Use of Patents By Governments – From Cruise Missiles to Genetic Tests

The Patent Act includes provisions permitting the use of inventions by the Government of Canada or the government of a province.

Prior to 1994, section 19 of the Patent Act provided:

The Government of Canada may, at any time, use any patented invention, paying to the patentee such sum as the Commissioner reports to be a reasonable compensation for the use thereof.

Section 19 has since been amended to no longer give the Government of Canada an automatic right to use a patented invention and to extend the opportunity to seek authorization to provincial governments. Subsection 19(1) currently reads:

Subject to section 19.1, the Commissioner may, on application by the Government of Canada or the government of a province, authorize the use of a patented invention by that government.

Subsections 19.1(1) and (2) read as follows:

(1) The Commissioner may not authorize the use of a patented invention under section 19 unless the applicant establishes that

(a) it has made efforts to obtain from the patentee on reasonable commercial terms and conditions the authority to use the patented invention; and

(b) its efforts have not been successful within a reasonable period.

(2) Subsection (1) does not apply in cases of national emergency or extreme urgency or where the use for which the authorization is sought is a public non-commercial use.

On November 3, 2014, Children’s Hospital of Eastern Ontario (“CHEO”) filed a statement of claim challenging the validity of various isolated nucleic acid claims and testing method claims in a series of patents relating to Long QT gene mutations: Children’s Hospital of Eastern Ontario v. Transgenomic Inc., Federal Court File No. T-2249-14. In its Amended Statement of Claim, CHEO states that its tests have not been approved by Ontario’s Ministry of Health and Long-Term Care due to the patents.

In additional to seeking a declaration of invalidity under subsection 60(1), CHEO also seeks a declaration under subsection 19.1(2) that its proposed tests to diagnose and/or assess the risk of Long QT syndromes constitute a “public non-commercial use”. While the public non-commercial use declaration might be relied upon by the Ontario government (or the federal or other provincial governments), interestingly no Canadian government is a party to the action.

One reason why the Canadian federal or a provincial government is not a party may be a 1982 decision by Mr. Justice Cattanach, namely Honeywell Inc. v. Litton Systems Canada Inc. (1982), 67 C.P.R. (2d) 129 (Fed. T.D.), affirmed (1983), 71 C.P.R. (2d) 284 (Fed. C.A.). In Honeywell, the patents at issue related to a Ring Laser Gyros. The patentee alleged that the defendant infringed its rights by manufacturing and selling the Ring Laser Gyros to the United State Navy for use in missile inertial guidance systems. The Government of Canada was not named as a party to the action.

While s. 18 of the Defence Production Act in relation to royalties was being considered, Justice Cattanach commented that s. 18 of the Defence Production Act was an extension of s. 19 of the Patent Act and that the contemplated procedures before the Commissioner of Patents are parallel. At paragraph 30, he stated:

The procedure under s. 19 of the Patent Act was outlined by Maclean P. in The King v. Bradley (1941), 1 C.P.R. at p. 3, at p. 4 [1940] 4 D.L.R. at p. 51, [1941] Ex. C.R. 1 at pp. 4-5, to the effect that the Crown as condition precedent to the disposition of the matter by the commissioner must admit the validity and infringement of the patent. If those two matters are denied by the Crown then the remedy is to litigate the matter before the Federal Court. The practice is incorporated in the Patent Rules.

He continued at paragraph 41:

I cannot refrain from expressing the view that Her Majesty may well be an essential party to the action. She may or may not admit validity of the patent sued upon and its use which are conditions precedent to payment of reasonable compensations and if denied must be determined.

Although CHEO cannot obtain an authorization pursuant to section 19 of the Patent Act to use its proposed tests, by seeking a public non-commercial use declaration it is attempting to make it easier for the Ontario government to obtain such authorization should the patents be held to be valid. And until a decision is rendered, the Ontario government seems content to remain on the sidelines.

Disputes with owners of so-called “gene patents” are not a first for the province of Ontario. In 2001, Myriad sent cease-and-desist letters to Canadian provinces, including British Columbia and Ontario, regarding patents it owned relating to two gene mutations, BRCA1 and BRCA2, associated with an increased risk of breast and ovarian cancer. While a court battle south of the border made its way up to the Supreme Court of the United States (Association for Molecular Pathology v. Myriad Genetics, 133 S. Ct. 2107 (2013)), a corresponding case involving Myriad’s Canadian patents has not been filed in Canada. Myriad has continued to pay maintenance fees for patents in Canada keeping the possibility of an action open (for example, see here for Canadian Patent No. 2,239,733 titled Chromosome 13-Linked Breast Cancer Susceptibility Gene).

If so-called “gene patents” are found to be valid and enforceable in Canada, it will be interesting to see whether the province of Ontario and other governments will apply to use the patented invention. Given the substantial costs of healthcare, the lure of section 19 may become too difficult to resist. Nevertheless under subsection 19(4), any government authorized to use a patented invention shall pay the patentee “such amount as the Commissioner considers to be adequate remuneration in the circumstance, taking into account the economic value of the authorization”.