Sunday, October 4, 2015

No New Cases for the Week of 28 September

No new patent / NOC / data protection cases were released for the week of 28 September 2015. Keep in mind that I do not normally blog on procedural cases. To keep up with all IP cases, I recommend Alan Macek's IPPractice Daily IP News service.

Monday, September 21, 2015

There Is No Requirement to Refer to Evidence of Demonstrated Utility in the Patent

Eli Lilly Canada Inc v Apotex Inc / tadalafil formulation (NOC) 2015 FC 1016 Gleason J
            2,379,948 / tadalafil formulation / CIALIS, ADCIRCA

After the discussion of abuse of process issues in Friday’s post, this post turns to the substantive issues in this Tadalafil Formulation decision. Gleason J held that Apotex’ product did not infringe the 948 patent [72], which claims a particular formulation of tadalafil, and that the 948 patent was invalid for obviousness as being obvious to try [112], but that it was not invalid for lack of utility [145].

The holdings on infringement and obviousness turned entirely on the facts, and Gleason J came to the same conclusion as did de Montigny J in Mylan Tadalafil III 2015 FC 178 (blogged here), which she referenced. Two points of some interest are that Gleason J relied on comity in coming to the same conclusion as de Montigny J regarding the inventive concept [92]; and Gleason J took a very dim view Lilly’s expert Dr. Bodmeier for having changed his evidence to avoid a conclusion unfavourable to Lilly [56]-[57].

The discussion utility was interesting in two respects. It started, as is now standard, by considering the promise of the patent. Lilly submitted that the promise of the patent was limited to rapid onset of pharmacological response [124], while Apotex argued for a broader promise, including advantages such as improved stability, among others. Gleason J ultimately held in favour of the more modest promise advanced by Lilly [137]. 

What is interesting is that Gleason J emphasized throughout that a patent need not have a promise. As Gleason J noted in her general statement of the law, it is established that in principle a patent need not have any promise at all ([117], [118], [120]), but it nonetheless remain the norm to assess utility against a promise which is more stringent than the scintilla that would otherwise be required to support a patent. Consequently, it is not surprising that Lilly chose to advance a modest promise rather than arguing that the patent contained no promise at all. Even so, in her analysis Gleason J suggested at several junctures that the patent might not contain any promises. She noted that while a promise must be explicit “the Patent nowhere makes an explicit promise of any sort” [133], and after reviewing the particular statements of advantage in the patent, she remarked that “There is little in these few statements to found a promise, but, despite this, it is common ground between the parties that this Patent does make a promise” [136]. Her holding that there was a modest promise was qualified by statements such as “To the extent there is any promise made in the 948 Patent” [136] and “to the extent the relevant claims in the Patent make a promise,” it is a modest one [137]. Given the current state of the law, it is no doubt tactically safer for a patentee to choose to argue for a modest promise rather than none at all, but it is apparent that in this case Gleason J would have been open to finding that the 948 patent did not make any promise.

The utility discussion also raised an important legal point on the requirement to disclose evidence of utility. It is now established in Canadian law that when utility is based on sound prediction, the factual basis for that prediction must be disclosed in the patent itself. (Though there has recently been some suggestion that this rule is limited to certain types of patents: see here and here.) In this case, no studies or tests at all were disclosed in the 948 patent, so Lilly did not appeal to sound prediction to establish utility, and appealed instead to demonstrated utility [123].

On the basis of Latanoprost 2011 FCA 236, [30], Pharmascience / NEXIUM 2014 FCA 133 [39], [40], and Sildenafil FCA 2010 FCA 242, Apotex argued that even evidence supporting demonstrated utility must be at least referred to in the disclosure [129], [140]. This interpretation of those cases had been accepted by Roy J in Gliclazide Dosage Form 2015 FC 108, which Apotex also relied on [140]. Gleason J dismissed this argument:

[141] With respect, I believe that Justice Roy’s determination on this point is erroneous and ought not be followed as it takes the obiter statements in Sildenafil FCA and Latanoprost out of context and does not address the many other cases where an opposite conclusion was reached.

I entirely agree with this view of of Latanoprost 2011 FCA 236 and Pharmascience / NEXIUM 2014 FCA 133, as discussed in my post on Roy J’s decision. Indeed, the FCA remarks relied on by Roy J were so tangential to the issues in those cases that I didn’t even mention them in my posts on those cases (see here and here). I must say that I read the Sildenafil FCA decision as providing stronger support for a requirement to disclose evidence of demonstrated utility in the patent, but that decision was brief and not entirely clear, and only a single sentence from it was being relied on. Moreover, in my view Gleason J was entirely right to conclude from her review of the case law generally that “the weight of authority is to the effect that the evidence of demonstrated utility need not be referenced in the patent for the patentee to rely on it” [142].

Gleason J’s holding on this point was not obiter, as she went on to find the promised utility was demonstrated on the basis of evidence that was not disclosed or even referred to in the patent [143]-[144]. I hope that Gleason J’s holding will settle this point, at least at the FC level

Saturday, September 19, 2015

Vigamox Decision Affirmed on the Facts

Actavis Pharma Compagny v Alcon Canada Inc / moxifloxacin (NOC) 2015 FCA 192 Boivin JA: Dawson, Webb JJA aff’g 2014 FC 462 Phelan J
1,340,114 / moxifloxacin / VIGAMOX

Alcon Canada Inc. v. Actavis Pharma Company / moxifloxacin (NOC) 2015 FCA 191 Boivin JA: Dawson, Webb JJA aff’g 2014 FC 462 Phelan J
            2,342,211 / moxifloxacin / VIGAMOX

These companion cases concern separate appeals, involving different patents, from a single decision by Phelan J. In both cases the FCA affirmed, essentially on the basis that the appellants were really attempting to re-argue the case on the facts and asking the FCA to re-weigh the evidence, which is not the role of a Court of Appeal.

Phelan J’s decision respecting the 211 patent is blogged here, and his decision on the 114 patent is blogged here and here.

Friday, September 18, 2015

Fairness in Abuse of Process: Which Party Will be More Severely Prejudiced

Eli Lilly Canada Inc v Apotex Inc / tadalafil formulation (NOC) 2015 FC 1016 Gleason J
            2,379,948 / tadalafil formulation / CIALIS, ADCIRCA

In Apotex Tadalafil Formulation Gleason J found that Apotex’ product did not infringe the 948 patent [72], which claims a particular formulation of tadalafil, and that the 948 patent was invalid for obviousness as being obvious to try [112], but that it was not invalid for lack of utility [145]. The main points of interest are Gleason J’s discussion of abuse of process, and her discussion of the suggestion in some recent case law that evidence of demonstrated utility must be disclosed in the patent. I will discuss abuse of process in this post, and utility in Monday’s post.

The abuse of process issue arose because de Montigny J ruled against Lilly on the same issues in respect of the same patent in Mylan Tadalafil III question, and in Sanofi Ramipril 2007 FCA 163 the FCA held that when an a patentee has failed in an NOC proceeding against one generic, it is generally an abuse of process within the meaning of paragraph 6(5)(b) of the NOC Regulations to relitigate the same allegation of invalidity when made by second generic. However, as Gleason J noted [11], the FCA did note that the doctrine of abuse of process should be applied on a case by case basis, “to ensure the application of the doctrine of abuse of process does not give rise to unfairness in the circumstances” (Sanofi Ramipril [40]). Gleason J held that “in the rather unique circumstances of this case, this application is not an abuse of process” [10]. The main distinction relied on by Gleason J was the fact that an appeal of de Montigny J's Mylan Tadalafil III decision was still pending, whereas in Sanofi Ramipril [40] appeals of the earlier decision had been exhausted [12], [14].

More important that this specific distinction is the general principle articulated by Gleason J:

[19] I believe the key issue for consideration involves determination of which party will be more severely prejudiced by a negative determination on the dismissal request.

Gleason J then went on to provide a detailed analysis of the consequences to both parties of allowing the prohibition application to proceed on the merits in this particular case. This principle strikes me as valuable in providing structure and meaning to the assessment of fairness in the exercise of the court’s discretion under s 6(5)(b), and indeed when dealing with abuse of process more generally. It is not an exhaustive principle (nor did Gleason J say it was), as it does not address concerns such as economy of judicial resources and the risk of conflicting judgments which go beyond the interests of the parties to the particular litigation, and which were emphasized in Sanofi Ramipril. But it is nonetheless a helpful elaboration on the question of fairness, which was adverted to but not developed in Sanofi Ramipril.

Gleason J’s statement and her subsequent discussion of the facts acknowledges that consideration of fairness requires a comparative balancing analysis, as opposed to focus solely on the plaintiff. A plaintiff may have legitimate reasons for bringing a subsequent action, even if considerations of judicial economy and fairness to the defendant ultimately warrant dismissal of the action for abuse of process. Implicit in Gleason J’s analysis is a risk analysis; there would be prejudice to Lilly from losing its ability to present its case on the merits, and that prejudice would be greatly magnified if it prevailed on the appeal in Mylan Tadalafil III [21]. In that sense, Gleason J’s analysis is broadly analogous to the “lower risk of injustice” principle enunciated by Hoffmann J In the context of interlocutory injunctions in Films Rover [1986] 3 All ER 772, 780. That is, even though one party might suffer a more substantial prejudice on a negative determination on the abuse motion, that prejudice should be discounted if that party would be unlikely to prevail on the merits. That would explain why it is relevant to ask whether the appeals from the prior decision are exhausted, which implies that the merits remain somewhat uncertain.

Tuesday, September 15, 2015

Non-Infringing Alternative and Intentional Infringement

Apotex Inc v Merck & Co, Inc / Lovastatin Damages 2015 FCA 171 Dawson JA: Stratas, Boivin JJA aff’g 2013 FC 751 Snider J
            1,161,380 / lovastatin / MEVACOR

In a comment to my post “Relevance of Infringer's Outside Option in Non-infringing Alternative Analysis,” on the FCA’s Lovastatin Damages decision, Ephraim Stulberg raises a point that deserves a full analysis:

My reading of the case is that the FCA has concluded (rightly or wrongly) that the NIA defence will typically be open only to unintentional infringers. The "but for" reconstruction cannot simply be based on the proposition that "had we only known the court would have found the patent valid"; otherwise, the actions of the defendant in the real world will be held against them (i.e. if the NIA was really such a good idea, why did you decide to roll the dice?)

I agree that the FCA did seem to be saying that an intentional infringer cannot normally raise the availability of an NIA in constructing the “but for” world. That is directly supported by the FCA’s repeated references to intentional infringement [91], [93] and it makes sense of the court’s reference to “brazen” infringement, which is otherwise puzzling [90]. It is also consistent with the court’s repeated references to Apotex’ belief that the 380 patent was invalid [92], [93], which indicates that, in the view of the FCA, Apotex intentionally infringed because it believed the patent was invalid.

The difficult question is why the FCA was of the view that intent is an important consideration. It is one thing to say that an intentional infringer cannot normally raise the availability of an NIA, but there must be some rationale for that holding, which would otherwise simply be unprincipled.

The reading I provided in my first post – that the FCA was saying that an infringer will not be able to raise the NIA in the damages assessment if it would not have been more profitable than the best outside option – is not strongly supported by the FCA’s emphasis on intent. As I explained in the footnote (*) in my first post, on that reading it doesn’t really make sense to say that an intentional infringer will not usually be able to raise the NIA analysis, because intent doesn’t say anything about whether the defendant believed it had a better outside option. On the other hand, my reading is quite strongly supported by the FCA’s only specific statement as to why as Apotex’ evidence was insufficient [94]; but if that reading is correct, the FCA’s emphasis on intent was misplaced.

While my reading of the decision does not really explain the court’s emphasis on intent, I can’t think of any other reading which does. The basic difficulty with a holding that an intentional infringer cannot raise the availability of an NIA is that, as the FCA explicitly recognized, the question at hand is one of causation [43], and intent is irrelevant to causation. If I smash a store window intentionally or accidentally, the damage I cause – the cost of replacing the window – is the same.

In some limited circumstances the intentional nature of the act might increase the harm done. The humiliation from an intentional public slap in the face might entail a real loss, even though the same physical act would be negligible if accidental. In such instances aggravated damages are appropriate to capture the intangible elements of the harm: see Cassell & Co Ltd v Broome (No 1) [1972] UKHL 3. But there is no suggestion in this case, either on the facts or in the FCA decision, that the infringement is linked to any kind of loss that would give rise to aggravated damages, and aggravated damages do not typically arise in patent litigation generally. And even if aggravated damages could somehow arise, I don’t see how there could be any link between the availability of the NIA and the quantum of the aggravated damages. So, an appeal to aggravated damages cannot justify a holding that an NIA should not be considered in assessing damages against an intentional infringer.

At first glance, punitive damages are more promising. Intent is certainly relevant to punitive damages, which are intended for punishment (or prevention), deterrence and retribution: Whiten 2002 SCC 18 [43], [53], Cinar 2013 SCC 73 [136]. Nonetheless, there are several problems with holding that an intentional infringer cannot rely on the NIA analysis in order to impose punitive damages.

First, as a general matter, punitive damages are not generally available for intentional patent infringers. Intentional infringement is common, particularly in pharmaceutical litigation, yet punitive damages are very seldom awarded. To award punitive damages routinely, but only in cases where the infringer could otherwise have competed with a non-infringing alternative, is unprincipled.

This leads to the second point. While intent is relevant to punitive damages, it is not the only factor that is considered. “Punitive damages are awarded against a defendant in exceptional cases for ‘malicious, oppressive and high-handed’ misconduct that "offends the court's sense of decency’. The test thus limits the award to misconduct that represents a marked departure from ordinary standards of decent behaviour” Whiten [36]. Intentional infringement alone falls far short of this standard, particularly when, as in this case, the infringer believed the patent to be invalid. If, for example, a generic launches at risk in the face of an evergreening formulation patent that it believes is almost certainly invalid, surely it should not be subject to punitive damages if the 10% chance that the patent was valid is ultimately realized.

Finally, punitive damages must be reasonably proportionate to the harm caused: Whiten [94]. This means the harm caused must be determined before punitive damages can be assessed; if we don’t know what harm was caused, how can we ensure that the punitive damages are proportionate to that harm? Again, we come back to the point that the harm caused does not depend on whether the infringement was intentional. By the same token, even if punitive damages were generally appropriate for intentional infringers, there is no particular reason to believe that the appropriate quantum of punitive damages would be arrived at by excluding the NIA analysis. Recall that the NIA analysis is not a defence, but only a method of assessing damages. In this case the facts established that Apotex would have competed equally effectively with the NIA, but in general the NIA analysis might show that the infringer would have captured only a part of the market, or even none at all. So to exclude the NIA analysis as a means of levying punitive damages would mean that sometimes the punitive damages would be an enormous multiple of the harm caused – potentially hundreds or thousands of times the harm actually caused, in cases where competition with the NIA would have been very effective – to a very small fractional multiplier. Indeed, the less the harm, the greater the multiplier, which is exactly the opposite of what we would want from punitive damages that are proportionate to the harm caused.

Consequently, it would be entirely unsound to impose punitive damages by holding that an intentional infringer cannot appeal to the NIA.

Having ruled out punitive damages and aggravated damages, I can’t think of any other reason why intent would be relevant. While the reading I offered in my first post doesn’t really explain the FCA’s emphasis on intent, I can’t think of any other principled explanation for the court’s holding that gives intent a central role. So on the whole, I still think the is the best reading is the one I provided in my first post, but it is certainly possible that I have misunderstood the court’s point.

Finally, Mr. Stulberg remarked that:

The "but for" reconstruction cannot simply be based on the proposition that "had we only known the court would have found the patent valid"; otherwise, the actions of the defendant in the real world will be held against them (i.e. if the NIA was really such a good idea, why did you decide to roll the dice?)

As a general matter, I don’t see what’s wrong with basing the but-for reconstruction on the proposition that “had we only known the court would have found the patent valid,” this is what the infringer would have done. For example, a reasonable royalty is assessed on the assumption that the parties to the hypothetical negotiation knew the patent is valid, even though real licenses are presumably discounted to reflect the possibility of invalidity. More generally, my view is that damages assessment should take into account not just whether the patent is valid, but all knowledge known at the time of trial: see my article with Tom Cotter, A New Framework for Determining Reasonable Royalties in Patent Litigation (forthcoming Fla L Rev). As to why the defendant would have infringed, the answer is that it is often more profitable to infringe. In this case the infringing process was substantially cheaper than the NIA, though that differential profit would have been captured by Blue Treasure (the Chinese joint venture which manufactured most of the infringing product), rather than by Apotex. But that does not make the NIA analysis irrelevant. If the NIA indeed just as good, it is true that the infringer would normally not infringe intentionally, but in general the NIA will allow some partial degree of competition. This is there is a broad range of possibilities between an NIA that is a perfect substitute for the patented product and one that would not have captured any sales at all. It is well established that a patentee cannot recover lost profits for sales that would have been captured by third parties with non-infringing products, and typically such competitors will capture some but not all of the infringing sales: see Jay-Lor 2007 FC 358, [197], AlliedSignal (1998), 78 CPR(3d) 129, 139 (FCTD). The NIA analysis just says the same is true even if the non-infringing sales would have been made by the infringer.

I consulted for Apotex at both the FC and FCA level. The views expressed in this post are my own.

Vigamox Decision Affirmed on the Facts

Actavis Pharma Compagny v Alcon Canada Inc / moxifloxacin (NOC) 2015 FCA 192 Boivin JA: Dawson, Webb JJA aff’g 2014 FC 462 Phelan J
1,340,114 / moxifloxacin / VIGAMOX

Alcon Canada Inc. v. Actavis Pharma Company / moxifloxacin (NOC) 2015 FCA 191 Boivin JA: Dawson, Webb JJA aff’g 2014 FC 462 Phelan J
            2,342,211 / moxifloxacin / VIGAMOX

These companion cases concern separate appeals, involving different patents, from a single decision by Phelan J. In both cases the FCA affirmed, essentially on the basis that the appellants were really attempting to re-argue the case on the facts and asking the FCA to re-weigh the evidence, which is not the role of a Court of Appeal.

Phelan J’s decision respecting the 211 patent is blogged here, and his decision on the 114 patent is blogged here and here.

Thursday, September 10, 2015

Latitude in Admitting Hearsay Evidence Contained Within Facially Reliable Scientific References

Takeda Canada Inc v Mylan Pharmaceuticals ULC / pantoprazole (NOC) 2015 FC 751 Barnes J
             2,341,031 / pantoprazole magnesium dihydrate / TECTA

In this NOC proceeding Takeda’s 031 patent claiming pantoprazole magnesium dihydrate was found to be not infringed and invalid for anticipation. Both aspects of the decision turned entirely on the facts. The most interesting aspect of the decision is Barnes J’s discussion of hearsay evidence in NOC proceedings, and in particular his statement that “some latitude should be extended to the reliance by expert witnesses upon hearsay contained within authenticated and facially reliable scientific references” [92].

Pantoprazole magnesium is a known gastric acid inhibitor, and the dihydrate form was the inventive concept of the 031 patent [3]. The relevant prior art was Example 10 of an international patent application [27]. As Barnes J noted, the test for anticipation is strict and requires that following the directions in Example 10 would “inevitably or necessarily” produce pantoprazole magnesium dihydrate. “If the evidence discloses on a balance of probabilities only that a dihydrate will sometimes be the result,” the attack based on anticipation will fail [39]. The only direct evidence was provided by Mylan’s expert, who testified that by following the directions in Example 10 he had produced pantoprazole magnesium dihydrate [40]. Takeda’s expert suggested that different choices might have produced a different result, but those concerns were all “theoretical” and Barnes J was not persuaded [48]. The fact that Takeda did not conduct any tests to determine whether Example 10 would produce the dihydrate form substantially undermined its case [49] (though of course, if Takeda had carried out such tests and they had all produced the dihydrate form, that would not have helped either).

Mylan argued its pantoprazole magnesium product did not infringe because it was the hemipentahydrate, not the dihydrate. The issue turned entirely on whether Mylan’s product was indeed the hemipentahydrate. Barnes J took into account the fact that Mylan’s ANDS submitted to the Minister of Health reports that its product was characterized by various testing methods and found to be a hemipentahydrate [15]. He held that the fact that the Mylan’s product specification allowed for a range of water content that encompassed both the dihydrate and hemipentahydrate, “says very little about what is actually produced” [60], and “it would take far stronger evidence than this to support an inference that Mylan’s disclosure about its product to the Minister was deceitful” [62]. Barnes J also considered evidence related to various tests used to characterize Mylan’s product, and he concluded that Takeda had not carried its burden of showing that Mylan’s product was the dihydrate, particularly in light of the imprecision of many of the tests [79]. [104]. Again, Takeda’s failure to carry out its own characterization tests weighed against it [103].

A significant piece of evidence relied upon by Mylan to characterize its product as a hemipentahydrate was the fact that the XRPD pattern obtained by Mylan for its product matches the XRPD pattern reported in US patent application 623 for a product characterized by the US 623 inventors as pantoprazole magnesium hemipentahydrate [88]. Takeda attempted to block the introduction of this evidence as hearsay [90]. Barnes J held it was indeed hearsay [90] and it did not fall clearly into one of the previously recognized exceptions to the hearsay rule [91]. Nonetheless, he considered it:

[91] In particular, there is no evidence before me to show that the admission of this evidence was justified on the basis of its necessity. That said, the opinions expressed by expert witnesses in patent litigation frequently rest on their acceptance of the accuracy of hearsay references concerning scientific issues or for the interpretation of prior art. In some cases, this is justified on the ground that experts in a particular field are permitted to rely on the accuracy of widely accepted and publicly reported data.

[92] Given the summary nature of NOC proceedings, I am of the view that some latitude should be extended to the reliance by expert witnesses upon hearsay contained within authenticated and facially reliable scientific references. The contents of US 623 were disclosed in Mylan’s NOA and its expert witnesses relied on the reported findings in support of their own analysis. Where such a reference contains sufficient information to allow the opposite party to replicate the work and assess the accuracy of the reported data, that party suffers no material prejudice by the admission of hearsay in support of an expert’s opinion. It was open to Takeda to run the same tests reported in US 623 and to fully characterize the resulting compounds. Despite the significance of this evidence, Takeda chose not to make that effort.

Thursday, September 3, 2015

The Value of the Standard

Professor Tom Cotter and I have working paper on FRAND royalties, “The Value of the Standard,” that is now available on SSRN. Here is the abstract:

Standard-setting organizations (SSOs) often require member firms to license their standard-essential patents (SEPs) on undefined "fair, reasonable, and nondiscriminatory" (FRAND) terms. Courts and commentators in turn have proposed various principles for calculating FRAND royalties, among them that the royalty should not reflect "the value of the standard." As we show, however, this principle could be understood to mean any or all of three distinct concepts, namely that the royalty should not reflect the implementer's sunk costs; that the patentee should not be able to extract any of the value resulting from network effects; or that the royalty should be proportionate to the patent's contribution to the standard.

This Article proposes, as an alternative benchmark, that a FRAND royalty should reflect the incremental contribution of the patent to the value of the standard. This principle combines two related ideas: first, that royalties should reflect the hypothetical bargain the parties would have struck ex ante (prior to standard adoption), in view of the incremental value of the technology over unpatented alternatives as revealed ex post; and second, that multiple patents reading on a standard should be valued in proportion to their marginal contribution ("ex post Shapley pricing"). Our proposal would prevent patentees from extracting sunk costs or a disproportionate share of standard value, but (contrary to some approaches) it would enable them to draw some of the increased value resulting from network effects. We show that our approach is more consistent with sound innovation policy, and suggest some practical applications

Wednesday, September 2, 2015

NOC Abuse of Process Summarized

Gilead Sciences Inc v Apotex Inc 2015 FC 610 Barnes J
            2,298,059 / tenofovir (PMPA) / TRUVADA

In Gilead v Teva / tenofovir (NOC) 2013 FC 1272, the companion case to 2013 FC 1270 (blogged here), Barnes J refused to grant an order of prohibition to Gilead on the basis that the 059 patent was obvious. Teva had put in issue the validity of Claims 1 through 7, but Gilead had relied on on Claims 3 and 4 [3]-[4]. Apotex then served an NOA on Gilead alleging obviousness [5] and also alleging an abuse of process. Gilead responded by saying it intended to fill in an evidentiary gap from the earlier proceeding [6] and that it relied on all the Claims, not just 3 and 4 [8]. Barnes J held that Gilead’s response was indeed an abuse of process:

[13] It seems to me that an abuse of process finding in the NOC context is not dependant on the evidence to be called but, rather, on the issues presented to the Court for determination. Once the second person puts a validity issue into play, the patentee proceeds at its subsequent peril by not fully responding. In other words, it must live with the consequences of not fully joining issue in the first proceeding.

[14] A patentee cannot avoid an abuse of process finding by asserting the validity of only a select number of claims in an initial NOC proceeding, only to assert the validity of different claims in a subsequent NOC proceeding involving a different generic challenger. Where the initial NOA puts in issue the validity of certain patent claims, it is not open to the patentee to concede some of the claims but later resile from that position. If it were otherwise, the patentee could effectively split its case and unilaterally compel subsequent generic challengers to litigate claims, the invalidity of which the patentee had effectively conceded. This would amount to a manipulation of the system and it would violate the principle that the patentee is required to put its strongest case forward in the first instance.

[15] The situation may well be different where the initial generic challenger declines to put the validity of certain claims in issue in its NOA, perhaps relying solely on an allegation of non-infringement. There the patentee could presumably rely on the presumption of validity in the first instance without compromising its right to assert validity in the face of a subsequent challenge.

Tuesday, September 1, 2015

Relevance of Infringer’s Outside Option in Non-infringing Alternative Analysis

Apotex Inc v Merck & Co, Inc / Lovastatin Damages 2015 FCA 171 Dawson JA: Stratas, Boivin JJA aff’g 2013 FC 751 Snider J
            1,161,380 / lovastatin / MEVACOR

In Lovastatin Damages the FCA held that a non-infringing alternative should be taken into account in assessing damages for patent infringement if the alternative “could and would” have been used by the infringer. Yesterday’s post discussed the “could” branch of this test (which the FCA held was dispositive on its own [89]). This post reviews the “would” branch. The FCA held that even if the NIA was available to the infringer in the sense that it would have been technically feasible (the “could” branch), it should not be considered in assessing damages if the NIA would not have been used because there was some other product entirely that would have been more profitable than the NIA. This raises a tension between treating causation purely as a matter of establishing what would most likely have happened but for the infringement, and a purposive approach to the interpretation of s 55(1) of the Act.

As noted in yesterday’s post, I consulted for Apotex in this case at both the FC and FCA level. The views expressed in this post are my own.

Monday, August 31, 2015

Non-Infringing Alternative Must be Instantaneously Available on the Market

Apotex Inc v Merck & Co, Inc / Lovastatin Damages 2015 FCA 171 Dawson JA: Stratas, Boivin JJA aff’g 2013 FC 751 Snider J
            1,161,380 / lovastatin / MEVACOR

In Lovastatin Damages the FCA has addressed the question of whether the availability of a non-infringing alternative (NIA) should be considered in assessing damages for patent infringement. As discussed here, Snider J had held that a non-infringing alternative cannot be considered. The FCA has now reversed on this point, holding that as a matter of law, the availability of a non-infringing alternative is a relevant consideration [1] if the infringer can establish that it “could and would” have sold an NIA but for the infringement [49], [50]. However, the FCA went on to hold that Apotex had not established that it either could or would have sold non-infringing product [88], [95]. Consequently the FCA affirmed Snider J’s decision that damages should be calculated on the basis that but for the infringement, Apotex would not have made any sales and Merck would have captured the entire market.

In my view, the FCA’s explanation of why the availability of a non-infringing alternative should be legally relevant to the calculation of damages is entirely correct. However, its holding that the NIA should not be considered relevant in this case is more problematic. On the “could” branch, dealt with in this post, the FCA held that as a matter of law, an NIA must be instantaneously available on the market at the time of infringement [79]. In my view, that holding is inconsistent with the general case law on causation, as well as US authority on point and the FCA’s own holdings in related areas. It is also inconsistent with the rationale given by the FCA for considering the NIA in the first place.

I consulted for Apotex at both the FC and FCA level. The views expressed in this post are my own.

Friday, August 28, 2015

Deduction for Fixed Costs in an Accounting Denied

ADIR v Apotex 2015 FC 721 Gagné J
            1,341,196 / perindopril / COVERSYL

I wrote two posts (here and here) on Gagné J’s Perindopril Accounting decision several weeks ago, but there is one more point from the decision worth mentioning. As discussed in my blog post on Harrington J’s Escitalopram decision 2013 FC 192, there is a difficult question as to whether to allow an infringer to deduct some part of its fixed costs (such as general overhead or rent) from the profits to be disgorged. On the one hand, fixed costs would have been incurred in any event and so are not costs caused by the infringement, but on the other hand a business cannot run profitably without covering its fixed costs. If the business produced 20 different products, all of which infringed patents held by different patentees, and deduction of fixed costs was not permitted, the infringer would be required to account for far more profit than it actually made. In Escitalopram Harrington J held that fixed costs should not be deducted. In Perindopril Accounting Gagné J [68]-[77] followed that decision without providing significant additional analysis. Nonetheless, her decision reinforces the trend against allowing deduction of fixed costs, which now appears quite well established at the FC level. Even so, there is a real issue as to whether refusing to allow deduction of any fixed costs is consistent with “but for” causation. This is a question that at some point should be addressed at the FCA level.

Wednesday, August 26, 2015

Restrictive Interpretation of Materiality Requirement under S 53 Wilful Misleading

SNF Inc v Ciba Specialty Water Treatment Ltd, 2015 FC 997 Phelan J

Phelan J's decision holding Ciba’s patent invalid for obviousness turns entirely on its facts [195-96]. The main point of interest in the decision is his obiter discussion of the argument that the 581 patent was invalid under s 53 for wilfully misleading statements.

The 581 patent concerns a method of treating mine tailings. Tailings are commonly disposed of by pumping aqueous slurry to an open lagoon and allowing it to dewater. To limits the area occupied by the tailings, it is desirable to deposit them in multiple layers. This requires that the lower layers are sufficiently solid to support the material deposited on top. One way of speeding up the process of solidification or “rigidification” is to add a polymer to the slurry which helps bind the waste particles together. Such polymers were well known in the art.

Ciba’s 581 patent claimed a process of rigidifying the tailings by adding an aqueous solution of polymer to the fluid slurry during transfer [24]. A key piece of prior art was the Gallagher patent, WO-A-0192167, which was also owned by Ciba. The Gallagher patent claimed a process of rigidifying the tailings by adding a polymer to the fluid slurry during transfer. The Gallagher patent did not anticipate the 581 patent because its disclosure focused on adding the polymer in powdered form rather than in aqueous form [169]. Nonetheless, the Gallagher patent evidently presented a validity problem for Ciba’s 581 patent, if not on anticipation, then on obviousness, as the 581 patent merely substituted an aqueous solution for powder [222] and both forms were well known in the prior art. (In the end, the 581 patent was held invalid over the common general knowledge alone, as it was not established that the Gallagher patent was part of the cgk.) Ciba, as the owner of the Gallagher patent, was well aware of this problem when the 581 application was filed.

The 581 patent directly addressed the Gallagher patent, stating (581 p6, [223]) that:

the importance of using particles of water soluble polymer is emphasised and it is stated [in the Gallagher patent] that the use of aqueous solutions of the dissolved polymer would be ineffective.

The s 53 attack was based primarily on this statement.

As summarized by Phelan J, a patent is invalid under s 53 if the impugned statement is [216]:

a) untrue;
b) material;
c) made in the drafting of the Patent with wilful intent to mislead; and,
d) the statement would be likely to mislead the Skilled Person.

In this case the statement were untrue – there was no statement to that effect in the Gallagher patent [224-25]. The statements were known by Ciba to be untrue [222] and the statement was made in order to make it seem as though the 581 invention was not obvious over Gallagher when Ciba knew it was an obvious modification to the Gallagher patent [225].

Nonetheless, the s 53 attack failed on the materiality requirement:

[229] Ciba is saved only by the issue of materiality. A statement is material if it affects how the public makes use of the invention taught by the 581 Patent (see Procter & Gamble Co v Bristol-Myers Ltd, [1978] FCJ No 812 (QL) at para 37, 39 CPR (2d) 145; Weatherford Canada Ltd v Corlac Inc, 2011 FCA 228, 95 CPR (4th) 101). 
    (my emphasis)

This is a very narrow definition of materiality which seems to make materiality almost co-extensive with sufficiency. The sources cited by Phelan J do not support such a narrow definition. The relevant statement from Procter & Gamble is that “it is really immaterial to the public whether the applicant is the inventor or one of two joint inventors as this does not got to the term or to the substance of the invention nor even to the entitlement.” To my mind this supports a much broader definition of materiality, to the effect that a statement is material if it would likely have affected the examiner’s decision to allow the patent, or at least to whom the patent should be granted. In Corlac v Weatherford 2011 FCA 228, (blogged here) in holding that the misstatement at issue was not material, the FCA did state that “Finally, the appellants have not demonstrated that inventorship is somehow relevant to the public's use of the invention in this case” [129], but this was a concluding remark in a long discussion citing a variety of factors all pointing to the same conclusion. Consequently, Phalen J’s definition is unlikely to become widely accepted as definitive, particularly given that the discussion of s 53 was expressly obiter [202].

Tuesday, August 25, 2015

Purposive Construction Does Not Support “Any Arguable Interpretation That Would Uphold the Patent”

ABB Technology AG v Hyundai Heavy Industries Co, Ltd, 2015 FCA 181 Stratas JA: Webb, Near JJA aff’g 2013 FC 947 and 2013 FC 1050 (costs) Barnes J

In my post on Barnes J’s decision in ABB v Hyndai 2013 FC 947, I remarked that it is “a fairly straightforward case which turned largely on its facts.” It is therefore not surprising that the FCA has affirmed the holding that both patents at issue are invalid, largely on the basis of a deferential standard of review.

The most interesting point was one of claim construction, which the FCA reviewed for correctness. The invention was a viewing window to allow visual inspection of the position of the grounding switch in gas-insulated switchgear. The crucial claim term used to describe the grounding switch was "a moveable switch-contact element" [32]. The patentee, ABB, acknowledged that the prior art disclosed the use of viewing windows to observe the position of knife blade switches [33] and argued that this term should be construed to encompass only sliding contact switches [33]. ABB argued that the principle that a claim should be required to “afford the inventor protection for that which he has actually in good faith invented” Consolboard ([1981] 1 SCR 504, 521) implies that an interpretation should be adopted which favours validity [50].

My post on the decision of Barnes J had a long (and now that I re-read it, somewhat convoluted) discussion of the possible tension between a purposive and textual analysis* of the claim. Whatever the merits of that discussion, the case at hand does not raise any such tension, because as Barnes J held and the FCA affirmed, all considerations point in the same direction [46].

The important principle emphasized by the FCA is that “Redrafting [the claims] would undermine the public notice function of patents, which entitles readers to clear and definite guidance concerning the extent of the monopoly conferred” [51]. If a construction favouring validity had to be adopted, then the claims could never be construed without a search to identify potentially invalidating prior art. It is reasonable to say that the patentee should be construed in light of the common general knowledge which a skilled reader already possesses, but prior art for the purposes of anticipation, as was at issue in this case, is not necessarily part of the cgk.

More broadly, the statement that a patent should be construed to give protection to that which the inventor had actually invented was not intended as an overriding rule of law, but rather as a reminder that patents serve a public good in providing an incentive to invent, and consequently, “There is no occasion for being too astute or technical in the matter of objections to either title or specification” (Consolboard 520). But that is not to deny that obscure or poorly drafted patents can be a disservice to the public, regardless of the merits of the invention. While the inventive function of patents should not be ignored, neither should the notice function; the construction must be “reasonable and fair to both patentee and public” (ibid).

Barnes J’s costs award 2013 FC 1050 was also appealed. As described in my blog post, Barnes J awarded costs with a slight premium above Column IV of the tariff. The FCA affirmed. The main point of legal interest is that the FCA affirmed that its decision in Imperial Manufacturing 2015 FCA 100 sets out the appropriate standard for a review of a discretionary order, which is the same as the standard for a ruling of mixed fact and law [88]. On the facts, Barnes J's departure from the tariff was justified [90].

*It is somewhat confusing that the modern approach to claim construction is referred to as “purposive construction.” There is a distinction to be made between an overall "approach" to interpretation, and an analysis which may be part of that approach. So, the modern approach to statutory interpretation considers text, context and purpose, and seeks to arrive at a harmonious interpretation of the legislation in light of all three analyses. The portion of that analysis which looks to the purpose is referred to as the purposive analysis, while the approach as a whole is usually referred to simply as the “modern approach.” The approach to interpretation which would consider purpose of the statute as the overriding consideration, rather than merely one component, was referred to as a “purposive approach.” The modern approach to claim construction, like the modern approach to legislative interpretation, also considers text, context (in the form of the skilled readers cgk) and purpose. It is referred to as purposive interpretation because Catnic emphasized the need to consider purpose as a reaction to an excessive reliance on parsing the text. But Catnic never said the text should be ignored, and indeed the text of the claim itself remains of dominant important, just as the text of the legislation is the most important consideration in legislative interpretation. Thus “purposive construction” is not the same as a “purposive approach,” nor is it the same as a purposive analysis. It would be easier simpler if the current approach to claim construction were simply referred to as the “modern approach” to claim construction.

Wednesday, August 19, 2015

Obviousness and “Blinding” an Expert

E Mishan & Sons, Inc v Supertek Canada Inc 215 FCA 163 Webb JA: Ryer, Near JJA aff’g 2014 FC 326 Hughes J
            2,779,882 here

In Mishan v Supertek the FCA has affirmed Hughes J’s finding that the 882 patent is invalid for obviousness. As discussed here, the trial decision largely turned on the the factual issue of whether a particular piece of prior art would have been found in a reasonably diligent search and it is not surprising that the FCA affirmed, using a deferential standard of review [25]. The case does raise an interesting legal point regarding the role of hindsight in the obviousness analysis.

The invention at issue is a lightweight expandable and contractible garden hose, comprising an elastic inner tube and an inelastic outer sleeve. When the hose is empty, the elasticity of the inner tube causes it to contract. When it fills with water, the inner tube expands; since the diameter is constrained by the outer sleeve, it elongates [3]. The key prior art was the McDonald patent, which disclosed a very similar hose, albeit one that was intended as an oxygen hose for an aviation crew oxygen mask. Hughes J found that the 882 invention was obvious over the McDonald patent.

On appeal, Mishan argued [35] that Hughes J had erred by using his knowledge of the 882 Patent to identify the differences between what is claimed in the 882 patent and the McDonald patent and to determine that the differences were obvious, on the basis that this is contrary to the fourth step of the Windsurfing / Pozzoli  test, adopted in Sanofi 2008 SCC 61 [67], which asks whether the invention would have been obvious in light of the state of art “viewed without any knowledge of the alleged invention as claimed.” There is considerable force to Mishan’s argument. As Lewison J explained in Virgin Atlantic 2009 EWHC 26 (Pat) [271-72]:

at the third stage of the structured approach it is necessary to focus on the differences between the prior art and the patent in suit; but at the immediately succeeding fourth stage it is necessary to erase all knowledge of the alleged invention from the mind. That is not an easy task. . . . If an expert approaches his own task in the manner set out in Pozzoli, he will almost inevitably expose himself to a charge of having approached the final question with the aid of hindsight.

The FCA nonetheless rejected Mishan’s submission, pointing out that the difficulty is inherent in the Windsurfing / Pozzoli framework:

[36] In applying the fourth step of the Sanofi test, in my view, the requirement that this step be completed “without any knowledge of the alleged invention as claimed” does not mean that the differences that were identified in step 3 would be forgotten for step 4. These differences are an essential part of step 4. Without knowing the differences between the relevant prior art and the inventive concept, step 4 could not be completed. The differences are based on the inventive concept of the claims in issue and the relevant prior art and, therefore, are determined based on some knowledge of what is claimed in the patent in issue. Therefore, some knowledge of the alleged invention will be reflected in the differences that are analyzed in applying step 4 of the Sanofi test.

Thus the statement that the fourth step of the test must be undertaken “without any knowledge of the invention as claimed” cannot be understood literally. It is really just an awkward way of repeating the standard warning against being influenced by hindsight: see eg Wandscheer [1948] SCR 1 at 12.

Though the FCA was bound to reject this objection as a matter of law, what about as a matter of policy? Is there any alternative? Lewison J said in order to avoid the problem of hindsight bias, “[t]he structured Pozzoli approach is a series of steps directed to the court; not to experts” [272]. But this does not solve the hindsight bias, as it is empirically well-established that judges are also subject to the hindsight bias – if anything, to a greater extent than experts in the art.

One alternative approach would be to “blind” the expert to the invention, by asking them to answer the problem addressed by the inventor without knowing the inventor’s solution. In this case, we would simply ask the experts – or rather a skilled person – to design a lightweight expandable and contractible garden hose, and see if they come up with the invention. This would avoid hindsight by asking each expert to fully replicate the inventive process faced by the inventor. But if done faithfully, this would often be unworkable, as the cost of litigation could exceed the cost of invention. With that said, “blinding” the expert to the solution might be workable in some cases, such as where the question is whether the invention is obvious to try; if the expert is blinded and yet readily suggests a route that in fact worked without difficulty, this would be good evidence that the proposed route was indeed obvious to try: see eg Esomeprazole 2014 FC 638 [321].

This relates to the question of whether experts should be blinded in claim construction. As discussed here, in her Rasagiline 2014 FC 1070 decision, Gleanson J indicated at [94]-[97] that the blinding of the Apotex experts in that case was reason to prefer their evidence over that of Teva’s experts. But more recently, in Apotex / Tadalafil 2015 FC 875 [166], she explained in effect that both her Rasagiline decision and Rennie J’s Esomeprazole decision turned on the facts. That is, blinding is not always preferred, though in some circumstances it might be preferred. This seems right to me. There is a tradeoff between avoiding the hindsight problem and keeping costs of litigation manageable by focusing on “where the shoe pinches,” and how that balance is best achieved will depend on the facts. Unfortunately, that means there is no easy way to for a litigant to decide whether to blind its experts in a particular case.(Note that Rasagiline concerned claim construction while Esomeprazole and Tadalafil concerned obviousness.)

Monday, August 17, 2015

No More Perfect Match Requirement for Patent Register Listing

Eli Lilly Canada Inc v Canada (Attorney General) 2015 FCA 166 Nadon JA: Boivin JA; Dawson JA concurring rev’g 2014 FC 152 Bédard J
            2,379,329 / TRIFEXIS

In Gilead / COMPLERA 2012 FCA 254 the FCA apparently held that a perfect literal match between the claims of a patent and the compounds set out in an NOC for a product is required before the patent can be listed on against that product on the Patent Register. In Lilly / TRIFEXISFC Bédard J, following Gilead, refused to allow the 329 patent to be listed against TRIFEXIS. The FCA has now reinterpreted Gilead and consequently set aside Bédard J’s decision. While this FCA decision evidently abolishes the perfect match requirement, it is not entirely clear what the new test is.

The facts in Lilly / TRIFEXIS are fairly simple. TRIFEXIS is authorized as an oral dosage form of a drug that contains two active medicinal ingredients: spinosad and milbemycin oxime. The 329 patent claims an “oral formulation” comprising spinosad [9]. “Oral formulation” was defined in the disclosure to include spinosad in combination with other compounds including “milbemycins” [9]. Consequently Bédard J construed the relevant claims to be directed "not only to a formulation including spinosad as the only active ingredient, but also to formulations that includes other active ingredients such as, but not restricted to, milbemycin oxime" [FC 69]. Thus she in effect held that a generic version of TRIFEXIS would necessarily infringe the 329 patent. She nonetheless refused to allow the patent to be listed against TRIFEXIS because in her view (and in my view as well, as discussed here), the FCA Gilead decision interpreted the product specificity requirement of s 4(2) of the PM(NOC) Regulations as requiring that all the ingredients be listed in the claims themselves.

The FCA has now reversed that decision. Dawson JA’s concurring opinion is straightforward. She was of the view that Gilead is not distinguishable from the case at hand, but that it was wrongly decided and should be reversed [100]. In her view, there is a sufficient nexus between the patent and the subject of the NOC if the patent claims the approved medicinal ingredient, in the sense that the approved product falls within the “boundaries” set out by the claims [107]. In my view Dawson J is entirely correct on all counts.

Friday, August 14, 2015

Disagreement on Date for Assessing Obviousness-type Double Patenting

Eli Lilly Canada Inc v Apotex Inc (NOC) 2015 FC 875 Gleason J
            2,226,784 / tadalafil /CIALIS

In this decision dealing withe Lilly’s CIALIS patent, Gleason J disagreed with de Montigny J’s earlier Mylan / tadalafil decision 2015 FC 17 as to the appropriate date for assessing obviousness-type double patenting. In my blog post on Mylan / tadalafil I had agreed with de Montigny J’s reasoning, but on reviewing Gleason J’s decision, I have realized that there are some holes in that logic. At the end of the day, this point was not determinative and so Gleason J expressly declined to come to any firm conclusion on this legal issue. I have spent considerably longer on the blog post than I usually do, and I haven’t come to any firm conclusion either; all I can say is that the law is unsettled, and that is just as well, as the point is a difficult one.

The judicially created doctrine of obviousness-type double patenting precludes an inventor from obtaining a second patent for an invention which is an obvious modification of an invention for which the same inventor holds a prior patent. While the “obviousness” aspect of this doctrine is the essentially same as the obviousness analysis generally, it is a distinct doctrine because it may be raised in circumstances in which the first patent would not constitute part of the state of the art for the purposes of an obviousness attack on the second patent. In particular, obviousness-type double patenting essentially permits a prior unpublished patent application to used as prior art against a subsequently filed application, even though the unpublished application is not part of the statutorily defined state of the art: [60]; s 28.3. Prior unpublished applications were particularly problematic under the old Act, under which patents were not published until issued: for example, in Whirlpool 2000 SCC 67, decided under the old Act, the second patent (734) was filed 2 ½ years after the first patent (803) application was filed, but two years before it was granted. The problem is reduced under the new Act, but it may still arise because patents are not published until 18 months after the priority date. So, in this case the priority date of the 784 patent was two weeks before the publication date of the earlier 377 patent which was the basis for the double patenting attack.

The date for assessing obviousness-type double patenting is important if the common general knowledge has advanced in the interim. Suppose the inventor invents the wheel and files an application at a time when wood is the only known material. Bronze then becomes a widely known material. The same inventor then develops an improved wheel made of bronze and files a second application, before the first application is published. If the date for assessing obviousness is the filing date of the first application, then the bronze wheel is non-obvious; but if the crucial date is the second filing date, then it is obvious over the wheel claimed in the first application. The basic dilemma is that the inventor has already received a reward for inventing the wheel, in the form of the first patent, and it seems wrong that she should be rewarded with an additional term of protection for a bronze wheel, when she did not invent bronze. But on the other hand, the improved bronze wheel would not be obvious to a skilled person even at the time of the second application; the skilled person would know nothing about the wheel, as the first application was still unpublished. If the inventor had waited to file her application until the later date, she would have been entitled to claim both the wheel and the bronze wheel, because neither would be obvious to a skilled person at that time; it seems perverse to say she should not be permitted to obtain a patent for the bronze wheel for the sole reason that she had previously filed the application for the wheel.

Friday, July 24, 2015

Blogging Break

I am taking a two week summer vacation. I’ll resume blogging sometime in the week of August 10, starting with the cases that came out this week that I didn’t have time to blog before leaving, namely: Eli Lilly Canada Inc. v. Canada (Attorney General) - 2015 FCA 166; Eli Lilly Canada Inc. v. Apotex Inc., 2015 FC 875; and E Mishan & Sons, Inc v Supertek Canada Inc 215 FCA 163.

Monday, July 13, 2015

Non-Infringing Alternative "Defence" Rejected Once Again

ADIR v Apotex 2015 FC 721 Gagné J
            1,341,196 / perindopril / COVERSYL

As noted in my last post, this case is the accounting of profits portion of a bifurcated trial. In the liability decision, Laboratoires Servier v Apotex Inc, 2008 FC 825 aff’d 2009 FCA 222, Snider J held that the defendants had infringed the plaintiff’s ‘196 patent and she allowed the plaintiffs to elect an accounting of profits [1]. This post deals with the treatment of non-infringing alternatives in the accounting.

A substantial amount of the infringing material manufactured by Apotex in Canada was destined for export to markets such as the UK and Australia. Apotex argued that it could have manufactured perindopril API and finished dosage in other non-infringing jurisdictions for export to those same markets at exactly the same price, and if it had done so, it would have made exactly the same profits (or even more!) than it made by manufacturing in Canada [79]-[80]. In Schmeiser 2004 SCC 34, where the SCC held that the preferred means of calculating an accounting is the differential profit approach, in which “A comparison is to be made between the defendant's profit attributable to the invention and his profit had he used the best non-infringing option” [102]. On this authority, Apotex argued that since it would have made just as much money using the non-infringing offshore manufacturing, the profits attributable to its Canadian infringement were zero. This is referred in the decision to as the “non-infringing alternative” or “NIA” “defence”. (As I have argued, this argument is not a defence, in the sense that it does not normally result in a complete bar to liability.)

Gagné J rejected the NIA argument as a matter of law [106], though she went on to hold that in any event it was not made out on the facts [142]. In my view, Gagné J’s reasons for rejecting the NIA analysis as a matter of law is not persuasive, but her analysis of its application on the facts is.

Friday, July 10, 2015

“Insurance” Provision in Transfer Pricing Agreement

ADIR v Apotex 2015 FC 721 Gagné J
            1,341,196 / perindopril / COVERSYL

This case is the accounting of profits portion of a bifurcated trial. In the liability decision, Laboratoires Servier v Apotex Inc, 2008 FC 825 aff’d 2009 FCA 222, Snider J held that the defendants had infringed the plaintiff’s ‘196 patent, and she allowed the plaintiffs to elect an accounting of profits [1]. This decision is primarily of interest for two points: the treatment of payments made on account of what was argued to be liability insurance provided by Apotex to its foreign purchaser to protect against infringement of a foreign patent, which is dealt with in this post, and the treatment of non-infringing alternatives, which I will consider in my next post.

Thursday, July 9, 2015

Inventive Concept and the Promise of Utility Are Not Necessarily Coextensive

AstraZeneca Canada Inc v Apotex Inc / esomeprazole 2015 FCA 158 Dawson JA; Ryer, Webb JJA aff’g 2014 FC 638 Rennie J
            2,139,653 / esomeprazole / NEXIUM

The FCA’s brief Esomeprazole decision affirms a couple of important points that were raised in yesterday’s post (which I wrote before having read the FCA decision).

An initial, basic point is that the FCA affirmed Rennie J’s holding that the patent was invalid for failing to satisfy the promise of the patent, which was higher than the mere scintilla necessary to support a patent. As I remarked in my post on Rennie J’s decision, this shows that “the promise doctrine is alive and well post-Plavix FCA 2013 FCA 186.” This is not entirely surprising, as Plavix formally reaffirmed the promise doctrine, holding only that the promise must be explicit, but with the FCA’s affirmance in this case any thought that Plavix was the first step towards abandoning the doctrine entirely must now be laid to rest.

The FCA also stated that “[i]t is also now settled law that some promises can be construed to impose utility requirements across each of a patent’s claims, while other promises may touch only a subset of the claims,” citing Celecoxib 2014 FCA 250 (blogged here). While Rennie J in this case did not construe the promise on a claim-by-claim basis, the FCA held this was not an error in light of the evidence and submissions before him [6]. As noted in yesterday’s post, the distinction between overarching and claim-specific promises was applied by O'Reilly J in his Deferasirox decision.

AstraZeneca also argued that “the Federal Court erred by construing the utility of the claims in issue in a manner inconsistent with their inventive concept. AstraZeneca argues that because it is a fundamental rule of claim construction that a claim receives one interpretation for all purposes, there must be a unitary, harmonious understanding of the essential elements of the claim, inventive concept and utility” [10]. The FCA rejected this proposition as being unsupported by any jurisprudence. In my view, this holding is entirely correct. To elaborate on an example given in yesterday’s post, suppose a racemic compound is known to treat cancer though with side effects, and it is obvious to a skilled person that one of the enantiomers is therapeutically effective while the other is responsible for the side effects, but it is unusually difficult to resolve the enantiomers. If a patentee succeeds in resolving the enantiomers through inventive ingenuity and claims the therapeutically effective enantiomer, the claimed invention is surely patentable. But if the inventive concept and the promise of utility are coextensive, it would be held invalid; the enantiomer is useful, because it treats cancer (without side effects), but that was obvious to anyone. The reason the claim is valid is that the inventive concept, namely the method of separating the enantiomers, is distinct from the utility.