Purpose of s 53.1 Explained

Bauer Hockey Ltd v Sport Maska Inc (CCM Hockey) 2021 FCA 166 Locke JA: de Montigny, Rivoalen JJA affg 2020 FC 624 Grammond J

2,214,748 / FC Prosecution History

In this decision, the FCA affirmed Grammond J’s holding that the claims at issue were obvious, essentially on the basis of the deferential standard of review applicable to conclusions of mixed fact and law [16]. The most important aspect of the decision are Locke JA’s obiter comments on the interpretation of s 53.1 regarding the use of prosecution history. He provide a succinct analysis of purpose of the provision which will no doubt inform its interpretation in future cases.

In the decision under appeal, Grammond J held that no valid claims of Bauer’s 748 patent were infringed. The invention at issue relates to hockey skates. The uppers were traditionally made with two “quarters” that were sewn together. The 748 patent essentially claimed a one-piece quarter. It may seem obvious that the two pieces should be joined together, and this is exactly what Grammond J held [FC 154-58], [FC 184]. Grammond J addressed the “Beloit question,” [FC 146], referring to Beloit (1986), 8 CPR (3d) 289 (FCA) 295, to the effect of “If it was so easy, why was it not done before?” His answer was that one-piece quarters were expensive when implemented with directional material, such as leather, and became commercially feasible with the development of non-directional skate materials [FC 162–64]. The FCA affirmed, essentially on the basis of the deferential standard of review applicable to conclusions of mixed fact and law [16].

Locke JA noted that Grammond J began his discussion of obviousness by referring to the Sanofi 2008 SCC 61 [67] framework. Locke JA remarked (citations omitted):

[6] The Federal Court further noted, and I agree, that this framework should not be applied in a rigid manner. The only mandatory considerations are those laid out in section 28.3 of the Patent Act, which is concerned with obviousness to a person skilled in the art or science to which the invention pertains, having regard to “information disclosed before the [relevant date] in such a manner that the information became available to the public in Canada or elsewhere.”

The Sanofi framework has proven to be contentious and even unhelpful in some cases, particularly at the step of either identifying the inventive concept or construing the claims—see here, here and here—and this remark by Locke JA might be seen as the FCA starting to step back from reliance on the Sanofi framework. But I wouldn’t read too much into this statement, as the Sanofi framework has never been considered mandatory, and this was a case in which identification of the inventive concept was easy, so that whatever guidance might be provided by that framework is less significant.

On another point of passing interest, Bauer made the novel argument that “where inferences from findings of fact involve an evaluation of numerous factors (as with obviousness), intervention by an appellate court may be more appropriate in cases where the fact-finding judge is inexperienced” [17], relying on Actavis v ICOS [2019] UKSC 15 [78]–[79], where the UKSC stated (my emphasis) “Where inferences from findings of primary fact involve an evaluation of numerous factors, the appropriateness of an intervention by an appellate court will depend on variables including the nature of the evaluation, the standing and experience of the fact-finding judge or tribunal, and the extent to which the judge or tribunal had to assess oral evidence.” Bauer argued that less deference should be given to Grammond J’s inferences of fact because he had only previously been involved in one other patent infringement case [17].

Locke JA rejected this argument, noting that “To set the degree of appellate intervention based on the experience of the judge at first instance would require an appeal court to consider the judge’s background on every appeal. This would result in standards of review in a spectrum, rather than the two standards defined in Housen” [18]. Locke JA also noted that Actavis could be distinguished, as “Bauer proposes reduced deference in the case of a judge with limited experience, whereas Actavis was suggesting increased deference in the case of a judge with considerable experience” [19, original emphasis]. That is true, but it seems to me that giving relatively more deference to an experienced judge necessarily requires giving relatively less deference to an inexperienced judge; while Bauer’s argument is remarkable, but it does have a basis in Actavis. Accordingly, Locke JA did not rely on that distinction, but instead indicated that he would not be inclined to follow Actavis on this point: “In any case, I see no reason to modify the tools the Court already has to address decisions under appeal.” He noted that functionally, “[t]he advantages the judge at first instance has regarding assessment of factually-suffused issues, which prompted the Supreme Court in Housen to adopt a deferential standard, apply even to inexperienced judges” [19]. This strikes me as an entirely compelling point. I’d also note that following the Actavis line of reasoning leads to a morass. Not all appellate judges are experienced in patent litigation, so we might have four standards based whether the appellate judges are or are not experienced and whether the trial judge is or is not experienced.

Finally, the most important aspects of the decision relate to the interpretation of s 53.1 regarding the use of prosecution history. Grammond J had held that

[65] When an issue of claims construction arises, the patentee is always making representations to the Court as to the proper construction of the claims and the defendant is always attempting to rebut those representations. Therefore, in my view, as long as the issue is one of claims construction, section 53.1 applies and the prosecution history is admissible. In other words, there is no need to identify a particular representation and rebuttal every time a reference is made to the prosecution history. It is simply integrated in the interpretive process.

As Locke JA noted, “[t]his interpretation seems to open the door to unrestricted reference to the prosecution history to assist with claim construction,” and as such it is at odds with the text of the provision:

Subsection 53.1(1) is a detailed provision that contemplates admitting into evidence certain portions of a patent’s prosecution history for a certain purpose: “to rebut any representation made by the patentee in the action or proceeding as to the construction of a claim in the patent.” If this provision had been intended simply to brush aside the general prohibition against reliance on a patent’s prosecution history for the purposes of claim construction, it could have been much shorter.

This is not simply a textual point. The purpose of of s 53.1 “is to provide a tool to use against patentees who take one position concerning the meaning of a claim during prosecution of a patent application and another during litigation on the resulting patent. Accordingly, the concern relates to inconsistent statements” [37] (my emphasis). This limited purpose makes sense. On the one hand, it is particularly objectionable when the patentee wants to have it both ways, advancing a narrow interpretation during prosecution to obtain the patent, and then advancing a broad interpretation during litigation to expand the scope of its monopoly. On the other hand, permitting the general use of prosecution history, raises problems relating to “the public notice function of patent claims and the potential for inappropriately complicating litigation” [39], that were identified by the SCC in Free World 2000 SCC 66 [66] as reasons for refusing to allow the use of prosecution history for claim construction. Even though the legislature has now permitted some use of prosecution history, those concerns remain valid. The need to balance these considerations provides a purposive rationale for the limited nature of the exception, and that purpose is consistent with a straightforward reading of the text. While the legislature might reasonably have balanced these considerations differently, “it is not the role of the courts to participate in such a debate. Rather, we interpret and apply the legislation as written” [39].

Locke JA also noted that Grammond J’s interpretation seems to be inconsistent with the prior FC caselaw on s 53.1, specifically referring to Canmar 2019 FC 1233 affd 2021 FCA 7 (see here) and Lilly v Apotex 2020 FC 814. The interesting point here is that Locke JA did not refer to the decision of Crampton CJ in Allergan v Sandoz 2020 FC 1189, which, as discussed here, identified what appears to be a truck size loophole that is based squarely in the text of the provision. Crampton CJ’s decision certainly supports the point being made by Locke JA, namely that the exception is a limited one, and the text of the Act must prevail when it is clear. So the fact that Locke JA chose not to cite Allergan v Sandoz, while citing other FC caselaw, namely Lilly v Apotex, suggests to me that he did not want to be seen as approving Crampton CJ’s interpretation. I don’t take this as suggesting that Locke JA necessarily disagrees with Crampton CJ’s interpretation, but only that, given the magnitude of the loophole that Crampton CJ identified, the issue is best addressed by the FCA after the point is directly raised and argued, rather than by approving the decision in obiter comments.

Anti-Suit Injunction Refused

 Seismotech Safety Systems Inc v Forootan 2021 FC 773 McHaffie J

2,199,189 / 2,364,081 / 2,551,847 / 2,551,854 / 2,552,603 / 2,621,287

Anti-suit injunctions, anti-suit injunctions and even anti-anti-suit injunctions, are a hot topic these days in the context of global SEP / FRAND proceedings: see eg Jorge Contreras, The New Extraterritoriality: FRAND Royalties, Anti-Suit Injunctions and the Global Race To The Bottom In Disputes Over Standards-Essential Patents, 25 BU J Sci & Tech L 251 (2019). On the other hand, Canadian anti-suit injunctions related to patents are rare—I think this is the first I’ve seen in the decade that I’ve been writing this blog. This adds interest to McHaffie J’s decision refusing Seismotech’s motion for an anti-suit injunction that would have prevented Mr Forootan from litigating a patent settlement agreement in California, though the circumstances of this case are very far removed from SEP / FRAND litigation.

Seismotech is owned by Reza Baraty, who invented disaster management technology that eventually gave rise to several Canadian and US patents. Mr Baraty is a BC resident and Seismotech is a BC company [8]. For convenience, I’ll refer to them collectively as Seismotech. Seismotech entered into a Purchase and Sale Agreement [PSA] with Mr Forootan under which Mr Forootan was to raise capital to assist in commercializing the technology [12]. The PSA includes a choice of law clause stating that the agreement “shall be governed by and construed in accordance with the laws of Canada, without giving effect to conflict of laws” [13]. As part of the PSA, Seismotech assigned the patents to Mr Forootan’s company [11].

The relationship soured and the parties began litigation. In 2015, Mr. Forootan filed a complaint in the California State Court [2015 California Action]. This was then settled by a Settlement Agreement in 2017, after mediation which took place in California [15], [16], [49]. Then things got messy. In January 2020, Mr Forootan filed a complaint in California District Court [the 2020 District Court Action] alleging breach of the Settlement Agreement, and seeking remedies including a transfer of the US and Canadian patents back to Mr. Forootan [21]. Five months later, Seismotech started an action against Mr Forootan in the Supreme Court of British Columbia [2020 BC Action], seeking a declaration that the US and Canadian patents belong to Seismotech. (So at this point we have parallel actions in US federal court and BC provincial superior court.) Now, as readers are aware, in Canada provincial superior courts have exclusive jurisdiction over purely contractual matters, though the Federal Court has jurisdiction over patent law. Contractual disputes involving patents are on the borderline, and cannot necessarily be heard in Federal Court. The US has a similar division, with state courts having jurisdiction over contractual disputes and the federal court system having jurisdiction over patent matters. Six months after Seismotech started the BC action, the 2020 District Court Action brought by Mr Forootan was dismissed for lack of jurisdiction, without prejudice to refiling in state court [23]. (Now we’re down to just the BC action.) As it turns out, just three weeks after Seismotech brought the 2020 BC Action, SALT v Baker 2020 FCA 127 was decided, holding that the Federal Court jurisdiction to hear contractual matters related to patents was broader than had previously been understood. Consequently, two weeks after Mr Forootan 2020 District Court Action was dismissed, Seismotech started an application in the Federal Court seeking declarations similar to those in the 2020 BC Action, though without formally discontinuing the BC action. (Now we have two Canadian actions, no US actions.) Two weeks after that, Mr Forootan started an action in the California state court [the 2021 California Action.] (Two Canadian actions, one US state court action.)

Seismotech then brought the present motion for an anti-suit injunction, seeking to prohibit Mr Forootan from pursuing the 2021 California Action as it pertains to the Canadian patents [48].

In deciding whether the anti-suit injunction should be granted, McHaffie J applied Amchem [1993] 1 SCR 897 and subsequent cases developing its principles. The first question is whether the Federal Court has personal jurisdiction over Mr. Forootan. McHaffie J held that requirement is satisfied. The underlying question in this litigation is who owns the Canadian patents on the basis of the Settlement Agreement. In light of SALT v Baker, McHaffie J was satisfied that the Federal Court has jurisdiction to hear such a matter, and that satisfies the “real and substantial connection” test [51].

At the next step, according to Amchem 931–32 (emphasis added):

the domestic court as a matter of comity must take cognizance of the fact that the foreign court has assumed jurisdiction. If, applying the principles relating to forum non conveniens outlined above, the foreign court could reasonably have concluded that there was no alternative forum that was clearly more appropriate, the domestic court should respect that decision and the application should be dismissed.

In this case, “[t]he question is thus whether the California State Court could reasonably have concluded there was no alternative forum (here, the Federal Court) that was clearly more appropriate” [54]. The California State Court has not yet actually made such a determination, so the question for McHaffie J was whether it could reasonably have done so.

While the Settlement Agreement does relate to some Canadian patents [58], there are many aspects which relate to the US. The Settlement Agreement arose from and resolved the 2015 California Action. “The parties to the Settlement Agreement agreed the California State Court ‘shall retain jurisdiction over the action for all purposes to enforce the terms of this Agreement.’ . . . Mr. Forootan is a California resident and SDRT, the registered owner of the majority of the patents, is a (suspended) California company” [56]. This was enough for McHaffie J to conclude that the California court might reasonably conclude that the Federal Court was not a clearly more appropriate forum [57].

McHaffie J also recognized that only the Federal Court can order records of the Canadian Patent Office to be varied, pursuant to s 52 [60]. However, he pointed out that “this does not mean the Federal Court is the only court that can address contractual issues relevant to title” [60]. The 2021 California Action Mr Forootan was seeking a declaration conferring all rights and title in the US and Canadian patents to Mr. Forootan [21], [62]. Prior to SALT, in the purely Canadian context, the Federal Court would often refuse to hear contractual matters related to title. As I understand it, the parties would seek a declaration of ownership in the provincial superior court, and then would take this declaration to the Patent Office, which would rectify the title accordingly, without an order being required. If the Patent Office declined to do so, the prevailing party could then apply to the Federal Court to have the register rectified in light of the judgment of the provincial superior court: see Lawther (1995), 60 CPR(3d) 510 (FC) 511–12. This is all to say that a purely declaratory remedy would be effective in practice.

McHaffie J also noted that the effect of granting the anti-suit injunction would not be to rationalize the litigation, but rather to divide it in two, as it would be litigated in the US in respect of the US patents and in Canada in respect of the Canadian patents [92]. This is even though ownership of both sets of patents is determined by the same Settlement Agreement.

McHaffie J also noted the importance of seeking a stay from the foreign court before seeking an anti-suit injunction: “a Canadian court should only rarely pre-empt a foreign court’s opportunity to address whether an action before them is properly brought: Amchem at pp 930–931. Either a stay should have been unsuccessfully brought in the foreign jurisdiction or there should be compelling reasons for not having done so” [82]. McHaffie J provided a thorough discussion of the caselaw illustrating what might constitute “compelling reasons”: [83]–[87]. He concluded that a compelling case had not been made out on the facts, but it was unnecessary for him to decide whether this was in itself sufficient reason to deny Seismotech’s request, given his conclusion on the main elements of the Amchem analysis.

Finally, there are some general comments that I’d like to highlight [citations omitted]:

[59] Contractual agreements pertaining to intellectual property will frequently cover rights in multiple jurisdictions, and even globally. Contrary to Seismotech’s submission, there is no requirement that the same provisions in the same contract be litigated separately in every jurisdiction in the world in which those intellectual property rights arise. I note that courts in Canada have been willing to interpret contracts as they pertain to international intellectual rights, even where those contracts are made under foreign law. A Canadian court may also be considered forum conveniens in respect of a transborder intellectual property dispute, even where relief is sought pursuant to the laws of the United States. As Professor Vaver summarizes, “IP-related activity that has a real and substantial connection with a country, province, or state can be handled by a court that is a convenient forum, whether or not the defendant accepts or is present within the jurisdiction.”

This is all very reasonable, but it goes considerably beyond the facts at hand. I’ll point out that the UKSC decision in Unwired Planet v Huawei [2020] UKSC 37, holding that a UK court may enjoin the sale of infringing products that incorporate an industry standard if the parties do not enter into a global license for patents covering that standard, has been very controversial: see eg here and here. There is a fear that there will be a race to the bottom, as patentees, and particularly patent assertion entities, will seek a global judgment from a patentee-friendly court. This may be exacerbated by the possibility of “forum selling”, in which courts compete to attract high-stakes litigation by making themselves increasingly patentee friendly. At some level these concerns call into question whether the strong presumption of comity that is reflected in Amchem is sound. There are also many differences between the SEP / FRAND litigation and this case—the validity of the patents is not at issue; infringement is not at issue; global licensing terms are not at issue—though these all go to substantive issues rather than the issues relating to the connection to the forum which are the focus of the Amchem anti-suit injunction analysis.

While I’m not an expert in this area, Seismotech strikes me as a relatively easy case; given the strength of the connection to California and the nature of the dispute, the California court is arguably more appropriate than the Canadian Federal Court. More contentious patent cases, such as the SEP / FRAND litigation, raise issues that may pose more of a challenge.

No Strict Rule that an NPE Cannot Elect an Accounting

Pfizer Canada ULC v Seedlings Life Science Ventures, LLC 2021 FCA 154 Locke JA: Gleason, Laskin JJA affg 2020 FC 1 Grammond J

2,486,935 / FCA Sufficiency / FCA Overbreadth / FC accounting / FC reasonable royalty / FC novelty and utility / FC claim construction / FC Overbreadth

My prior posts on Seedlings dealt with insufficiency and overbreadth. This one considers the issue of entitlement to an accounting. My prior posts were long, but I’ll keep this one short, given that I agree entirely with Locke JA’s discussion on this issue.

As discussed here, Grammond J at first instance indicated in obiter that a non-practising entity cannot be entitled to an accounting of profits: “where the patentee does not itself manufacture, distribute or sell the invention, it cannot be entitled to the profits made by the infringer with respect to those activities” [FC 252]. While Locke JA’s conclusion that the claims were invalid made it unnecessary to address the question of remedies, he nonetheless took the opportunity to do so, stating that there is no authority for a strict rule of that type: “none of the cited decisions provides firm support for the broad principle that a patentee that makes (or intended to make) profits by selling licenses to its patent should not be entitled to elect an accounting of profits” [78].

Moreover, a strict rule prohibiting a non-practising entity for electing an accounting would not be sound policy, particularly given that an entity that does not practice the invention is not necessarily a patent troll:

[79] I am particularly concerned about the potential effect of such a broadly defined principle on inventors who recognize that their specialty lies in inventing, and that production and marketing of their inventions are better left to different specialists. Such inventors will seek to license third parties to take their inventions to market as a matter of business efficiency. The broadly defined principle would force such inventors to choose between business efficiency and retaining a potential remedy for infringement of their patent rights. The value of a patent would therefore be reduced for specialist inventors. I see no reason to force such a choice. In my view, business efficiency should be encouraged.

This is not to say that it is irrelevant whether the patentee practices the invention itself, but only that it is not determinative.

[81] Certainly, a patentee’s decision to license its invention may be a factor for a court to weigh when considering whether to permit a patentee to elect an accounting of profits. However, I disagree that such a decision should necessarily deny a patentee the right to elect.

What is “the Core of the Invention”?

Pfizer Canada ULC v Seedlings Life Science Ventures, LLC 2021 FCA 154 Locke JA: Gleason, Laskin JJA affg 2020 FC 1 Grammond J

2,486,935 / FCA Sufficiency / FC accounting / FC reasonable royalty / FC novelty and utility / FC claim construction / FC Overbreadth

The FCA Seedlings decision is important for expressly affirming that overbreadth is an independent ground of invalidity and holding on the facts that the claims of interest were invalid for that reason. In my article Overbreadth in Canadian Patent Law: Part I (2020) 33 IPJ 21, I suggested that a revival of overbreadth as an independent ground of invalidity runs the risk of turning into a new kind of the promise doctrine, in which claims to perfectly good inventions will be invalidated based on an idiosyncratic parsing of the disclosure. Seedlings has done nothing to assuage my fears, and much to confirm them. Seedlings holds that a claim is overbroad if it omits elements which are at “the core of the invention.” Seedlings is express that “the core of the invention” is different from the essential elements of the claim, and, more importantly, Seedlings also makes it clear that “the core of the invention” is different from the inventive concept. Identifying the inventive concept has proven contentious enough and now we have a similar sounding but somehow different concept to wrestle with. The prior caselaw does not provide any assistance. As Locke JA acknowledges at [50], [52], in almost all of the prior cases, overbreadth overlaps with another ground of invalidity, so we cannot find guidance as to how overbreadth might apply as a distinct ground of invalidity. And indeed, in Seedlings itself, overbreadth overlaps with insufficiency both in the facts and in the reasoning. (See here for my post on insufficiency.) We are nonetheless assured that it is “a distinct ground of invalidity that must be considered separately” [50]. In this post I do my best to try to understand how overbreadth operates as an independent doctrine. Unfortunately, I come up empty-handed. It appears to me that to the extent that overbreadth is different from insufficiency, “the core of the invention” was identified largely arbitrarily.

With the FCA nonetheless expressly approving overbreadth doctrine, we will undoubtedly see overbreadth raised regularly in upcoming litigation. Given the very limited guidance provided by Seedlings, we can expect trial judges to struggle with how to apply the doctrine. I expect we will see a variety of approaches with more or less arbitrary results, which will ultimately have to be sorted out by the FCA. I have no idea where we will end up, but it will certainly be interesting times for patent litigators.

Enabling After-Arising Technology

Pfizer Canada ULC v Seedlings Life Science Ventures, LLC 2021 FCA 154 Locke JA: Gleason, Laskin JJA affg 2020 FC 1 Grammond J

2,486,935 / FC accounting / FC reasonable royalty / FC novelty and utility / FC claim construction / FC Overbreadth

The Seedlings decision is notable for holding that overbreadth is an independent ground of invalidity, but the discussions of insufficiency and entitlement to an accounting are also of interest. In this post, I’ll start with the insufficiency issue, which raises the very difficult issue of how the enablement requirement applies to after-arising technology. The post is long, but the bottom line is that the key holding, that “[t]he disclosure must teach the skilled person to put into practice all embodiments of the invention, and without exercising inventive ingenuity or undue experimentation” [68] This must be wrong, or any invention that is capable of improvement would be invalid for insufficiency. But this means that on its face, Seedlings raises some very obvious avenues of attack on almost any patent, particularly those relating to mechanical inventions. I suspect these attacks will mostly fail—unsurprisingly, there is a very large body of caselaw to the effect that a patent is not invalid simply because it encompasses improvements. Unfortunately, I don’t see a lot of wiggle room for a principled distinction on the facts. So the interesting question will be how the FCA will handle Seedlings going forward and how much the law will ultimately change as a result.

The invention at issue relates to an auto-injector, primarily intended for injecting epinephrine to treat anaphylaxis. The best known auto-injector is the EpiPen. The original EpiPen was relatively bulky—a cylinder about 15 cm long and 2.5 cm in diameter—which made it inconvenient to carry. Another problem was that the needle remained exposed after use, which is a particular concern in light of the risk of transmission of blood-borne diseases [FC 11]–[12]. The patented injector device solved these problems. It is flat and much smaller than the original EpiPen—the size of a thick credit card—so it is more easily carried and used [FC 63]; and it has an actuator that moves forward once the injection is complete to serve as a shield that protects the needle [FC 19]: see the video here. This second aspect of the invention, which I’ll refer to simply as the needle shield, is at the center of the holding on both insufficiency and overbreadth.

A number of claims were asserted, but the claims of particular interest are claims 40, 59, 60 and 62. Claim 40, which is representative of the claims of interest, “describes an auto-injector with a flat housing, that is front-actuated and that has an actuator that also serves as a needle shield. That is the ‘inventive concept’ of this claim” [FC 139]. These claims were invalidated by Grammond J solely on the ground of overbreadth. The FCA affirmed on overbreadth [56]–[65], but held that the claims were also invalid for insufficiency [66]–[72], reversing Grammond J [185]–[186] on that point. The claims were neither obvious nor anticipated ([FC 102], [FC 115], [FC 138] affd [40]–[45]), nor did they lack utility [FC 163]. Grammond J held that none of the asserted claims were infringed by Pfizer’s Next Generation Auto-Injector (NGA) Epipen, which is oval in cross-section, not flat [191], [208]. The FCA did not address infringement in light of its conclusion that the claims were invalid [74]. Consequently, the FCA holding on validity is not obiter, even in a technical sense.

Blogging break

 I'll be taking a couple of weeks off. Blogging will be a bit erratic after that until September.

Presumption That Marginal Rate of Return Equals Average Rate of Return

Apotex Inc v Eli Lilly and Company 2021 FCA 149 Boivin JA: Webb, Near JJA affg 2019 FC 1463 Zinn J [Cefaclor Interest]

            1,133,007 – 1,146,536 – 1,133,468 – 1,150,725 [the Lilly Patents]

            1,095,026 – 1,132,547 – 1,136,132 – 1,144,924 [the Shionogi Patents]

Is the Cefaclor litigation finally winding to a close, 25 years after the action was commenced? In Cefaclor liability FC 2009 FC 991 affd Cefaclor liability FCA 2010 FCA 240, Gauthier J found that at least one valid claim of each of Lilly’s patents had been infringed by Apotex. After Gauthier J was appointed to the FCA, Zinn J was assigned to hear the damages reference. His lost profits damages award of $31m was affirmed by the FCA, except in respect of the interest calculation: Cefaclor Damages FC 2014 FC 1254 affd Cefaclor Damages FCA 2018 FCA 217. Zinn J had awarded compound interest on the basis of a presumption that a plaintiff would have generated compound interest [FC 118] (see here), and the FCA remitted on the basis that there is no such presumption [FCA 156] and “a loss of interest must be proved in the same way as any other form of loss or damage” [FCA 158] (as discussed here).

The decision under appeal in this case is the interest decision on remand, which I’ll call Cefaclor Interest FC. In Cefaclor Interest FC, Zinn J set the compound interest rate by assuming that Lilly would use the money it would have had in such a way as to maximize its rate of return [30], [FC 27]. That’s fine, but he also set the rate at a rate equal to Lilly’s average rate of return [72]. The problem, as discussed here, is that as a matter of financial logic, the marginal rate of return—what Lilly would have done with the extra money—is necessarily lower than the average rate of return. Now of course, this is a matter for financial evidence, not just financial logic, but Zinn J considered the evidence of the financial experts to be “unhelpful”, because they carried out their analysis on the assumption that the lost profits were “a sum separate and apart from the other Lilly profits” [12], [FC 53]. That is, he disregarded the expert evidence as to the rate of return precisely because they carried out a marginal analysis. He preferred the evidence of Lilly’s fact witness, which was to the effect that Lilly would have spread the extra money among the same investments that it had made in the real world [13], [FC 55–56]. But there is actually no conflict between the financial experts and the fact witness. That Lilly would have spread the extra money among the same projects does not imply that the rate of return on extra money spent on those projects would be the same as the average rate of return on those projects. On the contrary, as a matter of financial logic, even if it is true that in fact Lilly would have spread the money among the same uses, the marginal return from an extra investment in those uses would have been less than the average return from those uses, again as discussed here. So far as I can tell, there was no evidence on the issue of the marginal rate of return on the same projects, presumably because the experts had focused their analysis on treating the extra money as a separate sum. In effect, Zinn J applied a presumption that the marginal rate of return would be the same as the average rate of return: “Where that proposed use of the slightly larger pool of profits parallels the use Lilly made in the real-world, there must be a heavy burden on Apotex to show that there was something making it impossible for Lilly to do so again” [FC 57].

Where does this leave the law? The FCA decision establishes that a trial judge is entitled to find that the marginal rate of return is the same as the average rate of return. But the issue was treated as a matter of fact at both levels of court, so this doesn’t establish a legal rule that the marginal rate of return is equal to the average rate of return. There is a “heavy burden” on a party seeking to show that average and marginal rates of return are different, but presumably that burden can be discharged by evidence directly on point, which we now know is necessary.

Stare Decisis and Statutory Interpretation

Janssen Inc v Canada (Attorney General) Mactavish JA: Stratas, Rennie JJA 2021 FCA 137 affg 2020 FC 904 Zinn J

esketamine hydrochloride / SPRAVATO

The FCA decision in Janssen is a straightforward application of the doctrine of stare decisis, with a loose end that raises some interesting questions for the application of stare decisis in the context of statutory interpretation.

Data protection is available for an “innovative drug” pursuant to section C.08.004.1 of the Food and Drug Regulations. “Innovative drug” is defined to mean:

a drug that contains a medicinal ingredient not previously approved in a drug by the Minister and that is not a variation of a previously approved medicinal ingredient such as a salt, ester, enantiomer, solvate or polymorph.

In a split decision in Takeda 2013 FCA 13, the FCA held that this definition should be interpreted to mean that the enumerated variations—a salt, ester, enantiomer, solvate or polymorph—were per se ineligible for data protection, regardless of the effort necessary to develop the data: see here. Stratas JA, dissenting, would have held that data protection is available for an enantiomer or other enumerated variation if regulatory approval for the drug required the submission of confidential data generated by considerable effort and the medicinal ingredient is materially different in terms of safety and efficacy: [22], Takeda [92]–[93]. I described the interpretive issue as a “hard case” where the purposive considerations relied on by Stratas JA pointed in one direction, while the textual and contextual considerations relied on by the majority pulled the other way.

In this case, Janssen applied for data protection for SPRAVATO, in which the medicinal ingredient is esketamine hydrochloride, an enantiomer of ketamine hydrochloride. Ketamine hydrochloride is the medicinal ingredient in the previously approved drug KETALAR. The Minister refused Janssen’s application. In the decision under appeal, Zinn J dismissed Janssen’s application for judicial review of that decision: see here. Zinn J accepted that there were factual differences between the cases. In particular, in Takeda both drugs were developed by the same company and used in the same manner for the same indication [FC 25], while in this case the enantiomer is indicated for an entirely different use: KETALAR is a narcotic, while SPRAVATO is an antidepressant. Thus, as a matter of policy, there is a stronger case for granting data protection in this case than in Takeda. (Note that in Takeda Stratas JA did not hold that data protection should be available for the enantiomer at issue on the facts, but only that the matter should be remitted for redetermination: Takeda [104]–[107].) However, as Zinn J pointed out, these facts were not material to the majority reasoning in Takeda, which held that the listed variations were per se ineligible, regardless of the amount of effort involved in developing the data: [41], [FC 26], Takeda [141].

In this appeal, Janssen acknowledged that the decisions below were consistent with Takeda. Its primary argument was that Takeda was wrongly decided and that Stratas JA’s interpretation of the provisions was correct [42], [71]. The FCA rejected this argument on the grounds of stare decisis, which permits departure from prior decisions only in “exceptional circumstances”: [72]–[79]. The FCA provided a useful brief summary of the relevant principles, with the most basic being that “one panel of this Court ought not to come to a different conclusion from a different panel, merely because it is of the view that the first decision was wrongly decided” [73], citing Miller 2002 FCA 370. The fact that Stratas JA was a member of both panels makes no difference: [80]–[83].

I agree with this result on the facts of this case, but I’m not comfortable with the Miller test. The law of stare decisis involves a trade-off between legal predictability and accuracy. In the easy cases, there is no conflict; if the first decision to address a point of law is clearly correct, then we get both predictability and accuracy by following it. But what if the first decision is wrong? When should we sacrifice accuracy, by following a wrong decision, for the sake of predictability? The Miller criteria set a very high bar for departing from a prior decision, giving very little weight to accuracy. The prior decision may be overruled only when it is “is manifestly wrong, in the sense that the Court overlooked a relevant statutory provision, or a case that ought to have been followed”: [75] quoting Miller [10]. “Manifestly wrong” has a “narrow” meaning, which is tantamount to saying the decision was made per incuriam: Olanzapine 2013 FCA 282 [8]. (It is a bit odd that the test for whether the FCA must follow its own precedent is much the same as the test for whether a lower court must follow a higher court.) Miller does implicitly acknowledge the trade-off between predictability and accuracy, but it adopts a threshold test for accuracy; where accuracy is unimportant outside the narrow threshold of manifestly wrong. This means that with Miller there is significant room for a lock-in effect from the first decision, where the initial decision may be generally considered to be wrongly decided, but will be reinforced by subsequent cases because it does not rise to the point of being manifestly wrong.

An alternative might be some kind of balancing test, which would more explicitly consider how likely it is that the prior decision was wrongly decided, how important the consequences are, and how much actual loss of predictability there might be. It might be said that the very use of a balancing approach to precedent would undermine predictability, because it would always be uncertain how a later panel would assess that balance. But I’m not sure that’s so different from where we are now, where problematic decisions are ignored, or gradually distinguished into oblivion. (Though that is easier when the point is factually suffused, rather than a narrow point of law.) How much worse would it be to explicitly recognize that some precedent is better than others, rather than doing it sotto voce? Another possibility would be greater use of expanded panels or en banc review, or some other approach entirely. I don’t have any answers here, but I do see a problem.

The problem of wrong precedent being locked in is particularly important in the context of statutory interpretation. As Professor Nina Varsava puts it “Does the judiciary have legitimate authority to knowingly misinterpret and misapply statutory law?”: How to Realize the Value of Stare Decisis 30 Yale J L & Human 62 (2018) 118. If the first decision interpreting a statutory provision is “manifestly wrong,” it can be revisited, but I am not sure it is sound to stick with an interpretation that is generally considered to be wrong, even if it is not “manifestly” wrong.

I should emphasize that I don’t think the main source of potential inaccuracy is poor legal reasoning on the part of the first panel to decide the issue. On that score, I do think the Miller criteria, amounting to whether the decision was made per incuriam, is appropriate. That is what makes this case an easy one. As the Court noted, the point was fully argued in Takeda and “[b]oth the majority and the minority decisions are thorough and carefully reasoned” [76]. Moreover, the case was a close call—my own view is that the majority decision was correct—with good arguments on both sides. There is much to be lost in terms of predictability if different panels flip-flop simply because they weigh close arguments slightly differently, and little to be gained in terms of accuracy of interpretation, given that either decision is about equally likely to represent the notional true intent of the legislature.

There are two other potential sources of inaccuracy that are much more important. One is that the full implications of a decision may become apparent only over time, as they are applied to different factual scenarios. A decision may be entirely well-reasoned and “right” given the information available at the time it was decided, and yet turned out to be wrong with the benefit of hindsight. That is largely what happened when, in Hospira 2016 FCA 215, the FCA departed from Aqua-Gem 1993 CanLII 2939 (FCA) on the standard of review for discretionary decisions of prothonotaries. The first reason the FCA gave for departing from Aqua-Gem was that experience had shown that the Aqua-Gem standard was difficult to apply and had generated confusion that detracted from the effective review of discretionary orders made by prothonotaries (Hospira [46]–[50]). A second reason was the persuasiveness of the reasoning on the same question in the Ontario courts (Hospira [51]–[55]). As I argued in my comment on Hospira, the FCA did not follow Miller in deciding to overrule Aqua-Gem: neither of these factors is relevant under the Miller test. Aqua-Gem was not poorly reasoned at the time it was decided (Hospira [49]) and it certainly was not manifestly wrong. This illustrates that the Miller criteria are poorly suited to a situation where the hindsight that comes with time and experience shows a prior decision to have been “wrongly” decided, even though it was entirely reasonable on the information available to the court at the time. None of these concerns are relevant to this case, as Takeda was recently decided and, so far as I can tell, nothing in our subsequent experience would cause us to weigh any of the arguments any differently.

Another source of error is when the case is poorly argued. This is perhaps particularly a problem for trial decisions, because the sheer number of factual and legal issues to be addressed can mean that a point that turns out to be important is not fully argued. My sense is that comity is not as powerful in the Federal Court for that reason. If a novel issue of law has been decided in a single prior FC decision, a subsequent FC judge will generally make their own assessment of the arguments before them, with the prior decision considered as one factor with considerable persuasive effect. (I’m afraid I can’t put my hands on particular examples right now.) This strikes me as a good approach. There is not much loss of certainty in the law, because a holding of law by the Federal Court is always liable to be overruled by the FCA in any event, and once a novel point of law has been addressed once, it is likely to be more thoroughly argued the next time. The same kind of problem can arise at the FCA level as well, particularly in cases (unlike Takeda), where there are multiple legal and factual issues being appealed.

The problem of a poorly argued case is particularly troublesome in the context of statutory interpretation. It’s disquieting to think that the law might depart from the intent of the legislature simply because a private litigant had argued its case poorly in the first decision on the issue.

This brings me to the loose end in this case. Janssen argued that the FCA should admit new evidence on appeal with respect to the effect of the repeal of NAFTA and the coming into force of CUSMA, and the impact that CUSMA should have on the interpretation of the data protection provisions [44]–[45]. In particular, “Janssen points out that under CUSMA, Canada agreed to provide protection to “new pharmaceutical products”, which are specifically defined as products that do not contain a chemical entity that has previously been approved” [46]: see CUSMA Art 20.48–20.49. Further, “Janssen notes that OSIP explicitly found that the medicinal ingredient in SPRAVATO had not been previously approved in a drug in Canada, and that this would qualify SPRAVATO for data protection under CUSMA” [46]. The FCA refused to admit the evidence on procedural grounds. First, Janssen could and should have made the argument in the Federal Court: [49]–[52]. The FCA noted that CUSMA was finalized in December 2019 and came into force on July 1, 2020, just before Janssen served and filed its application record in the Federal Court on July 17, 2020, and before its application was heard on August 31, 2020. Janssen therefore had the opportunity to make substantive submissions that CUSMA had changed the data protection regime, but failed to do so. Second, the question facing the Federal Court “was not to decide whether esketamine hydrochloride should be entitled to data protection. Its task was to determine whether OSIP’s decision to refuse data protection for SPRAVATO was reasonable, based on the record before it. OSIP [the Office of Submissions and Intellectual Property] rendered its decision on April 25, 2019, more than a year before the coming into force of CUSMA and the exchange of correspondence between the parties. Consequently, the agreement and the documents could have had no bearing on OSIP’s decision with respect to SPRAVATO, and they were not relevant to the task that the Federal Court had to perform” [54]–[55]. Both of these points strike me as compelling so far as procedural fairness to Janssen is concerned.

But what happens next time the same issue arises? Substantively, Janssen’s argument strikes me as quite reasonable. It would certainly have been taken into account if the interpretative question has been argued for the first time after CUSMA had come into force and it is at least possible that it would have tipped the balance. But the interpretive question is no longer a matter of first impression. As a matter of stare decisis, is the coming into force of CUSMA an “exceptional circumstance” that would warrant departing from Takeda, even though the legislation itself has not changed? This question raises an interesting point of principle. Suppose that the CUSMA argument was a knock-down argument that made it clear that Stratas JA’s position was correct. (I should say that this is purely for the sake of argument; I really have no opinion how the CUSMA argument would play out if it were added to the interpretive mix.) If the enactment of CUSMA was not an “exceptional circumstance” as a matter of the law of stare decisis, the result would be that a clearly wrong interpretation of the legislation would prevail simply because a private party had failed to make the argument at its first opportunity. I find this to be a troubling possibility; though perhaps it is simply a reflection of the fact that the interpretation of legislation through private litigation inevitably means that the interpretation will be shaped in part by the litigation strategy of the parties. Professor Varsava goes to far as to suggest that we should abandon stare decisis in the context of legislative interpretation, in part for that reason: see Varsava, How to Realize the Value of Stare Decisis 30 Yale J L & Human 62 (2018) 117–18. I would not go that far, but the point is an interesting one.

Because the FCA decided on procedural grounds, it was not necessary to address this question, and the Court—wisely, in my view—did not discuss the substantive point even tangentially. The door therefore remains open for this argument to be made. I expect we will find out the answer in due course, after the CUSMA argument is properly made to OSIP and it winds its way back up to the FCA on a more complete record.

Double Patenting over Published Prior Patent

Hoffmann-La Roche Limited v Sandoz Canada Inc 2021 FC 38 Manson J

2,667,654 / 2,709,997 / pirfenidone / ESBRIET / NOC

As I mentioned in my first post on this decision, Roche’s 997 patent was found to be invalid for obviousness-type double patenting over Roche’s 654 patent [148]–[153], even though the publication date of the 654 patent, June 26, 2008, was before the claim date of the 997 patent, November 10, 2008 [9], [11], [153], so the 654 patent was prior art over the 997 patent. In my first post, I didn’t make much of this point. I just said that I was “a bit puzzled” as to why the argument was run on a double patenting basis, given that the 654 patent was prior art over the 997 and so, under Hospira 2020 FCA 30, would have been part of the state of the art against the 997 patent. I suggested that “Perhaps Sandoz felt it was safer to use double patenting rather than to rely on the Hospira doctrine—presumably the 654 patent was not part of the common general knowledge and would not have been discoverable in a reasonably diligent search.”

On further reflection, it seems to me problematic to use double patenting in this situation. Now, it may not matter, if indeed under Hospira the 654 patent is part of the state of the art against the 997 patent. But what if there is a difference? Suppose the 654 patent could not be used in an obviousness attack against the 997 patent, but it could be used in a double patenting attack. In that case, allowing a double patenting attack would mean that the patentee is in a worse position than an unrelated third party. That is, suppose that the 654 patent can be raised against the 997 patent in a double patenting attack, but not in an obviousness attack, and suppose that the 997 patent is obvious over the 654 patent, but not otherwise. That means that the 997 patent would be considered a valid inventive improvement if granted to a third party, but would be invalid if granted to Roche. This seems to me to be contrary to the general principle that validity is objective. It also strikes me as unfair that Roche should be at a disadvantage in patenting improvements to a base technology that it invented and disclosed. 

There is also a problem of consistency with the Act. In Sanofi 2008 SCC 61 [12], the Supreme Court remarked that the law of patents is “wholly statutory.” That is a considerable overstatement: the double patenting doctrine itself, which was approved by the SCC in Whirlpool 2000 SCC 67, is a judicially created doctrine which, in the classic application, prevents an inventor from obtaining a second patent for an invention which is an obvious variant of an invention disclosed in its own unpublished prior application. The doctrine was thought to be necessary precisely because that prior application is not part of the state of the art as statutorily defined in s 28.3. There are many other instances where the courts have supplemented the sparse or ambiguous language of the statute: the non-obviousness requirement, fundamental as it is, was not codified until 1993. But there are limits. As the SCC also pointed out in Sanofi 2008 SCC 61 [12], “the general concepts which are the common currency of patent lawyers are founded on a statutory text, and cannot have any other firm foundation.” If the prior application has already been published, there is no loophole to close.

Now, as noted, none of this matters if, under Hospira the 654 patent could also be raised in an obviousness attack against the 997 patent even if granted to a third party. But that isn’t an adequate reason for holding that the double patenting doctrine applies even if the prior application is published. Hospira postdates the double patenting doctrine, and the two developed independently. If the double patenting doctrine applies now, it would also have applied prior to Hospira, when it did undoubtedly make a difference. Further, Hospira is recent and there is perhaps still some uncertainty as to its scope. Applying the double patenting doctrine in this scenario means that the 997 patent was held to be invalid without ever addressing whether the 654 patent was part of the state of the art against it.

Another problem with using double patenting in this case is that the obviousness-type double patenting was assessed as of the claim date of the 997 patent [153]. That is clearly the appropriate date for an obviousness attack, but it is not clear that it is the correct date for a double patenting attack, as it is currently unsettled whether the appropriate date is the claim date of the first (654) or second (997) patent: see here and here. Now, Manson J has previously held that the appropriate date is the second claim date, and perhaps that is why he used it, but the point is not settled at the FCA level, and it would have been preferable to have this issue discussed expressly.

Since Manson J did not have any discussion at all of whether it was appropriate to use double patenting in this situation, I would presume that Roche simply didn’t object to the use of the double patenting attack and instead chose to focus its efforts on the substantive question of obviousness. Consequently, I would suggest that this decision is not strong authority for the proposition that it is permissible to use obviousness-type double patenting when the first patent is already published.

Direct Infringement and Swiss-Form Claims

Hoffmann-La Roche Limited v Sandoz Canada Inc 2021 FC 38 Manson J

2,667,654 / 2,709,997 / pirfenidone / ESBRIET / NOC

Roche’s 654 and 997 patents at issue in this NOC proceeding relate to the use of pirfenidone in the treatment of idiopathic pulmonary fibrosis [IPF]. As discussed in my last post, Manson J held that the asserted claims of both patents were invalid for obviousness and as being methods of medical treatment. This post will address Manson J’s construction of the Swiss-type claims.

The 654 patent claimed a dose escalation regimen, while the 997 patent claimed full dose treatment of a patient who had exhibited liver abnormality after initial treatment. The details of the claims don’t matter for present purposes. Both patents had three distinct claim types [95]–[96]:

            1) “German-style” — “Use of [drug] for treatment of [disorder]

2) “Swiss-style” — “Use of [drug] in the manufacture of a medicament for treatment of [disorder]

3) “Product for use style” — “[Drug] for use in the treatment of [disorder]

Sandoz argued that “Swiss-style claims do not apply in Canada and are properly construed as ‘use’ claims where the alleged invention resides in the use and not in the manufacture or composition of the medicine” [96]. Roche apparently argued that there is a substantive distinction between the claim types, such that Sandoz would be a direct infringer of the Swiss-style claims. (Manson J did not expressly state Roche’s argument.)

Manson J rejected Roche’s approach, saying it “seeks a finding of claim form over substance. In doing so, it obscures the proper approach to claims construction. As discussed above, the claims construction exercise emphasizes a purposive construction” [97] (original emphasis); and similarly, the case law “supports an approach to claims construction which values substance over form” [107].

With respect, it’s not quite right to say that a purposive approach focuses on substance over form—though in saying that, I have to admit that in a previous post on the UKSC decision in Warner-Lambert v Actavis [2018] UKSC 56, I made comments about Swiss-form claims that were very much along the same lines as those as Manson J in this case, so the extent that I am disagreeing with Manson J’s analysis, I am also disagreeing with myself. In any event, the principles of statutory interpretation apply to claim construction by virtue of the Interpretation Act: Whirlpool 2000 SCC 67 [49(e)]. Those principles require consideration of text, context and purpose: Canada Trustco 2005 SCC 54 [10]; Canada v Utah 2020 FCA 224 [9]. Purpose is one consideration, but primacy is given to the text, both in statutory interpretation generally—“When the words of a provision are precise and unequivocal, the ordinary meaning of the words play a dominant role in the interpretive process”: Canada Trustco 2005 SCC 54 [10]— and in claim construction in particular, where “The primacy of the language of the claims was emphatically affirmed in the celebrated case of Catnic Components Ltd. v. Hill & Smith Ltd., [1982] R.P.C. 183 (H.L.)”: Whirlpool 2000 SCC 67 [40]. Thus the purpose and context inform our understanding of the text, but the focus is on the text itself. A purposive analysis may in principle result in some part of the text effectively being read out of the claim, but this is rare in practice and is only done after an explicit essentiality analysis, which was not at issue here.

The main purposive consideration relied on by Manson J was to the effect that the inventive concept was the dose escalation regime: “there is nothing novel about the manufacture or composition of pirfenidone to treat IPF in this case, but only a new dosing regimen of pirfenidone for use in the treatment of IPF” [103]; “The alleged invention in this case resides in the use of pirfenidone, whether in the context of the 654 or 997 Patent, and not in the manufacture or composition of pirfenidone, a known compound” [97]. That’s true enough, but it doesn’t imply that the claim should be construed as a use claim. Manson J’s analysis almost seems to imply that a patentee is restricted to a claim form that directly reflects the inventive concept, and that has never been the law. A claim that does not encompass the inventive concept will normally be invalid for obviousness or anticipation, but there is no general prohibition on adding other elements that narrow the scope. For example, if an inventor discovers a new medical use for a known compound, the inventive concept lies in the discovery of the use. While the patentee will normally claim the use to treat the disorder, the patentee may also claim the product for use in various forms, such as a tablet, capsule, injectable form and a form for parenteral administration, even though none of the various forms involves an additional inventive step. Manson J also referred to the experts’ understanding of the claims expert understanding of the claims as relating to a dose escalation regimen [91], [97]. In effect, they understood the claim as being addressed to the inventive concept. But claim construction is for the court, not the experts, and the fact that a scientific expert ignored the text does not mean that the court should do so.

Why does it matter? Two substantive points are engaged. The Swiss-form claim was originally developed to avoid the European prohibition on patenting of methods of medical treatment. A Swiss claim is to the use of the drug “in the manufacture of a medicament,” and since the physician who prescribes a drug does not manufacture it, on its face, physicians are excluded from the scope of infringement. The rationale currently offered by Canadian courts for the prohibition on patenting methods of medical treatment is to ensure that the patent does not impede the physician in their treatment of their patients, so if Swiss-form claims were successful in excluding physicians from the scope of the claim, it would certainly be a point of substance. However, as the EWCA pointed out in Warner-Lambert v Actavis [2015] EWCA Civ 556 [54], the Swiss-form claim is probably not effective in excluding doctors from the scope of the claim: “As the claim is a process claim [under s 60 of the Patents Act 1977], its direct product, the medicine, is an infringement, and all those who use or dispose of the product will infringe.” The same appears to be true in Canadian law, in light of the Saccharine doctrine: see Hospira 2018 FC 259 [328]. The basic problem is that if a Swiss-form claim is infringed only by the actual manufacturer, then a generic could escape infringement of a Swiss claim by manufacturing abroad (as was argued, and rejected, in Hospira); but since Swiss claims are construed as encompassing the product of the patented process, it follows that the sale and use—including by physicians and patients—will also infringe. The lesson here seems to be that the problem of patentability of methods of medical treatment is not going to be solved by clever claim drafting.

But there is another aspect to Swiss claims. If construed as a claim to the process of manufacture and not solely as a use claim, then the manufacturer would be a direct infringer. This is entirely aside from the issue of whether those who use the product are infringers as well. In this case, the result of Manson J construing the Swiss claim—on its face a process claim—as a use claim, is that even though Sandoz evidently used the process, by manufacturing a medicament for the claimed purpose, it was not liable for direct infringement of the Swiss claim, “as it does not and will not use the Sandoz Products in the treatment of IPF” [108]. That is, the original purpose of Swiss claims was to exclude physicians from the scope of the claim, so that only the manufacturer would be a direct infringer. If Swiss claims are construed as use claims, the result is that the manufacturer is excluded from the scope of direct infringement, while physicians are encompassed—effectively the opposite of the original intent.

Roche therefore was confined to an argument in indirect infringement, which requires (i) direct infringement; (ii) inducement by Sandoz; (iii) knowledge by Sandoz. The direct infringement is that of the physicians and patients, and the knowledge requirement is only that Sandoz knows that its actions will result in direct infringement. The first and third elements will normally be readily established in any case in which the generic makes and sells a product with indications for the specified use, as happened in this case: [142], [123]. The real difference between direct and induced infringement lies in the second requirement. The main issue in this case, as is typical, is whether prescribing physicians read and are influenced by the Product Monograph which directs an infringing use [124]–[141]. If the Swiss claims were construed as process claims, then Sandoz would have been a direct infringer, and it would not have been necessary for Roche to establish that the physicians read and were influenced by the PM. Because the the Swiss claims were construed as use claims, Roche was required to prove that physicians do actually read the Sandoz PM. In this case, Roche was able to establish that at least some phyusicians would consult the Sandoz PM [140], so indirect infringement was established, albeit with an extra evidentiary hurdle.

So, construing the Swiss claims as use claims means that a generic that made and sold a drug intending it to be used for the patented purpose, and which was in fact used for the patented purpose, will not be liable unless the patentee can establish that the physicians read and were influenced by the generic PM. If the facts establish that physicians read the brand PM and rely on their knowledge that the generic product is equivalent, without actually being influenced by the generic PM, the generic will be able to make and sell the drug for the patented use.

As a practical matter, the patentee is usually able to prove that the physicians were influenced by the generic PM, so the result is only to add cost and complexity without changing the result. This would be acceptable if there were some good reason of policy or principle for enabling the generic to escape liability if the physicians rely on the brand PM instead of the generic PM; but I have considerable difficulty seeing any good reason for restricting the scope of infringement in that manner. The requirement of influence makes good sense when the product has a substantial non-infringing use, to ensure that the defendant is not prevented from selling the product for non-infringing uses: see generally Contributory Infringement in Canadian Law (2020) 35 CIPR 10. But why should a generic be permitted to sell a product which it specifically intends should be used to infringe, and which is in fact used to infringe, simply because the physician relies on the brand PM and equivalency, instead of reading the generic PM? In effect, construing the Swiss-type claim as a use claim introduces a substantive limitation on the scope of infringement. Perhaps there is some good policy reason for it, but if so, it should be directly articulated. I have a draft paper “Is 'But For' Causation Necessary to Establish Inducement?” arguing that the law of inducement should be clarified to avoid this result. Unless it is, the construction of Swiss-form claims will remain significant even if the confusion over patentability of methods of medical treatment is eventually resolved.

A New Twist on the Patentability of Method of Medical Treatment

Hoffmann-La Roche Limited v Sandoz Canada Inc 2021 FC 38 Manson J

2,667,654 / 2,709,997 / pirfenidone / ESBRIET / NOC

Roche’s 654 and 997 patents at issue in this NOC proceeding relate to the use of pirfenidone in the treatment of idiopathic pulmonary fibrosis [IPF], a rare, chronic and incurable lung disease [7], [12]. Manson J held that Sandoz would induce infringement of the asserted claims of the 654 patent by making and selling its generic product, but the asserted claims of both patents were invalid for obviousness and as methods of medical treatment. The asserted claim of the 997 patent was also invalid for obviousness-type double patenting. Various other invalidity attacks failed. The obviousness analysis was legally straightforward and turned on the facts. This post will provide background and focus on the patentability of methods of medical treatment, where Manson J has introduced a novel twist into a confusing area of law. Another interesting issue relates to the construction of Swiss form claims, which I’ll deal with in a subsequent post.

It was common general knowledge at the relevant date that pirfenidone was under investigation as a treatment for IPF, and preliminary results were promising though inconclusive [70]. Consequently, the use of pirfenidone for the treatment of IPF could not be claimed. Instead, the 654 patent claimed a dose escalation regimen, intended to minimize side effects [8], [158]. The 997 patent claimed full dose treatment of a patient who had exhibited liver abnormality after initial treatment [10], [182]. The prior art indicated that treatment should be stopped if a patient developed liver function abnormalities with the use of pirfenidone, and the 997 patent disclosed that such patients could still receive the full dose, with suitable monitoring of liver function.

The 654 patent was held to be invalid on a straightforward obvious-to-try analysis, given that it was common general knowledge that a dose escalation regime was one way of minimizing side effects and that there was no particular difficulty in arriving at the claimed regime [166]–[181]. The 997 patent was obvious because management of drug-induced liver toxicity was part of the cgk and continuing treatment while doing so would be an obvious alternative to discontinuing treatment entirely if the benefits outweighed the risks [66(ii)], [190]. The 997 patent was also found to be invalid for obviousness-type double patenting over the 654 patent [148]–[153]. I’m a bit puzzled as to why this argument was run on a double-patenting basis, as the publication date of the 654 patent was June 26, 2008 and the claim date of the 997 patent was November 10, 2008 [9], [11], [153], so the 654 patent was prior art over the 997 patent and so, on Hospira 2020 FCA 30, would have been part of the state of the art against the 997 patent. Perhaps Sandoz felt it was safer to use double patenting rather than to rely on the Hospira doctrine—presumably the 654 patent was not part of the common general knowledge and would not have been discoverable in a reasonably diligent search.

Both patents had three distinct claim types [95]–[96]:

            1) “German-style” — Use of pirfenidone for treatment of IPF

2) “Swiss-style” — Use of pirfenidone in the manufacture of a medicament for treatment of IPF

3) “Product for use style” — pirfenidone for use in the treatment of IPF

Manson J construed all the claims as “use claims” including the Swiss-type claims [107], and consequently did not distinguish between them in assessing whether they claimed unpatentable methods of medical treatment. In this post, I’ll focus on the German-style claims of the 654 patent, which are use claims on their face, so as to avoid any of the tricky claim construction issues that arise with the Swiss-type claims.

Manson J stated that “Patent claims to methods of medical treatment are prohibited in Canada and are not patentable under section 2 of the Patent Act” [195]. This is perhaps now in doubt—see Cobalt 2015 FCA 116 [55]; Hospira 2020 FCA 30 [53]—but it’s well established at the Federal Court level and I won’t pursue the point here. The main battle ground is over what constitutes an unpatentable method of medical treatment: for background see here and here.

Claim 1 of the 654 patent was of the following form (the full claim is reproduced below):

1. Use of X for treatment of disorder Y at a [dosage regimen with fixed dose and schedule]

Manson J held this to be an unpatentable method of medical treatment, essentially for the following reason:

[195] Patent claims are invalid where they prevent or restrict physicians from applying their skill and judgment. . . . . [T]he crucial question remains of whether the 654 and 997 Asserted Claims encroach on the skill and judgment of physicians.

The claimed regimen specified fixed doses and a fixed schedule, and, as Manson J noted, such a regimen will not normally be held to be a method of medical treatment [197]. However, picking up on an obiter comment in AbbVie 2014 FC 1251 [114], Manson J held that a fixed dosage regime is patentable “unless there is evidence to contradict the claimed dosage” [197]. He held that such evidence exists in this case:

[204] [T]he evidence has established that there is a continued need for a physician’s exercise of skill and judgement, as the default dose escalation regimen is not appropriate for all patients taking pirfenidone for the treatment of IPF. There are several anticipated adverse effects and individualized patient characteristics that require the attention of the prescribing physician.

In particular, the specified dose escalation regimen would not be tolerable for all patients [205]; pirfenidone is associated with adverse effects that require individualized assessment [206]; deviations from the regimen might be warranted due to “dietary habits, experienced nausea, a patient’s assessment of the adverse events and frailty” [207].

The main take-away is that whether the claim is to a method of medical treatment doesn’t turn just on the claim itself, but requires a fact-based analysis as to how the treatment is likely to be administered in practice. The question isn’t whether the claim specifies a fixed dosage, but whether a fixed dosage will actually be administered in all cases. This is a novel holding. I wouldn’t say it is a departure from prior law. Rather, the prior cases have implicitly assumed that patentability is determined by the nature of the claimed subject-matter. That is, a claim to “the use of X to treat disorder Y” was considered to be patentable subject-matter, even if the use might be discontinued in practice. That assumption has now been disrupted.

A few observations:

1) This means that you can’t tell by reading the patent whether it claims patentable subject-matter. The question, on Manson J’s analysis, is whether it interferes with the physician’s skill and judgment in fact, not in principle. I find this odd for an attack that turns ultimately on whether the claimed subject-matter falls within a category specified in s 2. In Harvard Mouse 2002 SCC 76 [172], the SCC held higher life forms to be unpatentable in part because of concerns that “innocent bystanders” might inadvertently infringe through adventitious entry (see Harvard Mouse 2002 SCC 76 [172]. Under a fact-oriented approach, we might say that higher life forms are unpatentable if and only if the particular claimed form is likely to escape from the owner adventitiously. Of course, other validity attacks, such as obviousness or anticipation, turn on the facts, so it’s not objectionable in principle that validity should turn on the facts of the case, but it nonetheless seems strange to me for that to be true for subject-matter, though I can’t put my finger on exactly why.

2) The factual inquiry as to whether individualized assessment is necessary either radically disrupts established law or relies on an arbitrary distinction. For example, it is well established that “X for treatment of disorder Y” is patentable subject-matter: Wellcome / AZT 2002 SCC 77 [50]. From the little I know, in fact even AZT requires individualized assessment, eg if tolerance develops. More generally, I suspect that there are very few if any drugs that are well tolerated by 100% of the population and do not require any individualized assessment. If Manson J’s fact-based analysis is generally applicable, as suggested by his statements at [195], claims of the form “X for treatment of disorder Y” are unpatentable if it can be established on the facts that individualized assessment is necessary, or that some patients cannot tolerate the drug at all. If accepted, that would be a revolution in the law, resulting in the invalidation of many valuable patents. I can't imagine it would be very difficult to establish the factual basis for this kind of attack on a use claim, so I expect we will see it in due course. It will be interesting to see what happens.

An alternative would be to say that the fact-based inquiry applies only to claims to a fixed dosage or fixed dosage schedule: Manson J’s remarks at [195] were general, but his statement at [197] was more specific to those types of claims. In that case, the “rule” would be that “X for treatment of disorder Y” is patentable subject-matter regardless of whether individual deviations might be required, but “X for treatment of disorder Y at a fixed dosage” is patentable only if individual deviations are never required. Such a distinction strikes me as entirely unprincipled—though admittedly not more unprincipled than most of the distinctions in this area.

3) Manson J’s basic point was that the claim is unpatentable if it “prevent[s] or restrict[s] physicians from applying their skill and judgment.” This is the usual rationale for the restrictions on methods of medical treatment in the Federal Court caselaw. The difficulty with this rationale is that it isn’t consistent with the patentability of claims of the type “X for treatment of disorder Y.” As I noted in a previous post, the claim at issue in Wellcome / AZT was to a formulation comprising “an effective amount” of AZT ('277 claim 22). In the context of a use claim without any specific dosage regime, that effective amount must be determined by the physician in the exercise of their skill and judgment. Indeed, the SCC expressly held that the claims at issue were not unpatentable methods of medical treatment on the basis that the physician was left free to exercise her skill and judgment: “How and when, if at all, AZT is employed is left to the professional skill and judgment of the medical profession” [50]. If claims of the form “X for treatment of disorder Y” don’t restrict physicians from applying their skill and judgment, then I don’t see how claims of the form “X for the treatment of disorder Y according to fixed dosage regimen” are any different. Adding Manson J’s point that an individualized assessment may be required to decide whether the claimed use is appropriate doesn’t make it any easier to reconcile this holding with Wellcome / AZT. To paraphrase, “How and when, if at all, [the claimed fixed dosage regimen] is employed is left to the professional skill and judgment of the medical profession.” That is precisely the reason given by the SCC in Wellcome / AZT for holding the claimed use was not a method of medical treatment and I can’t see how the point is any different when a fixed regimen is claimed instead of a use.

In making these observations I mean no criticism of Manson J, who had the unenviable task of applying incoherent principles in an inconsistent area of law. As the Court of Appeal has recognized, and as Manson J recognizes in this decision [195], the law relating to what constitutes an unpatentable method of medical treatment is confused and inconsistent at best. Manson J’s basic point that a claim is unpatentable if it encroaches on the skill and judgment of physicians strikes me as unpersuasive, but it is certainly not new: see eg Janssen / galantamine 2010 FC 1123 [55]. Indeed, it is the main justification for the rule against patentability of methods of medical treatment. With that said, the fact-based analysis undertaken by Manson J adds a new twist to an already twisted area of the law. It will be interesting to see what happens if someone tries to run this kind argument in respect of a more standard claim to “X for the treatment of Y.” I doubt that argument would succeed, but given the state of the law, anything is possible.

More broadly, this decision illustrates how incoherent this area of the law is. It also shows that the issue isn’t going to go away on its own. We will be facing incoherent and inconsistent decisions on this issue until the Court of Appeal takes it up. In Hospira, the FCA articulated a willingness to do so in the appropriate case. I rather doubt that this will be the case, given the holding on obviousness, but this will be worth keeping an eye on if it goes to the FCA.