Good faith clause under Canada's Access to Medicines Regime

The legislation establishing Canada's Access to Medicines Regime contains a "Good Faith Clause" that provides patent holders with the right to challenge a compulsory licence in the Federal Court of Canada. A challenge can be mounted if the patent holder believes the licence is being used for predominantly commercial rather than humanitarian purposes. The patent holder must establish that the average price of the licensed drug or medical device is 25 percent or more of the average price of the equivalent patented product in Canada. The licence holder has an absolute defence if the licence holder can establish that the average price of the drug or medical device remains less than its direct supply cost, plus 15 percent.

The August 2003 World Trade Organization 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 policy objectives. The good faith clause is intended to give effect to Canada's obligation to implement the Decision in keeping with the Chairperson's statement by providing a patent holder with the right to challenge a licence in Court where there is good cause to believe the licence is commercial in nature.

For more information on the factors that the Federal Court of Canada will consider in determining whether a compulsory licence has been used for commercial purposes, and the types of orders it may issue, refer to Section 21.17 of the Patent Act.