A Patent Assignment Can Offend Canada's Competition Act

In a case which will be closely analyzed by IP lawyers and competition lawyers alike, the Federal Court of Appeal has held that, as a matter of law, a patent assignment can violate competition law. More specifically, an assignment of a patent could constitute an agreement or arrangement to lessen competition unduly, contrary to section 45 of the Competition Act. In the case at hand, a brand name drug manufacturer, Eli Lilly and Company and its Canadian subsidiary had sued Apotex Inc (Apotex), a generic manufacturer, for the infringement of patents related to the manufacture of an antibiotic product, cefaclor. Some of the patents at issue had been assigned to Lilly by Shionogi & Co Ltd. In its defence, Apotex argued that the patent assignment resulted in an undue lessening of competition, contrary to section 45 of the Competition Act. Ordinarily, a breach of that provision can result in the aggrieved party recovering damages from the party in breach. After a series of motions and an earlier appeal (including a finding by a trial judge that the assignment in question did indeed lessen competition), the question of "conflict" between the Patent Act and the Competition Act came before the Federal Court of Appeal. In a unanimous decision of a three-judge panel, the Court followed and re-stated earlier law to the effect that the mere exercise of patent rights could not amount to undue lessening of competition. However, the Court went on to say that where as here, by reason of the assignee's existing ownership of other patents, an assignment transfers more market power than that which is inherent in the patent assigned, that assignment cannot be exempt from the anti-competitive provisions of the Competition Act. As a result, Apotex was free to assert its claim for damages. For the full reasons for judgment in Eli Lilly and Company et al v Commissioner of Competition, 2005 FCA 361, see: http://decisions.fca-caf.gc.ca/fca/2005/2005fca361.shtml Summary by: The Editor