Response to Comments Received on the Updated Consultation: Agreement for Data Protection under Section 66 of the Pest Control Products Act
The Updated Consultation: Agreement for Data Protection under Section 66 of the Pest Control Products Act was published for consultation from November 16, 2018 to December 16, 2018. Comments were received from seven stakeholders - four representing registrants’ perspectives (product innovation companies who are data generators), two representing applicants’ perspectives (typically generic companies seeking to rely on existing data to register generic products), and one trade association (whose members both innovate new products and register generic copy products). For the purposes of this summary and response document, “registrants” are considered to be those who generate the data and “applicants” are generic companies who seek to rely on registrants’ data.
Several registrants supported the 30-day time limit for the applicant to pursue binding arbitration included in Article 5 and section 19 of Appendix B, and some requested that there also be a 30-day time limit to send a Section 66 Agreement to initiate the negotiation period once the compensable data list has been established.
The 30-day time limit for the applicant to initiate arbitration after the negotiation period has ended is included to respond to several stakeholders’ requests from the previous consultations, from both registrants and applicants, to have a more predictable process. The Section 66 Agreement must be sent by the applicant to begin the formal 120-day negotiation period. The request for another 30-day time limit to initiate this negotiation period once the compensable data list is provided, was not included as the PMRA wishes to maintain the flexibility for applicants and registrants to settle outside of the formal process.
Rather than delivering the arbitration notice within 30 days from the end of the negotiation period, an applicant requested that the applicant deliver the arbitration notice within 30 days after receiving the registrant’s final offer, as they may not know what the registrant’s final offer is at the end of the negotiation. However, others supported the timeliness intention of the 30-day deadline following negotiation to initiate binding arbitration.
Although both parties are expected to make their last offers at the end of the negotiation period, which will be their final offer at arbitration, they are not obligated to do so. As per section 17.92 of the Pest Control Products Regulations (the Regulations), if the registrant does not make the last offer in writing at the end of the negotiation period, the applicant can receive an early registration without being required to enter into an escrow agreement.
Several registrants indicated the use of the word “may” in Article 5 appears permissive in reference to the applicant pursuing binding arbitration within 30 days.
The use of the word “may” is permissive and means that the applicant is not required to pursue binding arbitration. The wording reflects section 17.91 of the Regulations, which indicates that the applicant “may” submit the determination of compensation payable to binding arbitration. However, if the applicant elects to pursue binding arbitration, then they must serve notice of their intent by the 30-day deadline.
Several registrants objected to the Arbitral Tribunal having discretion to order a schedule of payments as stated in paragraph 10.2 (c) of Appendix C.
An Arbitral Tribunal has had the authority to set a schedule of payments since 2010 when the data protection provisions in the Regulations came into force. The wording in section 3.2 of Appendix C – Conduct of Arbitration is further revised to clarify such authority.
Several registrants requested that they be permitted to include restrictions on Letters of Access (LOA) submitted to the PMRA. However, applicants were supportive of the clarification that LOAs are not to have restrictions.
Registrants and Applicants can negotiate restrictions on the use of the data through the ordinary course of business. As outlined in section 5.5 of Regulatory Directive DIR2010-04 (Guidelines for Reliance on Proprietary Data Under the Pest Control Products Regulations), restrictions are not to be placed in LOAs. The clarification added to Article 10 is intended to reinforce this practice. See section 5.5 of the Guidance on Letter of Access.
Both registrants and applicants commented on the new requirement to provide first offers during negotiations in section 6 of Appendix B. Some registrants requested a 90 day period to make first offers during negotiations, rather than 40 days, as they felt this was a more realistic time period to assemble the required information. Several applicants requested that the registrant be required to present a first offer earlier in the negotiation period (for example, within 30 days) while permitting the applicant to present their first offer later (for example, within 90 days). This was requested because the applicant has limited information about the cost of the data, and knowing the registrants first offer earlier in the process would provide them with time and information to make a more informed first offer.
The PMRA does not consider it necessary to further define the terms of negotiations in the Section 66 Agreement, as different negotiating terms (including the exchange of first offers) can be adopted, as long as both Parties are in agreement, as per Appendix B – Conduct of Negotiations. In addition, before the negotiating period begins, both parties would have been involved in the establishment of the list of compensable data, which provides the basis for negotiations.
Some registrants disagreed with the requirement in section 6 of Appendix B to disclose information outlining how the amount of the first offer is calculated at negotiations as much of the information is confidential.
This information is deemed necessary to facilitate timely negotiations to enable reliance on data. The parties are bound to keep this information confidential as per section 4 of Appendix D. In addition, as per section 6 of Appendix D, they are permitted to enter into their own agreement regarding confidentiality; thus, the parties can set further (stricter) parameters around how this information can be used. Further, the information in the first offer is not required to be submitted to the Arbitral Tribunal, so it cannot be used to influence the Arbitral Tribunal’s decision. Finally, section 6 of Appendix B doesn’t specify exactly what information must be disclosed, so the parties can control the level of detail to be provided.
A registrant requested that confidentiality provisions be added to the Section 66 Agreement that prohibits both parties from disclosing any information related to the Section 66 Agreement.
The confidentiality parameters set out in section 4 of Appendix D apply to information disclosed during negotiations as set out in Appendix B and arbitrations as set out in Appendix C. As the compensable data listed in Appendix A is necessary information for the parties to share to conduct the negotiations, these confidentiality parameters also capture the information disclosed in Appendix A because this information forms the basis of negotiation or arbitration. However, PMRA will continue to issue and disclose compensable data lists as they are established and will not consider these as confidential.
Further, Article 9 of the Agreement gives the parties flexibility to establish additional confidentiality terms as it requires the parties to comply with Appendix D, unless they otherwise agree. Section 6 of Appendix D also allows the parties to enter into a specific confidentiality agreement governing the disclosure of oral or written information during negotiation or arbitration. If parties are concerned that the terms in the Agreement are insufficient to protect the confidentiality of the information in Appendix A, they can establish further terms to protect this information.
However, any terms respecting the confidentiality of information in Appendix A agreed to by the parties are not binding on the PMRA. The PMRA will continue to issue and disclose compensable data lists as required in order to fulfil its regulatory functions.
Several applicants requested that the cost sharing principle in Appendix E of the former Section 66 Agreement continue to apply in the updated Section 66 Agreement. These applicants indicated that they should not be required to compensate the registrant for the full cost of the data if the registrant has already been compensated for the data by another applicant in Canada or in another jurisdiction.
As set out in Appendix E, compensation should be determined on the basis of the cost of the data rather than the value of the data. Despite the removal of the cost sharing principle from the updated Section 66 Agreement, Parties can continue to include available information demonstrating payments made for the data in Canada or in other jurisdictions for consideration by the Arbitral Tribunal.
Several applicants questioned why the Section 66 Agreement now grants the Arbitral Tribunal discretion to extend the arbitration period under Article 6.
This discretion was added in an amendment to section 17.91(4) of the Regulations.
A registrant requested that section 11 of Appendix C require that the registrant’s costs at arbitration be covered entirely by the applicant in cases where a registration is not pursued because the registrant will have unnecessarily incurred expenses. These registrants further expressed concern regarding whether the costs award can be enforced like an Arbitral Award when the applicant has indicated they are not pursuing a registration.
The Commercial Arbitration Act requires an order to be issued to terminate the arbitration. The updated provisions allow the Arbitral Tribunal to award all or a greater portion of the costs to either Party, based on a number of factors to be considered, including the conduct of the parties and if the applicant choses to not pursue a registration as per section 11.2 of Appendix C. The provisions of the Commercial Arbitration Act, including those respecting enforcement, apply regarding any orders or awards issued by the Arbitral Tribunal.
Applicants requested the addition of a provision to permit the applicant to withdraw from the process without paying costs after a Section 66 Agreement has been delivered but before the Arbitral Tribunal is established under section 2 of Appendix C.
It is expected that all applications under review are proceeding towards registration for the purpose of taking the product to market. The updated Section 66 Agreement includes a 30-day time period to initiate arbitration to help ensure timeliness of the registration process. Adding an additional opt-out provision after the arbitration notice is provided does not match this objective.
Some applicants requested that costs for arbitration be kept at equal shares because they claim it would be unfair to pay expenses for the registrant who launches a large case to discourage a generic registration.
It is expected that the applicant can present such a case to the Arbitral Tribunal who will, at their discretion, vary the allocation of costs referenced in section 11.1 of Appendix C depending on the facts of the case. The Arbitral Tribunal may order a Party to pay all or a greater share of the costs referred to in section 11.1, as well as all or a share of the reasonable legal fees and disbursements incurred by the other Party, taking into account the subject matter in dispute, the outcome, and the conduct of the Parties prior to and during the arbitration.
Some applicants indicated that the wording in Article 6(b) is unclear regarding whether the applicant is prohibited from ever applying for the registration of the product at issue again.
Article 6(b) indicates that if the arbitration is terminated because the applicant has withdrawn its application and given notice that it does not intend to rely on the registrant’s data to register its product, the applicant is not allowed to rely on the registrant’s data. However, Article 6(b) does not prohibit the Applicant from submitting another application to the PMRA and restarting the application process from the beginning (i.e., starting at Phase I, with the equivalency and data compensation assessment).
An applicant indicated that the use of the term “applicant” during arbitration (for example, in Article 5 and Appendix C) is an incorrect use of the term as there is no application for registration while at arbitration.
As the applicant is still considered the applicant at the point of signing the Section 66 Agreement this term will continue to be used.
- An applicant indicated the default in section 2 of Appendix C of appointing one arbitrator for the Arbitral Tribunal if parties are unable to agree on the number of arbitrators can lead to less impartiality. They indicated that having three arbitrators as the default is preferred.
As the arbitration process is to be time limited to 120 days, this change provides for more timely proceedings and reflects the Arbitral Tribunal selection process at the Alternative Dispute Resolution Institute of Canada (ADR Institute of Canada) whose December 1, 2016 rules indicate a dispute must be determined by a Tribunal made up of a single Arbitrator unless the parties agree otherwise. The process for the appointment of the Arbitral Tribunal is set out in section 2 of Appendix C.
An applicant requested that the wording in Appendix E that describes Financial/Investment Risk Premium as “claims for an additional adjustment to the cost… should generally be discouraged.” be changed to “claims for an additional adjustment to the cost… should not be considered.”
The Appendix E compensation principles are for consideration by the Arbitral Tribunal and are not binding on any Party. As such, the requested change to this part of Appendix E was not made. However, to be consistent with the basis of compensation paragraph in Appendix E the word “generally” was removed.
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