Tuesday, October 25, 2016

TRUVADA Patent Invalidated by Conference Call With Investors Outside of Grace Period

Gilead Sciences, Inc v Apotex, Inc 2016 FC 856 Brown J
            2,512,475 / TRUVADA

In this chapter of the continuing TRUVADA saga, Brown J held Gilead’s 475 patent invalid as being anticipated, or in the alternative, obvious, on the basis of a disclosure made by Gilead executives in the course of a conference call with investors. The filing date was 13 January, 2004, and the conference call, which was public [67], took place more than one year before, on 2 December, 2002, and so outside the one year grace period for disclosure by the inventor set out in s 28.2(1)(a) and s 28.3(a). The argument for anticipation or obviousness based on the conference call was very strong, and the main tactic of Gilead’s counsel was to try to keep the conference call transcript out of evidence by instructing the Gilead witnesses not to produce the conference call transcript, in violation of Rule 94(1), and without seeking the relief of Rule 94(2) [60], [61]. Brown J held that in the circumstances hearsay evidence of the conference call transcript introduced by Apotex was admissible as being both necessary and reliable [60]. The holding on anticipation [97] and obviousness [120-21] followed directly. Apotex also argued lack of utility, but Brown J construed the promise of the patent modestly [139], and found that the promised utility was soundly predicted [143].

As a minor point, Brown J found that the conference call, which was public [67], would have been known to a person skilled in the art [103], but I don’t see a specific holding by Brown J that it was part of the state of the art, in the sense of being common general knowledge or prior art which would be discovered in a reasonably diligent search directed to the problem at hand. As noted here, there is an issue as to whether the art that can be used in an obviousness attack includes only the state of the art, so defined, or all prior art. This would potentially have been an important point had the decision rested primarily on obviousness, but given that anticipation was the primary basis for Brown J’s holding of invalidity, nothing turned on it.

Monday, October 24, 2016

When is Does a Submission for an NOC Trigger S 5 of the NOC Regulations?

Teva Canada Limited v Pfizer Canada Inc 2016 FCA 248 Dawson JA: Webb, Rennie JJA rev’g 2014 FC 1243 Gleason J
            2,409,059 / exemestane / AROMASIN
            2,261,630 / infliximab / REMICADE / INFLECTRA

Section 3.4.1 of the most recent (2012) Guidance Document: Patented Medicines (Notice of Compliance) Regulations, states that when a generic manufacturer of a drug that already holds an NOC licenses a second generic to sell “the identical drug,” the second / licensee generic need only file an administrative drug submission which does not trigger s 5 of the NOC Regulations. This reversed the prior policy, under which the second generic’s submission was considered to trigger s 5. The change in policy resulted from the Minister of Health’s interpretation of the term “submission” in s 5(1) of the NOC Regulations, and not from any change in the regulations themselves. In this decision, the FCA held that the Minister’s interpretation of the Regulations was owed deference, and that the new interpretation was reasonable, reversing Gleason J on both points. This means that a patentee cannot decide whether to respond to an NOA in light of the threat it perceives from the particular generic; instead, a patentee must respond to every NOA it receives, or take the risk that the generic in question will subsequently license. With that said, according to the Guidance Document, the submission by the second generic will only be considered administrative if the drug is “identical.” In the cases under appeal, the second generic certified that its product would be manufactured in the same location with identical specifications and procedures. That is, as I understand it, the first generic, which had received the NOC, was manufacturing the drug for sale by the second generic. The FCA decision suggested that when a drug is manufactured by the second generic in circumstances that give rise to a “to a new or different basis for asserting that a particular product is infringing” [89], the submission should not be considered administrative. I would imagine that manufacturing by the second generic in a different facility might by considered sufficiently different, even if under licence by the first generic, but the Guidance Document is not explicit on this issue. And regardless of this suggestion by the FCA, the Minister’s interpretation on this point would be reviewed on a deferential standard.

Thursday, October 20, 2016

Is Recourse to the Disclosure Impermissible When the Words of the Claim Are Plain and Unambiguous?

Cascade Corporation v. Kinshofer GmbH 2016 FC 1117 Southcott J
            2,587,065 / I-LOCK and X-LOCK quick coupler

This infringement action ultimately turned entirely on claim construction. A key issue in claim construction was whether recourse to the disclosure was permissible; in the course of coming to opposite conclusions, the defendant’s expert started with the disclosure and relied extensively on it in construing the claims, while the patentee’s expert largely ignored the disclsoure. Southcott J began his discussion of claim construction by quoting the principle that recourse to the disclosure is “unnecessary where the words are plain and unambiguous”. As discussed below, Southcott J evidently took this as saying that recourse to the disclosure in claim construction is permissible only when the claims are ambiguous. In my view, that proposition is clearly wrong. Since Southcott J found the claims to be ambiguous, and hence recourse to the disclosure was permissible, the error made no difference to the result. Nonetheless, because Southcott J’s view was based on FCA authority, the point warrants some discussion.

Wednesday, October 19, 2016

Uncontested Change of Inventorship

Qualcomm Incorporated v. Canada (Commissioner of Patents) 2016 FC 1092 Southcott J

This decision concerned an uncontested application by Qualcomm pursuant to s 52 of the Act to correct the name of the inventor on the 594 patent by adding the true inventor and deleting two incorrectly named inventors. In a previous Qualcomm decision, 2016 FC 499 (blogged here), Simpson J held that the affidavits that would be required to amend the inventorship for a pending application under s 31 are not strictly required under s 52. Qualcomm nonetheless provided affidavits, out of an abundance of caution [13], [14].

Qualcomm also sought to have certain documents recorded against the 594 patent, including a copy of replacements sheets for the PCT Declarations of Entitlement [1]. Southcott J declined to grant that relief, but without actually holding that the FC does not have the jurisdiction to grant such relief under s 52. Qualcomm did not urge the point very strongly, acknowledging that it would have other means have filing the replacement documents. Accordingly, in the absence of case law holding that s 52 authorized the FC to order the recording of documents, Southcott J declined to grant the relief, without any express holding as to whether he had the necessary authority to do so [16]-[17].

Tuesday, October 18, 2016

“How Is That a Proxy for the Value Associated with the Use of the Invention?”

Arctic Cat Inc v Bombardier Recreational Products Inc 2016 FC 1047 Roy J

Complex products embody hundreds or thousands of patented components, all of which contribute a small amount to the overall value of the product. When one of those patents is infringed, how are damages to be assessed? That is problem is central to much of the high-profile litigation taking place internationally in the ICT sector concerning standard-essential patents (SEPs) subject to a commitment to license on fair, reasonable and non-discriminatory (FRAND) terms. Essentially the same problem was also raised, albeit in obiter, in Arctic Cat v BRP. As noted in Friday’s post, Roy J held that Arctic Cat’s 738 patent was not infringed. While it was therefore strictly unnecessary to consider damages, the case had not been bifurcated (“This is a case where bifurcation should have been more carefully assessed [349]), and Roy J went on to make a number of observations on the damages issue, though without arriving at any final figure. His discussion is of considerable interest as Canadian law has relatively few cases assessing damages for infringement when the invention is a minor part of a complex product.

The patentee sought damages in the form of a reasonable royalty for the use of the invention [352] and experts for both parties advanced a variety of methods for assessing those royalties. Ultimately Roy J concluded that most of the proposed methods were wholly unreliable, though one was inadequate as presented, but, with adjustment, could serve as a starting point [413]. Roy J’s criticisms of the various methodologies all turned on one fundamental point: “the Court must strive to compensate the claimed invention solely with respect to damages that can be attributed to the invention” [353]:

Where the invention is but one individual component of a multi-component product, the damages in the form of royalties must be in order to compensate the infringement of that individual component of the multi-component product that is captured by the invention. In effect, the royalty recognizes that the sales by the infringer are an illegal transaction which requires to be compensated. However, it is only the infringement that requires compensation.

The problem is that the invention is a method of tuning a two-stroke engine, in particular a snowmobile engine, for optimal performance by setting the ignition timing according to the exhaust temperature (see Friday’s post). How is the value of that invention to be separated from the value of all the other components of a snowmobile, or even of a snowmobile engine [354]? I will argue below that the method that found favour with Roy J is just as susceptible to this critique as those he rejected.

Friday, October 14, 2016

You Can’t Have the Claim Construction Cake, and Eat the Validity Cake Too

Arctic Cat Inc v Bombardier Recreational Products Inc 2016 FC 1047 Roy J

In Arctic Cat v BRP Roy J held that Arctic Cat’s 738 patent was not infringed by BRP’s snowmobile engines. This holding turned primarily on the construction of the claims. Roy J also held that if he was wrong as to the proper claim construction, so that BRP’s engines did infringe, then the claims at issue were invalid for obviousness. The analysis raised no new issues of law, but it does illustrate the interaction between claim construction, validity, and infringement. The patentee was trying to argue for a broad construction for infringement and a narrow construction for validity, which made it difficult to mount a consistent argument on either point.

Thursday, October 13, 2016

Is Trivial and Incidental Domestic Use of a Patented Intermediate Infringing?

Bayer Inc v Fresenius Kabi Canada Ltd 2016 FC 581 Brown J motion for reconsideration dismissed 2016 FC 970
            2,192,418 / moxifloxacin hydrochloride for injection / AVELOX IV / NOC

In Bayer v Fresenius Brown J granted Bayer’s application for an order of prohibition on the basis that the NOA was insufficient, even though the application would otherwise have been dismissed on the basis that Bayer had not established infringement [7]. Brown J held that the transient and insignificant use of the claimed invention in making Fresenius product which was then imported, was not an infringement. On this point he was on firm legal ground. But the implications of this legal rule, in light of the SCC decision in Monsanto 2004 SCC 34, has implications that go beyond the context of importation. It suggests that trivial and incidental use of a patented intermediate is not infringing, even if the use is entirely domestic.

Friday, October 7, 2016

The Status of Intellectual Property Licences in Insolvency Proceedings

Today's post is a guest post by Professor Anthony Duggan, the Hon. Frank H. Iacobucci Chair in Capital Markets Regulation at the University of Toronto Faculty of Law.


1.      Introduction
If an intellectual property owner grants a licence and subsequently becomes insolvent, can the insolvency administrator disclaim the licence? Or, alternatively, can the insolvency administrator sell the intellectual property free and clear of the licence? Norman Siebrasse and I explored these questions in depth in a report we wrote for Industry Canada in 2013 and in an article, based on the report, which was published in the Annual Review of Insolvency Law in 2014.[1] The questions recently came up for consideration in Golden Opportunities Fund Inc. v. Phenomenome Discoveries Inc.,[2] where the court overlooked nearly all the key points.

2.      The disclaimer of intellectual property licences
Section 65.11 of the Bankruptcy and Insolvency Act[3] provides for the disclaimer of contracts in BIA proposal proceedings. Section 32 of the Companies’ Creditors Arrangement Act[4] is a parallel provision which applies in CCAA proceedings. BIA, s.65.11(7) and CCAA, s.32(6) apply to intellectual property licence agreements where the debtor is the licensor and they provide that disclaimer of the agreement does not affect the licensee’s right to use the intellectual property during the term of the agreement, provided the licensee continues to perform its obligations under the agreement. These provisions are loosely based on s.365(n) of the United States Bankruptcy Code.[5] Their immediate purpose is to protect the licensee’s reliance interest, but the larger objective is to preserve the licensing system as a means of sharing and exploiting intellectual property rights.

Inexplicably, there are no corresponding provisions for bankruptcy proceedings or receiverships. The GOFI case involved a receivership and the court held that the above provisions were inapplicable.[6] The court went on to hold that, in the absence of any relevant statutory provisions and subject to any relevant provisions in the receivership order, a receiver is not bound by the debtor’s contracts and is free to disclaim them.[7] This is subject to the exception that “a receiver cannot disclaim a contract that has granted a property right”.[8] However, in  the GOFI  case the court, following Royal Bank of Canada v. Body Blue Inc.,[9] held that a licence “does not confer any interest or property in the thing being licensed” and so the licensee’s rights are purely contractual.[10] The implication is that if the receiver in the present case had sought to disclaim the licence agreement, the court would have upheld its right to do so and it would further have ruled that the disclaimer precluded the licensee from continuing to use the intellectual property.[11]

But this is wrong as a matter of both law and policy. It is a mistake to think of the issue in terms of property rights. Disclaimer of a contract in insolvency proceedings is a breach of contract, not rescission. The essence of a licence agreement is that the licensor promises not to sue the licensee for infringement, provided the licensee observes the terms of the licence. Outside insolvency, if the licensor sued the licensee for infringement even though the licensee was in compliance with all its obligations under the licence agreement, the licensor would be in breach of its primary obligation under the licence agreement and the court would disallow the action. In principle, the position should be the same in insolvency proceedings. In other words, disclaimer of a licence should not prevent the licensee from continuing to use the intellectual property; if the insolvency administrator sues the licensee for infringement, the court should disallow the action, just as it would have done outside insolvency.[12] Furthermore, as indicated above, there are strong policy reasons for not allowing disclaimer. These policy reasons apply regardless of the form the insolvency proceedings happen to take. The court in the GOFI  case overlooked these points and the case is open to criticism on this score. But more importantly, perhaps, this aspect of the decision serves to underscore the unforgivably patchwork nature of Canada’s insolvency laws. The rules governing disclaimer of contracts should be the same across the board both in the interests of consistency and to discourage forum shopping (picking and choosing between insolvency regimes to take advantage of discrepancies between the regimes).

3.      Asset sales and licensee’s rights
As it happens, the receiver in the GOFI  case did not seek to disclaim the licence agreement. Instead, it applied to the court for approval to sell the intellectual property (a patent) free and clear of the licence. BIA, s.65.13 governs asset sales in BIA commercial proposal proceedings and CCAA, s.36 is a parallel provision applicable in CCAA proceedings. There is no corresponding provision for receiverships, but the courts have developed a similar set of criteria for approving asset sales in a receivership, including a requirement that, in deciding whether to approve a sale, the court should take account of third party interests.[13] In the GOFI  case, the court held that even though the licensee had no proprietary interest in the patent, it did have a contractual right (presumably in the form of a damages claim) which it was entitled to pursue against the sale proceeds.[14] The court framed the question in terms of whether it would be unfair to permit this right to be extinguished and on the facts of the case, it concluded that this question should be answered in the negative. Specifically, the court found that the licensor and licensee companies were both, in effect, alter egos of the same human actor (Dr Goodenowe) and that Goodenowe had years previously bargained away the licensee’s rights.

This conclusion seems plausible as far as it goes, but it must be stressed that it turns on the particular facts of the case. Furthermore, even if the facts had been different and the court had found in the licensee’s  favour, on the court’s own reasoning this would have served only to keep alive the licensee’s  claim for damages and the claim, being a provable one, would be poor compensation for loss of the licence.   In this connection, the policy considerations are the same as in the context of disclaimers:  an order approving the sale free and clear of the licence would be detrimental to the licensee’s reliance interest and, if the licence is central to the licensee’s business, it might trigger the licensee’s own insolvency. Furthermore, the risk that the licence may be defeasible in the licensor’s insolvency proceedings could have a significantly chilling effect on intellectual property licensing activity at large. In this respect, too, the  GOFI  case points to the incoherence of the Canadian insolvency laws: it makes no sense to enact provisions aimed at giving effect to these policies in the disclaimer context, but to leave the licensee exposed to the very same risk in the context of asset sales.

In the GOFI  case,  the court overlooks the possible application of the registration and priority rules in the Patent Act.[15] At least until recent amendments, the Patent Act clearly required exclusive licences to be registered[16] and it further provided that that an “assignment” was void against a subsequent assignee unless registered.[17] It was unclear  (1) whether “assignment” included an exclusive licence;  (2) if so, whether the provision meant that the holder of a registered licence had priority over a subsequent purchaser of the patent; and (3) if not, what the governing priority rule might be.[18] The disputed agreement in the GOFI  case was a non-exclusive licence and, as such, it was clearly not registrable. But it is still not clear how the priorities should be determined.  Poolman v. Eiffel Productions [19] suggests that the federal intellectual property registration provisions do not establish priority regimes and that priorities between competing interests in intellectual property are subject to provincial law, not federal law. 

On the other hand, the correctness of Poolman has been doubted. For example Professor Vaver argues that the federal statutes do determine priorities, at least as between registrable interests, and that there is no room for the application of provincial laws.[20] But Vaver’s reading of the provisions leaves open the question of how to determine the priorities where one or more of the competing interests is an unregistrable interest.[21]  Perhaps the answer is that, at least in the case of a non-exclusive licence,  the licensee has no proprietary claim and so no question of priorities arises.  In any event, to the extent that federal laws apply to determine priorities between competing interests in intellectual property, they should be equally relevant inside and outside insolvency proceedings. This means that, in considering third party interests when deciding whether to approve an asset sale in insolvency proceedings, the court should not confine itself  to asking whether the asset sale is “fair” to the third party; it should also ask whether and, if so, how, the federal intellectual property laws might apply. 

In the broader scheme of things, there is a strong case for reforming the intellectual property laws to establish a modern and comprehensive system for the registration of intellectual property interests and a coherent set of priority rules, along the lines of the provincial Personal Property Security Acts.  If the government were to grasp that nettle, the new priority provisions would clearly be front and centre in any asset sale proceedings involving intellectual property.

Anthony Duggan,
Hon. Frank H. Iacobucci Chair,
Faculty of Law,
University of Toronto

[1] Anthony Duggan and Norman Siebrasse,  The Treatment of Intellectual Property Rights in Insolvency : Report to Industry Canada (September, 2013); “The Protection of Intellectual Property Licences in Insolvency: Lessons from the Nortel  Case [2014]  Annual Review of Insolvency Law  19.
[2] 2016 SKQB 306 (the “GOFI  case”).
[3] RSC 1985, c.B-3 (“BIA”).
[4] RSC 1985, c.C-36 (“CCAA”).
[6] At [21].
[7] At [23], quoting from an unreported judgment of Meschishnick J. in the same proceedings (July 19, 2016) at paras 8-10 which, in turn, cites Bennett on Receiverships  (Toronto: Carswell, 1999) at 341.
[8] Ibid.
[9] (2008) 42 CBR (5th) 125, 2008 CanLII 19227 (Ont. SCJ).
[10] At [18].
[11] As it happens, the receiver did not seek to disclaim the licence agreement, but instead applied for approval to sell the intellectual property free and clear of the licence (see further below).
[12] Duggan and Siebrasse [ARIL],  supra note 1 at 33.
[13] See Toronto-Dominion Bank v. 101142701 Saskatchewan Ltd  2012 SKQB 289, quoted in the GOFI  case at [27].
[14] At [25].
[16] Section 50(2), now replaced by s.49(3).
[17] Section 51, now replaced by s.49(4), replacing “assignment” with “transfer”.
[18] Duggan and Siebrasse [ARIL],  supra  note 1 at 38-46.
[19] (1991) 35 CPR (3d) 384 (Fed.TD).  Poolman  was a copyright case, but its reasoning seems equally applicable in the patents context.
[20] David Vaver, Copyright Law (Toronto: Irwin Law, 2000) at 248.
[21] Duggan and Siebrasse at 45.

Thursday, September 22, 2016

Claim Construction in EXJADE Affirmed as Correct

Teva Canada Ltd v Novartis Pharmaceuticals Canada Inc 2016 FCA 230 Dawson JA: Gauthier, Near JJA aff’g 2015 FC 770 O'Reilly J
            2,255,951 / deferasirox / EXJADE / NOC

In the decision under appeal O'Reilly J issued an order of prohibition in respect Teva’s generic version of EXJADE on the basis of the ‘951 patent. The only issue on appeal was whether O’Reilly J, having correctly stated the law relating to the promise of the patent, had correctly applied that law in construing the promise of the ‘951 patent [4]. (The promise aspect of O’Reilly J’s decision is blogged here. See here and here for discussion of other aspects of his decision.)

In a brief decision, the FCA held that O’Reilly J’s construction of the promise was “correct” [25]. In light of the recent Nova v Dow , 2016 FCA 216 decision on the standard of review for claim construction (see here), it is interesting that the FCA did not discuss the standard of review at all. (To be clear, the FCA did not hold that the standard of review for construction of the promise was correctness; it simply did not discuss the issue.) Of course, a holding that the decision below is correct is consistent with upholding it on a less stringent standard of review, and it may be that the FCA simply felt no need to address the standard of review.

The FCA also went out of its way to quote Celebrex 2014 FCA 250 [66] (see here) to the effect that “the promise of the patent doctrine will hold an invention to an elevated standard of utility ‘only where a clear and unambiguous promise has been made.’ Where a patent’s validity is ‘challenged on the basis of an alleged unfulfilled promise, the patent will be construed in favour of the patentee where it can reasonably be read by the skilled person as excluding this promise’” [26]. Finally, the FCA re-affirmed that the point made in Celebrex (see here) that the promise doctrine applies on a claim-by-claim basis, so “different claims can have different utilities for the same compound” [23].

Wednesday, September 21, 2016

Repayment of Damages Paid Pending Appeal

Pfizer Canada Inc v Teva Canada Ltd 2016 FCA 218 Stratas JA:Gleason JA (Ryer JA*) refusing to vary 2016 FCA 161
            1,248,540/ 2,199,778 / venlafaxine / EFFEXOR XR

The circumstances of this motion are “unusual” [25]. In Teva v Pfizer 2014 FC 248 (here), Zinn J awarded Teva almost $125m, including interest, under s 8 of the PM(NOC) Regulations, as compensation for having wrongly been kept off the market for venlafaxine. Pfizer paid the damages award to Teva and launched an appeal [3]. Pfizer was successful, at least to the extent that in 2016 FCA 161 the FCA vacated Zinn J’s award because it was based on inadmissible hearsay evidence. The matter was remitted to Zinn J for redetermination (see here) [2]. Pfizer then asked Teva for the money back. Teva refused. The difficulty for Pfizer is that there was no provision in the FCA judgment requiring Teva to return the money. Pfizer therefore brought this motion, asking the FCA to vary its judgment to add a term requiring Teva to repay the money with interest [5].

The first issue was whether the two remaining members of the original panel has subject-matter jurisdiction, notwithstanding the retirement of the third. The Court concluded that it did have jurisdiction [10].

Nonetheless, and notwithstanding that “[i]n light of the judgment of this Court and on the record before us, Teva has absolutely no right to keep Pfizer’s payment” [4], the FCA refused to vary its judgment to order Teva to return the money. Pfizer’s failure to request the return of the money was fatal: “Without a formal, explicit request for specific relief in the notice of appeal, the request is not before the Court. . . . Now that judgment has been rendered, it is not possible to retroactively expand the scope of the appeal and then vary the judgment” [22].

Pfizer is not without recourse. The matter has been remitted to Zinn J for redetermination. He may again find that Pfizer owes substantial damages to Teva. If he does, in making his award of damages he “will be bound to take into account any payments that Teva might have received to which it is not entitled,” including consideration of interest [23]. That is, the amount already paid will be offset, with interest, against any future award. In the alternative, or if no damages are awarded on remand, Pfizer “can sue Teva for restitutionary recovery of monies wrongly withheld from it” [23].

*Ryer JA was a member of the original panel, but had retired and was functus by the time of this hearing [8].

Tuesday, September 20, 2016

The Complexities of Comity and Stare Decisis

Bayer Inc v Apotex Inc 2016 FC 1013 Fothergill J
            2,382,426 / micronized drospirenone / YAZ YASMIN

As noted in yesterday’s post Bayer’s ‘426 patent covers an oral contraceptive comprising drospirenone and ethinylestradiol, where the drospirenone is in the form of fast dissolving particles. The claims of the ‘426 had previously been construed by Hughes J and the FCA in the prior NOC proceedings: Bayer v Cobalt 2013 FC 1061 J aff’d 2015 FCA 116 (blogged here). This raised the question of the extent to which Fothergill J was bound to follow the claim construction arrived at by Hughes J (on the basis of comity) and the FCA (on the basis of stare decisis) [45].

Bayer argued that Fothergill J should adhere to the FCA’s construction “unless the evidence demonstrates the prior construction was wrong, or if different evidence compels a different result” [46], relying on Allergan 2012 FCA 308, [44] (here). This position is in some ways surprisingly modest. Allergan did state that test, but in the context of comity, which governs the relationship between courts of the same level. As noted in Pfizer 2014 FCA 250 [59] (here) (also relied on by Bayer), claim construction is a matter of law, and stare decisis implies that a subsequent lower court should be strictly bound by a holding of law by a higher court. On the other hand, Cobalt and Apotex pointed out that because of their summary nature, even holdings of law in an NOC proceedings are arguably not strictly binding at all in a subsequent infringement action: Lilly v Novopharm / nizatidine [1998] 2 SCR 129 [95]-[96]; Lilly v Novopharm /olanzapine 2007 FCA 359 [41].

Monday, September 19, 2016

Broad Experimental Use Exception to Anticipation

Bayer Inc v Apotex Inc 2016 FC 1013 Fothergill J
            2,382,426 / micronized drospirenone / YAZ YASMIN / action

Bayer’s ‘426 patent covers an oral contraceptive comprising drospirenone and ethinylestradiol, where the drospirenone is in the form of fast dissolving particles. In this consolidated infringement action, Fothergill J found claims 31, 48 and 49 to be valid and infringed by Apotex’s Zamine and Mya tablets and Cobalt’s Zarah tablets. The conclusions on validity and infringement turned on almost entirely the facts. With that said, it is significant that that Fothergill J accepted the broad experimental use exception to anticipation set out by Hughes J in his NOC decision concerning the same patent. Fothergill J’s remarks on blinding of expert witnesses, as well as on comity and the binding effect of prior FCA decisions on claim construction, are also of interest. This post deals with experimental use and blinding, while tomorrow’s post will deal with comity.

More than one year before the filing date, Schering, Bayer’s predecessor in title [19], conducted Phase III clinical studies in Europe and the United States involving oral contraceptive tablets containing the claimed amounts of drospirenone and ethinylestradiol [145]. (It is not clear to me whether it was admitted that these tablets also fit the claimed formulation profile, but for the purposes of Fothergill J’s reasoning, we may assume they did.)

Participants were given a large number of the tablets, which were to be self-administered over several months outside of a clinical setting. In all three trials, participants were told what the tablets contained, and knew that the tablets were intended to be used as oral contraceptives. No restriction was imposed on participants regarding the disclosure of information concerning the tablets. The participants did not sign confidentiality agreements. [145-46].

Apotex alleged these trials anticipated the ‘426 patent. Fothergill J held they did not. He pointed out that anticipation requires enabling disclosure, and he held that even if some of the tablets had made their way into the hands of a person skilled in the art, such a person would not have been able to reverse engineer the tablets to discover the particular formulation which constituted the invention without the exercise of inventive ingenuity [154-55]. That finding turned on the facts and the law he applied is not controversial.

More interesting is the “alternative” basis for Fothergill J’s holding that the trial did not anticipate [156]. In Bayer v Apotex 2014 FC 436 a prior NOC case involving the ‘426 patent, the same argument was raised that these same clinical trial were anticipatory. Hughes J held that they were not, on the primary basis that Bayer benefited from an experimental use exception to anticipation. The following key passage from Hughes J's decision was quoted by Fothergill J [159]:

[121] In the present case clinical studies were necessary to prove that the drug was safe and effective and, thereby, gain government approval for sale. Until this had been demonstrated, no commercial sale of the drug could have been made. Bayer took reasonable steps to ensure the confidentiality of the relevant documents and to ensure that unused tablets were returned. The theoretical possibility that some tablets were retained and analyzed is just that, theoretical. This theoretical possibility does not preclude the fact that the studies were experimental, and of necessity, conducted by the provision of tablets to members of the public. Thus these clinical studies are exempted from public use.

As I said in my blog post on Hughes J’s decision, this seemingly establishes a broad experimental use exception to what would otherwise be anticipating disclosure, which applies to any clinical trial, so long as reasonable steps are taken to ensure that the unused tablets are returned. Fothergill J agreed with Hughes J both as to this statement of the law and its application to the facts of this case [156], [159]. Fothergill J also clarified that the fact that these trials had been conducted for the purpose of gaining regulatory approval did not take them outside of the experimental use exception [162].

In my post on Hughes J’s decision, I suggested that his decision was notable because, while there was some case law supporting such a broad exception, it was not well-established. Fothergill J’s holding is therefore significant as reinforcing the law stated by Hughes J.

Blinding Expert Witnesses
Apotex argued that the evidence of its expert witnesses should be preferred to those of Bayer’s witnesses because its experts had been “blinded.” Like Brown J in the recent VIREAD decision, 2016 FC 857 (blogged here), Fothergill J was unimpressed by the arguments in favour of blinding. Fothergill J noted that “[t]he fact that expert witnesses were blinded may be persuasive and helpful in weighing their evidence where credibility concerns arise” [65], but, citing Locke J in Shire 2016 FC 382, [45] (blogged here), he continued to say that “if an expert’s opinion is well supported, then there may be no reason to place less weight on the expert’s evidence merely because he or she was not blinded to certain facts when forming that opinion” [66]. In this case, “I have not found the blinding of expert witnesses to be a significant factor in deciding the legal and factual issues raised by this case” [66]. It is still too early to be sure, but the tide may be turning against “blinding.”

Monday, September 12, 2016

"Some leeway" Standard of Review for Claim Construction

NOVA Chemicals Corporation v The Dow Chemical Company, 2016 FCA 216 de Montigny JA: Webb, Boivin JJA aff’g 2014 FC 844 O'Keefe J here
            2,160,705 / film-grade polymers / ELITE SURPASS / Action

At trial in this action O’Keefe J held Dow’s ‘705 patent related to film-grade polymers to be valid and infringed by Nove. In my post on that decision I noted that “[t]he result turned largely on the evidence, and no novel points of law were raised.” Unsurprisingly, the FCA has now affirmed, noting that “[a]ll of the arguments raised by the appellant amount to no more than mere disagreements with the Judge’s factual findings and assessment of the expert evidence” [93]. With that said, there are a few points of general interest in the decision relating to the nature of claim construction, the meaning of “comprising,” and the promise of the patent.

The most significant point is the Court’s remarks on the nature of claim construction:

[15] On the other hand, the construction of the patent is to be reviewed on the basis of correctness. As the Supreme Court has stated in Whirlpool Corp. v. Camco Inc., 2000 SCC 67 at para. 61, [2000] 2 S.C.R. 1067, “claims construction is a matter of law”. That being said, I share the concerns of my colleague Justice Stratas that it will often be difficult, if not unrealistic and artificial, to distinguish between those aspects of claim construction that flow from the trial judge’s assessment of expert evidence from the words of the claim themselves (see Cobalt Pharmaceuticals Company v. Bayer Inc., 2015 FCA 116 at paras. 16-24, [2015] F.C.J. No. 555). After all, the construction of a patent is heavily dependent on the evidence given by persons skilled in the art, and that evidence will bear heavily on the judge’s findings. For that reason, I accept (as I must) that the construction of a patent is a question of law to be reviewed on a standard of correctness, but trial judges are nevertheless entitled to some leeway as they are often in a much better position than appellate judges to understand the intricacies of the art underlying the invention disclosed in a patent.

“Some leeway” is an interesting caveat to the correctness standard, which arguably amounts to a halfway (quarterway?) house between correctness and deference. Substantively, it is seems like a reasonable position in light of the concerns identified by the FCA. In principle the expert evidence enables the court to understand the meaning of the technical terms – a factual inquiry – while the court interprets the claims in light of that understanding – a legal inquiry. But since words take their meaning partly from the context in which they are used, it is not possible to separate the two inquiries so neatly. However, as the FCA notes, claim construction is a matter of law, and the standard is therefore correctness, and it is not clear that giving the trial court “some leeway” is consistent with the correctness standard. Moreover, whether as a third level of deference, or simply a caveat to correctness which is applicable to claims construction, it runs counter to the general trend of simplifying the standards of review, as illustrated by Dunsmuir [2008] 1 SCR 190, Housen v Nikolaisen 2002 SCC 33, and most recently in the FCA’s own decision in Hospira 2016 FCA 215 (discussed here). I note that the FCA did not embrace the correctness standard on its merits, but rather because of binding SCC authority. Do I detect some dissatisfaction with the SCC’s holding in this paragraph? Perhaps the FCA is hinting that it would prefer a fully deferential standard of review for claim construction and “some leeway” is the furthest it felt it could go in light of Camco. But a fully deferential standard would have its own significant problems, and maybe it is better to accept the decision on its face, as fully endorsing a standard of correctness with some leeway, even if that leaves a tension with broader trends.

On another claim construction point, the FCA affirmed O'Keefe J’s construction of the word “comprising” as meaning “including, but not limited to” [81]. The FCA stated that Nova’s argument to the contrary “is inconsistent with the ordinary meaning of the word ‘comprising’” [82] The Court also noted that “the traditional meaning of the word ‘comprising’ is ‘including but not limited thereto’” [82]. This is a welcome departure from the FCA’s decision in Purdue Pharma / TARGIN 2011 FCA 132, where, as discussed here, the FCA held in effect that “comprising” has no presumptive meaning. The FCA in this case did acknowledge that “a presumption should not be applied inflexibly” [83], so it is possible that “comprising” might be interpreted as limiting in the context of a different patent. However, even that statement helpfully recognizes that there is indeed a “presumption” that “comprising” is not normally limiting.

Finally, the utility argument at trial had turned on the construction of the promise of the patent, and O’Keefe J had held that there was no promise at all, so that utility should be assessed against a scintilla standard. The FCA affirmed, referring to the “presumption that an inventor should only be held to an elevated standard where a clear and unambiguous promise has been made,” and citing Celecoxib 2014 FCA 250 [66] (blogged here), for the proposition that “[w]here the validity of a patent is challenged on the basis of an alleged unfulfilled promise, the patent will be construed in favour of the patentee where it can reasonably be read by the skilled person as excluding this promise” [24]. It might be possible to read this as generally emphasizing the need for restraint in construing the promise of the patent, reinforcing Plavix 2013 FCA 186 (here). However, as the FCA also emphasized, in this case the argument for an enhanced promise was weak in any event. We’ll learn more when the FCA next reviews a construction of the promise that is closer to the line, one way or the other.

UPDATE: In preparing this post, I neglected to review Cobalt v Bayer 2015 FCA 116, which was cited by the FCA in the key paragraph 15, quoted above. As discussed in my post on that decision, Stratas JA explicitly argued for a deferential standard of review in construction of the patent at [12]-25]. So the answer to the question I posted above, as to whether the FCA in this case is expressing some dissatisfaction with the correctness standard and hinting that it would prefer a more deferential standard, is evidently "yes." In my post on Cobalt v Bayer I argued that while there are compelling arguments against reviewing claim construction on a correctness standard, there are also problems with a fully deferential standard. I'm now inclined to think that the modestly deferential "some leeway" standard might be the best approach, notwithstanding the trend towards simplification of standards of review.

Wednesday, September 7, 2016

VIREAD Patent Valid on the Facts

Gilead Sciences v Apotex Inc 2016 FC 857 Brown J
            2,261,619 / tenofovir disoproxil / VIREAD / NOC

In this NOC decision. Apotex’s validity attacks on the ‘619 patent, based on anticipation / invalid selection, obviousness and lack of utility, all failed on the facts. The main point of legal interest is Brown J’s agnostic approach to the question of “blinding the witness.”

Tenofovir, or PMPA, is a nucleotide reverse transcriptase inhibitor which was known to be effective against retroviral infections such as HIV. However, its oral bioavailability was poor and it was only effective when administered intravenously [32]. The claim of the ‘619 patent at issue, Claim 32, claims tenofovir disoproxil (TD) and its salts, tautomers and solvates [6], [70]. TD is an oral prodrug of tenofovir, which allows effective oral admininstration of tenofovir [31].