Royalty Payment
A pharmaceutical company that holds a compulsory
licence under Canada's Access to Medicines Regime is required to pay royalties to the
patent holder. The company must make payments within a prescribed amount of time and in accordance with a
prescribed formula. The formula takes into account the humanitarian and non-commercial basis for the licence.
The formula calculates the royalty by multiplying the monetary value of the supply agreement between the
licence holder and the importing country by an amount that fluctuates on the basis of that
country's standing on the United Nations Human Development Index (UNHDI). The lower the ranking on the UNHDI, the lower the prescribed royalty rate will be.
The formula to determine the royalty rate is 1, plus the number of countries on the UNHDI, minus the
importing country's rank on the UNHDI, divided by the number of countries on the UNHDI, multiplied
by 0.04. Mathematically, the regulatory formula cannot result in a royalty rate in excess of 4 percent, a
ceiling that is consistent with the humanitarian and non-commercial considerations that are the foundation of
the Regime.
![Formula for calculating royalty payments](/web/20061210151958im_/http://camr-rcam.hc-sc.gc.ca/images/royal_pay-verse_redev_01_e.gif)
For example, if country X is ranked 165 on the UNHDI and there are 177 countries on the UNHDI this year, then
the royalty rate for products imported into country X under the Regime would be
![Example formula for calculating royalty payments](/web/20061210151958im_/http://camr-rcam.hc-sc.gc.ca/images/royal_pay-verse_redev_02_e.gif)
The patent holder has the right to apply to the Federal Court of Canada for an order setting a higher amount.
In considering the merits of such an application, the court must take into account the economic value of the use
of the licensed product by the importing country and the humanitarian and non-commercial reasons
underlying the issuance of the licence.
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