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E-TIPS^®

E-commerce, Technology and

Intellectual Property Summaries

 Headlines:  November 8, 2006 (Volume 5, Number 10)

Identity Theft in Canadian Criminal and Regulatory Statutes

Dispute Between Generic Drug Manufacturers and the Ontario Government Now Involves Pharmacists

Statutory Freeze Period Sought by Innovator Drug Company under NOC Regulations Denied by Supreme Court of Canada

US Supreme Court Will Hear Microsoft v AT&T Patent Dispute

New Interest in an Old Security Device: Automatic Data Encryption on Hard Drives

FTC Rebukes Rambus for Acquiring Standards-Based Patents

Identity Theft in Canadian Criminal and Regulatory Statutes

A previous issue of E-TIPS® (Vol 5, No 8, “New York State Enacts Three Identity Theft Laws”, October 11, 2006) noted recently passed New York State identity theft legislation.  This new legislation is in addition to three existing New York State anti-ID theft laws: the Security Freeze Law, the Disposal of Personal Records Law and the Anti-Phishing Act of 2006.

By contrast, Canadian laws do not specifically address Internet-based ID theft such as phishing, or pharming, which are variants of schemes designed to trick a consumer into divulging personal information.  Further, with some exceptions, the Canadian legislation tends to be of more general application, rather than specifying particular technological tools or systems.

For a review of Canadian criminal and regulatory provisions that may be brought into play by identity theft activity, link to the more extensive article with the same title.

Summary by:  Andrei Edwards

Dispute Between Generic Drug Manufacturers and the Ontario Government Now Involves Pharmacists

As previously reported in E-TIPS®, political pressure has been growing to move towards lower pricing of generic drugs in Canada (“National Pharmaceuticals Strategy Report: Concern about Generic Drug Prices in Canada”, October 11, 2006, Vol 5, No 8), with the Ontario Government already having taken action via the enactment of Bill 102 to revise the basis for reimbursement and drug interchangeability within Ontario’s drug plan (“Generic Manufacturers Call for Review of Ontario Regulations Reducing Drug Prices”, October 25, 2006, Vol 5, No 9).

The growing dispute has now prompted Ontario pharmacists to join the fray.  Some druggists claim they are already buying certain generic drugs from manufacturers at prices higher than those at which the druggists are being reimbursed by the Ontario government.

In addition to the price capping provided for in Bill 102, druggists are objecting to the new ban on drug companies paying rebates to pharmacies for shelf space.  One pharmacist representative claims that this could have an impact on overall Canadian pharmacy revenues by as much as several hundred million dollars, something which he claims the industry cannot absorb without adverse impact on inventories and the ability of druggists to meet patient demand.

In another legislative event involving the industry, an Opposition Liberal MP has introduced in the House of Commons a private member’s bill (Bill C-378) giving the Cabinet the power to limit bulk drug exports, in anticipation of the US Government permitting such activity.  Unless this initiative is adopted by the Government, it is unlikely to become law.

For the reaction of the Canadian Pharmacists Association to Bill 102, go to this page and follow the links re Bill 102:

http://makeashorterlink.com/?P20123F1E

and for the Association’s reaction to Bill C-378, see:

http://makeashorterlink.com/?F51125F1E

For a recent article in The Globe and Mail, visit:

http://makeashorterlink.com/?N12123F1E

Summary by:  Michael Migus

Statutory Freeze Period Sought by Innovator Drug Company under NOC Regulations Denied by Supreme Court of Canada

In Apotex Inc v AstraZeneca Canada Inc et al, 2006 SCC 49, the Supreme Court of Canada has held that there are limits to “evergreening” within the complex process of determining when a generic drug manufacturer is able to manufacture and sell a “copycat” drug.

The process in question is outlined in the Patented Medicines (Notice of Compliance) Regulations (NOC Regulations) which lie at the intersection of two regulatory systems, one under the Food and Drugs Act and the other under the Patent Act.  At the heart of the NOC process is a Patent Registry within the federal Department of Health in which an innovator drug company may list patents relevant to its various drug submissions for regulatory approval.  If a generic manufacturer is not prepared to wait until the expiry of all the patents listed, in effect, it must challenge the list; even so, the innovator manufacturer can bring an application to the Federal Court for an order to prohibit the Minister of Health from issuing a NOC to the generic manufacturer until the expiry of the relevant patents.  The commencement of such a proceeding has the effect of freezing for two years any action by the Minister in the generic company’s pending application.

In 1989 the innovator drug manufacturer, AstraZeneca Canada Inc (Astra), obtained a NOC from the Minister of Health for the product at issue, Losec 20, and that product was sold until 1996 when it was withdrawn from the Canadian marketplace by Astra.  Astra’s patent on omeprazole itself expired in 1999.  In 1993, Apotex Inc (Apotex) had applied for a NOC for its generic version of Losec 20.  In 2002, despite the absence from the market of Losec 20, Astra obtained and registered with the Minister of Health two more patents associated with Losec 20 but did not incorporate this new technology into any products which it sold in Canada.  When the Apotex application eventually came before the Minister for approval in 2004, the Minister granted the generic application, ruling that Apotex did not have to address the two after-issued patents.  Astra applied for judicial review and the motions judge in the Federal Court of Canada upheld the Minister’s decision.  On appeal to the Federal Court of Appeal, in a split (2-1) decision, the appeal was allowed and the Minister’s decision quashed.

On a further appeal to the Supreme Court of Canada, Justice Binnie, writing for all nine judges, allowed the appeal and restored the Minister’s decision.

In upholding the Apotex view of the NOC Regulations (that is, that the NOC Regulations could not apply to this application in respect of the after-issued patents), the Court made a number of observations.  In dealing with Astra’s argument that a patent list is submitted in respect of a drug and not in respect of any particular drug submission, the Court had this to say:

“On this view a [patent owner] could carry on “evergreening” its product indefinitely by the addition of new patents of marginal significance which would trigger an indefinite series of 24-month statutory freezes even though such subsequently listed patents are [those] from which … the generic manufacturer derives no advantage. “

The Court recognized that Parliament’s stated purpose in authorizing the NOC Regulations was to permit early working of the patented invention, and noted the importance of the linkage between the patent listed and the submission(s) to which it relates.  Because Apotex did not make use of the patented inventions taught by the two later listed patents, the Court held that the scheme of the NOC Regulations and the statutory freeze with respect to those patents should not apply to Apotex.

Coupled with Justice Binnie’s references to the NOC Regulations as being “much litigated” and the industry as “very litigious” and his approval of former Justice Iacobucci’s remark in an earlier case that the NOC Regulations are “draconian”, the Supreme Court of Canada appears to be signalling that, at the margin when close interpretation of the NOC Regulations is involved, the innovator manufacturers will need to demonstrate a clear right under the legislation in order to defend delaying the time when generic competitors can enter the market.

For the full text of the case, visit:

http://scc.lexum.umontreal.ca/en/2006/2006scc49/2006scc49.html

Summary by:  The Editor

US Supreme Court Will Hear Microsoft v AT&T Patent Dispute

By deciding to hear the patent infringement case Microsoft v AT&T, the US Supreme Court has set the stage for a possible outcome that could extend the reach of US patent law to include foreign activities.

Microsoft Inc (Microsoft) exported copies of its Windows operating system software from the US to foreign computer manufacturers.  Those manufacturers installed Windows on computers which were sold outside the US.  However, Microsoft Windows contained speech encoding and compression software which is the subject of a US patent owned by AT&T Corp (AT&T).

35 USC §271(f) prohibits the export from the US of components of patented inventions to be assembled elsewhere and holds an exporter of such components liable for patent infringement.  The Trial and Appeal Courts found that foreign-made copies of AT&T’s US-patented software sold outside the US infringed AT&T’s patent.  Microsoft was held liable for damages resulting from the foreign sales.

Microsoft claims that the ruling in its current form could impose substantial liability on US software companies and could force many of them to locate R&D jobs overseas.  Meanwhile AT&T’s lawyers stated, “… [C]ongressional authority is [designed] to protect the rights of U.S. inventors, not U.S. infringers.”

The US Department of Justice (DOJ) filed an amicus curiae brief supporting Microsoft’s request for the Supreme Court to hear this case.  According to the DOJ, AT&T should obtain and enforce foreign patents instead of extending US patent law overseas.  The DOJ brief argues that the decision as it now stands “improperly extends United States patent law to foreign markets and puts United States software companies at a competitive disadvantage vis-a-vis their foreign competitors in foreign markets.”

For more information see:

http://news.lp.findlaw.com/ap/f/66/10-27-2006/691d0011c6dd991d.html;

http://www.patentlyo.com/patent/2006/10/supreme_court_l.html; and

http://www.usdoj.gov/osg/briefs/2006/2pet/6invit/2005-1056.pet.ami.inv.pdf

Summary by:  Andrei Edwards

New Interest in an Old Security Device: Automatic Data Encryption on Hard Drives

The loss or theft of computers containing sensitive data has cost governments and corporations millions of dollars.   Spurred by such events, the world’s largest hard drive manufacturer, Seagate Technology LLC (Seagate), has turned the security spotlight away from the conventional solutions, which employ software and firewalls, to the use of automatic encryption in hard drives.

In a common application, a laptop with Seagate’s technology would require the user to enter a password or key before the computer would boot up and the user could gain access to the hard drive.  Without the key, all data on the hard drive would be inaccessible.  As described by a spokesperson for Seagate, “The encryption keys … are hidden in what we call secure partitions.  If you take, for instance, a 200 GB drive, about 10 per cent of that storage is unaddressable by outside resources.  We store the encryption keys in that hidden space so that none of other resources in this computer can get to it, [whereas] with software encryption, you have the keys floating around in the [operating system]”.

While not an entirely new concept, it appears that this time round hard drive encryption will receive much more serious attention.  A technology consultant, IDC, predicts that this approach will become the industry standard, in particular, for laptops used within large enterprise organizations.

As with many other advances, this innovation is likely to bring with it new challenges.  Data recovery will become much more difficult, even impossible, in some cases.  Also, automatic encryption could increase the complexity of document discovery under Ontario Civil Procedure Rules 30.01 and 30.02. Electronic discovery of documents pertaining to a case could be “lost” inside one of these hard drives.  If it is possible to retrieve the data, it will no doubt be an additional cost to an already expensive process.

For articles in IT.business.ca and in The Globe and Mail, see:

http://www.itbusiness.ca/it/client/en/home/News.asp?id=40983

http://makeashorterlink.com/?Z43121F1E

For a string of Q&As and comments on the topic, see Bruce Schneier’s blog on security and security technology at:

http://www.schneier.com/blog/archives/2005/06/seagates_full_d.html

Summary by:  Oren Weichenberg

FTC Rebukes Rambus for Acquiring Standards-Based Patents

In a recent ruling, the US Federal Trade Commission (FTC) has set a higher standard for behaviour among participants in industry standard-setting. 

Rambus Inc (Rambus), a memory chip manufacturer, had participated in an industry standards-setting organization, in the course of which it had access to shared information regarding the standards under consideration for high speed random access memory chips.  Using this information, Rambus applied for patents covering the standards set in the sessions, thereby preventing others from using the technology without licensing it from Rambus. 

In its recent ruling, the FTC has condemned such behaviour as a violation of US anti-trust laws.  The FTC found that Rambus engaged in exclusionary and deceptive conduct that significantly contributed to its acquisition of monopoly power in four related markets.

The FTC is now taking submissions on an appropriate remedy, which may include injunctive relief and the imposition of “reasonable” royalty rates.

For the full text of the FTC Decision, see:

http://www.ftc.gov/os/adjpro/d9302/060802commissionopinion.pdf

For news coverage, including commentary by several industry observers, visit:

http://www.law.com/jsp/article.jsp?id=1161606920964

Summary by:  James G. Kosa

 The E-TIPS^® newsletter is edited by Richard Potter QC, an independent consultant to professional services firms (see his web site at www.i-lawmarketing.ca).

To review past issues of the E-TIPS^® newsletter, visit:

http://www.dww.com/newsletter/archive.html

Disclaimer: This Newsletter is intended to provide readers with general information on legal developments in the areas of e-commerce, information technology and intellectual property.  It is not intended to be a complete statement of the law, nor is it intended to provide legal advice.  No person should act or rely upon the information contained in this newsletter without seeking legal advice.

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