NAFTA Arbitration May Yield Compensation for Prematurely Terminated Canadian Patents

This White Paper describes an opportunity that some of our United States clients may have to pursue a claim for patent-related damages against the Canadian government. The claim would be based on Canada’s admitted failure to provide patent protection to the full extent required under international law. Damages, based on a loss of market exclusivity in Canada, may be recoverable in an international arbitration.

In September 2000, the World Trade Organization (“WTO”) affirmed a ruling that Canada had violated its obligation to extend Canadian patents for the greater of 17 years from date of issuance and 20 years from date of application. The obligation stems from the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”). Canada responded to that ruling by amending its patent law, effective July 12, 2001. The amendment satisfies the WTO ruling, but only prospectively. No relief is afforded to holders of Canadian patents that were (1) issued on an application filed before October 1, 1989, (2) unexpired as of January 1, 1996 or issued from applications pending on that date, and (3) expired before July 12, 2001. Holders of such patents were deprived of market exclusivity, and associated revenues.

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