The Federal Court of Appeal recently held that where an agreement to assign a patent increases the assignee's market power in excess of that inherent in the patent itself, the assignment may be subject to scrutiny under the Competition Act. This holding shouldn't have been really surprising, but the judge at the lower court thought that since the patent act provides that a patentee may assign the patent, such an assignment--even if results in a lessening of competition--can never be undue. He also rejected the argument that all that the patent act meant was to reiterate the principle that a property right may be assigned. In his view, if that was all that the patent act meant to say, that would be a redundancy because it was obvious that patents (like any other property) may be assigned.
So luckily the court of appeals reversed. It makes a lot of sense to hold that holders of substitute patents may not be allowed to combine them together and have a carte blanche to eliminate competition between themselves.
What's more interesting, however, is a question that hasn't been discusssed at all: the question of Apotex's standing. Apotex raised the antitrust claim as a counterclaim for patent infringement and the question is: even if the purchase of the patents is indeed anticompetitive, what's the injury for Apotex? If the one or more patents are valid and if Apotex infringes, it is excluded from the market. No doubt that it suffers injury but that's exactly what the patent act was designed to achieve. However, if Apotex can stay in the market without infringing the patents, it may actually benefit from the increased market power arising from the purchase of the patents by Eli Lilly. Why? Because if Eli Lilly has more market power and can raise prices, Apotex may raise prices too or increase its output. There may be injury to consumers, but not to Apotex. And if Apotex suffers no injury it's not clear what the basis for its antitrust counterclaim is.
Nevertheless, maybe there could be a valid theory of harm. The theory would focus not on the increased market power resulting from Shionogi's assignment of its patents to Eli Lilly per se, but instead in change of the incentives to sue Apotex resulting from the assignment. Before the assignment both Shionogi and Eli Lilly (acting independently) might have had weak incentives to try enforcing their respective patents against Apotex. The reason is that in that case each of them has only limited amount of market power and litigating Apotex away will not benefit only the litigating company but also its competitor. The equilibrium in a competitive market thus may be one under which regardelss of their patents, the patentees choose not to sue. This may be a normal outcome in a competitive market. The assignment of the patents changes this equilbrium. Not only now Eli Lilly had greater market power, it will now capture the entire benefits from excluding Apotex.
The question thought is whether a transaction that creates an incentive to enforce one's IP rights, where previously there were none, could create an actionable offence? I don't know. But it seems to me to be the more intersting question in this case.