By Julius Melnitzer | February 6, 2026
“Competition issues can arise at various points in the patent life cycle, including the filing stage, during licensing or commercialisation, litigation, and with respect to distribution practices.” – Chen Li
Patent law confers exclusivity. Competition law shuns monopolies. The two are bound to clash.
“Competition issues can arise at various points in the patent life cycle, including the filing stage, during licensing or commercialisation, litigation, and with respect to distribution practices,” says Chen Li, an intellectual property (IP) litigator in the Toronto office of Smart & Biggar, a member of the IPH Network.
A 2024 decision by the European Commission saw a major organisation fined hundreds of millions of dollars for abusing dominant position by misusing divisional patent filings to delay generic competition.
Mere exercise of rights is not anti-competitive
So how does Canadian law deal with the potential impasse?
“The goal of competition law here is to remove or prevent market power that constrains access to innovation, but patent rights are a legally permitted form of monopoly,” Li says. “So the ‘mere exercise’ of IP rights will not generally attract scrutiny from the competition regulator, but anti-competitive conduct that amounts to more than that and lessens competition may do so.”
Indeed, the Competition Act and the Competition Bureau’s (CB) Intellectual Property Enforcement Guidelines (IPEG)—which deal with the regulator’s approach to competition enforcement regarding rights granted under the Copyright Act, the Trademarks Act, the Industrial Design Act, the Integrated Circuit Topography Act, and the Plant Breeders’ Rights Act, as well as the Patent Act—make it clear that exercising IP rights is not presumptively anti-competitive, and that exclusivity in the IP context does not automatically create market dominance or lessen competition in a manner that offends competition law.
Li points out that while the IPEG are “guidelines and are not binding on the courts”, they are an interpretive indication as to how the CB intends to apply the Competition Act, and therefore a useful guide to rights holders.
Section 32: When ‘mere exercise’ matters
What’s clear, however, is that even the mere exercise of patent rights can impact consumers.
“So, the Bureau, whose role is to protect consumers, will step in whenever market power is abused,” Li explains. “But that involves a tricky balancing of policy objectives, including the role of patents in promoting innovation.”
That need for balance is behind the carefully-worded provisions of s. 32 of the Competition Act, which allow regulators to intervene even when the impugned conduct is a “mere exercise” of IP rights.
“Section 32 allows the Federal Court to revoke IP rights,” Li says. “But proving that ‘mere exercise’ unduly prevents or lessens competition is a very tough case for the Competition Bureau to make, and the provision is regarded as a very exceptional remedy.”
Indeed, the IPEG expressly confirms that s. 32 is reserved only for extreme cases where rights holders use their patent or other IP rights to unduly restrain trade. As well, s. 32 does not allow the Bureau to act unilaterally: a referral to the Attorney General must precede any application for special remedy.
“The Bureau has only made recommendation to the Attorney General under s. 32 twice, and both cases settled,” Li says.
What is a ‘mere exercise’?
The upshot is that most problems relating to the intersection of competition law and patent law occur when conduct goes beyond the “mere exercise” of rights.
Which leads to a foundational question.
“The challenging task is to determine what amounts to something more than a ‘mere exercise’ of IP rights,” Li says. “The Guidelines allow patentees to arrange their affairs to effectively enforce their rights, but they can’t conduct themselves in a way that results in competitive harm.”
Put another way, the conduct most likely to attract attention from regulators is commercial behaviour that ventures beyond the mere exercise of patent rights. When that occurs, the CB relies on the Competition Act’s general provisions relating to abuse of dominance, anti-competitive agreements, deceptive marketing, or merger review.
Examples of conduct that may, according to the Guidelines, attract the CB’s attention under these general provisions include:
- False or misleading allegations of infringement, including by patent assertion entities, designed to exclude competitors;
- Price-fixing among rights holding competitors in the same markets;
- Targeted refusals to license; and
- Patent “hold up” in the context of collaborative standard setting and Standard Essential Patents.
Settlements
The settlement of IP disputes has in the past attracted scrutiny of the Bureau.
In pharmaceutical litigation, “entry-split settlements” provide for generic drug entry on or prior to patent expiry and do not include a payment or other compensation from the brand manufacturer. These settlements are not investigated by the Bureau.
“Settlement arrangements that go beyond the scope of the disputed patents, for example, delay generic entry past the date of patent expiry, can raise red flags,” Li says.
“Where a payment is involved, the Bureau may review and assess whether the amount is within a reasonable estimate, taking into consideration a number of factors such as the expected remaining litigation costs absent settlement.” Li explains.
It doesn’t hurt to look abroad
Rights holders and their counsel, Li asserts, may be well-advised to go beyond familiarity with the IPEG.
“Becoming aware of what’s going on in the US and Europe by way of legislative and enforcement action could help rights holders prepare for what’s coming down the pipeline,” Li says. “But they should also know that, on the whole, Canada has historically taken a more restrictive approach to competition law enforcement in IP matters than US and Europe, because we are cautious about competition law interfering with our efforts to incentivise innovation.”
Chen Li is a qualified IP litigator based in Toronto, Canada. Access her contact information here.
Julius Melnitzer is a Toronto-based legal affairs writer, ghostwriter, writing coach and media trainer. Readers can reach him at julius@legalwriter.net or on his website.