, lists
the least developed countries, the developing countries that have chosen not to notify the
WTO that they do not intend to import drugs under compulsory licenses, and the member
countries that have stated they will issue compulsory licenses only in situations of
emergency.29 The drugs do not have to be sold directly to government of the importing
state. However, the applicant must provide the name of the governmental entity or “the
person or entity permitted by the government of the importing country”.30 As such, an
NGO31 could act as the purchaser but would have to be permitted by the importing state
to do so. In addition, the NGO would have to inform the Canadian regulators what
country wants which particular products and in what amount. It also appears that
separate approval must be obtained for each state that the drugs will be imported to.
Apotex press release, “Canadian-Owned Generic Company Prepared To Provide HIV/AIDS Drug to
Developing Nations” November 7, 2003 available at http://www.apotex.com/PressReleases/2003110701.asp. (last visited March 29, 2005).
27
See www.hansard.ca
28
Section 21.01.
29
s.21.03.
30
s.21.04(2)(f).
31
For the purposes of this paper NGO is seen to include nongovernmental organization and
intergovernmental organization (e.g. MSF, UNAIDS, The Global Fund, The World Bank, etc.)
26
When a party wishes to apply for a compulsory license they must file a notice of
intent to apply to the Commissioner of Patents and attach a series of additional
documents.32 They must provide notice of intent to identify the product, prescribing
information, the quantity to be manufactured, information about the patentee, the
importing country, and the terms of the contract that establishes how the product will be
sold.33 Additionally, documentation must be provided: a copy of the WTO notification of
intent to import (if they are a member state), the importers notification to the Canadian
government and the patent status of the product in the importing country.34 The applicant
must also provide the Commissioner with a solemn and statutory declaration stating that
at least 30 days prior to filling the application the applicant sought form the patentee(s) a
license to manufacture and sell the product to the importing country on reasonable terms
and conditions and provided the patentee(s) with the information provided to the
Commissioner with the application.35
The Commissioner will grant the compulsory licence once the applicant has paid
the prescribed fee, and the below conditions are met:36

All the requirements in the regulations have been met (these
regulations have not yet been published);

The Minister of Health has informed the Commission that the product
meets all relevant Food and Drugs Act requirements;

The applicant has provided notice to the patent holders as required
under s. 21.04; and

Provides a certified copy of the notice given to the WTO specifying
the product and quantities required by the WTO member (if they are a
member)
Before export, the licensee is responsible for publishing on a website the
importing country, name and quantity of the product sold and other information required
by the Food and Drug Regulations.37 In addition, a royalty must be paid to the patent
holder. The Governor in Council who “must consider the humanitarian and noncommercial reasons underlying the issuance of authorizations” determines the royalty.
The royalty is tied to the import countries U.N. Human Development Index (HDI). With
the lower HDIs of developing countries, a generic firm is unlikely to have to pay royalty
rates higher than 3%, and for many importing countries the rate will be below 1% of the
32
see generally s.21.04.
s. 21.04(2).
34
s. 21.04(3).
35
ss.21.04(3)(c)(i)(ii)
36
ss.21.04(3)
37
s. 21.07
33
total value of the product being exported.38 If there is more than one patent holder, the
royalty is divided equally among them.39
The compulsory licence is issue for a period of 2 years, unless another period is
prescribed as per the regulations.40 This can be renewed for an additional 2 years by the
Commissioner if the licensee applies, pays the fee and certifies that the quantity intended
to have been exported was not exported before the licence expired. It can be renewed
only once.41 The licensee’s authorization is non-transferable unless it is permitted by
paragraph 31(e) of the TRIPS Agreement, which provides that the use of compulsory
licensed product be non-assignable, “except with that part of the enterprise or goodwill
which enjoys such use”.42
The compulsory licence expires when the two year licence ends, the Minister of
Health no longer believes that the product meets the requirements of the Food and Drugs
Act, the day the last of the product provided for in the licence is exported, 30 days after
the product or importing country is removed from the schedules under the Act or any
other date established in the regulations.43 The patentee can file a challenge to the
Federal Court of Canada, challenging the accuracy of the information given by the
licensee, its failure to meet obligations under the bill, or that the product is being diverted
from the importing country. If this is demonstrated, the Federal Court can terminate the
licence under section 21.14.
The amendments also limit the scope of any commercial enterprising. If the price of the
product is equal to or greater than 25% of the average price of the Canadian
equivalent sold by, of with the consent of the patentee, the patentee can apply to
the Federal Court for a ruling that the agreement is commercial in nature. The
Court is instructed to consider the exporter’s need to make a reasonably sufficient
return to sustain continued participation in humanitarian initiatives as well as the
ordinary levels of profitability of commercial pharmaceutical agreements in
Canada. Moreover, the Court is instructed to consider the international trends in
prices of the products sold for humanitarian purposes.
Richard Elliot “Generics for the developing world: a comparison of three approaches to implementing
the WTO (World Trade Organisation) decision (F)” available at
http://www.aidslaw.ca/Maincontent/issues/cts/Scrip-article-RElliot-241104.pdf (last visited April 27, 2005)
39
s. 21.08
40
s. 21.09
41
s. 21.12.
42
s. 21.11.
43
s. 21.13.
38
Norway:44
Norway also implemented legislation in May of 2004. It differs from the
Canadian legislation. The Norwegian legislation does not contain a schedule of
pharmaceutical products. Instead, a licensee is able to export “pharmaceutical products”
as defined with reasonable breadth in the WTO decision. Whereas importing countries
that are not WTO members must declare a national emergency to be considered under the
Canadian legislation, the Norwegian legislation does not impose this burden, which was
flatly rejected in the WTO negotiations. The Norwegian legislation is vague and
uncertain about the nature of the duties of the generic firms to obtain a voluntary license.
In addition to these uncertainties, the legislation is also unclear regarding what constitutes
“adequate remuneration” for the patent holder.45
The European Commission:
The European Commission has but forward a proposal to allow for uniform
implementation of the conditions for granting compulsory licenses. EU members that
have the capacity to issue compulsory licenses under domestic law are able to export.46
The EU draft regulation still requires approval by EU institutions. The EU proposal only
allows the export of generic products to WTO members.47 Like the Norwegian
legislation, the EC’s draft legislation is also vague, requiring that a generic firm attempt
to obtain a voluntary license for a “reasonable period of time” which takes into account
whether the importing member has declared a national emergency.48 Evidence of these
attempts must be provided with the application.49 The legislation asserts that the
“product(s) shall only be exported if those countries have issued a compulsory licence for
the import and sale of the products”.50 Moreover, the EU draft legislation does not
provide any material guidance on royalty rates51; however, this can be done in the
domestic implementation by member states. There appears to be no time limit on the
compulsory license. It can be terminated only if the licence conditions are not respected
or the circumstances that lead to the licence no longer exist.52
Netherlands:
44
For jurisdictions outside Canada the analysis shall focus on the differences between the varying
legislation, taking the Canadian as a base point, and not go through the specific provisions. Moreover,
aside from India, none of the countries addressed below have a generic industry equal to the size of the
Canadian industry.
45
Elliot supra note 37
46
Article 3.
47
Article 4.
48
Article 7.
49
Article 5(3)(f).
50
Article 8.
51
Article 8(9) requires: licensee shall be responsible for the payment of adequate remuneration to the
right holder as determined by the competent authority taking into account the economic value of
the use that has been authorised under the licence to the importing WTO member(s) concerned.
52
Article 14.
On December 21, 2004, the State Gazzette published the “Policy rules on issuing
compulsory licences pursuant to WTO Decision WT/L/540 on the implementation of
paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health, under
section 57, subsection 1 of the Kingdom Act on Patents of 1995”.53 The Dutch
legislation does not create an independent list of products, but relies on the WHO list.54
The importing state does not have to be a WTO member. The Minister is under a duty to
ensure that the patent holder is unwilling to issue a voluntary license before issuing a
compulsory license. However, in urgent cases the Minister is not required to investigate if
the patentee was willing to issue a voluntary license.55 The legislation does not
specifically lay out how royalty levels will be determined, but does state the economic
value of the products in the importing state must be taken into consideration.56 The
licensee must provide information on how diversion will be avoided.57 Importantly, the
legislation specifically contemplates NGOs acting for a group of states: “The application
shall be accompanied by an order addressed to the pharmaceutical manufacturer from an
importing state, a group of states, or non-governmental organisation acting for one or
more importing states”.58
India:
India recently passed the Indian Patents (Amendment) Bill, 2005 and addresses
the issuing of compulsory licences for export as provided for by the August 30th
Agreement.59 Based on a reading of the provision dealing with the compulsory licenses,
the new patent act is cursory in explaining the requirements. It only demands that a
licence be issued in the importing country without manufacturing capacity and used to
address public health concerns. Moreover, these requirements are without prejudice to the
extent to which pharmaceutical products produced under a compulsory license can be
exported under any other provision of the act.60 Regardless of how the legislation is
crafted, there is a real and more general concern the India will lack the simple
administrative process for issuing compulsory licenses. The questions surrounding the
new Indian regime necessitates new and viable options in other regimes.61
Other Developments:
Other states have noted intentions to move forward with legislation to implement
the August 30th Agreement. According to France’s Minister of Health, Philippe Douste-
53
The legislation was obtained online through the CPTech at
http://www.cptech.org/ip/health/cl/netherlands-export-rules.html (last visited April 27, 2005).
54
Article 1.
55
Article 2.
56
Article 5.
57
Article 3.
58
Article 3(2).
59
See Appendix B for the relevant section of the Indian Patent Amendment Act (2005).
60
Section 92A, Indian Patents Amendment Bill 2005 available at
http://lawmin.nic.in/Patents%20Amendment%20Ordinance%202004.pdf.
61
See Amit Gupta “Patent Rights on Pharmaceutical Products and Affordable Drugs: Can TRIPS Provide a
Solution” 2 Buff. Intell. Prop. L.J. 127
Blazy, “The bill is ready and we will be able to submit it to parliament in January.”62 In
addition, Switzerland is in the process of proposing amendments to their Patent Act and
on November 26, 2004 15 Congressmen introduced a draft Bill for Amending Korean
Patent Act to the National Assembly.63
III. WHAT COMPULSORY LICENSE LEGISLATION SHOULD AND SHOULD
NOT DO: THE CANADIAN EXAMPLE
The end goal of the various implementing legislation is simple – to bring cheap
but essential medication to those who need it but cannot produce it themselves. The
means are more difficult. For better or worse, the August 30th Agreement laid out the
loose framework for issuing compulsory licenses. Member states have implemented the
General Council decision, often complicated the procedure and narrowed the scope of
who can help, who can be helped and what can be provided.
1. The Key Issues:
There are a number of differences among the legislations described above. In
addition, there were approaches discussed but not taken (as demonstrated by the
legislative history of Canada’s Bill C-9). None of the domestic implementing legislations
are perfect, and they present various strengths and weaknesses. For legislation to be
effective it must support commercial incentives that allow generic companies to
participate. This means legislation that creates processes that are flexible, efficient and
certain. If the process is inflexible, it will have trouble adapting to the varying needs of
the parties. If the process is inefficient and burdened with various bureaucratic processes,
it will increase the costs for generic companies and provide more opportunities for the
patent holder to oppose the issuing of compulsory licences. If the process is uncertain
and the likelihood of commercial success unclear, few generic manufacturers will risk the
opportunity costs for what is likely to be a small return on their investment.
The central issues that will affect these concerns include, but are not limited to: the
right of first refusal, the listing of exportable products and importers, the remuneration
for the patent holder, the role of NGOs, how the risk of diversion is addressed, the
domestic requirements for registering the generic product, the non-commercial
restrictions and the procurement role of NGOs. Each of these is discussed below.
Common Issues

Responsibility to seek a voluntary licence and the Right of first refusal
The August 30th Agreement requires that applicants for a compulsory license first
seek a voluntary licence on “reasonable commercial terms and conditions”.64 A
“France to apply WTO generic drug pact by 2005” available at
http://www.expatica.com/source/site_article.asp?subchannel_id=58&story_id=14233&name=France+to+a
pply+WTO+generic+drug+pact+by+2005
63
See CPTech at http://www.cptech.org/ip/health/cl/ (last visited April 27, 2005)
64
August 30th Agreement supra note 20.
62
compulsory licence can only be issued if these efforts do not succeed within a
“reasonable period of time”.65 This resulted in a right of first refusal under the original
Canadian legislation and considerable criticism.66 Since then, the right of first refusal has
been abandoned by the legislative scheme, and was not incorporated into the domestic
legislation of other jurisdictions.
The original Canadian legislation created a duty for the Commissioner of Patents to
provide the patent holder with a copy of the application. This provided all the details of
the contract.67 This is a significant disincentive for generic manufacturers.68 Upon
viewing the application, the patentee could then undercut the contract and provide the
drugs at a slightly lower cost. The motivation would be two-fold. First, the patent holder
would be able to produce the drugs more cheaply since the machinery is already geared
towards such production and there is no need to demonstrate bioequivalence. Moreover,
it would be a strong warning to other generic companies not to invest time and money
establishing a contract for generic production. Providing a right of first refusal would
likely scuttle any commercial incentive for generic companies and therefore seriously
undermine the legislative attempt to implement the August 30th Agreement.69
Richard Elliot, of the Canadian HIV/AIDS Legal Network, complements the
Canadian legislative for keeping the “reasonable period of time” short (30 days).70 In
addition, the duty to negotiate a voluntary licence is left with the applicant; therefore, the
patent holder will not be provided with the details of the possible contract. Nonetheless,
Elliot remains critical. The Canadian law could adopt the greater flexibility allowed for
under TRIPS which allows for the issuance of a compulsory licence without seeking a
voluntary licence. It can be waived in cases of emergency or public non-commercial use
of the patent, or where the compulsory licence is issued to remedy an anticompetitive
practice. This would eliminate the 30-day time period and added possibility of the patent
holder hijacking the process.71 The CGPA notes that the patent holder already has the de
65
Ibid.
See “Getting the Balance Right” a report by World Vision to the Standing Committee on Industry,
Science and Technology regarding Bill C-9 (March 5, 2004) which commented, “the greatest concern
about Bill C-9 relates to the provisions for the second ‘right of first refusal’.” Available at
http://www.worldvision.ca/home/media/GettingtheBalanceRight-WorldVisionBriefonBillC-9.pdf
67
See the legislative summary of Bill C-9 available through Hansard at www.hansard.ca.
68
World Vision Report supra note 65, see also CGPA Report to the Standing Committee on Standing
Committee on Industry, Science and Technology regarding Bill C-9, February 2004 available at
www.hansard.ca.
69
In their submissions to the Standing Committee on Industry, Science and Technology reviewing the
proposed legislation the CGPA asserted, “Canadian generic pharmaceutical companies will not seek out
international contracts if they are required to pass any business they find to the brand-name company that
holds the Canadian patent (and that company’s generic subsidiaries or licensees). Our member companies
will be unlikely to participate if they do not have the ability to recoup their investments.” Supra note 67.
70
Elliot supra note 37.
71
It should be noted that having the patent holder “hijack” the agreement to provide medicines at low costs
is beneficial on a one-off analysis. However, this would greatly reduce incentive for the generic
manufacturer to initiate an application for a compulsory licence in the future. The lack of potential
competition removes one of the chief incentives for the patent holder to provide essential medicines at
reduced prices.
66
facto right of first refusal, “as they are the current patent holders of the products covered
under this legislation”.72
This being said, the Canadian legislation remains a strong model. It provides a
certain and relatively risk-free process for meeting the requirements of the Agreement.
The European, Norwegian and Dutch legislation are vaguer on the demands for how a
voluntary licence are met, creating an opportunity for slow down and legal challenge.

Listing Products:
The Canadian legislation has added an unnecessary limitation by creating a
separate schedule of products for which a compulsory licence may be issued. TRIPS
does not require Canada to create an independent list of products that can be exported.
While a list was proposed at the WTO negotiations, it was rejected by WTO members.73
The various European implementations allow for exportation of “pharmaceutical
products” as defined in the WTO decisions. The Agreement defines “pharmaceutical
product” as including “any [patented product] needed to address the public health
problems as recognized in paragraph 1 of the [Doha] Declaration.”74 International
mechanisms already exist to ascertain what products are needed by developing
countries.75 Canada’s decision to create a specific list of products, despite providing for
the addition of other products, creates an unnecessary delay, further inflexibility and an
additional opportunity for political lobbying by patent holders. In Canada new medicines
were excluded from the list after drug industry lobbying. As an example, Bayer was able
to keep moxifloxacin, a pneumonia therapy, off the list of medicines.76
As the original list was passing through the Canadian Parliament there was
political lobbying regarding the inclusion of certain pharmaceutical products. Julie Tam
of the CGPA explained many of the situations in which generic companies would seek
compulsory licenses could arise unexpectedly.77 Clarithromycin is an anti-biotic often
used to treat conditions such as pneumonia. Generic manufacturers were gearing up for
production of Clarithromycin in anticipation of the patent expiring. However, the patent
holder initiated judicial procedures pushing back the expiry date. At the time, if the
amendments were in effect and Clarithromycin was on the list, the costs to the generic
company of providing the drug under a compulsory licence would have been minimal.
They could have supplied the drug under a two-year license while waiting to provide the
drug domestically. However, Clarithromycin was not on the schedule of drugs available
for export. Not surprisingly, Clarithromycin was one of the drugs that was removed from
the list following lobbying by the research-based pharmaceutical industry.

72
Listing the Import Countries:
CGPA Report supra note 67.
Ellen ‘t Hoen supra note 14
74
Doha Declaration supra note 20.
75
e.g. the WHO’s list of essential medicines
76
t’ Hoen supra note 14; more generally see Elliot supra note 37 and CGPA Report supra note 67
77
This information was obtained through a telephone interview with Julie Tam in March, 2005
73
Listing potential importing countries creates unnecessary limitations. The
Canadian legislation does not require that the importing country be a WTO member.
Instead, Bill C-9 includes all least-developed countries and most developing countries.
The proposed EU legislation does require the importing country be a WTO member and
creates a distinction that does not reflect the nature of problem. Perhaps the Canadian
law creates an unnecessary hurdle in requiring the developing nation to declare a national
emergency as a precondition to import. WTO members do not face this same
requirement, but only have to identify the quantity required, demonstrate an inability to
domestically produce the drug and to issue a compulsory license.78 Appropriately, the
Norwegian legislation only considers the need of the importing country rather than
membership in a trade organization, and does not place the responsibility on developing
nations to declare an emergency when evidence of the emergency is patently clear.

Adequate Remuneration and Royalties for Patent Owners:
Paragraph 3 of the Agreement requires that “adequate remuneration pursuant to
Article 31(h) of the TRIPS Agreement shall be paid.”79 Royalty payments are used to
fulfil this requirement. Originally the Canadian legislation imposed a royalty rate of 2%.
However, generic manufactures contested this, asserting that this increased cost would
reduce the incentive and what is already a slim profit margin.80 The current legislation
recognized these concerns and reduced the royalties by incorporating a calculation that
includes the UN’s Human Development Index. As a result, many of the least developed
countries, that need the drugs most desperately, will only require a royalty payment of
less than 1%. The Canadian process is good in that it provides cost certainty for the
generic manufacturers and it is not overly burdensome. Conversely, the uncertainty
present in the EU and Norwegian systems is a major flaw. Various concerns must be
balanced, and the remuneration is meant to recognize the commercial loss of the patent
holder.81 Using the HDI to ascertain the loss to the patent holder approaches a more
accurate reflection of that loss.

Trade Diversion:
Concerns for trade diversion and parallel importing attract a great deal of attention
from research-based pharmaceutical companies and government legislatures. In theory,
the concern is clear and logical. A first line treatment, Cipla Triomune, is available for
US$154 in developing countries and the bioequivalent sells for US$8773 in Australia.82
It would be a profitable business to purchase the drugs in Sub-Saharan Africa and then
re-export them to Australia. Kevin Outterson notes that the market discrepancies are
roughly similar to cocaine. In Columbia, the street value of one gram of cocaine is about
US$3 to US$5; in the North America it is about US$100. Outterson then promptly
asserts, “reality appears to depart from the neo-classical economic model, for there is
78
see Elliot supra note 37
supra note 20
80
See CGPA Report supra note 67
81
Mercurio supra note 11 at 242-244.
82
MSF paper supra note 3
79
quite limited evidence of dysfunctional arbitrage”.83 India has produced generic drugs
for decades, yet they have not made there way into the western market.
Much of the concern appears to be a white elephant. In 2002 GlaxoSmithKline
claimed that 36 thousand packages of HIV/AIDS drugs (US$18 million) were diverted
from West Africa to the EU. They brought a suit against various participants include
Dowellhurst, a legal parallel trader. However, during the course of the trial it became
apparent that 99% of the packages were not Glaxo’s charitable donations, but were
ordinary commercial sales to Africa being sold at prices similar to those in Europe.
Moreover, 99% of the packages were sold by Glaxo to addresses in France and likely
never made it to Africa to be diverted, and Glaxo made no attempts to differentiate the
drugs destined for charitable donation.84 While there have been other problems of local
corruption in Indonesia, Chile and Lebanon, these do not provide evidence of diversion
into western markets.85
That being said, legislation should not ignore the potential. Moreover, lowincome markets should not bear the administrative burden of anti-diversion measures. As
such, the state issuing the compulsory licence should establish a regime ensuring that the
products destined for developing countries are marked for easy differentiation. The
WTO decision requires that, “Suppliers should distinguish such products through special
packaging and/or special colouring/shaping of the products themselves, provided that
such distinction is feasible and does not have a significant impact on price.”86 Provided
that the requirements for product differentiation to not impose too burdensome a cost, it
is important that they can be distinguished. There are already a number of industry
practices regarding how to differentiate products. This requirement will likely not create
a problem.
Perhaps of greater concern than how exactly the products are to be distinguished
is who is handling the products. Outterson notes, “the manufacturer also has the
responsibility to deliver the essential medicines to a reputable supply chain”.87 This
concern will be addressed below in considering who should be able to purchase drugs
through compulsory licenses.

“Commercial in nature” provision:
The patent holder can challenge the application of a generic in the Canadian
Federal Court if the price of the generic product in the contract is 25% or more of what
the brand company charges for the product in Canada. This requirement derives from the
General Council’s statements following the August 30th Agreement that the motivation
behind issuing a compulsory license not be commercial in nature. This is well below the
63% of the brand price At which Canadian generic products typically enter the market.
83
Outterson supra note 5 at 262.
Outterson supra note 5 at 263-265.
85
ibid at 265.
86
paragraph 2(b).
87
Outterson supra note 5 at 266.
84
However, this restriction clearly makes sense. The legislation is not designed to slowly
introduce a competitive market based on current prices in the developed world. The goal
is to drastically reduce the cost of medicines. If a drug were more than 25% of the price
in developed countries, this would do little to resolve price-related access issues.

National drug registration:
A further impediment/cost in successfully acquiring a compulsory licence is the
requirement to gain approval to produce the drugs under national drug registration
authorities (NDRAs). This requires first reverse-engineering a patented medicine.
Essentially, there are requirements that drugs made for export in Canada must meet
Canadian safety standards. For generic medicines, this means demonstrating that the
copy has the same effect on the body as the original product. This can become difficult
in the HIV/AIDS context. First, there are limitations on access to data on the original
studies of the patent holder. Without that data the generic companies must perform their
own costly studies. Also, constructing FDCs will require a new set of studies.88
There are problems with the transnational administration of drug regulation.
Many reputable systems duplicate themselves. The WHO pre-qualification system is not
trusted by many developed countries, especially the United States. While any nation has
the right to question the approval processes of others, one may question its rational when
the drugs are only being made for export to a country that has accepted the WHO prequalification process.
In addition, forcing generics to reverse-engineer the patent, or reproduce studies
through extended data exclusivity (the US is currently negotiating TRIPS Plus
agreements that extend data exclusivity for 5 or 10 years) is merely a means of artificially
extending the patent. Depending on how states choose to recognise the balance between
more affordable products and new innovation; these requirements may be acceptable.
However, when legislation is designed to subvert patent laws under situations of
(inter)national emergency it makes little sense to increase the cost on generic
manufacturers and significantly delay the export of the essential medicines.
88
Jack Kay, COO of Apotex explained that it will entail demonstrating that the drugs, when combined,
have the same effect on the effect on the blood as they do when administered separately and at different
times.
Uniquely Canadian and Not to be Repeated:

Term of licence:
The two-year limitation of the compulsory licence creates a further disincentive
for generic companies. Generic manufacturers are expected to have small profit margins
on a drug they are able to produce for two years. The license can only be renewed once,
if the contract is not yet complete. A large percentage of the costs in producing the
medicines are in proving bioequivalence and gearing up the plants for production of the
particular product. Moreover, this complicates other uncertainties. Many of the drugs
that are need are FDCs. These products will have multiple patent holders. Obtaining
voluntary license for the products may not be simultaneous. As such, the narrow window
of opportunity is a major disincentive for the generic industry (which may be made
shorter depending on how the legislation plays out with various patents). This also
creates a problem for importing countries that are not able to develop long-term health
care solutions. The various European legislations do not have this limitation.

Termination for “inaccurate information”
Section 21.14 of Bill C-9 allows for patent holders to challenge the issuing of a
compulsory licence if the application contained “material information” that is
“inaccurate”. Lawyers who represent generic manufacturers are necessarily wary of such
language.89 While the veracity of an application is important, there are always a number
of uncertainties and gaps in information when working with least developed and
developing countries. Fears that the accuracy of the information will be judged to a
Canadian standard create yet another uncertainty for generic manufacturers. In essence,
it provides a further opportunity for costly litigation. The EC legislation does not
specifically arm the patent holder with this opportunity to challenge the licence. It goes
more to what should be the central concern – that the conditions for the licence are met
and the circumstances that precipitated the licence continue to exist.
Procurement and the Role of Non Governmental Organizations:
The role NGOs may play in procuring medication has been a hotly contested
issue. In Canada, states remain the central player as the importer. An NGO can act as a
purchaser but must be permitted by the importing state. Moreover, it appears separate
approval must be obtained for each state that the drugs will be imported to. In their
submissions to the Senate Foreign Affairs committee the research based companies
supported the central role of the importing state:
It is countries who will be held accountable at TRIPS Council or to Canada
through diplomatic channels should aspects of this legislation not be followed.
Therefore, their involvement is important. Experience on the ground also tells us
The possibility of litigation and challenges under 21.14 was described by Tim Gilbert of Gilbert’s LLP as
one of the “hidden barriers to access”. Gilbert’s LLP is a Toronto law firm that specializes in intellectual
property law and represents a number of generic manufacturers.
89
that the best success happens when the local governments are involved and help
take responsibility for improved health care regulations.90
This is not necessarily true. First, importing countries may not be members of the WTO, and are therefore not accountable to the
TRIPS council. Second, the “best success” does not always involve the government. Involving the “government” of Somalia or the
Democratic Republic of the Congo will do very little in ensuring access throughout the country. As a best-case scenario, the
importing government can and should be involved, but the legislation should not require this.
The EC legislation is vague on the issue, only requiring that the “product(s) shall
only be exported if those countries have issued a compulsory licence for the import and
sale of the products” (as is required by the August 30th Agreement).91 The Dutch
legislation is more specific regarding the possibility of NGO involvement. “The
application shall be accompanied by an order addressed to the pharmaceutical
manufacturer from an importing state, a group of states, or non-governmental
organisation acting for one or more importing states”.92
Certain NGOs have the potential to play a central role in getting essential
medicines to developing countries. Many NGOs are well structured and financed. They
have strong connections in possible importing countries that generic pharmaceutical
companies do not. Moreover, generic companies may be more comfortable dealing with
well-established NGOs. First, they may provide a buyer that is better known to the
generic company. Second, a research-based company will fear that negative publicity
that would arise if they were to challenge the compulsory licence of a generic
manufacturer that is acting in concert with an NGO. However, most legislation leaves
rules governing their involvement vague and peripheral. This should be changed.
Current Concerns:
To issue a compulsory license there are at least three players whose motivations
(whether commercial or moral) must be aligned. The importing country has to develop
the procedures and will have to notify the WTO (if it is a member) or the exporting state
(if it is a non-member) of its need for a particular medicine. Moreover, when it is the
central actor on the importing side, it must be able to make concrete the need and demand
for the generic producer so that they can create a contract able to specify particular
amounts. The exporting country must implement domestic legislation to allow for the
issuing of compulsory licenses. In so doing, it must minimize the barriers by keeping the
legislation flexible, efficient and certain. Third, and central, the commercial incentives
must motivate generic producers to apply for compulsory licenses. The more uncertain
and costly the process, the less likely generic firms will be to apply for a license.
a. Generic Incentives:
On November 6, 2003 then Prime Minister Jean Chrétien introduced legislation to
implement the August 30th Agreement. On November 7, 2003 the Apotex Group of
Remarks by Canada’s Research-Based Pharmaceutical Companies (May 12, 2004) available at
www.hansard.ca.
91
Article 8.
92
Article 3(2).
90
Companies announced that it was prepared to produce a key HIV/AIDS drug under the
legislation. Apotex is Canadian-owned pharmaceutical company with worldwide sales
totalling over $800 million (Canadian) per year.93 In Canada it employs 5,500
Canadians, investing $190 million in research and development. Apotex asserted that it
could manufacture Apo-Zidovidine, a generic equivalent of Retrovir-AZTÒ. Jack Kay,
President and COO explained, “With our expertise and experience in producing the
generic equivalent of AZTÒ, we can gear up fairly quickly…We are ready to assist in the
fight against the HIV/AIDS disaster in Africa and other parts of the developing world.”94
The Canadian Generic Pharmaceutical Association (CGPA) has been involved
throughout the legislative process. The CGPA was highly critical of the initial legislation
tabled by the government and succeeded in pushing for changes regarding the right of
first refusal and the high royalty rates. Its continued involvement demonstrates the prima
facia interest of the generic industry.
Generic incentives must be measured through a corporate perspective. While a
desire to be good corporate citizens can grease the wheels, one cannot expect a
pharmaceutical company to take massive and uncertain risks for small and temporary
gains. While risk will always be there, and the reward is to be found in an impoverished
market, a workable balance is possible because of the sheer volume of the pandemic.

Creating Markets of Scale:
For generic companies to begin the long process of seeking an application there
must be a commercial reward. This does not need to be the fabled pot of gold, however,
producing 200,000 tablets for a medical clinic in Harare does not justify the bureaucratic
and legal costs of seeking an application, or the production and opportunity costs in
research and product development. Those in the industry suspect that between 5 and 10
million dosage units would be required to justify the above cost and risks.95 As such, if
an FDC is taken twice daily and the licence is limited to two years this would require
(under perfect situations) between 3500 and 7000 patients all taking the medication for
two years.
Carlos Correa notes that the August 30th Agreement, “recognizes that the viability
of the ‘solution’ largely depends on the existence of economies of scale that justify
production”.96 Keith Maskus recognises the immense needs of poorer nations but
"because the eligible import markets in really small countries will not be large, generic
93
Apotex press release available at http://www.apotex.com/CorporateInformation/Default.asp (last visited
April 5, 2005).
94
Apotex press release available at http://www.apotex.com/PressReleases/20031107-01.asp (last visited
April 5, 2005).
95
Conversations with Tim Gilbert, Julie Tam and Jack Kay.
96
Carlos M. Correa “The Nexus Symposium: An Interdisciplinary Forum on the Impact of International
Patent and Trade Agreements in the Fight Against HIV and AIDS Introduction: TRIPS and Access to
Drugs: Toward a Solution for Developing Countries Without Manufacturing Capacity (2003) 17 Emory
Int'l L. Rev. 389 at 403.
producers may not be interested in producing such small volumes and foregoing chances
for economies of scale.”97
Combining markets can ameliorate this problem, and this establishes a potentially
crucial role for NGOs. Presently, 700,000 Africans are receiving treatment. This is a
massive market, even if profits per patient are minute; the possibility of gaining a
foothold into this market could provide the necessary motivation. NGOs such as the
Clinton Foundation, MSF and the Global Fund straddle borders and can access tens of
thousands of patients.98 While a small fraction of the total population in need, this can
still provide a sufficient market for a generic company to begin production and undergo
the application process, especially with the potential of other markets. However, for this
to be possible under the Canadian legislation MSF must involve all importing countries
concerned and the generic producer would likely have to seek approval for each country
MSF of another NGO proposes to use the drugs.
The Dutch legislation specifically allows for a NGO to purchase for “a state or
group of states”.99 This direct recognition is essential to creating the flexibilities and
options necessary to make compulsory licences work. Ideally, the Canadian legislation
would have made this clearer. As a baseline, the August 30th Agreement only requires
that importing governments demonstrate an inability for domestic production and prevent
diversion. The role of NGOs as a central procurement agency would likely not violate
the Agreement. Moreover, current implementing legislations should design their
requirements with this potential in mind. Briefly, a list of reputable NGOs can be
established, the compulsory licensing procedures should specifically allow for single
applications with multiple import states. In short, the legislative vision of a functioning
compulsory licensing system should not be restricted to a generic manufacturer in a
developed country contracting with a developing country for the provision of essential
medicines. It should be expanded to clearly provide for the buyers to be responsible nongovernmental organizations who provide treatment in multiple countries in concert with
those governments.

Providing Market Certainty:
The process is plagued with uncertainty. A pharmaceutical company considering
a compulsory licence is unsure of what the legislation requires (but perhaps certain that
97
Keith Maskus, TRIPS, Drug Patents and Access to Medicines-Balancing Incentives for R&D with Public
Health Concerns, Sept. 4, 2003, at 1, available at
http://www.developmentgateway.org/download/206719/Maskus_on_TRIPS,_Drug_ Patents at 2 Quoted in
Correa supra note 95.
98
Currently MSF treats 25,000 patients supra note 3. Also, the Clinton Foundation recently announced
plans to treat 10,000 children in developing nations by the end of 2005 and is working with UNICEF to
expand this number to 60,000 by the end of 2006. Moreover, the Clinton Foundation works with more than
30 countries. See “President Clinton Announces HIV/AIDS Initiative to Provide Treatment to 10,000
Children in Developing Countries” (April 11, 2005). The Global Fund hopes to provide the resources to
treat 1.6 million people within the next five years. See Global Fund website available
http://www.theglobalfund.org/en/about/aids/default.asp. Last visited April 13, 2005.
99
Article 3(2).
there will be litigation resulting from these uncertainties), uncertain about real support
from the government, unsure about market sizes and the prices it can charge. They may
also be unsure about receiving the money. Many of the generic industry’s concerns
would be mitigated if a group came forward, provided the money for 10 million doses,
said ship the product here, and if this contract is successful, there is a larger market that
will be opened. However, this is not the case. Aside from navigating the legislation, the
market is uncertain and payment remains a question. Well-funded NGOs and
foundations may provide a surer business partner. In the absence their involvement,
government programs, such as Export Development Canada (EDC) or CIDA should
make every effort to insure the business ventures undertaken.
Current Developments and Potential for success:
As the implementing regulations waiver in limbo, NGOs, academic institutions, a
foreign government, a laws firm and a generic manufacturer are testing the workability of
the Canadian legislation. Analysis and critique aside, the real test of how well the
legislation works will only be answered by actually using it. To the author’s knowledge,
there are two projects currently underway.
b) Apotex and Medicines Sans Frontier:
Apotex has expressed and demonstrated continued interest to provide generic
medicines to developing nations. It is currently working in concert with MSF to gain
regulatory approval of a FDC drug and have undertaken discussions with regulatory
bodies toward this end. Apotex has also begun research on how to produce a FDC that
includes Lamivudine, Nevirapine and Zidovudine. According to Jack Kay100, discussions
with the Therapeutic Products Directorate of Health Canada101 in Ottawa have
demonstrated support for obtaining an approval for generic products that will be
produced under a compulsory licence. Nonetheless, Mr. Kay suspects that the process
will require 12-18 months before approval is granted. Apotex has discussed the issue
with the research-based pharmaceutical company that holds 2 of the 3 patents in Canada.
Glaxo has indicated that there is a possibility that they will grant a voluntary licence for
the products. Presently, it is hoped that MSF will be the purchaser of the medicines.102
Jack Kay recognizes that this FDC is currently being produced in India and it is
unlikely that they will be able to compete with Indian prices. However, if they are able to
approach the costs of the Indian products, the higher Canadian safety standards and
product quality will hopefully justify the slightly higher price. Moreover, there is
significant uncertainty about what India will be able to provide under their new patent
regime and Brazil remains unwilling to export their generic products. As such, there is a
risk (from a patient’s point of view) that Apotex generics will be required.
100
All information provided from Jack Kay was obtained through two telephone interviews in March and
April 2005.
101
TPD is responsible for reviewing and approving new drugs and drugs already being sold to ensure safety
and effectiveness.
102
MSF is likely interested in finding an alternative source for reliable generic products in light of the
current uncertainties in India.
c) Ghana, Gilberts LLP and the Access to Drugs Initiative
In March of 2005 representatives from the law firm Gilberts LLP and the Access
to Drugs Initiative (ADI)103 travelled to Ghana. The Ghanaian Ministry of Health, which
indicated an interest in using Bill C-9 to acquire affordable generic ARVs, prompted the
initiative. Ghana is not at the epicentre of the pandemic and only has a prevalence rate of
roughly 3.1%104 thanks to an extensive prevention campaign that has kept infection rates
down. Nonetheless, 72,000 persons in Ghana are living with HIV/AIDS; only 2000
currently have access to ARVs, which remain too expensive to permit an extensive
treatment campaign. Medicines accessed through Bill C-9 would assist in the treatment of
the 72,000 persons living with HIV/AIDS in Ghana.
The various parties attempted to assess the viability of accessing Bill C-9. The
dialogues have led to a Memorandum of Understanding (MOU) between ADI and the
Ghanaian Ministry of Health. The MOU outlines how Bill C-9 can be exercised with the
goal of providing sustainable treatment to Ghanaians living with HIV/AIDS. These
measures include:
103

Reviewing Ghanaian patent legislation to ensure it conforms with the TRIPS
Agreement and is amenable to the provisions of Bill C-9;

Stimulating the supply of generic ARVs in Canada by liaising with Apotex
Inc., the project’s generic drug producing partner;

Fulfilling all requirements of the application procedure outlined in Bill C-9;

Obtaining the necessary funding to achieve the WHO ‘3 by 5’ target in
Ghana;

Assisting in the training of Ghanaians to ensure the sustainability of ARV
treatment sites; and

Encouraging the bulk procurement of bioequivalent ARV treatment from
generic producers to developing countries through organizations such as MSF.
ADI is a collaborative project between the International Human Rights Program at the Faculty of Law
and the Leslie Dan Faculty of Pharmacy, both at the University of Toronto.
104
UNAIDS.org.
IV CONCLUDING REMARKS: A Piece of the Puzzle
The AIDS pandemic continues to spread and exact a massive toll on nations
struggling to develop. Providing these countries with affordable medicines is essential,
not only for the millions of lives it will save, but to prevent the corrosion of the social
infrastructure in nations hit most hardly. As the disease continues to spread in Eastern
and Central Europe as well as Asia, the need will only grow. Procuring the drugs is only
the first step, adequate health institutions are required to test for the virus, distribute the
drugs, and educate patients about the importance of complying with the drug regiment to
reduce the likelihood of mutation. Moreover, action will still be required to remedy deep
scars to the family and social structures and the lost human capital in areas most affected
by the pandemic.105 Nonetheless, none of this is possible if the first step is not made; the
drugs must get to the patients.
Several NGOs criticized the WTO for seeking a solution within Article 31 of
TRIPS as being too bureaucratic and slow. They viewed an Article 30 solution as more
practical due to the political nature of the world trading system: "Unlike the Article 31(f)
amendment, an Article 30 exception [would have] allow[ed] the producer country to
manufacture and export without issuing a compulsory license."106 This may very well be
the case. However, the approach taken may provide an important piece of the puzzle.
The concern is that affordable medication is provided to those suffering from
HIV/AIDS. Whether the medication reaches Africa, Asia or South America through
compulsory licences, voluntary licenses, negotiating reduced prices, donations or bulk
purchasing is not important. However, if all these pathways are viable options there is a
synergistic effect. The threat of a successful application motivates the patent holder to
consider the other options more seriously. As explained by Outterson, “Sovereign threats
of such compulsory licenses, public pressure from NGOs, and actual competition from
generic companies persuaded PhRMA companies and the United States to embrace
differential pricing of antiretroviral (ARV) medications for a number of poor countries
combating HIV/AIDS.”107
While the Canadian legislation is far from perfect, the potential is there.
Improving the legislation by increasing the time period for a compulsory license,
providing a greater role for NGOs and keeping drug approval barriers to a minimum
would improve the legislation and increase the likelihood and number of compulsory
licenses sought. Nonetheless, the benefit of a viable threat is already visible. A generic
company is beginning the process and the major patent holder has not responded with the
normal hostility that exists between research based and generic pharmaceutical
companies, but with an unofficial assertion that they will not stand in the way. Moreover,
while Canada is one the international leader in the generic industry the drugs need not
come from Canada for the legislation to be a success. If export continues in India, Brazil
105
Taylor supra note 20 at 3-5.
Mercurio supra note 11 at 231; see also Gupta supra note 60.
107
Outterson supra note 5 at 224.
106
and China decide to enter the international market, or other developed countries initiate
better legislation, the potential of competition from Canada will increase quality and push
prices down. Again, only time will tell if this can work, and whether this will have an
effect, but as MSF worker, Rachel Kiddle-Monroe, recently expressed during a
presentation at the University of Toronto, “we have to hope that it can”108 and, as a
number of current players are demonstrating, we have to see that it does.
108
This assertion was made at a recent lunch discussing the implementation of Bill C9. The talk was
sponsored by the University of Toronto Faculty of Law’s International Human Rights Program.
Appendix A: Amendments to the Canadian Patent Act
1. The Patent Act is amended by adding the following after section 21:
USE OF PATENTS FOR INTERNATIONAL HUMANITARIAN PURPOSES TO ADDRESS PUBLIC
HEALTH PROBLEMS
Purpose
21.01 The purpose of sections 21.02 to 21.2 is to give effect to Canada's and Jean Chrétien's pledge to
Africa by facilitating access to pharmaceutical products to address public health problems afflicting many
developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria
and other epidemics.
Definitions
21.02 The definitions in this section apply in this section and in sections 21.03 to 21.19.
"authorization" « autorisation »
"authorization" means an authorization granted under subsection 21.04(1), and includes an authorization
renewed under subsection 21.12(1).
"General Council" « Conseil général »
"General Council" means the General Council of the WTO established by paragraph 2 of Article IV of the
Agreement Establishing the World Trade Organization, signed at Marrakesh on April 15, 1994.
"General Council Decision" « décision du Conseil général »
"General Council Decision" means the decision of the General Council of August 30, 2003 respecting
Article 31 of the TRIPS Agreement, including the interpretation of that decision in the General Council
Chairperson's statement of that date.
"patented product" « produit breveté »
"patented product" means a product the making, constructing, using or selling of which in Canada would
infringe a patent in the absence of the consent of the patentee.
"pharmaceutical product" « produit pharmaceutique »
"pharmaceutical product" means any patented product listed in Schedule 1 in, if applicable, the dosage
form, the strength and the route of administration specified in that Schedule in relation to the product.
"TRIPS Agreement" « Accord sur les ADPIC »
"TRIPS Agreement" means the Agreement on Trade-Related Aspects of Intellectual Property Rights, being
Annex 1C of the Agreement Establishing the World Trade Organization, signed at Marrakesh on April 15,
1994.
"TRIPS Council" « Conseil des ADPIC »
"TRIPS Council" means the council referred to in the TRIPS Agreement.
"WTO" « OMC »
"WTO" means the World Trade Organization established by Article I of the Agreement Establishing the
World Trade Organization, signed at Marrakesh on April 15, 1994.
Amending Schedules
21.03 (1) The Governor in Council may, by order,
(a) on the recommendation of the Minister and the Minister of Health, amend Schedule 1
(i) by adding the name of any patented product that may be used to address public health problems
afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS,
tuberculosis, malaria and other epidemics and, if the Governor in Council considers it appropriate to do so,
by adding one or more of the following in respect of the patented product, namely, a dosage form, a
strength and a route of administration, and
(ii) by removing any entry listed in it;
(b) on the recommendation of the Minister of Foreign Affairs, the Minister for International Trade and the
Minister for International Cooperation, amend Schedule 2 by adding the name of any country recognized
by the United Nations as being a least-developed country that has,
(i) if it is a WTO Member, provided the TRIPS Council with a notice in writing stating that the country
intends to import, in accordance with the General Council Decision, pharmaceutical products, as defined in
paragraph 1(a) of that decision, and
(ii) if it is not a WTO Member, provided the Government of Canada with a notice in writing through
diplomatic channels stating that the country intends to import pharmaceutical products, as defined in
paragraph 1(a) of the General Council Decision, that it agrees that those products will not be used for
commercial purposes and that it undertakes to adopt the measures referred to in Article 4 of that decision;
(c) on the recommendation of the Minister of Foreign Affairs, the Minister for International Trade and the
Minister for International Cooperation, amend Schedule 3 by adding the name of any WTO Member not
listed in Schedule 2 that has provided the TRIPS Council with a notice in writing stating that the WTO
Member intends to import, in accordance with the General Council Decision, pharmaceutical products, as
defined in paragraph 1(a) of that decision; and
(d) on the recommendation of the Minister of Foreign Affairs, the Minister for International Trade and the
Minister for International Cooperation, amend Schedule 4 by adding the name of
(i) any WTO Member not listed in Schedule 2 or 3 that has provided the TRIPS Council with a notice in
writing stating that the WTO Member intends to import, in accordance with the General Council Decision,
pharmaceutical products, as defined in paragraph 1(a) of that decision, or
(ii) any country that is not a WTO Member and that is named on the Organization for Economic Cooperation and Development's list of countries that are eligible for official development assistance and that
has provided the Government of Canada with a notice in writing through diplomatic channels
(A) stating that it is faced with a national emergency or other circumstances of extreme urgency,
(B) specifying the name of the pharmaceutical product, as defined in paragraph 1(a) of the General Council
Decision, and the quantity of that product, needed by the country to deal with the emergency or other
urgency,
(C) stating that it has no, or insufficient, pharmaceutical capacity to manufacture that product, and
(D) stating that it agrees that that product will not be used for commercial purposes and that it undertakes to
adopt the measures referred to in Article 4 of the General Council Decision.
Restriction -- Schedule 3
(2) The Governor in Council may not add to Schedule 3 the name of any WTO Member that has notified
the TRIPS Council that it will import, in accordance with the General Council Decision, pharmaceutical
products, as defined in paragraph 1(a) of that decision, only if faced with a national emergency or other
circumstances of extreme urgency.
Removal from Schedules 2 to 4
(3) The Governor in Council may, by order, on the recommendation of the Minister of Foreign Affairs, the
Minister for International Trade and the Minister for International Cooperation, amend any of Schedules 2
to 4 to remove the name of any country or WTO Member if
(a) in the case of a country or WTO Member listed in Schedule 2, the country or WTO Member has ceased
to be recognized by the United Nations as being a least-developed country or, in the case of a country that
is not a WTO Member, the country has permitted any product imported into that country under an
authorization to be used for commercial purposes or has failed to adopt the measures referred to in Article 4
of the General Council Decision;
(b) in the case of a WTO Member listed in Schedule 3, the WTO Member has notified the TRIPS Council
that it will import, in accordance with the General Council Decision, pharmaceutical products, as defined in
paragraph 1(a) of that decision, only if faced with a national emergency or other circumstances of extreme
urgency;
(c) in the case of a WTO Member listed in Schedule 4, the WTO Member has revoked any notification it
has given to the TRIPS Council that it will import pharmaceutical products, as defined in paragraph 1(a) of
the General Council Decision, only if faced with a national emergency or other circumstances of extreme
urgency;
(d) in the case of a country listed in Schedule 4 that is not a WTO Member,
(i) the name of the country is no longer on the Organization for Economic Co-operation and Development's
list of countries that are eligible for official development assistance,
(ii) the country no longer faces a national emergency or other circumstances of extreme urgency,
(iii) the country has permitted any product imported into that country under an authorization to be used for
commercial purposes, or
(iv) the country has failed to adopt the measures referred to in Article 4 of the General Council Decision;
(e) in the case of any country or WTO Member listed in Schedule 3 or 4, the country or WTO Member has
become recognized by the United Nations as a least-developed country; and
(f) in the case of any country or WTO Member listed in any of Schedules 2 to 4, the country has notified
the Government of Canada, or the WTO Member has notified the TRIPS Council, that it will not import
pharmaceutical products, as defined in paragraph 1(a) of the General Council Decision.
Timeliness of orders
(4) An order under this section shall be made in a timely manner.
Authorization
21.04 (1) Subject to subsection (3), the Commissioner shall, on the application of any person and on the
payment of the prescribed fee, authorize the person to make, construct and use a patented invention solely
for purposes directly related to the manufacture of the pharmaceutical product named in the application and
to sell it for export to a country or WTO Member that is listed in any of Schedules 2 to 4 and that is named
in the application.
Contents of application
(2) The application must be in the prescribed form and set out
(a) the name of the pharmaceutical product to be manufactured and sold for export under the authorization;
(b) prescribed information in respect of the version of the pharmaceutical product to be manufactured and
sold for export under the authorization;
(c) the maximum quantity of the pharmaceutical product to be manufactured and sold for export under the
authorization;
(d) for each patented invention to which the application relates, the name of the patentee of the invention
and the number, as recorded in the Patent Office, of the patent issued in respect of that invention;
(e) the name of the country or WTO Member to which the pharmaceutical product is to be exported;
(f) the name of the governmental person or entity, or the person or entity permitted by the government of
the importing country, to which the product is to be sold, and prescribed information, if any, concerning
that person or entity; and
(g) any other information that may be prescribed.
Conditions for granting of authorization
(3) The Commissioner shall authorize the use of the patented invention only if
(a) the applicant has complied with the prescribed requirements, if any;
(b) the Minister of Health has notified the Commissioner that the version of the pharmaceutical product that
is named in the application meets the requirements of the Food and Drugs Act and its regulations, including
the requirements under those regulations relating to the marking, embossing, labelling and packaging that
identify that version of the product as having been manufactured
(i) in Canada as permitted by the General Council Decision, and
(ii) in a manner that distinguishes it from the version of the pharmaceutical product sold in Canada by, or
with the consent of, the patentee or patentees, as the case may be;
(c) the applicant provides the Commissioner with a solemn or statutory declaration in the prescribed form
stating that the applicant had, at least thirty days before filing the application,
(i) sought from the patentee or, if there is more than one, from each of the patentees, by certified or
registered mail, a licence to manufacture and sell the pharmaceutical product for export to the country or
WTO Member named in the application on reasonable terms and conditions and that such efforts have not
been successful, and
(ii) provided the patentee, or each of the patentees, as the case may be, by certified or registered mail, in the
written request for a licence, with the information that is in all material respects identical to the information
referred to in paragraphs (2)(a) to (g); and
(d) the applicant also provides the Commissioner with
(i) if the application relates to a WTO Member listed in Schedule 2, a certified copy of the notice in writing
that the WTO Member has provided to the TRIPS Council specifying the name of the pharmaceutical
product, as defined in paragraph 1(a) of the General Council Decision, and the quantity of that product,
needed by the WTO Member, and
(A) a solemn or statutory declaration in the prescribed form by the person filing the application stating that
the product to which the application relates is the product specified in the notice and that the product is not
patented in that WTO Member, or
(B) a solemn or statutory declaration in the prescribed form by the person filing the application stating that
the product to which the application relates is the product specified in the notice and a certified copy of the
notice in writing that the WTO Member has provided to the TRIPS Council confirming that the WTO
Member has, in accordance with Article 31 of the TRIPS Agreement and the provisions of the General
Council Decision, granted or intends to grant a compulsory licence to use the invention pertaining to the
product,
(ii) if the application relates to a country listed in Schedule 2 that is not a WTO Member, a certified copy of
the notice in writing that the country has provided to the Government of Canada through diplomatic
channels specifying the name of the pharmaceutical product, as defined in paragraph 1(a) of the General
Council Decision, and the quantity of that product, needed by the country, and
(A) a solemn or statutory declaration in the prescribed form by the person filing the application stating that
the product to which the application relates is the product specified in the notice and that the product is not
patented in that country, or
(B) a solemn or statutory declaration in the prescribed form by the person filing the application stating that
the product to which the application relates is the product specified in the notice and a certified copy of the
notice in writing that the country has provided to the Government of Canada through diplomatic channels
confirming that the country has granted or intends to grant a compulsory licence to use the invention
pertaining to the product,
(iii) if the application relates to a WTO Member listed in Schedule 3, a certified copy of the notice in
writing that the WTO Member has provided to the TRIPS Council specifying the name of the
pharmaceutical product, as defined in paragraph 1(a) of the General Council Decision, and the quantity of
that product, needed by the WTO Member, and stating that the WTO Member has insufficient or no
pharmaceutical manufacturing capacity for the production of the product to which the application relates,
and
(A) a solemn or statutory declaration in the prescribed form by the person filing the application stating that
the product to which the application relates is not patented in that WTO Member, or
(B) a certified copy of the notice in writing that the WTO Member has provided to the TRIPS Council
confirming that the WTO Member has, in accordance with Article 31 of the TRIPS Agreement and the
provisions of the General Council Decision, granted or intends to grant a compulsory licence to use the
invention pertaining to the product,
(iv) if the application relates to a WTO Member listed in Schedule 4, a certified copy of the notice in
writing that the WTO Member has provided to the TRIPS Council specifying the name of the
pharmaceutical product, as defined in paragraph 1(a) of the General Council Decision, and the quantity of
that product, needed by the WTO Member, and stating that the WTO Member is faced with a national
emergency or other circumstances of extreme urgency and that it has insufficient or no pharmaceutical
manufacturing capacity for the production of the product to which the application relates, and
(A) a solemn or statutory declaration in the prescribed form by the person filing the application stating that
the product to which the application relates is not patented in that WTO Member, or
(B) a certified copy of the notice in writing that the WTO Member has provided to the TRIPS Council
confirming that the WTO Member has, in accordance with Article 31 of the TRIPS Agreement and the
provisions of the General Council Decision, granted or intends to grant a compulsory licence to use the
invention pertaining to the product, or
(v) if the application relates to a country listed in Schedule 4 that is not a WTO Member, a certified copy of
the notice in writing that the country has provided to the Government of Canada through diplomatic
channels specifying the name of the pharmaceutical product, as defined in paragraph 1(a) of the General
Council Decision, and the quantity of that product, needed by the country, and stating that it is faced with a
national emergency or other circumstances of extreme urgency, that it has insufficient or no pharmaceutical
manufacturing capacity for the production of the product to which the application relates, that it agrees that
product will not be used for commercial purposes and that it undertakes to adopt the measures referred to in
Article 4 of the General Council Decision, and
(A) a solemn or statutory declaration in the prescribed form by the person filing the application stating that
the product to which the application relates is not patented in that country, or
(B) a certified copy of the notice in writing that the country has provided to the Government of Canada
through diplomatic channels confirming that the country has granted or intends to grant a compulsory
licence to use the invention pertaining to the product.
Form and content of authorization
21.05 (1) The authorization must be in the prescribed form and, subject to subsection (2), contain the
prescribed information.
Quantity
(2) The quantity of the product authorized to be manufactured by an authorization may not be more than
the lesser of
(a) the maximum quantity set out in the application for the authorization, and
(b) the quantity set out in the notice referred to in any of subparagraphs 21.04(3)(d)(i) to (v), whichever is
applicable.
Disclosure of information on website
21.06 (1) Before exporting a product manufactured under an authorization, the holder of the authorization
must establish a website on which is disclosed the prescribed information respecting the name of the
product, the name of the country or WTO Member to which it is to be exported, the quantity that is
authorized to be manufactured and sold for export and the distinguishing features of the product, and of its
label and packaging, as required by regulations made under the Food and Drugs Act, as well as information
identifying every known party that will be handling the product while it is in transit from Canada to the
country or WTO Member to which it is to be exported.
Obligation to maintain
(2) The holder must maintain the website during the entire period during which the authorization is valid.
Links to other websites
(3) The Commissioner shall post and maintain on the website of the Canadian Intellectual Property Office a
link to each website required to be maintained by the holder of an authorization under subsection (1).
Posting on the website
(4) The Commissioner shall, within seven days of receipt, post on the website of the Canadian Intellectual
Property Office each application for authorization filed under subsection 21.04(1).
Export notice
21.07 Before each shipment of any quantity of a product manufactured under an authorization, the holder
of the authorization must, within fifteen days before the product is exported, provide to each of the
following a notice, by certified or registered mail, specifying the quantity to be exported, as well as every
known party that will be handling the product while it is in transit from Canada to the country or WTO
Member to which it is to be exported:
(a) the patentee or each of the patentees, as the case may be;
(b) the country or WTO Member named in the authorization; and
(c) the person or entity that purchased the product to which the authorization relates.
Royalty
21.08 (1) Subject to subsections (3) and (4), on the occurrence of a prescribed event, the holder of an
authorization is required to pay to the patentee or each patentee, as the case may be, a royalty determined in
the prescribed manner.
Factors to consider when making regulations
(2) In making regulations for the purposes of subsection (1), the Governor in Council must consider the
humanitarian and non-commercial reasons underlying the issuance of authorizations under subsection
21.04(1).
Time for payment
(3) The royalties payable under this section must be paid within the prescribed time.
Federal Court may determine royalty
(4) The Federal Court may, in relation to any authorization, make an order providing for the payment of a
royalty that is greater than the royalty that would otherwise be required to be paid under subsection (1).
Application and notice
(5) An order may be made only on the application of the patentee, or one of the patentees, as the case may
be, and on notice of the application being given by the applicant to the holder of the authorization.
Contents of order
(6) An order may provide for a royalty of a fixed amount or for a royalty to be determined as specified in
the order, and the order may be subject to any terms that the Federal Court considers appropriate.
Conditions for making of order
(7) The Federal Court may make an order only if it is satisfied that the royalty otherwise required to be paid
is not adequate remuneration for the use of the invention or inventions to which the authorization relates,
taking into account
(a) the humanitarian and non-commercial reasons underlying the issuance of the authorization; and
(b) the economic value of the use of the invention or inventions to the country or WTO Member.
Duration
21.09 An authorization granted under subsection 21.04(1) is valid for a period of two years beginning on
the day on which the authorization is granted.
Use is non-exclusive
21.1 The use of a patented invention under an authorization is non-exclusive.
Authorization is non-transferable
21.11 An authorization is non-transferable, other than where the authorization is an asset of a corporation
or enterprise and the part of the corporation or enterprise that enjoys the use of the authorization is sold,
assigned or otherwise transferred.
Renewal
21.12 (1) The Commissioner shall, on the application of the person to whom an authorization was granted
and on the payment of the prescribed fee, renew the authorization if the person certifies under oath in the
renewal application that the quantities of the pharmaceutical product authorized to be exported were not
exported before the authorization ceases to be valid and that the person has complied with the terms of the
authorization and the requirements of sections 21.06 to 21.08.
One renewal
(2) An authorization may be renewed only once.
When application must be made
(3) The application for renewal must be made within the 30 days immediately before the authorization
ceases to be valid.
Duration
(4) An authorization that is renewed is valid for a period of two years beginning on the day immediately
following the day of the expiry of the period referred to in section 21.09 in respect of the authorization.
Prescribed form
(5) Applications for renewal and renewed authorizations issued under subsection (1) must be in the
prescribed form.
Termination
21.13 Subject to section 21.14, an authorization ceases to be valid on the earliest of
(a) the expiry of the period referred to in section 21.09 in respect of the authorization, or the expiry of the
period referred to in subsection 21.12(4) if the authorization has been renewed, as the case may be,
(b) the day on which the Commissioner sends, by registered mail, to the holder of the authorization a copy
of a notice sent by the Minister of Health notifying the Commissioner that the Minister of Health is of the
opinion that the pharmaceutical product referred to in paragraph 21.04(3)(b) has ceased to meet the
requirements of the Food and Drugs Act and its regulations,
(c) the day on which the last of the pharmaceutical product authorized by the authorization to be exported is
actually exported,
(d) thirty days after the day on which
(i) the name of the pharmaceutical product authorized to be exported by the authorization is removed from
Schedule 1, or
(ii) the name of the country or WTO Member to which the pharmaceutical product was, or is to be,
exported is removed from Schedule 2, 3 or 4, as the case may be, and not added to any other of those
Schedules, and
(e) on any other day that is prescribed.
Termination by Federal Court
21.14 On the application of a patentee, and on notice given by the patentee to the person to whom an
authorization was granted, the Federal Court may make an order, on any terms that it considers appropriate,
terminating the authorization if the patentee establishes that
(a) the application for the authorization or any of the documents provided to the Commissioner in relation
to the application contained any material information that is inaccurate;
(b) the holder of the authorization has failed to establish a website as required by section 21.06, has failed
to disclose on that website the information required to be disclosed by that section or has failed to maintain
the website as required by that section;
(c) the holder of the authorization has failed to provide a notice required to be given under section 21.07;
(d) the holder of the authorization has failed to pay, within the required time, any royalty required to be
paid as a result of the authorization;
(e) the holder of the authorization has failed to comply with subsection 21.16(2);
(f) the product exported to the country or WTO Member, as the case may be, under the authorization has
been, with the knowledge of the holder of the authorization, re-exported in a manner that is contrary to the
General Council Decision;
(g) the product was exported, other than in the normal course of transit, to a country or WTO Member other
than the country or WTO Member named in the authorization;
(h) the product was exported in a quantity greater than the quantity authorized to be manufactured; or
(i) if the product was exported to a country that is not a WTO Member, the country has permitted the
product to be used for commercial purposes or has failed to adopt the measures referred to in Article 4 of
the General Council Decision.
Notice to patentee
21.15 The Commissioner shall, without delay, notify the patentee, or each of the patentees, as the case may
be, in writing of any authorization granted in respect of the patentee's invention.
Obligation to provide copy of agreement
21.16 (1) Within fifteen days after the later of the day on which the authorization was granted and the day
on which the agreement for the sale of the product to which the authorization relates was entered into, the
holder of an authorization must provide by certified or registered mail, the Commissioner and the patentee,
or each patentee, as the case may be, with
(a) a copy of the agreement it has reached with the person or entity referred to in paragraph 21.04(2)(f) for
the supply of the product authorized to be manufactured and sold, which agreement must incorporate
information that is in all material respects identical to the information referred to in paragraphs 21.04(2)(a),
(b), (e) and (f); and
(b) a solemn or statutory declaration in the prescribed form setting out
(i) the total monetary value of the agreement as it relates to the product authorized to be manufactured and
sold, expressed in Canadian currency, and
(ii) the number of units of the product to be sold under the terms of the agreement.
Prohibition
(2) The holder of an authorization may not export any product to which the authorization relates until after
the holder has complied with subsection (1).
Application when agreement is commercial in nature
21.17 (1) If the average price of the product to be manufactured under an authorization is equal to or
greater than 25 per cent of the average price in Canada of the equivalent product sold by or with the
consent of the patentee, the patentee may, on notice given by the patentee to the person to whom an
authorization was granted, apply to the Federal Court for an order under subsection (3) on the grounds that
the essence of the agreement under which the product is to be sold is commercial in nature.
Factors for determining whether agreement is commercial in nature
(2) In determining whether the agreement is commercial in nature, the Federal Court must take into account
(a) the need for the holder of the authorization to make a reasonable return sufficient to sustain a continued
participation in humanitarian initiatives;
(b) the ordinary levels of profitability, in Canada, of commercial agreements involving pharmaceutical
products, as defined in paragraph 1(a) of the General Council Decision; and
(c) international trends in prices as reported by the United Nations for the supply of such products for
humanitarian purposes.
Order
(3) If the Federal Court determines that the agreement is commercial in nature, it may make an order, on
any terms that it considers appropriate,
(a) terminating the authorization; or
(b) requiring the holder to pay, in addition to the royalty otherwise required to be paid, an amount that the
Federal Court considers adequate to compensate the patentee for the commercial use of the patent.
Additional order
(4) If the Federal Court makes an order terminating the authorization, the Federal Court may also, if it
considers it appropriate to do so, make an order, on any terms that it considers appropriate,
(a) requiring the holder to deliver to the patentee any of the product to which the authorization relates
remaining in the holder's possession as though the holder had been determined to have been infringing a
patent; or
(b) with the consent of the patentee, requiring the holder to export any of the product to which the
authorization relates remaining in the holder's possession to the country or WTO Member named in the
authorization.
Restriction
(5) The Federal Court may not make an order under subsection (3) if, under the protection of a
confidentiality order made by the Court, the holder of the authorization submits to a Court-supervised audit
and that audit establishes that the average price of the product manufactured under the authorization does
not exceed an amount equal to the direct supply cost of the product plus 15 per cent of that direct supply
cost.
Definitions
(6) The following definitions apply in this section.
"average price" « prix moyen »
"average price" means
(a) in relation to a product to be manufactured under an authorization, the total monetary value of the
agreement under which the product is to be sold, expressed in Canadian currency, divided by the number of
units of the product to be sold under the terms of the agreement; and
(b) in relation to an equivalent product sold by or with the consent of the patentee, the average of the prices
in Canada of that product as those prices are reported in prescribed publications on the day on which the
application for the authorization was filed.
"direct supply cost" « coût direct de fourniture »
"direct supply cost", in relation to a product to be manufactured under an authorization, means the cost of
the materials and of the labour, and any other manufacturing costs, directly related to the production of the
quantity of the product that is to be manufactured under the authorization.
"unit" « unité »
"unit", in relation to any product, means a single tablet, capsule or other individual dosage form of the
product, and if applicable, in a particular strength.
Advisory committee
21.18 (1) The Minister and the Minister of Health shall establish, within three years after the day this
section comes into force, an advisory committee to advise them on the recommendations that they may
make to the Governor in Council respecting the amendment of Schedule 1.
Functions of standing committee
(2) The standing committee of the House of Commons that normally considers matters related to industry
shall assess all candidates for appointment to the advisory committee and make recommendations to the
Minister on the eligibility and qualifications of those candidates.
Website for notices to Canada
21.19 The person designated by the Governor in Council for the purpose of this section must maintain a
website on which is set out a copy of every notice referred to in subparagraphs 21.04(3)(d)(ii) and (v) that
is provided to the Government of Canada through diplomatic channels by a country that is not a WTO
Member. The copy must be added to the website as soon as possible after the notice has been provided to
the Government of Canada.
Review
21.2 (1) A review of sections 21.01 to 21.19 and their application must be completed by the Minister two
years after this section comes into force.
Tabling of report
(2) The Minister must cause a report of the results of the review to be laid before each House of Parliament
on any of the first fifteen days on which that House is sitting after the report has been completed.
-- 2004, c. 23, Schs. 1 to 4:
Appendix B: India’s Patent Amendment Bill 2005

This is the relevant section on the issuance for compulsory licences under India’s Patent
(Amendment) Bill 2005 as passed by the Lok Sabha on 22/3/05 109:
“92A. (1) Compulsory licence shall be available for manufacture and export of patented
pharmaceutical products to any country having insufficient or no manufacturing capacity in the
pharmaceutical sector for the concerned product to address public health problems, provided
compulsory licence has been granted by such country.
(2) The Controller shall, on receipt of an application in the prescribed manner, grant a
compulsory licence solely for manufacture and export of the concerned pharmaceutical product to
such country under such terms and conditions as may be specified and published by him.
(3) The provisions of sub-sections (1) and (2) shall be without prejudice to the extent to which
pharmaceutical products produced under a compulsory license can be exported under any other
provision of this Act.
Explanation.–For the purposes of this section, ‘pharmaceutical products’ means any patented
product, or product manufactured through a patented process, of the pharmaceutical sector needed to
address public health problems and shall be inclusive of ingredients necessary for their manufacture and
diagnostic kits required for their use.”.
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Available at http://lawmin.nic.in/Patents%20Amendment%20Ordinance%202004.pdf.