WORLD TRADE  
ORGANIZATION  IP/C/W/464 
14 November 2005 
 (05-5319) 
Council for Trade-Related Aspects 
of Intellectual Property Rights Original:   English/ 
 French 
 
 
 
THE TRIPS AGREEMENT AND PUBLIC HEALTH 
 
Communication from Canada  
 
 
 The following communication, dated 24 October 2005, is being circulated at the request of the Delegation of Canada.  It was circulated as an advance copy for the Council's October 2005 
meeting. 
_______________ 
 
  Further to the last TRIPS Council meeting of 14-15 June 2005, Canada is pleased to present a 
description of the functioning of Canada's system w ith respect to the implementation of the 30 August 
Decision on TRIPS and Public Health.  
 Delegations seeking additional information or  clarification are invited to contact the 
Permanent Mission of Canada directly.  
I. CANADA'S IMPLEMENTATION OF THE 30
TH AUGUST DECISION ON TRIPS 
AND PUBLIC HEALTH 
1. Canada has implemented the WTO's 30th August Decision on TRIPS and Public Health (the 
"Decision") through amendments to both its Patent Act and its Food and Drugs Act  and to a series of 
subordinate regulations.  These am endments, which came into for ce on 14 May 2005, establish the 
procedure to be followed by domestic pharma ceutical manufacturers who wish to apply for a 
compulsory licence to manufacture a generic version of an eligible patented  pharmaceutical product 
for export to an eligible importing country.  Th e following is a summary of Canada's regime. 
A. ELIGIBLE IMPORTERS  
2. Although the Decision is an agreement betw een WTO Member countries, for humanitarian 
reasons, Canada has opted to implement it in a manner that enables both WTO and non-WTO Member countries to import pharmaceutical products under licence.  Schedules 2, 3 and 4 of Canada's 
Patent Act  list the countries eligible to make use of  the regime.  While non-WTO least-developed 
countries are automatically eligible to import under the Canadian regime, non-WTO developing 
countries may only do so upon request and on the condition that they be eligible for official development assistance according to the Organisa tion for  Economic Co-operation and Development 
(OECD). 
3. In order for an eligible importing country to avail itself of the Canadian regime, it must 
publicly disclose the name and quantity of the product it is seeking, and, if that product is protected by 
a domestic patent, indicate that it has or will be issuing a compulsory licence authorizing imports of the product.  Unless the importer is a least-develope d country, notice of the above information must 
also contain a declaration that it has no or insuffi cient capacity to manufacture the required product.  IP/C/W/464 
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 More highly developed countries, which are listed on Schedule 4, must also indicate that they require 
the patented product to respond to a public health emergency.  WTO Member countries must provide 
notice of the above information to the WTO, copies of which will be posted on a website which has 
been established for that purpose.  All other countries must provide notice to the Government of Canada, through diplomatic channe ls, copies of which will be posted on a website maintained by 
Canada's Minister of Foreign Affairs. 
4. Non-governmental organizations may act as purchasers of licensed pharmaceutical product 
under Canada's regime, with the permissi on of the importing country's government. 
B. E
LIGIBLE PHARMACEUTICAL PRODUCTS  
5. Products eligible for export under Canada's regime are lis ted in Schedule 1 of the Patent Act .   
Schedule 1 is composed primarily of products on the World Health Organization's (WHO) Essential 
Medicines List which are patented in Canada.  The Schedule will be amended from time to time to 
ensure that the list of eligible products remains current with the public health needs of developing 
countries.  To facilitate this process, the Patent Act  provides for the creation of an expert committee to 
advise the Canadian Government on the need to a dd products to the list.  Schedule 1 was recently 
amended for the first time by the addition of a fixe d dose combination anti-retroviral medication used 
in the treatment of HIV/AIDS.    
6. Although not required by the Decision, at  the request of Canadian pharmaceutical 
manufacturers, all products to be exported under Canada's regime must meet the same safety, efficacy 
and quality standards as drugs destined for domestic c onsumption.  A special review stream has been 
established by Canada's Minister of Health in order to expedite the approval of such products and the 
applicable fees normally associated with the regul atory review process will be remitted upon meeting 
certain criteria, once it has been established that a co mpulsory licence has been issued to the applicant 
in respect of the approved product.  
C. APPLICATION PROCESS  
7. A Canadian pharmaceutical manufacturer that has entered into a contract with an eligible 
importing country for the supply of an eligible pharm aceutical product must file  an application for an 
export licence with Canada's Commissioner of Patent s (the "Commissioner").  The application must 
identify, inter alia , the pharmaceutical product for which a licence is sought, the patent(s) which 
protects it, the quantity to be manufactured, the country  to which it is to be exported and the identity 
of the purchaser.  Here too the fees normally associ ated with a compulsory licence application have 
been waived. 
8. In keeping with Article 31(b) of TRIPS, the application must also include a declaration that 
the applicant had, at least 30 days prior to appl ying for the compulsory licence, unsuccessfully sought 
a voluntary licence from the patentee and, in doing so , provided the latter with information that is 
substantially the same as the information appearing in the application.  This declaration must be 
accompanied by, in the case of a WTO Member, a copy  of that country's notification to the WTO of 
its intention to import the product to which the a pplication relates and, in the case of a non-WTO 
Member, a copy of the country's notice to the Govern ment of Canada of its intention to import that 
product.  In either case, the applicant must also  provide the Commissioner with a declaration setting 
out the patent status of the product in the importing country.  
9. The manner in which the above information is communicated to the Commissioner is 
prescribed by Canada's  Use of Patented Products for In ternational Humanitarian Purposes 
Regulations .  Form 1 of these regulations sets out th e information which must appear in the 
application itself.  Form 2 sets out the information which must appear in the applicant's declaration  IP/C/W/464 
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 that it unsuccessfully sought a voluntary licence fro m the patentee.  Forms 3 to 7 set out the 
information which must appear in the applicant's declaration as to the identity of the pharmaceutical 
product and its patent status in  the importing country (whichever of Forms 3 to 7 applies  in the 
circumstances will depend on whether the importi ng country is a WTO or non-WTO Member and on 
the patent status of the product in that country. 
10. If the application meets the content requireme nts described above, specifies an eligible 
product on Schedule 1 which has been approved by th e Minister of Health, and names a country on 
Schedule 2, 3 or 4, the Commissioner is required to grant the applicant a compulsory licence to manufacture and export the product in question. The actual content of the licence issued by the Commissioner is set out at Form 9 of the above named regulations.  
D. T
HE GOOD FAITH CLAUSE  
11. The Decision was adopted by the General Council in light of the General Council 
Chairperson' s statement stipulating that it must be  used in good faith in order to deal with public 
health problems and not for commercial po licy objectives.  A provision in Canada's Patent Act , which 
has come to be known as the "good faith clause", gives effect to Canada's obligation to implement the 
Decision in keeping with the Chairperson's statemen t by providing patent holders with the right to 
challenge an export licence in court where ther e is good cause to believe it is predominantly 
commercial, as opposed to humanitarian, in nature. 
12. In order to bring such a challenge, the patent hol der must first establish that the average price 
of the licensed product is 25% or more of the av erage price of the equivalent patented product in 
Canada.  If this test is met, the court will look to  the other merits of the application and determine, 
based on a number of statutory considerations, wh ether the licence is commercial in nature.  An 
absolute defence exists to any such challenge if  the licence holder can establish that the product's 
average price remains less than its direct supply cost plus 15%. 
13. If the court determines that the agreement is co mmercial in nature, it may make an order, on 
any terms that it considers appropria te, either terminating the licence or requiring the licence holder to 
pay, in addition to the royalty otherwise required to be paid, an amount that the court considers 
adequate to compensate the patent holde r for the commercial use of its patent. 
E. ANTI-DIVERSION MEASURES  
14. Also in keeping with the Chairperson's statem ent, Canada's regime contains a number of 
measures designed to promote transparency and minimi ze the risk of diversion.  Most notably, the 
product to be exported  must be distinctive from the ve rsion sold in Canada (i.e., of a different colour) 
and the product and/or its label must bear the mark 'XCL' to indicate that it was produced for export 
under a compulsory licence.  
15. In addition, before a pharmaceutical product s ubject to a licence may be exported, the licence 
holder must establish a website setting out informati on about the name of the licenced product, its 
distinguishing characteristics, the identity of the importing country, the amount to be manufactured 
and sold for export, as well as information identif ying every known party who will be handling the 
product while it is in transit from Canada to the importing country.  
16. Lastly, the licence holder must provide, within  15 days before the product is exported, a 
notice specifying the quantity to be exported, as we ll as every known party that will be handling the 
product while it is in transit.  This notice must be  provided to the patent holder(s), the country named 
in the application and the person or entity that has purchased the product. IP/C/W/464 
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 F. R
OYALTIES  
17. Paragraph 3 of the Decision calls for "adequate remuneration" to be paid to the patentee on a 
case-by-case basis, taking into account the economic value to the importing country of the use that has been authorized by the exporting country. Under Canada's regime, the royalty is calculated by 
multiplying the monetary value of the supply agr eement between the licence holder and the importing 
country by an amount which fluctuates on the basi s of that country's standing on the United Nations 
Human Development Index (UNHDI).
1  The formula to determine the royalty rate is: 1, plus the 
number of countries on the UNHDI, minus the importing country's rank on the UNHDI, divided by the number of countries on the UNHDI, multiplied by 0. 04.  For example, in 2004 Nigeria was ranked 
number 151 of the 177 countries listed on the UNHDI .  Therefore, the royalty rate that would be 
applicable to exports of pharm aceutical products to Nigeria w ould be [(1+177-151)/177] x 0.04 = 
0.0061 or 0.61 percent. 
G. T
ERMINATION BY FEDERAL COURT  
18. Finally, the court may also make an order te rminating an export licence where the patent 
holder can establish that one of th e following events has transpired: 
• the application for the licence contained materially inaccurate information; 
• the licence holder has failed to establish a website; 
• the licence holder has failed to provide an export notice; 
• the licence holder has failed to pay the prescribed royalties; 
• the licence holder has failed to provide a copy of its supply agreement; 
• the product has been re-exported in a manner contrary to the Decision; 
• the product has been exported in a quantity gr eater than the quantity authorized to be 
manufactured under the licence; 
• Where the importing country is a non-WTO Memb er, that country has failed to adhere to 
the principles underlying the Decision. 
 
19. A copy of Canada's implementing legislation, An Act to amend the Patent Act and the Food 
and Drugs Act (The Jean Chrétien Pledge to Africa) can be obtained electronically at: 
• http://www.parl.gc.ca/PDF/37/3/parlbus/ch ambus/house/bills/government/C-9_4.PDF 
 
and the Regulations at: 
 
• http://canadagazette.gc.ca/partII/2005/20050601/pdf/g2-13911.pdf 
 
 
__________ 
 
 
                                                      
1 Where the importing country is not listed on the UNHDI, the royalty is to be calculated by 
substituting the individual country's rank in the formula wi th the average rank of all countries appearing on the 
same Schedule.  However, an exception to this rule has been made in the case of non-WTO Member developing 
countries that are unranked.  Although these countries are individually eligible for listing on Schedule 4, their 
individual rank in the formula will be replaced by the aver age rank of all countries appearing on Schedule 3, as 
the latter is thought to better reflect the level of development of the countries in question.