May 5, 2000 (1:15 p.m. EDT) No. 95

CANADA TO APPEAL WTO RULING

The Government of Canada will appeal a World Trade Organization (WTO) panel report that concluded that Canada's term of patent protection for pre-1989 patents is inconsistent with Canada's obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Under Canada's Patent Act, the term of protection of patents based on applications filed before October 1, 1989 ("Old Act" patents), is 17 years from the date the patent is granted. The Panel reasoned that this does not meet the minimum term of patent protection required under TRIPS. The Panel concluded that under TRIPS a minimum term of 20 years from the date the patent application is filed must be available.

"Canada is committed to meeting its international trade obligations. But we are not satisfied with the panel's findings and will appeal the decision to the WTO Appellate Body," said International Trade Minister Pierre S. Pettigrew.

The WTO panel was established in September 1999 to examine the U.S. allegation that Canada's patent regime is not in conformity with the TRIPS Agreement. Canada has argued that proper interpretation of the Agreement accommodates the "Old Act" patent term.

Patents based on applications filed on or after October 1, 1989 ("New Act" patents) have a term of 20 years from the date of filing and are not at issue in the dispute.

"Canada's patent regime establishes a strong foundation for innovation and economic growth. We believe that the panel erred in law," said Minister of Industry John Manley.

"While only a few patents in question relate to pharmaceuticals, it is important that we proceed with an appeal to continue to defend our regime," said Health Minister Allan Rock.

Under WTO rules, Canada has at least 20 days to formally notify the WTO Dispute Settlement Body of its decision to appeal the report. The WTO dispute settlement rules include provisions allowing parties to appeal panel reports on issues of law and legal interpretation.

The WTO Panel report is available on the following Web page: http://www.dfait-maeci.gc.ca/tna-nac/dispute-e.asp

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A backgrounder is attached.

For further information, media representatives may contact:

Sylvie Bussières

Office of the Minister for International Trade

(613) 992-7332

Media Relations Office

Department of Foreign Affairs and International Trade

(613) 995-1874

Tony Macerollo

Office of the Minister of Industry

(613) 995-9001

Derek Kent

Office of the Minister of Health

(613) 957-1515

This document is also available on the Department of Foreign Affairs and International Trade's Internet site: http://www.dfait-maeci.gc.ca.

Backgrounder

WTO PANEL REPORT ON U.S. CHALLENGE OF

CANADA'S PATENT TERM

At the request of the United States, the World Trade Organization (WTO) Dispute Settlement Body (DSB) established a panel in September 1999 to examine Canada's term of protection for patents issued on the basis of applications filed before October 1, 1989. The United States alleged that the term of protection conferred on these patents was inconsistent with Canada's obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

Canada's Patent Act contains two term-of-protection provisions:

the term of patents based on applications filed before October 1, 1989 (section 45 of the Act), is 17 years counted from the date the patent is granted ("Old Act" patents);

the term of patents based on applications filed on or after October 1, 1989 (section 44 of the Act), is 20 years counted from the date the patent application is filed ("New Act" patents).

The 1987 Act to Amend the Patent Act (Bill C-22) introduced the 20-year from filing term of protection into Canadian law, effective October 1, 1989. Previously, all patents had a term of protection of 17 years counted from the date of grant.

The United States has alleged that TRIPS requires a minimum term of 20 years counted from the date of filing for all patents. The dispute thus concerns Old Act patents that were granted within three years from filing of applications.

During the WTO Panel proceedings, Canada argued that Old Act patents had, on balance, equivalent protection to New Act patents, and that a term of 20 years from the date of application filing was available. Canada also argued that the term of protection provisions of the TRIPS Agreement did not have retroactive application to patents granted before TRIPS came into force. The Panel rejected Canada's arguments.

Number of Patents at Issue

As of January 1, 2000, there were 169 966 Old Act patents outstanding. Of these, 103 030 have a term of protection greater than 20 years from the date of filing and are not at issue in the dispute. The remaining 66 936 Old Act patents have a term of less than 20 years counted from the date of filing. Of the latter, 77 percent have a term of protection greater than 19 years counted from the date of filing. In other words, for more than three-quarters of the 66 936 affected patents, the term of protection at issue in the dispute is less than one year. This challenge concerns patents across all fields of technology; clearly, not all patents have commercial value.

This dispute is unrelated to the recent WTO decision with respect to the European Union's complaint about Canada's patent regime. In the EU dispute, the WTO validated Canada's early working exception, a fundamental element of our patent policy. The early working exception allows manufacturers to seek regulatory approval for competing versions of patented products prior to the expiration of the patent term. On April 25, 2000, Canada indicated to the DSB its intention to implement the panel's other finding that Canada's stockpiling exception is not consistent with our international obligations. The stockpiling exception allows pharmaceutical manufacturers to stockpile quantities of product during the six months prior to the expiration of the patent.