Wednesday, May 23, 2018

Testing in not Invention

MIPS AB v Bauer Hockey Ltd 2018 FC 485 Gagné J
            2,798,542 [MIPS Patent]
            2,784,316 / 2,821,540 / 2,838,103 / 2,847,669 [Bauer Patents]

MIPS v Bauer concerns an invention near and dear to me, namely sports helmets designed to absorb rotational energy in order to minimize brain injury. (I do a lot of cycling, and all of my current helmets are equipped with MIPS technology.) Both Bauer and MIPS had developed and patented technology addressed at this problem. In this litigation, MIPS alleged that it was a co-inventor of the Bauer technology; that the Bauer products infringed the MIPS patent, and that the Bauer patents were invalid. In response, Bauer attacked the validity of the MIPS patent. The decision, that the MIPS employees were not co-inventors of the Bauer technology, the MIPS patents were valid but not infringed, and that the narrower claims of the Bauer patents were valid, turned on the facts and claim construction.

MIPS was an early leader in this technology, which is at the core of MIPS’ business. MIPS was founded in 2001 [15], and a patent for its first generation technology (MIPS I) was granted in Sweden in 2002. MIPS I used a sliding facilitator apparatus to allow rotational movement between the hard outer shell of the helmet and the inner energy-absorbing layer [13]. Its first product using this technology, an equestrian helmet, was launched in 2007 [16]. MIPS II technology was developed starting in 2009 [19], to address in-mold helmets, in which the inner energy absorbing layer is fused directly to the outer shell, making it impossible to place a sliding facilitator between the two. MIPS II technology uses an “attachment device” (3) as an interface between the wearer’s head and the inner energy absorbing layer, allowing relative rotation between the head and the inner layer.

Concussions are an increasing concern in hockey, and around the same time as MIPS was developing MIPS II, Bauer was also developing a technology to address rotational impact, specifically in hockey helmets, known as RE_AKT, using a SUSPEND-TECH floating liner.

Rotational impact is a relatively new concern in helmet design, and older testing equipment had been made to test only linear impact. The inventorship dispute arose because part-way through its development cycle, Bauer lost its academic partner responsible for testing, and Bauer, which had become aware of the MIPS I helmet, approached MIPS with the aim, as Gagné J held, of having MIPS test the Bauer designs. Gagné J’s decision recounts the details of the collaboration, but at the end of the day, she held that the MIPS team were not co-inventors of the Bauer product. The legal principle is that a party who tests an invention does not thereby become a co-inventor [93], and in this case Bauer employees had wholly conceived of the inventive concept, which had only been tested by MIPS [94], [100]. She noted that a series of events and coincidences (such as the fact that the inner liner on both products happened to be made of yellow material) had contributed to MIPS’ misperception of the facts [91].

On the issue of infringement, the MIPS products use an attachment device which is fixed securely to the head, with elastic fixation members between the attachment device and the inner energy absorbing layer. The attachment device and inner layer slide freely against one another, and energy absorption is achieved by deformation of the fixation members. The Bauer helmets, in contrast, have a floating liner, which is not securely attached to the head, and there are no fixation members as such, but rather energy absorption is provided by friction between the liner and the inner layer [184]. As Gagné J noted, to determine infringement, the defendant’s product is compared with the patent, not with the plaintiff’s product, even if that product embodies the invention. She held that using friction as a mechanism for absorbing rotational energy did fall within the broadest claims of the MIPS patent [163]. However, she also held that the claimed attachment device had to be coupled to the head, both before and during impact, and Bauer’s SUSPEND-TECH floating liner did not operate in that manner [192]. In effect, MIPS had not invented the concept of permitting rotation decoupling between the head and the helmet, but only one way of achieving that decoupling, and Bauer had independently developed another method. Because the attachment device was a crucial element of the claims, the Bauer products did not infringe [192], [197]. (MIPS also lost on other independent points, so the finding of no infringement did not rest on this issue alone [219].)

Bauer’s attack on the MIPS patent on the basis of anticipation and obviousness failed in large part because MIPS got caught in an infringement / validity squeeze [231], [243]. Because the court construed the “attachment device” more narrowly than MIPS’ experts, the validity attacks failed but so did infringement claim. A broader interpretation of the element would have led to a finding of invalidity [244]. (An overbreadth attack also failed on the facts [256].)

MIPS attacked the Bauer patents as being obvious in light of the MIPS II technology, which was on sale before the Bauer patent application was filed [257]. The broadest Bauer claim was held to be invalid for obviousness, on the basis that it would have been obvious to a skilled person to put a MIPS attachment device inside a hockey helmet, and that would fall within the claims [286], [287]. However, the narrow claims, addressed to Bauer’s specific implementation, were upheld [294].

Thursday, May 17, 2018

Formal Protective Orders Largely Unnecessary in Light of the Strength of the Implied Undertaking Rule

Seedlings Life Science Ventures LLC v Pfizer Canada Inc 2018 FC 443 Tabib J

While I do not normally blog on procedural decisions, Tabib J’s opinion in Seedlings Life Science v Pfizer is an important decision on an important point, namely the exchange of commercially sensitive information in litigation.

In her decision in Live Face on Web, LLC v Soldan Fence and Metals (2009) Ltd, 2017 FC 858 Tabib J held that, given the existence of the implied undertaking rule, the Court ought no longer to routinely issue consent protective orders [4]. In this case, Pfizer nonetheless sought a formal protective order. Pfizer did not attempt to distinguish Live Face on Web, but in effect asked Tabib J to overrule her own recent decision [6]. Unsuprisingly, Tabib J refused to do so, and consequently she refused to grant the order sought. But Pfizer nonetheless largely achieved its purpose. Pfizer’s concern was that notwithstanding Live Face on Web, there remains such uncertainty as to the scope, application and enforceability of the implied undertaking rule, that the clarity and certainty provided by an express protective order is necessary [37]. Tabib J acknowledged the merit of Pfizer’s “thoughtful and helpful” submissions, which “highlighted the specific areas where intellectual property practitioners may have had concerns as to the scope and certainty of application of the implied undertaking rule” [66]. Rather than issuing a protective order for clarification, Tabib J clarified the law itself.

Tabib J reviewed the history and meaning of a variety of mechanisms which can be used to protect sensitive information. These include the implied undertaking rule, “pursuant to which a party to whom documents or information are transmitted in the course of pre-trial discovery is taken to have given an undertaking to the Court that he or she will not disclose or use them for any purpose other than the litigation in which they are produced. Any collateral or ulterior use constitutes a contempt of court” [3]. Tabib J explained the distinction between a protective order, relating to information that the parties will exchange between themselves in the pre-trial phase of an action, and a confidentiality order, which allows information which would be filed with the court, and so would otherwise be available to third parties, to be filed under seal. In addition, she noted that private agreements between the parties can also be used to supplement these other mechanisms.

The gist of Tabib J’s decision is that generally, the implied undertaking rule, supplemented by a private agreement between the parties, will provide adequate protection, so routine protective orders are no longer useful or necessary, and absent special circumstances they should be avoided as wasteful of the Court’s time and resources [67], [73], [74].

As to the scope and application of the implied undertaking rule, Tabib J emphasized that the sanctions for breach of the implied undertaking rule as every bit as clear and immediate as for breach of a formal protective order [60]. Further, she reiterated her holding in Live Face on Web, to the effect that [34]

an express agreement between the parties, whereby they recognize that such measures constitute undertakings given to the Court as additional protection to their privacy interest for the purposes of the litigation, is amenable to enforcement by this Court, including by way of contempt proceedings, without the need to be first acknowledged by the Court or enshrined in an order:

(See also [75].) This is very important to her broader conclusion that protective orders are generally not needed, as she held that, given that an express agreement between the parties is enforceable by the Court, many of the specific concerns raised by Pfizer could be addressed in that manner rather than by a protective order. For example, limits on the number or categories of people who can access designated information can be addressed by supplementary undertakings.

Tabib J further clarified that the implied undertaking rule binds third parties, such as experts, consultants and service providers:

[40] Discovery information is primarily disclosed to and controlled by the parties and their solicitors. Pursuant to the implied undertaking, they have no right to disclose that information to anyone, including third party experts, consultants or service providers, unless it is necessary for the conduct of the litigation. In that role, these third parties act as agents or sub-contractors for the parties. It would be unthinkable that these agents would not be bound by the same obligation as their principals. To entertain the contrary would be to accept that the important protection intended to be afforded by the implied undertaking could be defeated and rendered nugatory simply by allowing a party to act through an agent.

She further held that the law is clear that:

[49] A person who is aware of the application of the implied undertaking rule or of any order issued by this Court, whether or not they have given an express undertaking to attorn to the Court’s jurisdiction, is under a duty to this Court not to interfere with justice by acting in such a way as to breach the intent and purpose of the rule or order

She acknowledged that it may be difficult to enforce the implied undertaking rule on persons outside the Court’s jurisdiction, but she noted that that difficulty stems from the fact that it may be difficult to enforce a contempt judgment in a foreign jurisdiction. But that difficulty is not addressed by granting a formal protective order, which is also ultimately enforceable through contempt [50]. She suggested that consequently “a party may be more likely to obtain effective relief against breach of protective measures by asking the foreign court to recognize and enforce the underlying obligation” [50].

She also held that “the case law has clearly recognized that the implied undertaking does not prevent use of information that was obtained from other [non-confidential] sources [59].

She did leave open the question of whether protective orders should be issued in proceedings other than actions, in which the implied undertaking rule might not be applicable [58].

In concluding, Tabib J suggested that some misconceptions about the nature of the implied undertaking rule may stem from the “climate of uncertainty” as to the nature of the rule up to the 1990s, before clarifying jurisprudence had developed, and as a result of familiarity with US practice. Tabib J emphasized the distinction from US practice, “where the concept of the implied undertaking does not exist and where, as a result, protective orders are routinely issued” [67]. She emphasized the need for lawyers dealing with clients who are familiar with US practice to educate those clients “of the existence of the implied undertaking rule, of the restrictions on the use of this information and of the penalties they may face if the restrictions are breached, even in the absence of a formal order or agreement” [69].

Sunday, May 13, 2018

No new cases

No new substantive patent cases were released last week.

Monday, April 30, 2018

Formal Confidentiality Order Not Always Required

MediaTube Corp. v. Bell Canada 2018 FC 355 Locke J
            2,339,447 / Internet Protocol Televsion / Fibe TV, FibreOp

This decision raises a couple of interesting points regarding procedure and substantive law of confidentiality orders. As discussed here, MediaTube's infringement action against Bell fell apart during discovery, and Locke J’s decision on the meritslargely addressed costs: 2017 FC 6. (And see 2017 FC 495 discussed here further clarifying the costs order.)

During the trial, in an exchange with the Court, Bell identified certain exhibits and transcripts that it felt should be treated as confidential. MediaTube did not object at that time, but it did object after retaining new counsel, and just after the trial decision was issued, MediaTube filed a motion seeking a declaration that these exhibits and transcripts are part of the public domain, and that they be made available to the public [4]-[6]. (The Court of Appeal has indicated that the hearing of the appeal would not be scheduled until after a decision on this motion [7].)

No formal evidence was submitted on the issue of confidentiality and no formal Confidentiality Order had ever been granted, but Bell had raised the issue of confidentiality several times during the trial, asking that certain material be treated as confidential, and Locke J had agreed [15], [16], [18]. Thus the issue of confidentiality had been duly raised, considered and decided at trial [20], and Locke J held that the matter was therefore res judicata notwithstanding the absence of a formal order (citations omitted):

[20] The fact that no formal Confidentiality Order was issued does not render null my rulings on confidentiality, and does not impede the application of the principle of res judicata. In addition, I am concerned about potential negative effects on the efficient conduct of trials in the future if I were to give weight now to Bell’s failure to make a formal motion, supported by formal evidence, for a formal Confidentiality Order. . . . The issuance of the order sought by MediaTube, and the consequent loss of confidentiality of Bell’s information, would likely prompt future litigants with information that all parties agree is confidential to devote unnecessary resources to obtain formal Confidentiality Orders.

This is not to say that a formal order is never advisable, but only that the need for a formal order at trial should be left to the trial judge [20].

MediaTube also relied on the fact that the court had not been formally closed when the confidential testimony was heard. After noting that it was unlikely that any member of the public had actually had access to the confidential evidence [23], Locke J rejected this argument as well, for similar reasons of judicial economy:

[24] As with the issue of Bell’s failure to request a formal Confidentiality Order, I am concerned about potential negative effects on the efficient conduct of trials in the future if I were to give weight now to Bell’s failure to request that the courtroom be formally closed during discussion of confidential information during trial. Requiring a party to take this step when it has no practical effect would impede the efficient conduct of trial.

The decision also raised a significant point on the substantive law related to confidentiality. In Sierra Club of Canada 2002 SCC 41, the SCC held that a confidentiality order should only be granted when it is necessary “to prevent a serious risk to an important interest, including a commercial interest.” The SCC elaborated by saying “In order to qualify as an ‘important commercial interest’, the interest in question cannot merely be specific to the party requesting the order; the interest must be one which can be expressed in terms of a public interest in confidentiality” [53], [55]. While the primary basis for his decision is that the matter was res judicata, Locke J also remarked that

[22] . . . I am satisfied that, where a party that finds itself involved in litigation (especially as a defendant in an action that is without merit) and is compelled by the rules of discovery to divulge sensitive and confidential information, there is a strong public interest in that party being able to maintain the confidentiality of that information. Otherwise, no confidential information is safe. I am satisfied that the salutary effects of maintaining the confidentiality of the information in question in the present motion, outweigh its deleterious effects on the right to free expression, including the public interest in open and accessible court proceedings.

This strikes me as a sensible interpretation of the SCC’s remarks.

Sunday, April 29, 2018

No new cases

No new substantive patent cases were released last week.

Note that I generally only blog on substantive patent / pharma cases. If you want to keep abreast of all new Canadian decisions, including procedural decisions and copyright and trade-mark cases, I recommend subscribing to the Daily Intellectual Property News service from Alan Macek's IPPractice.

Friday, April 20, 2018

Late Request to Amend Priority Date

Bayer Cropscience LP v. Canada (Attorney General) 2018 FCA 77 Nadon JA: Webb, Gleason JJA aff’g 2017 FC 178 O'Reilly J

In this decision the FCA has affirmed O'Reilly J’s decision affirming the Commissioner’s decision to refuse Bayer’s request to amend the priority date, essentially for the same reasons given by O’Reilly J, namely that the request was outside the sixteen month window set in by Rule 88(1)(b).

As discussed here, this case turned on a narrow point of law in the context of unusual facts. Bayer filed a US patent application on 3 April 2012. The USPTO refused to assign a filing date for it on the basis that Bayer had failed to file accompanying drawings. Bayer filed the drawings on 19 April 2012, and the USPTO assigned that as the filing date. The following year, on 15 March 2013, Bayer filed a PCT application claiming priority from the US application. Bayer asked for a filing date of 3 April 2012, but WIPO pointed out that the US application had a filing date of 19 April. Therefore Bayer requested, and was given, a filing date of 19 April 2012. Two years after that, Bayer persuaded the USPTO that the drawings were not required after all, and on 14 April 2015, the USPTO amended the filing date for the US application to 3 April 2012. However, the USPTO, which acted as the international receiving office for the PCT application, refused to amend the PCT filing date. On 7 August 2015, the PCT application entered the national phase in Canada as Canadian Patent Application No 2,907,271. Bayer requested that the ‘271 application be given a filing date of 3 April 2012 on the basis that it was claiming priority from the ‘691 US Priority Application, which had an amended filing date of 3 April 2012.

Bayer’s argument was essentially that it had physically filed the complete and proper US application on 3 April 2012, and it should therefore be entitled to claim priority based on that date [47], [76]. The problem is that Rule 88(1)(b) provides that the request for priority must be made “before the expiry of the sixteen-month period after the date of filing of [the US application].” Bayer’s request was simply out of time. It was in effect asking for a waiver of the sixteen month period set out in the Rules, and there is no basis for such a waiver [77].

Wednesday, April 18, 2018

Non-infringing Alternative and Non-economic Factors

Adir v Apotex Inc 2018 FC 346 Gagné J
            1,341,196 / perindopril / COVERSYL

This decision concerns the accounting of profits portion of a bifurcated trial. In the liability decision, Apotex had been held liable for infringement and Servier elected an accounting: 2008 FC 825 aff’d 2009 FCA 222. A substantial amount of the infringing material manufactured by Apotex in Canada was destined for export to markets such as the UK and Australia. In the accounting portion of the trial, Apotex argued that it had a non-infringing alternative (NIA) which would have allowed it to compete in those markets, namely by sourcing perindopril from third party manufacturers based outside Canada. Apotex argued that the profits it would have made by manufacturing abroad should be deducted from the profits actually made by the infringing manufacture in Canada, to arrive at the differential profit to be disgorged. As discussed here, Gagné J rejected consideration of the NIA as a matter of law: 2015 FC 721. Her decision was delivered prior to the FCA decisions in Lovastatin Damages 2015 FCA 171 and Venlafaxine s8 2016 FCA 161, in which the FCA affirmed the need to consider any non-infringing alternative in the causation analysis (as discussed here, here and here). It was therefore unsurprising that the FCA allowed Apotex’s appeal in part, remanding on the NIA issue: 2017 FCA 23 Perindopril Accounting FCA rev’g in part and remanding 2015 FC 721 (here). 

The sole question in this decision on remand was “whether any of Apotex’s profits from export sales of perindopril could have and would have been realized through use of a non-infringing alternative [NIA],” with a consequent reduction in the amount to be disgorged [2]. In a striking application of the “would” branch of the test, Gagné J held that even though Apotex could have sourced non-infringing perindopril from a third party, albeit with a delay of one year, it would not have done so. Consequently, no reduction was ordered in the award of $56,000,000 plus interest.

Tuesday, April 10, 2018

NEXIUM Saga Is Not Over Yet

AstraZeneca Aktiebolag v Apotex Inc 2018 FC 185 Locke J
            2,139,653 / esomeprazole / NEXIUM

While the SCC abolished the promise doctrine in AstraZeneca v Apotex 2017 SCC 36 rev’g 2015 FCA 158 rev’g 2014 FC 638, the associated litigation is not over yet. To recap, Apotex had prevailed in NOC proceedings (2010 FC 714). The subsequent infringement action was bifurcated to carve out any experimental and regulatory use exemption, as well as the quantum of any damages or profits [5]. In the first part of the bifurcated action, AstraZeneca initially lost, on the basis that the 653 patent was invalid for lack of utility, but then ultimately won when the SCC in AstraZeneca abolished the promise doctrine. At first instance, Rennie J had held that the 653 patent was invalid for failure to meet the promised utility, but had rejected all other validity attacks. The FCA had upheld the decision on the basis of lack of promised utility, but did not address Apotex’s appeal of the other validity attacks. In the meantime, Apotex brought a s 8 action consequent on its victory in the NOC proceeding. This went to trial before Locke J, after the SCC hearing but before its decision [9]. The parties agreed that Locke J should not issue his decision until after the SCC had issued its decision [10]. When the SCC decision issued, and after hearing supplemental submissions, Locke J dismissed Apotex’s s 8 NOC claim: 2018 FC 181. The second part of the birfurcated infringement action is ongoing, and this decision concerned motions as to how to proceed in light of the SCC AstraZeneca decision. The difficulty is that SCC had concluded its decision by holding that “The `653 patent is not invalid for want of utility” [64]. Apotex argued that this was not the same as a holding that the patent was valid, and the trial should be re-opened to allow the parties an opportunity to address the validity issues, in particular those which had not been addressed by the FCA, with additional evidence [27]. AstraZeneca, on the other hand, argued that the SCC decision had finally determined the validity of the 653 patent, and consequently the second part of the bifurcated trial, should proceed. Locke J ruled in favour of AstraZeneca, on the basis that he had decided in dismissing Apotex’s s 8 claim, in 2018 FC 181, [30]-[36] that “the validity of the 653 Patent was finally decided by the SCC, and that there remains no other validity issue to debate” [29].

Thursday, April 5, 2018

Remedies and Extraterritoriality

In a recent post I pointed out that Canadian and US law have different approaches to the problem which arises when domestic acts of infringement cause losses in a foreign country (see also here). In Canada, it appears that all losses which are proximately caused by the domestic infringement are recoverable, regardless of where the loss itself occurs, though the courts will offset foreign awards in assessing damages. In contrast, several US Federal Circuit cases have held that recovery may be barred if the loss itself occurred abroad, even if the loss was caused by domestic infringement The US Supreme Court will address this issue in WesternGeco LLC v. ION Geophysical Corp., No 16-1011. Many of the briefs, including that of the US Solicitor General, are urging that the position of the US Federal Circuit is wrong (see here), and yesterday Professor Tom Cotter had a post on his Comparative Patent Remedies blog, also arguing, in effect, that the Canadian position is correct.

Thursday, March 22, 2018

Correction of Ownership Does Not Necessarily Require Direct Evidence from Assignor

Copperhead Industrial Inc. v. Canada (Attorney General) 2018 FC 311 Gleeson J
            2,614,533 / 2,919,266

Copperhead Industrial concerns a contested application to vary the ownership records of the Patent Office. The applicant’s legal corporate name is Copperhead Industrial Inc, and its Ontario Corporation Number is 002152706 [2]. The applicant’s sole director mistakenly believed that its legal name was 002152706 Ontario Ltd., and that Copperhead was its trade name [8]. Consequently, the inventor of the patents at issue assigned them to 002152706 Ontario Ltd, and that was the name reflected in the Canadian Patents Database. Copperheard subsequently commenced actions alleging infringement by Charger & Dresser, who responded in part by arguing that because 002152706 Ontario Ltd. is not a legal corporate entity, all the patent rights remain with the inventor. (The inventor was seriously ill when the action was commenced and is now deceased [11]-[12].) Copperhead therefore brought this application, pursuant to s 52, to have the records corrected to show Copperhead Industrial Inc. as the owner of the patents. While the Patent Office did not oppose the application, and did not appear, Charger & Dresser opposed the application as an intervener [5]-[6].

Gleeson J held that the Federal Court has jurisdiction, as there is no question of a contested interpretation of a contract of assignment [21]. He further held that while non-hearsay evidence from relevant inventors and assignors is commonly provided, and is of assistance to the Court, it is not required [22]-[23]. (The inventor was too ill to provide an affidavit before his death.)

Gleeson J also held that when the Patent Office records are varied, an effective date of variation is not required [34] . He explained that the effect of an order pursuant to section 52 is to correct an error or mistake; it does not serve to alter the effective date of the assignment or other underlying contractual documents, and consequently there is no requirement to identify an effective date for such an order [35].

On the facts, Gleeson J held that the error was due to an honest misunderstanding on the part of the applicant, and the intervener would not suffer any substantive prejudice in the related litigation as a result of the correction [36]. He therefore ordered the Patent Office records corrected to show Copperhead Industrial Inc. as the owner of the patents.

Friday, March 16, 2018

Legal Facts in the “But For” World: Does it Matter Who Might Have Been on the SCC in Calculating Damages?

Apotex Inc v AstraZeneca Canada Inc 2018 FC 181 Locke J
            2,139,653 / esomeprazole / NEXIUM / S 8 NOC

In AstraZeneca 2017 SCC 36, an action involving the 653 patent, the SCC abolished the promise doctrine (here). In so doing, it held the 653 patent to be valid,1 reversing the decisions in the courts below which had applied the promise doctrine to invalidate it. But before that action, in 2010 FC 714, Apotex had prevailed in the NOC proceeding. This decision, by Locke J, is the s 8 damages decision following from that NOC decision. Section 8 proceedings entitle the generic to recover damages for having wrongly been kept out of the market as a result of the statutory stay triggered by the NOC proceedings in which it prevailed. But what if ultimately, in the infringement action, the patentee prevails? The key question is whether Apotex should be entitled to recover s 8 damages for having been wrongly kept out of the market, when it turns out that it never had the right to enter the market. In AstraZeneca v Apotex 2017 FC 726 Barnes J held that the answer was no: see here. Locke J has now come to the same conclusion, and he therefore dismissed Apotex’s s 8 action [112]. While Locke J’s reasoning is somewhat different from that of Barnes J, the decisions are consistent. 

The relationship between s 8 damages and damages in a subsequent infringement action will soon be of historical interest only, as the new NOC proceeding will take the form of an action. This decision does, nonetheless raise a point of more general importance regarding the nature of hypothetical legal facts in the “but for” world. For example, does it matter who is on the Supreme Court of Canada in the but for world?

The technical point is that s 8 damages, like all damages, are assessed as the difference between the plaintiff’s actual position and the position it would have been in “but for” the wrong (ie but for the statutory stay in the case of s 8 damages). The patentee’s general argument in a case in which the patent is subsequently held to be valid is that in the but for world, the generic would have infringed, and would have liable to the patentee for infringement, and that liability in the “but for” world would offset any profits the generic would have made had the statutory stay not prevented it from entering the market. In effect, the generic did not suffer any lost profits as a result of the statutory stay, because the patent, which we now know to be valid, would have prohibited it from entering the market anyway.

It is clear from prior FCA decisions, in particular Lovastatin 2011 FCA 364 (here) and Omeprazole 2013 FCA 77 (here), that liability for damages for infringement should be taken into account in assessing s 8 NOC damages. There was a preliminary dispute in this case as to whether it should be taken into account under s 8(1), which establishes liability (AstraZeneca’s position), or under s 8(5), which allows the court to consider all relevant matters in assessing quantum (Apotex’s position). Locke J, relying on Lovastatin, held that Apotex’s “but for” infringement should be taken into account using s 8(5) [62]. I think that’s right as a matter of the interpretation of Lovastatin, but I have to admit that it is not entirely clear to me what difference it makes: as Locke J pointed out, it wouldn’t have made any difference on the facts of this case: [64].

The more interesting point was how to construct the “but for” world:

[76] . . .Apotex argues that there is no evidence that any of the following would have happened in the but-for world: (i) AstraZeneca would have sued Apotex for patent infringement, (ii) the parties would not have settled the matter before a trial, (iii) the SCC would have granted leave to appeal, or (iv) the SCC would have decided such an appeal the same way. Accordingly, Apotex argues that, for the purposes of constructing the but-for world, the 653 Patent should be treated as invalid just as it was in the real world during the Delay Period.

On the details, Apotex argued, for example, that the SCC would not necessarily have decided the same way because in the “but for” world, the matter would have come to trial at a time when Rowe J, who wrote the AstraZeneca decision, was not on the Court [88].

AstraZeneca’s position was that this should all be irrelevant:

[77] It argues that we now know that the 653 Patent was valid during the Delay Period, and that it should be treated as such for the purposes of the assessment of compensation under s. 8 of the Regulations, regardless of whether it would have been found valid in the but-for world.

Locke J found it unnecessary to decide the question. Relying in large part on the principle from Ramipril s 8 2014 FCA 67 [145] that “All steps that were taken in the real world should be assumed to have been taken in the but-for world unless there is evidence upon which the trier of fact may reasonably conclude that different steps would have been taken,” he concluded that all of Apotex’s hypotheticals should be resolved against Apotex. Since AstraZeneca prevailed on the facts, it was not necessary for Locke J address the legal argument.

The point is nonetheless an important, to the extent that different facts might warrant a different conclusion. In my view, AstraZeneca was right on this point. The reason for this is emphasized in an article by David Taylor: “reasonable royalties should reflect the value of patented technology rather than patent rights” (49 Ga Law Rev 79. 89, original emphasis). Taylor made that observation in the context of reasonable royalties, by way of explaining the established rule that in determining a reasonable royalty using the hypothetical negotiation approach, the patent should be assumed to be valid, even though in the hypothetical “but for” negotiations, the parties would not have known it to be valid. The same principle applies in the context of lost profit damages. To elaborate, the purpose of assessing damages for patent infringement is to preserve the incentive to invent. In order to promote socially beneficial inventions, the incentive to invent should be commensurate with the social value of the invention. That social value is equal to the incremental value of the invention over the best non-infringing alternative: see eg The Sedona Conference, Commentary on Patent Damages and Remedies, 23-24; David O. Taylor, David, Using Reasonable Royalties to Value Patented Technology,” 49 Ga Law Rev 79. 91-97; Lee & Melamed, “Breaking the Vicious Cycle of Patent Damages,” (2016) 101 Cornell Law Rev 385, 411-12. As I said in my article “A Remedial Benefit-Based Approach to the Innocent User Problem” 920014) 20 CIPR 79, “A patent is ‘nothing very special’ when it provides only a small advantage over the next best publically available alternative. The differential profit approach, by comparing the actual profits with those which would have been made with the next best alternative, provides a precise means of identifying a patent which is ‘nothing very special.’”

The “but for” world is a construct for determining the true social value of the patent invention. The “but for” world should therefore be sensitive to factors which affect the value of the patented technology. If a drug treats a disease that has become an epidemic, it should be more valuable than one that treats a disease that was anticipated but which never emerges. This gives the inventor a strong incentive to focus its efforts on inventions that it believes will be socially valuable. The “but for” world should not be sensitive to factors which solely affect the value of the patent rights, such as whether an injunction would have been granted, or whether the patent would have been held invalid. The grant of an injunction by a court may increase the value of the patent right to the patentee, but it does not increase the social value of the patented technology.

This suggests that legal facts about the “but for” world should be treated like past events: “past events must be proven, and once proven they are treated as certainties” (Athey v Leonati [1996] 3 SCR 458, [28]). This is consistent with Locke J’s observation in response to Apotex’s argument that the SCC’s decision to change the law and reject the promise doctrine was not foreseeable (my emphasis):

[96] Even accepting all of the facts asserted in the preceding two paragraphs, the fact remains that the 653 Patent is, and always was, valid. This is the case in the real world even if I accept Apotex’s allegations that the law on the Promise Doctrine would not have evolved in the but-for world as it did in the real world. Whether or not such allegations are justified, the fact is that Apotex claims compensation for loss as a result of being prevented from infringing AstraZeneca’s valid patent.

1There was a preliminary dispute as to whether the SCC in AstraZeneca had held the 653 patent to be valid, or merely that it is not invalid for lack of utility. Locke J held that the SCC had held the 653 patent to be valid [30].

Thursday, March 15, 2018

Promise Doctrine Zombie Watch: Part III

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2018 FC 259 Phelan J
            2,261,630 / infliximab / REMICADE / INFLECTRA

In this case (discussed more generally in my previous post), Hospira had initially based its utility argument on “promise of the patent,” but after the trial, AstraZeneca 2017 SCC 36 was released, abolishing the doctrine: [253]. Phalen J allowed the parties to make submissions on the effect of AstraZeneca [254], and Hospira "recast its argument to link 'promise of the patent' to the absence of sound prediction and to insufficiency and overbreadth" [255]. The exact nature of Hospira’s argument is not entirely clear, but what is clear is that Phelan J was having none of it:

[258] Hospira attempts to import the discarded “promise” doctrine into insufficiency and overbreadth. Certainly AstraZeneca does not do so and it would be inconsistent to discard that doctrine only to have it resurface under another principle without clear language to do so.

This is in line with the other post-AstraZeneca cases, which have consistently refused to entertain any attempt to resurrect the promise doctrine in another guise: see here and here.

Tuesday, March 13, 2018

More Support for Experimental Use Exception to Anticipation

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2018 FC 259 Phelan J
            2,261,630 / infliximab / REMICADE / INFLECTRA

The 630 patent, held by Kennedy Trust, covers the adjunctive use of methotrexate [MTX] and infliximab for the treatment of rheumatoid arthritis [RA] in patients who do not respond fully to MTX alone. Infliximab is only approved for treatment of RA when used in combination with MTX [16]. Kennedy Trust’s licensee, Janssen, markets infliximab for use in combination with MTX under the name REMICADE [18]. Hospira’s infliximab product INFLECTRA, is a biosimilar of REMICADE, sold for the same purpose [18] (and see the product monograph). Hospira brought an action for a declaration that Kennedy’s 630 patent is invalid, and that INFLECTRA would not infringe, while Kennedy brought a counterclaim to the opposite effect [5].

MTX was a popular prior art treatment for severe RA [111], but for some patients — “incomplete responders” — MTX alone did not adequately control their RA. The efficacy of infliximad was also part of the cgk [113], but the duration of effect was be limited [11]. It turned out that the combination of MTX and infliximab, as claimed in the 630 patent, exhibited enhanced efficacy over either drug alone as well as a sustained duration of effect [15]. On the facts, Phelan J concluded that this particular combination therapy was not obvious or obvious to try [230].

Hospira argued “an astonishing number and veritable panoply of patent law issues.” [24], including standing, ownership, improper priority, and double patenting plus along with the full range of the usual attacks, including anticipation, obviousness, sufficiency, utility, and overbreadth (and this list isn’t complete). As an academic, I hesitate to comment on litigation strategy, but I can’t help but feel that Hospira’s scattershot approach undermined the strength of its better arguments, particularly given that several of the arguments were thinly argued, occasionally without any supporting authority (see eg [159]). On overbreadth, Phelan J remarked that “Its submissions seem to have been made in the hope that something would “stick” – the patent law equivalent of the Hail Mary pass” [249]. At the end of the day, nothing stuck: Phelan J held the 630 patent to valid and infringed. I won’t run through all of the arguments, but only those that raise a point of interest.

Experimental Use Exception to Anticipation

A couple of interesting points were raised by Hospira’s novelty attack. First, Phelan J endorsed the experimental use exception to anticipation, albeit in obiter [198]. Hospira argued that the patient consent forms used in Kennedy’s Phase II clinical trials were anticipatory. Phelan J rejected this primarily on the basis that confidentiality was established on the evidence (in part on the basis that the industry practice with clinical trials is to expect the maintenance of that confidence) [196i]. He also rejected it on public policy grounds, as it would effectively put an end to informed consent or to the patenting of medication [196i]. And he also suggested that “the experimental use exception is not as defunct as Hospira would have one conclude,” citing with approval Fothergill J’s decision in Bayer v Apotex 2016 FC 1013, discussed here (and see also Bayer v Apotex 2014 FC 436, Hughes J, discussed here). This experimental use defence to anticipation had some basis in the early case law, but it was not previously well-established; we now have three different Federal Court judges who have recently lent credence to the idea.

Speculative Anticipation

Hospira argued anticipation on the basis of a number of prior art documents which suggested trying infliximab or another anti-TNF-α antibody in combination with MTX, or referenced a trial in which that combination was being tried [196]. This is a bit of a twist on the usual anticipation attack, where the prior art says “We did X” and the question is whether X necessarily falls within the claims of the patent at issue. In this case (to oversimplify), the prior art says “Someone should try X” where X is exactly what the patent claims, namely combining MTX and infliximab to treat RA. (More precisely, the prior art references didn't all reference infliximab specifically.) Phelan J dismissed the prior art references as all being speculative [167], [191]. This calls to mind the case-law arising in the context of a conflict proceeding under the first-to-invent system, where in order to establish inventorship, it had to be shown that at the asserted date “the invention was no longer merely an idea that floated through the inventor's brain but had been reduced to a definite and practical shape” Ernest Scragg & Sons Ltd v Leesona Corp (1964), 45 CPR 1, 33. The allegedly anticipatory prior art in this case was really no more than “an idea that floated though the brain” of the proponents. It strikes me that just as a speculative idea cannot be an invention for the purposes of establishing priority over an inventor who had actually reduced the idea to practice, so it cannot be a disclosure sufficient to anticipate an invention that had actually reduced the idea to practice.

Blinding the Witness

Hospira’s experts were blinded. Phelan J gave little weight to this, saying “blinding alone is not a guarantee of reliability and it is not a sufficient reason to prefer the evidence of one witness over another” [203], consistently with 2016 FC 382 (discussed here). Phelan J also questioned whether blinding was even possible, at least on the facts of this case:

Further, given the involvement of the experts in this case in the development of RA treatments during the relevant time period, it is at least questionable whether blinding holds any value. It is impossible to believe that these experts were not aware of the development of Remicade prior to this trial.

Methods of Medical Treatment

Hospira argued that the 630 patent was invalid as being an unpatentable method of medical treatment [136]-55]. Phelan J recognized that “[t]he jurisprudence with respect to the unpatentability of methods of medical treatment is not entirely consistent” [141]. This is not very surprising, given that the FCA has also called for “full consideration [of the patentability of methods of medical treatment] by this Court or the Supreme Court in a case where the issue is squarely raised on the facts” 2015 FCA 116 [101]. Phelan J’s observation further emphasizes the need for reform in this area of the law.

On the facts, Phelan J held that the patent at issue was not a method of medical treatment, essentially because “the use of X in combination with Y to treat disorder Z” is no different in substance from “the use of X to treat disorder Z” and the latter is clearly patentable: [147]. A claim of that type was at issue in Wellcome / AZT, 2002 SCC 77; and see the discussion here.

Monday, March 5, 2018

Gillette Defence (Not Really) Applied

TearLab Corp v I-Med Pharma Inc 2018 FC 164 Manson J
            2,494,540/ TearLab System / i-Pen System

It was lucky for TearLab that its application for an interlocutory injunction was denied by Manson J 2016 FC 606 aff'd 2017 FCA 8 (see here), as TearLab has now lost the infringement action, on the basis that the asserted claims were infringed but invalid as being anticipated and obvious. (Had TearLab been granted the interloctory injunction, it would now be liable to I-Med on the undertaking in damages.) The result turned on a self-created squeeze between infringement and validity:

[183] That result flows directly from the dilemma created by the Plaintiffs urged broad construction for the asserted claims to include both in vivo and ex vivo applications of the invention, which, while I have agreed to that construction, leads to invalidity due to anticipation.

The Gillette defence was invoked, though not really applied. As Manson J explained, the Gillette defence is based on the House of Lords decision in Gillette Safety Razor Co v Anglo-American Trading Co Ltd (1913) 30 RPC 465 (HL), holding that “a defendant may plead that their alleged infringing actions are part of the prior art, and therefore the patent is either invalid for claiming subject matter included in the prior art or, if the patent is valid, the defendant cannot infringe” [179]. The key feature of the Gillette defence is that it obviates the need for the defendant to establish whether the patent is invalid or infringed; once it is estabblished that the defendant’s device was part of the prior art, one or the other must be true, and it is not necessary for the defendant to establish which. Indeed, in principle, it is not even necessary to construe the claims. As Lord Moulton explained at 480-81:

I am, therefore, of opinion that in this case the Defendants' right to succeed can be established without an examination of the terms of the Specification of the Plaintiffs' Letters Patent. I am aware that such a mode of deciding a Patent case is unusual, but from the point of view of the public it is important that this method of viewing their rights should not be overlooked. In practical life it is often the only safeguard to the manufacturer. It is impossible for an ordinary member of the public to keep watch on all the numerous Patents which are taken out and to ascertain the validity and scope of their claims. But he is entitled to feel secure if he knows that that which he is doing differs from that which has been done of old only in non-patentable variations, such as the substitution of mechanical equivalents or changes of material shape or size. The defence that “the alleged infringement was not novel at the date of the plaintiff's Letters Patent” is a good defence in law, and it would sometimes obviate the great length and expense of Patent cases if the defendant could and would put forth his case in this form, and thus spare himself the trouble of demonstrating on which horn of the well-known dilemma the plaintiff had impaled himself, invalidity or non-infringement.

In TearLab, while the Gillette defence was raised, it was not really applied, because Manson J did construe the claims, and held them to be infringed but anticipated (and also obvious). The advantages of the Gillette defence are likely more theoretical than practical, as it would be a bold defendant that would put all its eggs in one basket of proving that its product was the same as the prior art, without bothering to construe the claims, or address validity and infringement directly. It is perhaps worth noting that the Gillette defence was not put forward by the defendant in Gillette itself, but rather was developed by Lord Moulton on his own initiative: 477.

Tuesday, February 27, 2018

Applying for an NOC Does Not Sustain an Action

Purdue Pharma v Collegium Pharmaceutical, Inc 2018 FC 199 O'Reilly J

Purdue Pharma began an infringement action against Collegium for infringement of Purdue’s patent related to oxycodone, on the basis that Collegium had taken various steps to obtain marketing approval in Canada in respect of its oxycodone product. The steps alleged included importing the drug for purposes of its NDS, filing an NDS, obtaining approval in the US, publicly expressing its intention to market the drug in Canada, and invoking the NOC Regulations by serving Purdue with an NOA [21].

Reversing Aalto J, O'Reilly J granted Collegium’s motion to strike. He held that these facts did not allege anything going beyond the regulatory use exemption in s 55.2. There is no requirement that the party seeking to strike on that basis tender evidence that the activity in question did not go beyond attempting to meet regulartory requirement: “Rather, a statement of claim will be deficient on its face if it merely alleges activity that falls within the statutory exemption in s 55.2" [20].

Nor will these facts support a quia timet action. The prospect of Collegium launching at risk after succeeding in the NOC proceeding is not in itself sufficient to satisfy the requirement of imminence, given that it might never actually obtain the NOC prior to expiry of the patent [26]-[28].

More generally, this decision implies that allegations which amount to saying that the defendant was attempting to meet Canadian regulatory requirements will not survive a motion to strike [28]. Note that Purdue has also instituted NOC proceedings, which are not affected [1]. Of course, this will all be moot with the new NOC Regs.

Thursday, February 22, 2018

Switching Costs, Path Dependence, and Patent Holdup

While this blog focuses on case law, I also do more theoretical work, including a new paper, “Switching Costs, Path Dependence, and Patent Holdup,” co-authored with Tom Cotter and Erik Hovenkamp, which we have just posted on SSRN. Here’s the abstract:

Patent holdup occurs when a patent holder extracts higher royalties ex post (after the payor has committed to use of the patented technology) than it could have negotiated ex ante, where the difference is not explained by an increase in the technology’s value. To date, the literature principally has focused on—indeed, sometimes conflated—two potential sources of holdup: the sunk costs the user has incurred ex ante to adopt the technology, and the “switching costs” of adopting an alternative ex post. We demonstrate, however, that this literature tends either to over- or underestimate holdup risk, because holdup may arise even when sunk costs are zero, or be absent despite high ex post switching costs. More generally, we show that patent holdup is best understood as an opportunistic exploitation of path dependence, arising when prior commitment to a technology creates some dynamic distortion in the technology’s incremental value over alternatives.

Friday, February 16, 2018

FCA Affirms that Dead Application is Dead

University of Alberta v. Canada (Attorney General) 2018 FCA 36 Near JA: Webb, Laskin JJA aff’g 2017 FC 402 Russell J
            Application 2,804,560

S 37 of the Patent Rules provides that a patent application “must contain. . . a declaration that the applicant is the legal representative of the inventor.” The ‘560 application, filed by an agent on behalf of TEC Edmonton, had no such declaration. CIPO timely issued a requisition to TEC’s agent. TEC’s agent did not respond do that requisition or to a subsequent notice of abandonment, which stated that the application could be reinstated within a further 12 months pursuant to s 73(3). TEC then assigned the its right in the 560 Application to the University of Alberta, and a new agent was appointed, but the new agent did not respond to the original requisition or to the Notice of Abandonment. Two years after the requisition was issued, the 560 application was marked as dead, meaning that the time for reinstatement had passed. A year after that, the University of Alberta filed a petition effectively asking CIPO to reinstate the ‘560 Application. CIPO refused on the basis the 560 application was beyond the period of reinstatement. As discussed here, Russell J refused. The University appeal to the FCA, which, unsurprisingly, affirmed. The FCA did hold that Russell J had erred in holding that the appellants were seeking judicial review of the requisition, and consequently the FCA held that CIPO’s decision should be reviewed on the merits [15]. That did not help the applicant, because the FCA held, on a straightforward reading of the relevant provisions, that the application was deemed abandoned once the applicant failed to timely respond to the requisition [23], and CIPO has no discretion to reinstate a patent application once it is deemed abandoned and the period for reinstatement has passed [24].

Patentable Subject Matter when the Inventive Contribution is an Algorithm

Georgetown Rail Equipment Co v Rail Radar Inc 2018 FC 70 Fothergill J
             2,572,082 / 2,766,249

In Georgetown Rail v Rail Radar Fothergill J held that Georgetown’s 082 and 249 patents were valid and infringed by Tetra Tech EBA Inc. (Rail Radar Inc was the first named defendant, but it did not participate in the proceeding, its status is unknown, and Georgetown did not seek relief against it.) The decision, including the main validity attack, based on obviousness, turned entirely on the facts.

The patents related to an automated system and method for inspecting railroad track using a laser, camera, to collect information about the railroad track, plus a processor to analyze the information according to a specified algorithm [16], [31]. The individual components were known, and there was no suggestion of inventive ingenuity in adapting those components to implement the algorithm. Fothergill J accepted the patents were inventive “only in respect of their algorithms” [129]. This may be an interesting example when compared with CIPO’s approach to computer-implemented inventions.

Thursday, February 15, 2018

Standing of Plaintiffs Carrying on Activity Outside of Canada

Teva Canada Ltd v Janssen Inc 2018 FCA 33 Dawson JA: Webb, Gleason JJA aff’g 2016 FC 593 Hughes J and 2016 FC 727
            1,304,080 / levofloxacin / LEVAQUIN

As discussed in Tuesday’s post, the FCA dismissed Teva’s appeal on a number of factual points that do not raise issues of general importance. But Teva v Janssen is a significant decision on standing. It raised a novel question as to whether a foreign party which has a licence from the Canadian patent owner, but which does not need the licence because it does not carry out any infringing activity in Canada, has standing as a person claiming under the patentee pursuant to s 55(1). The FCA, affirming Hughes J, held that the claimant does indeed have standing in this situation:

[126] I reject Teva’s submission that Janssen US was required to demonstrate that it engaged in conduct in Canada that would otherwise amount to infringement.

[127] A party need only establish that they enjoy rights under a patent in order to be a person claiming under the patentee.

In so doing, the FCA also affirmed and distinguished Servier 2008 FC 825 (aff’d without discussion on this point, 2009 FCA 222), in which Snider J held that the foreign parties did not have standing in similar circumstances. Between the two cases, this should provide good guidance as to when a licensee which does not carry on activity in Canada does or does not have standing. However, I must say that I do not find the FCAs explanation of Servier entirely persuasive, and I am inclined to think it is better to regard Servier as having been effectively overruled.

Tuesday, February 13, 2018

Levofloxacin Liability Decision Affirmed on the Facts

Teva Canada Ltd v Janssen Inc 2018 FCA 33 Dawson JA: Webb, Gleason JJA aff’g 2016 FC 593 Hughes J and 2016 FC 727
            1,304,080 / levofloxacin / LEVAQUIN

In Janssen-Ortho v Novopharm 2006 FC 1234 aff’d 2007 FCA 217, Hughes held that Janssen’s 080 patent was valid and infringed by Teva’s sale of its levofloxacin product [3]. In the damages phase, 2016 FC 593,Hughes J ordered Teva to pay damages to Janssen Canada in the amount of $5.5m, and to pay damages to Janssen US of just over $13m [4]: see here.

Teva appealed and the FCA has now affirmed. Hughes J’s decision turned almost entirely on the facts, with the exception of his holding that Janssen US had standing under s 51 as a person claiming under the patentee, which I will discuss in tomorrow’s post. Apart from the issue of standing, Teva’s appeal focused primarily on factual errors. Unsurprisingly, the FCA rejected all of Teva’s attacks on Hughes J’s factual findings. 

One point of principle raised by Teva was the complaint that the Lord Shaw’s admonition in Watson, Laidlaw & Co (1914), 31 RPC 104, 118 that compensation is accomplished “by the exercise of a sound imagination and the practice of the broad axe,” quoted with approval by Hughes J [69], is inconsistent with the FCA’s statement in Lovastatin FCA 2015 FCA 171, [43] that damages assessment must aim at "perfect compensation." The FCA explained that there is no inconsistency. The point of the Court’s observation in Lovastatin FCA is that damages must aim in principle for perfect compensation, so that lawful competition and the effect of a non-infringing alternative must be taken into account. Lord Shaw’s remark recognizes that in practice the goal of perfection is seldom achieved [34]-[36]. In assessing damages, a court must account for eg competition from a non-infringing alternative in the "but for" world, but it is not required to arrive at a number which perfectly reflects that hypothetical world; it is only required arrive at the best estimate on the evidence.

The FCA also reaffirmed that damages may be awarded for price suppression [78], and for losses sustained after expiry of the patent, so long as they were caused by the infringement [83]. Neither of these points is novel.

Teva also appealed Hughes J’s costs award of a lump sum of $1m, 2016 FC 727, on the basis that the award is excessive when compared to the amount an assessment officer would have awarded had the Janssen plaintiffs elected to have their costs assessed [153]. The FCA rejected this, noting that there is no requirement that a lump sum award correspond to the amount an assessment officer would assess [156].

Friday, February 9, 2018

The Infringer Cannot Elect an Accounting

Apotex Inc v Bayer Inc 2018 FCA 32 Nadon JA: Stratas, Woods JJA aff’g 2016 FC 1192 Fothergill J
            2,382,426 / ethinylestradiol & drospirenone / YAZ YASMIN

In Bayer Inc v Apotex Inc 2016 FC 1013 Fothergill J held that Apotex had infringed Bayer’s ‘426 patent: see here and here. Subsequently, Apotex argued that it, not Bayer, should be entitled to make the election between damages and an accounting of profits, and that Bayer should be confined to the (presumably lesser) remedy of an accounting. In 2016 FC 1192 Fothergill J rejected this argument: see here. (On the facts, he also held that Bayer was entitled to elect between damages and an accounting after discovery and inquiry.)

Apotex appealed the decision on remedy, reiterating the argument that, subject to the court’s discretion, the defendant can elect the remedy to which the respondents are entitled. The FCA has dismissed the appeal, affirming that the entitlement to elect (subject to the court’s discretion), rests with the patentee, not the infringer. The result is not very surprising, but the decision is noteworthy for providing an authoritative summary of the law relating to the right to an election, including a compelling historical analysis.

Section 55(1) of the Act provides that an infringer is liable to the patentee “for all damage sustained . . . by reason of the infringement.” On its face, this implies that the patentee is entitled to a damages, and so, by implication, cannot be denied that remedy on election of an accounting by the infringer. To counter this, Apotex appealed to s 57(1)(b), which provides that the court “on the application of the plaintiff or defendant,” may make an order “for and respecting inspection or account” (my emphasis). Apotex argued that 57(1) entitles the defendant to request an account, and this is not overridden by s 55(1), as there is no hierarchy between the provisions of the Act.

Nadon JA had a powerful answer to this proposition: yes, s 57(1)(b) does indeed entitle the defendant to make an application for an account — an interlocutory account [40], [66]. Nadon JA quoted the editorial comment to Vidi v. Smith (1854), 118 E.R. 1404 (QB), which noted that there were two classes of account, namely the accounting of profits ordered after a final decision, and interlocutory accounts which “are ordered by the consent of the defendant, and indeed on his application, as a condition for dissolving an interim injunction” [47, FCA emphasis]. That is, the defendant might apply to have an account ordered against itself in order to avoid being subject to an interlocutory injunction. Nadon J’s historical analysis showed that what is now 57(1) derived from early UK legislation which reflected this practice, while at the same time enabling the common law courts to grant equitable remedies, including a final account. He observed further that Canadian cases have also allowed the defendant to provide an interlocutory account in place of an injunction [51].

With that puzzle resolved, and having reviewed Benoit v Valmet-Dominion [1997] 3 FC 497 (FCA), the Court affirmed a number of propositions:

• An accounting was an equitable remedy historically available to a successful patentee, and the intention of what is now 57(1), and the UK legislation on which it is based, “was limited to providing to the common law courts the power to make certain orders that had previously only been available in the courts of equity” [62-64].
• 57(1) enables a defendant to request an interlocutory account for the purpose of dispensing with an interlocutory injunction [66].
• The election of a final accounting of profits “necessarily belongs to a patentee, subject to the Court’s discretion” [67].
• If the Court refuses an accounting “the patentee shall be entitled to its damages” [67].
• The Court “cannot oblige the patentee to accept as a remedy an accounting of profits if it is not willing to do so” [67].

This means that a successful patentee always has a right to damages unless waived by election, and that right cannot be abrogated by the infringing party or the Court [69], [71].