Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 9 - Evidence
OTTAWA, Wednesday, March 23, 2005
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill C-29, to amend the Patent Act, met this day at 4 p.m. to give consideration to the bill.
Senator Jerahmiel S. Grafstein (Chairman) in the Chair.
[English]
The Chairman: Honourable senators, today we are going to consider Bill C-29, which contains some technical amendments to the Patent Act. The bill was introduced in the House of Commons on December 3 and given approval there on February 10.
We are delighted to have before the committee today the Parliamentary Secretary to the Minister of Industry, the Honourable Jerry Pickard, and officials from the department to assist us in this.
Welcome to the committee, Mr. Pickard.
The Honourable Jerry Pickard, Parliamentary Secretary to the Minister of Industry: Mr. Chairman and honourable senators, thank you very much for having us at your meeting. We appreciate that you are hearing us today. Thank you for accepting me in my capacity as parliamentary secretary to talk about Bill C-29, an act to amend the Patent Act.
I will ask officials accompanying me to brief you on some of the details of the bill. Before doing so, I will take a few minutes to speak to the importance of this bill, the unanimous support it has received from all political parties in both Houses of Parliament, the strong support it enjoys from every stakeholder that will be most affected by it, and the importance of moving expeditiously with its adoption, again, something unanimously endorsed by all parties in both Houses.
As honourable senators will have noted, Bill C-29 is technical in nature. It neither changes the nature or substantive content of the Patent Act nor alters Canada's policies on intellectual property rights with regard to patents. This is not a policy bill. It is a technical bill, which, nonetheless, is important legislation that Parliament must adopt as soon as possible.
We must adopt it as soon as possible for two reasons. First, the bill provides a legal solution to thousands of patents that are potentially at risk after the Federal Court ruling in the Dutch Industries case on the Canadian Intellectual Property Office's widely accepted practice of top-up payments and the payment of certain fees based on the size of the entity of the applicant or patent holder. The officials here with me will explain those issues and decisions in more detail.
Suffice it to say that, unless Parliament adopts this bill, thousands of patents believed for years to have been valid could suddenly be declared invalid and put at risk, and significant investments and benefits for Canadians could be lost.
The second reason that Bill C-29 must be adopted by Parliament as soon as possible is that, unless it is passed, the Jean Chrétien Pledge to Africa Act, which all parliamentarians eagerly await, will not come into force. The government is proposing a technical amendment to Bill C-29 that is necessary for the coming into force of that act. Officials will provide you with further details on that.
That is how important this technical bill is. That is why it is important for your committee to amend the bill and that Parliament adopt it as soon as possible.
With your permission, Mr. Chair, I will ask Mr. Jacques Hains from Industry Canada`s Canadian Intellectual Properties Office and Mr. Robert Sutherland-Brown from Industry Canada's Legal Services to brief you further on this bill and to respond to your questions.
[Translation]
Mr. Jacques Hains, Director, Corporate Strategies Branch, Canadian Intellectual Property Office, Industry Canada: Thank you Mr. Chairman. As Mr. Pickard just mentioned, Bill C-29 submitted for review has two main purposes.
[English]
The first purpose is to provide a legal remedy to thousands of patent applicants and patent holders who have been affected by court decisions in 2003 and have seen the validity of their patents put at risk. They currently have no legal remedy to rectify that unfortunate situation, and Bill C-29 proposes to provide that.
The second purpose of the bill is to rectify an oversight in the former Bill C-9, known as the Jean Chrétien Pledge to Africa Act.
Returning to the first purpose of the bill, the fees issue, in order for patents and patent applications to remain valid throughout their 20 years, a number of fees have to be paid every year — filing fees, maintenance fees, examination fees, et cetera. In 1985, Parliament adopted a scheme whereby a distinction was made between small and large entities with regard to these fees. The purpose of that change was to encourage smaller entities, basically universities, individual investors and employers with 50 employees or less, to innovate and seek patent protection for their inventions. As fees had to be based on the entity size, if the entity size changed over the 20-year period because of downsizing, mergers or acquisitions, the fees to be paid changed accordingly. That was logical. Since fees changed with the size of the entity, it was reasonable to expect that people would sometimes be late paying their fees, and the practice at the Canadian Intellectual Property Office was to allow for late payments, catch-up payments or top-up payments if lower fees were paid when higher fees should have been.
That was valid until 2001 when the Dutch Industries case went to the Federal Court. That was a patent infringement case in which the defendant argued that the plaintiff's patent was not valid because the proper fee was not paid. The plaintiff said that it topped up its payments as soon it learned it should have paid higher fees. The defendant argued that the commissioner has no legal authority to accept such top-up payments, and the original decision was that the commissioner indeed lacked the legal authority to accept late top-up payments for varying fees.
That decision affected thousands of patent applications and patent holders and sent a chill through the community. That decision was appealed, and the commissioner was a party to that appeal. The case went to the Federal Court of Appeal, which ruled in 2002 that, not only did the commissioner lack the legal authority to accept such top-up payments, but also, surprising everyone, that the fees to be paid were determined once and for all when the system was engaged, likely when an application for patent was filed, regardless of what happened later to the size of the entity of the applicant and patent holder. That was the big surprise.
The result is that those thousands of patent applicants and patent holders who, in good faith over the years, paid varying fees, find they may have acted illegally and, if their patents were challenged in court on those grounds, there is a strong likelihood that their patents would be declared invalid. That is a significant risk for thousands of patent applicants and patent holders.
We need to do something about that, and Bill C-29 does.Bill C-29 will ensure that those patents remain valid.
Following the Federal Court of Appeal decision, a large entity that held a patent application and later became a small entity and paid the lower fees therefore had no way of topping up their payments and preserving the validity of their patent. Bill C-29 will give these parties 12 months to rectify that situation, after which the law as interpreted by the Federal Court will be valid.
With regard to the oversight in the Jean Chrétien Pledge to Africa Act, before Bill C-9 was passed in the last hours of the last Parliament, it had been amended in the House of Commons to provide the House of Commons committee with a role to review and assess candidates for an expert panel to be established under the Jean Chrétien Pledge to Africa Act, but such a role was not extended to the Senate. That was noted, of course, by the Senate when you considered Bill C-9. However, it was too late to amend it then. It was an important bill and it was adopted unanimously by the Senate on the understanding that at the first opportunity that oversight would be corrected. Bill C- 29 is the first opportunity to open the Patent Act, and we are proposing in Bill C-29 to correct that.
Mr. Chairman, this is the bill referred to your committee for approval. As the parliamentary secretary noted in his opening remarks, however, the government would like to propose to your committee an amendment to the bill that is required to bring into force the Jean Chrétien Pledge to Africa Act. It is a rather technical amendment and my colleague, Mr. Sutherland-Brown, can answer questions you might have. In a nutshell, in putting the final touches on the regulations required to bring the Jean Chrétien Pledge to Africa Act into force, reviewers from the Department of Justice found that the annexes to the Jean Chrétien Pledge to Africa Act would have no legal standing as they are not technically attached to the Patent Act.
The first opportunity to make the required technical amendments to the Patent Act is through Bill C-29. This amendment will ensure that the Jean Chrétien Pledge to Africa Act can be implemented as soon as possible.
The Chairman: We welcome the government's undertaking to ensure that any provision of powers for the other place are shared equally by the Senate. We welcome the amendment for equal participation of the Senate. This has been an ongoing problem and there are still a number of statutes to be amended to rectify this. This is a good start.
Senator Day: Mr. Sutherland-Brown, the schedules were complete and were attached to Bill C-9. I understand that the problem arose because it was amending two different statutes. Can you explain that in detail?
Mr. Rob Sutherland-Brown, General Counsel, Intellectual Property Law Group, Legal Services, Industry Canada: Schedule 1 defines the pharmaceutical products that are eligible for compulsory licensing for export. Schedules 2, 3 and 4 define three different classes of eligible importers who have to meet different tests before their eligibility is established.
They are an integral part of Bill C-9, the Jean Chrétien Pledge to Africa Act, but in the process of drafting they got divorced from the enacting language that amended the Patent Act. That is to say, Bill C-9 opens with substantive amendments to the Patent Act. Initially, the schedules followed immediately, but there were then additional amendments introduced to give Health Canada the authority to examine the proposed compulsory licensed pharmaceutical products, that is, the same examination which is given to domestic products, so that Canada could be sure that they would be safe and efficient for their intended use. That divorced the schedules from the enacting words that you will see in clause 1 of Bill C-9.
That is what happened. Had we had known it at the time, it would not have happened. Everyone missed it: the drafters, the revisers, the editors, the jurilinguists, the instructing officers, and all the members of the House and the Senate. I am happy to say that even the very skilled professional, Carswell, missed it. If you look at the 2004-05 edition of their consolidations of the patent legislation, you will see the schedules are properly attached to the Patent Act, but not legally so. The first amendment would legally attach those schedules to the body of the Patent Act.
Senator Day: We have circulated to all members the proposed amendment to this bill that would attach to the Patent Act the schedules that everyone thought were attached but were not.
Is that all that is required?
Mr. Sutherland-Brown: In my judgment, absolutely, and, because of the first error, we have looked at this carefully.
Senator Day: There is a second amendment that will be proposed and that is merely a coming-into-force amendment, because there were two pieces of legislation here.
Mr. Sutherland-Brown: That is correct. It is not certain when the amendments relating to the Dutch Industries case will be implemented by the Canadian Intellectual Property Office, but pursuant to these amendments they will come into force on the same day as does the Jean Chrétien Pledge to Africa Act, together with the accompanying regulations. The goal is that the entire scheme for the compulsory licensing of pharmaceutical products for export to requesting WTO member countries will come into force on the same day in a seamless fashion. All the pieces need to be together.
Senator Day: In a nutshell, the Jean Chrétien Pledge to Africa Act is a compulsory licence scheme for patented medicines.
Mr. Sutherland-Brown: Yes, those that appear in Schedule 1.
The Chairman: Mr. Sutherland-Brown, you have articulated the constitutional role of the Senate to give every piece of legislation second sober thought. This is second sober thought. It is never too late. We were urged to rush through the bill in the first instance. We let down our guard, and we should never do that. It is a lesson to senators in this room. We were sober, but not as persistent as we have been in the past.
Mr. Pickard: Both Houses missed it and that can happen from time to time. However, the error was discovered upon the final analysis and I commend the officials for finding it.
Senator Harb: Thank you very much for your excellent presentation. There is a definite sense of urgency to this, and the sooner we pass it, the better it will be for all concerned. On a daily basis, thousands of people in Africa die because of lack of access to the type of services this bill would provide to them.
My question is with regard to clause 2. Has any analysis been done of that in terms of the financial implications of its implementation?
Mr. Hains: There are two costs we can talk about. There is the cost to patent applicants who would have to make top-up payments at that 12-month window of opportunity. The cost is minimal. The fees are in the amount of hundreds of dollars a year. Even if you went back 10 or 15 years, they would not add up to an awful lot.
More important, applicants and patent holders are keen to make these additional payments because in that way they will protect their patents. The cost is minimal, and they are more than willing to pay them.
The second cost associated with the scheme is the cost to us of administering it. Again, that is minimal because fees have to be paid on an annual basis. Bill C-29 gives a 12-month window of opportunity in order to span a complete fee period so that applicants and patent holders can make the additional payments at the same time as they pay their annual fees. For us, it is the same process. The costs are very minimal for both parties.
Senator Harb: I am a bit leery of retroactive legislation in general, because I think it sets a dangerous precedent. Why did you choose 12 months retroactively and 12 months forward to comply?
Mr. Hains: There is only one 12-month period, and it is prospective. When the bill comes into force, the clock will start ticking and will stop 12 months later. People who want to avail themselves of that remedy, will do so in that 12- month period. There is no 12 months retroactive. The retroactive period is with respect to the 20 years since the scheme of small versus large entities was established and the size of payments changed as the entities changed in size. The court said there was no legal basis for the commissioner to accept top-ups payments, and Bill C-29 will clear the deck on that. The court said that it would not be fair that those who acted in good faith should suffer, but that from now on they must pay the proper fee as determined the first time they engage the system.
The Chairman: In ancient days, this would be a question not of the courts of law but of the courts of chancery. This would be an equitable remedy that is being adopted by a black letter means.
Mr. Pickard: The officials have looked carefully at the 12-month period moving forward and they feel that is a sufficient amount of time to ensure that everyone who may be at risk can be contacted and can upgrade their patent payment.
Senator Kelleher: It is very nice that members of the Senate have been added to this advisory committee, but why do we need an advisory committee to tell us which drugs to use? Do we not have experts at Health Canada who can do that? Why do we need a separate committee?
Mr. Pickard: There are experts at Health Canada who can tell us what drugs to use, but final authorization is left to the committee as the representative of Parliament, giving Parliament control of what drugs we are shipping to other countries.
Senator Kelleher: To be honest, I am having trouble understanding why we need a committee to do this. The officials at Health Canada are qualified to do this and I think this is just extra bureaucratic red tape and the expenditure of extra money.
[Translation]
Senator Massicotte: I agree with Senator Kelleher. Parliamentarians usually draft legislation and establish policies but it is often up to the government and civil servants to implement them.
You say that these bills and their amendments are to clarify situations and to shape them to the expectations of all stakeholders in the sector. In other words, if you correct an error that should not have been there in the first place, no one gains and no one loses; those are the rules of the game with regards to patents. Do I understand correctly?
[English]
Mr. Pickard: I believe so. Obviously an error was made when they were finalizing the work. In a perfect world it would not have happened, but sometimes mistakes are made. The good news is that, even though it went through the House and the Senate, on final analysis officials did pick up the glitch, and it was just that the schedules were separated from the bill itself.
The schedules identify who can ship what drugs to what countries, so they are absolutely necessary to make this work. In some situations, there would not be schedules incorporated like this.
[Translation]
Senator Massicotte: It is a matter of correcting an error that should not even be there. In a year, no one will be able to claim he won or lost as a result of these amendments.
[English]
Mr. Pickard: That is exactly correct.
The Chairman: There being no further questions, I wish to thank the witnesses very much.
Is it agreed, honourable senators, that the committee move to clause-by-clause consideration of Bill C-29?
Hon. Senators: Agreed.
The Chairman: Unless the committee decides otherwise, the normal procedure is to postpone consideration of the long title. Shall the committee proceed in the normal way?
Hon. Senators: Agreed.
The Chairman: Shall clause 1 carry?
Hon. Senators: Agreed.
The Chairman: Shall clause 2 carry?
Senator Day: I wish to propose an amendment to clause 2. The amendment has been circulated and I move the addition ofclause 2.1.
The Chairman: The amendment reads:
That Bill C-29 be amended, on page 2, by adding after line 19 the following:
``2.1 The Act is amended by adding, after section 103, Schedules 1 to 4 set out in An Act to amend the Patent Act and the Food and Drugs Act (The Jean Chrétien Pledge to Africa), being chapter 23 of the Statutes of Canada, 2004.''.
Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
Senator Kelleher: I have just seen this amendment now and I have been advised by my experts that this clause is not drafted properly. We are not objecting to the goal here, but I am told that this is not properly drafted.
Senator Day: I asked Mr. Sutherland-Brown if the clause was properly drafted, and his opinion was that it was.
Senator Massicotte: In what sense is it not drafted properly?
Senator Kelleher: Unfortunately, I just received this. I do not know the technical details of how it is improperly drafted.
I am not opposing it, but I am told that this amendment does not follow from the bill.
The Chairman: This has been reviewed by many technical counsel after it was discovered that the schedules were not attached to the original bill. This is an amendment to the Patent Act to which the Jean Chrétien Pledge to Africa Act is connected. This bill and the Jean Chrétien Pledge to Africa Act amend the Patent Act, and this amendment adds the schedules that were unanimously approved by both Houses. The parliamentary intent is clear in this provision. We have advice from legal counsel that it is drafted correctly. Unless there is evidence to the contrary, I am going to ask for the adoption of this motion.
Hon. Senators: Agreed.
The Chairman: We will give Senator Kelleher another kick at the can, because we want to be fair. However, we have been through this prodigiously and had some consultations on it. The mover of this motion has looked at it again. Legal counsel and the parliamentary secretary advise that this corrects an omission. As a former drafter myself, I see no problems with it.
What is the technical problem? It is clear, on the face of it, to me.
Senator Kelleher: My problem is that I have not been properly briefed. I do not understand what I am being told, except that it is wrong.
The Chairman: All I hear is that it is wrong; I do not hear the nature of the problem.
Senator Fitzpatrick: It seems clear to me. It says that the act is amended by adding, after section 103, Schedules 1 to 4 set out in the act to amend the Patent Act and the Food and Drugs Act (The Jean Chrétien Pledge to Africa), being chapter 23 of the Statutes of Canada, 2004.
Senator Day: The first act referred to is the Patent Act, which this motion amends. Section 103 is the last section of that act. This adds the schedules after the last section of the Patent Act, those being the schedules found in the Jean Chrétien Pledge to Africa Act.
The Chairman: I apologize to all members. This came up just in the last day or so. I tried to alert the deputy chair, who is not here, about this. We received the drafting just shortly before the hearing, and we tried to circulate it as quickly as possible. We apologize for not giving you previous notice, but our side had approximately the same amount of time to look at this.
Senator Fitzpatrick: It is simply the case that schedules that should have been included in the Patent Act were not included, and this amendment attaches them.
The Chairman: There is a parliamentary nexus between the two bills because they both deal with the same subject matter, and it is referred to in an earlier amendment that makes the Senate equal to the other place in this regard, and therefore I think the amendment is appropriate.
Is it your pleasure to adopt this motion?
Hon. Senators: Agreed.
The Chairman: Shall clause 3 carry?
Senator Day: I wish to move an amendment to clause 3. The amendment has been circulated and it reads:
That Bill C-29 be amended in clause 3, on page 2, by replacing lines 20 and 21, with the following:
3. (1) Sections 1 and 2.1 come into force on the day on which An Act to amend the Patent Act and the Food and Drugs Act (The Jean Chrétien Pledge to Africa), being chapter 23 of the Statutes of Canada, 2004, comes into force.
(2) Section 2 comes into force on a day to be fixed by order of''.
Clause (2) deals with the decision of the Federal Court and it comes into force on a day to be fixed by order of the Governor-in-Council.
The Chairman: Is it your pleasure, honourable senators, to adopt the motion?
Hon. Senators: Agreed.
The Chairman: Shall clause 3 as amended carry?
Hon. Senators: Agreed.
The Chairman: Shall the title carry?
Hon. Senators: Agreed.
The Chairman: Is it agreed that this bill, as amended, be adopted.
Hon. Senators: Agreed.
The Chairman: Does the committee wish to discuss appending observations to the report?
Hon. Senators: No.
The Chairman: Rule 92(4) allows us to go in camera to discuss the report. There is no report because we are not dealing with observations.
Is it agreed that this bill be reported with amendments and without observations at the next sitting of the Senate?
Hon. Senators: Agreed.
The Chairman: Thank you, senators, and I think the people of Africa thank you. I thank our colleagues in the industry for correcting this so that we can bring immediate relief to the people of that bereft continent who need it.
I want to thank the officials for bringing this error to our attention.
The committee adjourned.