Friday, February 14, 2020

Burden of Proving Priority

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2020 FCA 30 Locke JA: Rivoalen, Nadon JJA var’g 2018 FC 259 Phelan J
            2,261,630 / infliximab / INFLECTRA

An apparently novel issue raised in this appeal was the burden of proving priority. The application for the 630 Patent was filed on August 1, 1997, and a priority claim was made based on a US application filed in 1996 [59]. However, s 28.4(4) provides that where there are two or more previous applications on which priority could be claimed, the earliest must be used. The 1996 US priority application itself claimed priority from another US application which was filed in 1992. Hospira argued that the priority claim to the 1996 application was therefore invalid (with the result that the claim date would be the Canadian filing date, making additional prior art relevant) [60].

Per s 28.1, priority cannot be claimed from the 1996 application unless it discloses the same subject-matter as the 630 patent; and the effect of 28.4(4) is that priority must be claimed from the 1992 application if the 1992 application discloses the same subject-matter as the 630 patent. The question for both was therefore whether they disclosed the same subject matter as the 630 patent. Neither priority application was in evidence. Thus the argument, and Locke JA’s holding, turned on the burden of proof.

Hospira argued that the patentee had the burden to establish the priority claim, and it failed to meet that burden because it did not put the 1996 application into evidence. Kennedy Trust, on the other hand, argued that the burden of proof was instead on Hospira in light of the presumption of validity per s 43(2) of the Act.

Locke JA rejected both these positions [63]. He held that that Hospira’s reliance on the 1992 priority “is remote enough from the issue of the priority claim on the 630 Patent” that Hospira had the burden to prove the contents of the 1992 priority” [64]. It seems reasonable to me that the party asserting a particular priority date should have the obligation to prove it. Given that burden, there is a separate question of how to actually prove the contents of the earlier priority application. At trial Hospira seemed to have relied on the fact that Kennedy Trust had actually pursued an appeal to the USPTO to establish that the 1996 application was entitled to claim priority to the 1992 priority, essentially on the basis that it disclosed the same subject-matter [FC 157]. Locke JA did not specifically discuss why this was not sufficient to carry the burden (and it's not clear that issue was even raised on appeal). Given that the 1996 application was not in evidence, evidence that the 1992 priority disclosed the same subject matter as the 1996 application may not be sufficient proof that either disclosed the same subject matter as the 630 patent.

Turning to Kennedy Trust’s argument, Locke JA held that the presumption of validity does not extend to the priority claim because the claim date only affects the prior art, and does not go directly to validity [63]. That seems right to me on the text of s 43(2). But if the presumption of validity does not apply and the 1996 application itself was not introduced into evidence, what is the basis for holding that the 1996 priority claim was valid? Locke JA held that “With no dispute that the 1996 priority supports the subject matter of the claims in issue” and in the absence of evidence of the contents of the 1992 priority, he saw no error in recognizing the 1996 claim date [65]. I must say that this looks to me like the application of some kind of presumption of validity, given that there was no evidence at all about the contents of the 1996 application. (Hospira’s position at trial was that both the 1992 and the 1996 disclosed the same subject matter, but that doesn’t necessarily imply that either discloses the same subject matter as the 630 patent.) Would the result have been different if Hospira had asserted, without any evidence, that the 1996 application did not disclose the same subject matter as the 630 patent? Would that have been enough of a dispute to require the patentee to introduce the 1996 application? If not, it would seem that some kind of presumption is at work. But, as noted, Locke JA expressly held that the presumption of validity does not extent to a priority claim.

In any event, in either case it does seem that the best way of establishing the content of the priority application is directly, by introducing it into evidence.

Thursday, February 13, 2020

A Party Acting Entirely Outside of Canada Cannot Be Liable under the Saccharin Doctrine

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2020 FCA 30 Locke JA: Rivoalen, Nadon JJA var’g 2018 FC 259 Phelan J
            2,261,630 / infliximab / INFLECTRA

This point covers two issues related to the Saccharin doctrine: a party who conducts activities entirely outside of Canada cannot be liable under the Saccharin doctrine; and the Saccharin doctrine applies to Swiss-type claims.

As discussed here, Phelan J at first instance held that Hospira’s infliximab product INFLECTRA, infringed several valid claims of the 630 patent. One of the defendants was Celltrion, a South Korean group that makes biopharmaceutical products [FC 18]. Celltrion supplied the infringing INFLECTRA to Hospira, which imported it and distributed it in Canada [FC 17]. Several of the claims at issue were Swiss-type claims (ie claims “to the use of composition X for the preparation of a medicament to be used for Y” [16]), and at trial Hospira had argued that “as the Swiss-type claims refer to the manufacture of a medicament and Inflectra is not made in Canada and is not sold to Hospira in Canada, the Swiss-type claims are not infringed” [FC 294]. Phelan J rejected this argument on the basis of the Saccharin doctrine, holding that “Hospira cannot escape liability for infringement merely by housing its production overseas” [319]-[322].

The FCA held that Phelan J had erred in including Celltrion among the companies found to have infringed [37], because “the Judge made no finding that Celltrion conducted any activities in Canada” [33]. As Locke JA noted, the Saccharin doctrine holds that the imported product of a patented process is itself infringing, even though the process is used abroad and the product itself is not patented [34]. But he also pointed out that the Saccharin doctrine does not do away with the territorial limits on patent infringement; a party whose activities are entirely outside of Canada cannot infringe a Canadian patent: [36]. A party who is liable under the Saccharin doctrine may not have carried out directly infringing activities in Canada, but it will have carried out activities in Canada which profited from the invention (namely importation and sale of the product of the patented process). As Locke JA noted, this point was well-recognized in the English case law following the Saccharin decision itself, and had also previously been recognized by Gauthier J in Cefaclor 2009 FC 991 at [283-84]. It is helpful to now have the point affirmed by the FCA.

The puzzle for me on this point is that, so far as I can see, Phelan J never actually held that Celltrion infringed. Hospira’s argument, noted above, appears to be a general argument that the claims themselves were not infringed by any party, specifically including Hospira because they were to the use in manufacture, and manufacturing had been done outside of Canada. Phelan J rejected this argument on the basis of the Saccharin doctrine, holding that “Hospira cannot escape liability for infringement merely by housing its production overseas.” [FC 319]-[322]. This holding is expressly directed at Hospira, not Celltrion, and it was not disputed that Hospira acted within Canada by importing and distributing INFLECTRA [FC 17]. This holding therefore seems to be to be a correct application of the Saccharin doctrine, which helpfully clarifies that Swiss-type claims are subject to the Saccharin doctrine. Hospira’s liability for infringement on this basis does not appear to have been appealed.

While the FCA decision implies that Phelan J also held that Celltrion infringed, I couldn’t find any such holding in Phelan J’s reasons. Phelan J distinguished between Hospira [3] and Celltrion [17], rather than referring to them collectively as Hospira. As just noted, his holding regarding the Saccharine doctrine was directed at Hospira, as was his overall conclusion on infringement: “For all these Reasons, Kennedy’s claim against Hospira for infringement will be granted” [336]. With that said, I didn’t re-read every word of Phelan J’s decision, and perhaps I missed something, or perhaps there was such a holding in the formal judgment.

Tuesday, February 11, 2020

Patentability of Methods of Medical Treatment “Deserves Deep Analysis”

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2020 FCA 30 Locke JA: Rivoalen, Nadon JJA var’g 2018 FC 259 Phelan J
            2,261,630 / infliximab / INFLECTRA

Kennedy Trust’s 630 patent 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. As discussed here, Phelan J at first instance held that Hospira’s infliximab product INFLECTRA, infringed several valid claims of the 630 patent. This appeal, reversing Phelan J on several points, raises a number of interesting (and mostly unrelated) issues, which I'll cover in a series of posts, starting, in this post, with the FCA's desire to reform the law related to patentability of methods of medical treatment.

As I argued in this blog post, the law related to patentability of methods of medical treatment is incoherent. In Cobalt v Bayer 2015 FCA 116 [101], the FCA agreed that the current law on the issue “calls for full consideration by this Court or the Supreme Court in a case where the issue is squarely raised on the facts.” However, the issue was moot in Cobalt because the patent was not infringed [100], and the FCA devoted only a single paragraph to the issue.

In this case, Hospira again raised arguments related to patentability of methods of medical treatment. Locke JA devoted several paragraphs to reviewing the state of the law. He summarized the Federal Court jurisprudence as holding that a claim to “a substance intended for the treatment of a medical condition, can be good subject matter for a patent claim, but not if the claim encompasses the skill of a medical professional such as a dosage range rather than a fixed dosage” [51]. He remarked that “it is not clear to me that the decisions of the Supreme Court of Canada that form the basis of the principle that methods of medical treatment are not patentable justify a distinction between a fixed dosage (or interval of administration) and a range of dosages (or intervals)” [52]. He then cited Cobalt (and also my blog post, I am pleased to say) and stated that “I agree that this issue deserves deep analysis” [53]. He concluded by saying that “[u]nfortunately, this does not appear to be the case for such an analysis,” because the claims at issue are of a type that are clearly patentable even in the current state of the law.

I read this as a clear signal that the FCA is willing, and even eager, to undertake a review of the law on this issue itself, rather than leaving the matter to the SCC. Locke JA considered it “unfortunate” that the case did not lend itself to treating the issue in depth, and he clearly stated that he does not consider the current law to be determined by the SCC jurisprudence, so leaving leeway for the FCA. Even the fact that Locke JA devoted almost four pages to the issue indicates the FCA wants to deal with the issue. Hospira raised so many issues on appeal that “it will not be practical to address each one specifically,” so Locke JA generally did not address those that were without merit [15]. He did, nonetheless, choose to address methods of medical treatment at some length, even though it was ultimately without merit. The panel in this case was differently constituted from that in Cobalt (Pelletier, Stratas and Webb JJA), so we now have six judges on two different panels indicating a willingness to review the law related to the patentability of methods of medical treatment.

Wednesday, February 5, 2020

Lump Sum Costs Awarded

Packers Plus Energy Services Inc v Essential Energy Services Ltd 2020 FC 68 O’Reilly J

In this costs decisions following from Packers Plus 2017 FC 1111 aff’d 2019 FCA 96, holding Packers’s 072 patent to be invalid and not infringed, O’Reilly J awarded the prevailing defendants lump sum costs of 40% of their taxable costs, plus disbursements (with some minor adjustments). O’Reilly J’s reasons for awarding a lump sum rather than following the Tariff were brief: “I also do not agree with Packers that costs should be assessed according to the Tariff. A lump sum is more appropriate given the complex nature of this case.” This seems to reflect a general sense that the Tariff scale is outdated and no longer adequate. A collective costs award calculated under the Tariff, even at the upper end of Column IV, would have resulted in an amount of about $375,000, when actual costs were apparently closer to $10,000,000.*

Another point is that there were multiple defendants, and Packers argued that there should only be one set of costs as the defendants’ interests were aligned and they could all have been represented by the same counsel. O’Reilly J rejected this submission, noting that

It was Packers’ choice to pursue each of the defendants separately. It could have limited its costs exposure by proceeding only against the first defendant, Essential Energy Services Ltd, and pursuing the other defendants later if successful. Its approach complicated the proceedings and increased the costs incurred.

He also noted that the defendants, as competitors, were entitled to be represented separately, and that “defendants’ counsel made considerable efforts to divide their labours and reduce duplication throughout the trial.” Accordingly he held the defendants were entitled to individual costs.

*The amount of the defendants’ actual fees is not stated in the decision, but Packers proposed an alternative lump sum amount of $1,003,000 and O’Reilly J remarked that this approach “would effect an arbitrary discount of the defendants’ fees and yield a reimbursement of only 10% of the defendants’ taxable costs.”

Monday, February 3, 2020

Determining the Rate of Return for Compound Interest Damages

Eli Lilly and Co v Apotex Inc 2019 FC 1463 Zinn J [Cefaclor Interest] remitted from 2018 FCA 217 Gauthier JA: Gleason, Laskin JJA [Cefaclor Damages] aff’g 2014 FC 1254 Zinn J [Cefaclor Damages FC]
1,133,0071,146,5361,133,4681,150,725 [the Lilly Patents]
1,095,0261,132,5471,136,1321,144,924 [the Shionogi Patents]

Cefaclor Interest is devoted to assessing the proper rate of return for compound interest damages. While the determination was ultimately a matter of fact, it raises issues that will arise in any similar determination. I also suggest that an overarching lesson from the decision is that whatever particular approach is used, the determination of the rate of return as a matter of fact is likely to be a burdensome undertaking. As a matter of policy is might be desirable to amend the relevant statutory provisions to permit a successful party to claim compound interest at a modest rate as a matter of law, without the need for a fact intensive inquiry as to what exactly it would have done with the money.

As discussed here and here, the common law traditionally prohibited recovery of interest on a damages award. While that prohibition was reversed by statutory provisions permitting the award of pre-judgment interest, those statutes generally did not allow for compound interest. In Bank of America 2002 SCC 43 the SCC recognized that simple interest is not fully compensatory, and consequently, the SCC held that even if compound interest was not available under the relevant statute, it was available under the common law of contract as compensation, so long as it was claimed as such and proven.

In Cefaclor Damages FC, the damages portion of a bifurcated trial, Zinn J had awarded lost profits of just over $31m (the Lost Profits), with compound interest on the Lost Profits as damages: [4]. On appeal, In Cefaclor Damages the FCA confirmed that compound interest is indeed available in the patent context when interest is claimed as a head of damages: see here. However, Zinn J had held that the loss could be presumed, and the FCA reversed on this point alone, saying “a loss of interest must be proved in the same way as any other form of loss or damage” [158]. The FCA therefore remitted the matter to Zinn J for reconsideration of this point alone [164].

When compound interest is claimed as damages, the loss is the value of the lost opportunity to use the funds that the plaintiff would otherwise have had — in this case, the Lost Profits. The question in Cefaclor Interest therefore, was whether Lilly had proven a lost opportunity to use the Lost Profits, and how prove the applicable rate of interest: [18].

Friday, January 31, 2020

Claims Upheld on the Presumption of Validity

Georgetown Rail Equipment Co v Tetra Tech EBA Inc 2020 FC 64 Fothergill J on remand from 2019 FCA 203 DawsonJA: Pelletier, Webb JJA rev’g 2018 FC 70 Fothergill J
             2,572,082 / 2,766,249

This case is the exception that proves the rule that the presumption of validity rarely plays a significant role in validity determinations.

At trial in Georgetown Rail v Tetra Tech Fothergill J held that Georgetown’s 082 and 249 patents were valid and infringed by Tetra Tech (see here). The FCA reversed, on the basis that Fothergill J had “erred in law by failing to consider and analyze how the skilled worker would have applied the common general knowledge to the prior art” [FCA 13] (and see here). The FCA consequently held the 082 patent and several asserted claims of the 249 patent to be invalid for obviousness [FCA 134]. The issue of validity of the remaining claims of the 249 patent was remitted to Fothergill J.

On remand, Fothergill J found the two broadest claims (Claim 1 and 12), to be invalid for obviousness, but there was insufficient relevant evidence to allow him to conclude that the other remanded claims were obvious [11], [51]. This is apparently because the obviousness of these claims was not a major issue at trial, and “neither Tetra nor Georgetown devoted much time or effort at trial” to elucidating the inventive concept of those claims [47]. “Applying the presumption of validity and the burden of proof,” Fothergill J therefore held that Tetra had not established that the remanded claims were invalid [57].

A granted patent is presumed to be valid, but the presumption is very weak, and is therefore rarely determinative. The presumption of validity was determinative in this case only because of the unusual circumstances surrounding the issue of obviousness for these particular claims.

Wednesday, January 29, 2020

Does a Direct Infringer Have a Cause of Action Against its Inducer?

McCain Foods Limited v JR Simplot Company 2019 FC 1635 McVeigh J
2,412,841 / Process for Treating Vegetables and Fruit Before Cooking

This appeal of Aylen J’s decision granting Simplot leave to file a third party claim and file related amendments to its statement of defence raises a couple of novel legal issues. One of the amendments to the statement of defence seems to be premised on a novel extension of the law of implied licence: see the discussion below under Amendments: Licence (2). And McVeigh J also held that it is arguable that in an inducement scenario, the direct infringer has a cause of action against the indirect infringer that induced it to infringe. This implies that in an inducement scenario, the direct infringer can effectively force the patentee into an action against the indirect infringer: see the discussion below under Third Party Claim: Induced infringement. However, McVeigh J upheld Aylen J’s decision on these points on the deferential basis that there was no palpable and overriding error, so this decision does not establish any point of law. If this litigation proceeds to trial, these will be issues to watch.

Monday, January 27, 2020

Overbreadth Sole Basis for Holding Claims Invalid

Seedlings Life Science Ventures, LLC v Pfizer Canada ULC 2020 FC 1 Grammond J
             2,486,935 / Auto-Injection of Medication

In Seedlings Grammond J held four claims of the 935 patent to be invalid on the sole ground of overbreadth. In my draft paper on Overbreadth in Canadian Patent Law, I argued that overbreadth is almost always redundant, in the sense that the same facts and analysis that support overbreadth also support a finding of invalidity on some other ground as well. Overbreadth has been applied as a truly independent ground of invalidity in just four cases. The first was Amfac (1986), 12 CPR (3d) 193 (FCA), in which the FCA upheld a decision striking down the key claim in the patent on the sole basis of overbreadth. The doctrine then lay unused for over thirty years, until last year, when it was invoked in two FC decisions, Servier v Apotex 2019 FC 616 (here) and Aux Sable 2019 FC 581 (here). In those decisions, while overbreadth was applied as an independent doctrine, it was not the sole basis for striking down the claims at issue. Seedlings is the third recent case to apply overbreadth as an independent doctrine, and in this case four claims were held invalid solely on that basis.

The SCC decision in BVD [1937] SCR 221 provides a good example of the typical use of overbreadth. The patent at issue disclosed a method of making semi-permeable fabrics using thermoplastic fibres woven into a yarn with cotton fibres, then fusing the fibres with heat and pressure. The use of thermoplastic in the form of a yarn was “the very essence of the invention” (228, 230). The claims, however, specified a fabric which “contains” a thermoplastic with no mention that it was in the form of yarns. The Court therefore held that the prior art Dreyfus patent, which disclosed a similar process using thermoplastics in the form of sheets rather than yarn, “constitutes a complete anticipation of the claims of the respondent,” unless those claims could be limited to a thermoplastic yarn (232-33). The Court held that the claims could not be so limited, and consequently, “[t]he claims in fact go far beyond the invention. Upon that ground the patent is invalid” (237). Thus the claims were overbroad because they had omitted an essential element, namely that the thermoplastic should be woven into the yarn. As the SCC explained, the situation was much the same as that in Erickson’s Patent:

In Erickson’s Patent case [(1923) 40 RPC 477 (CA)], it was held that the patentee had failed so to limit his first claim as to confine it to that which was the novelty (if any) of the invention, and that accordingly the claim was so wide as to render the patent invalid.

It is because the claim lacked novelty that, “accordingly,” it was too wide.

Thursday, January 23, 2020

Can an Entity That Does Not Practise the Invention Be Entitled to an Accounting?

Seedlings Life Science Ventures, LLC v Pfizer Canada ULC 2020 FC 1 Grammond J
             2,486,935 / Auto-Injection of Medication

The facts in Seedlings are summarized here along with a discussion of claim construction. Novelty and utility are discussed in Tuesday’s post. Despite his holding that the asserted claims were either invalid or not infringed, Grammond J went on to consider remedies, which had been fully argued. Yesterday’s post discusses a timing issue in the context of the reasonable royalty determination. Today’s post considers Grammond J’s suggestion that a patentee that does not itself practice the invention cannot be entitled to an accounting of profits.

Grammond J held that he would not have allowed Seedlings to elect an accounting of profits, largely because Seedlings only intended to licence its product, and would not have competed directly in the market, and so could not have suffered damages by way of lost sales. Grammod J stated:

[252] The fact that the patentee does not practice the invention may also be taken into account in deciding whether to award an accounting of profits. In other words, where the patentee does not itself manufacture, distribute or sell the invention, it cannot be entitled to the profits made by the infringer with respect to those activities. [citations omitted]

The first sentence is well-established by the authorities cited by Grammond J, in particular Unilever v Proctor & Gamble (1993), 47 CPR (3d) 479 (FCTD), where the Muldoon J refused to allow an accounting, stating at 570-71:

The two factors which mainly predicate the Court's discretion in this regard are the plaintiff's brandishing their patent as a bargaining tool with P & G, and their never having made or practised their patent's invention in Canada.

The second sentence, which appears to say that the fact that the patentee does not practice the invention is not only a factor to be taken into account, but gives rise to a strict rule that the patentee “cannot be entitled” to an accounting, goes beyond what is established by any of the case law which he cited. So, Frac Shack 2017 FC 104 [283] and Human Care Canada 2018 FC 1302 [437], simply state that whether the patentee practiced the invention is one factor of several that can be considered. A strict rule of that nature is also difficult to reconcile with the well-established principle that an accounting, being equitable in nature, is discretionary. Grammond J recognized that an accounting is discretionary [251], and his remark at [252] should perhaps be interpreted as saying only that considerable weight will be given to this factor. Indeed, Grammond J went on to consider other factors, in particular that an accounting would have resulted in an award that would be “up to twenty times” greater than the reasonable royalty that would be assessed in damages [253], and that there was no evidence of wilful infringement [255].

It strikes me that a strict rule that a patentee that does not itself manufacture, distribute or sell the invention, cannot be entitled to an accounting, goes too far. Such an entity cannot of course get damages in the form of lost sales, so it’s remedy would be confined to a reasonable royalty, or potentially punitive damages. The difficulty with awarding only on a reasonable royalty is that it may not provide an adequate deterrent against infringement, as explained by Zinn J in Monsanto v Rivett 2009 FC 317:

[23] At the level of principle, there is no deterrent from infringing the patent if what the infringer is required to hand over is the sum he would otherwise have paid to Monsanto to buy the seed and the licence. In fact, this would almost be counter to the purpose of deterrence. It is much like saying, as the plaintiffs put it in their oral submission, “Catch me if you can”. If caught, the defendant would be required to pay the sum he would have paid to use the patent in any event. When not caught, he is left with a windfall.

In response to the deterrent argument, Grammond J pointed out that the court can award punitive damages for willful infringement [258]. The difficulty is that punitive damages are arguably an excessive deterrent, if routinely awarded, because the amount payable exceeds the benefit to the infringer from the use of the invention. Punitive damages make the infringer worse off than if it has never used the invention at all, and therefore have a chilling effect on legitimate forms of wilful infringement, such as when a party knows of the patent but believes it is probably invalid: see here. An accounting strikes a better balance, because the infringer is made worse off than if it had licenced, but not worse off than if it had never used the invention: see Rivett [22].

More broadly, a rule that a non-practising entity cannot be entitled to an accounting seems intuitively reasonable if the patentee is a patent assertion entity. But at the other end of the spectrum, consider a scenario in which a startup company with design expertise developed important new technology, and sought to licence it to a larger entity for commercialization. If the larger entity believed the patent to be valid and nonetheless copied the technology and began selling it, I don’t see why the patentee should be denied an accounting. In such a case the patentee might be entitled to punitive damages, as Grammond J pointed out, but I see no reason why it should be confined to punitive damages. Consider a similar scenario, except that the larger entity in believed, reasonably and in good faith, that the patent was invalid, but validity was ultimately upheld in close fought litigation. Why should the court have to choose between a reasonable royalty and punitive damages, rather than the middle ground of an accounting? The jurisprudence on the circumstances in which an accounting should be granted is still developing, but in my view, on the current state of the law and our understanding of the effects of the remedy, a discretionary multi-factorial approach, such as that set out by Phelan J in Varco 2013 FC 750 (see here), remain preferable to any strict rule.

Wednesday, January 22, 2020

Use of ex Post Information in Assessing a Reasonable Royalty

Seedlings Life Science Ventures, LLC v Pfizer Canada ULC 2020 FC 1 Grammond J
             2,486,935 / Auto-Injection of Medication

The facts in Seedlings are summarized here along with a discussion of claim construction. Novelty and utility are discussed in yesterday’s post. Despite his holding that all the asserted claims were either invalid or not infringed, Grammond J went on to consider remedies, which had been fully argued. This post discusses a timing issue that arises in assessing a reasonable royalty. In particular, I will argue that the timing of the hypothetical negotiation construct used in assessing a reasonable royalty must reflect its purpose, which is to ensure proper compensation. This implies that there is no strict rule that the hypothetical negotiation takes place at the time of first infringement, nor is there a rule that ex post information cannot be used.

Tuesday, January 21, 2020

A Scintilla of Utility for a Mechanical Invention

Seedlings Life Science Ventures, LLC v Pfizer Canada ULC 2020 FC 1 Grammond J
             2,486,935 / Auto-Injection of Medication

This post will discuss novelty, where, with respect, I feel Grammond J’s analysis went astray, as well as utility, where the decision provides a good illustration of what constitutes a “scintilla” of utility in the context of a mechanical invention. The facts are summarized here.

Novelty
Novelty requires enabling disclosure of the claimed invention in the prior art: Sanofi 2008 SCC 61 [24]-[28]. This is a two-step test, and both steps must be satisfied for the claim to be anticipated. To satisfy the first step, disclosure, “the matter relied upon as prior art must disclose subject-matter which, if performed, would necessarily result in an infringement of the patent”: Synthon [2005] UKHL 59 [22]; Sanofi [25]. At this stage “[n]o trial and error is permitted”: Sanofi [32]. Without disclosure, there is no anticipation. If the disclosure requirement is satisfied, the second stage, enablement, requires that “the ordinary skilled person would have been able to perform the invention which satisfies the requirement of disclosure”: Synthon [26]. The enablement requirement is satisfied so long as the skilled person could perform the invention without undue burden”: Synthon [29] The stages are distinct. This is important because, as the SCC noted in Sanofi [27], “While trial and error experimentation is permitted at the enablement stage, it is not at the disclosure stage.” Lord Hoffmann explained in Synthon:

[30] [T]here is a serious risk of confusion if the two requirements are not kept distinct. For example, I have explained that for the purpose of disclosure, the prior art must disclose an invention which, if performed, would necessarily infringe the patent. It is not enough to say that, given the prior art, the person skilled in the art would without undue burden be able to come up with an invention which infringed the patent. But once the very subject-matter of the invention has been disclosed by the prior art and the question is whether it was enabled, the person skilled in the art is assumed to be willing to make trial and error experiments to get it to work. If, therefore, one asks whether some degree of experimentation is to be assumed, it is very important to know whether one is talking about disclosure or about enablement.

While Grammond J acknowledged the two-step nature of the test for enablement [106]-[109], he did not address the steps separately when it came to assessing novelty on the facts, and, with respect, he appears to have made the error that Lord Hoffmann cautioned against.

For example, with respect to claim 57, Grammond J held as follows:

[132] [The expert for Seedlings] argues that claim 57 is not anticipated, because its distinctive element is that “the needle shield extends beyond the forward end of the housing when the device is in its retracted storage configuration” and the needle shield of the ‘369 patent is flush with the housing. I agree with [the expert for Pfizer], however, that it would be within the common general knowledge of the skilled person to extend the needle beyond the housing without undue burden. Thus, I find that claim 57 is also anticipated.

The difficulty is that this analysis skips directly to considering undue burden, which arises only at the enablement stage, without first considering whether the claimed invention was disclosed. If the “distinctive element” of claim 57 is not present in the prior art, then it is not disclosed, because: “At this stage, there is no room for trial and error or experimentation by the skilled person. He is simply reading the prior patent for the purposes of understanding it”: Sanofi [25]. The disclosure requirement is therefore not satisfied, and consequently, the claim is not anticipated, regardless of how the enablement question is answered. Moreover, the enablement question is aimed at the same prior art that is the subject of the disclosure inquiry: the question is whether “the ordinary skilled person would have been able to perform the invention which satisfies the requirement of disclosure.” The question on enablement is whether the skilled person would have been able to perform the prior art without undue burden, not whether the skilled person would have been able to perform the claimed invention without undue burden. Grammond J appears to have run the two stages together by asking whether the claimed invention might have been derived from the prior art without undue effort, without first asking whether it was disclosed. The analysis of claims 44 and 47 [125], [127], and claims 45 and 46 [131], appears to take the same approach.

Utility
Utility is assessed at the Canadian filing date. By that time, a prototype of the invention falling within the claims had been fired four times, once with no needle or liquid, and three times with a need and a syringe full of water. Two of these latter three tests were successful, but on the third attempt, the glass syringe broke:[156]-[160]. (More rigorous tests conducted soon after filing had a similarly uneven success rate: [161].) Grammond J held this was sufficient to establish demonstrated utility, given the low bar of a “scintilla of utility”: [151], [160]. Grammond J emphasized that a prototype that needs improvement and works imperfectly may nonetheless demonstrate utility: [162]. This was even though the prototype could not have been used to inject epinephrine in an emergency situation: [163]. Grammond J held that holding it to that standard, of the ultimate intended commercial application, would be to invoke the discredited promise doctrine. AstraZeneca 2017 SCC 36 has made it clear that the standard is much lower than that: “The use of the invention to inject medication other than epinephrine is not tantamount to using it ‘as a paperweight’”: [163].

Monday, January 20, 2020

Presumption That Inventor Intended to Claim the Invention Disclosed?

Seedlings Life Science Ventures, LLC v Pfizer Canada ULC 2020 FC 1 Grammond J
             2,486,935 / Auto-Injection of Medication

Grammond J’s decision in Seedlings v Pfizer raises a number of issues, the most significant of which is the application of overbreadth to hold several claims invalid. This post provides an overview, and discusses Grammond J’s views on “blinding” the expert witnesses, and on the principle that claim construction should be approached “with a judicial anxiety to support a really useful invention.” Subsequent posts will deal with other aspects of the decision.

The invention at issue relates to an auto-injector, primarily intended for injecting epinephrine to treat anaphylaxis. The best known auto-injector is the EpiPen. The original EpiPen was on the market from late 1980s until 2009 [10]. Seedlings’ auto-injector, known as the LifeCard, was the inventor’s solution to problems with the original EpiPen, which he recognized both because of his work as a physician and as a result of his own experience of anaphylactic shock [13]-[14]. The original EpiPen was relatively bulky — a cylinder about 15 cm long and 2.5 cm in diameter — which made it inconvenient to carry. Also, the needle remained exposed after use, which is a particular concern in light of risk of transmission of blood-borne diseases [11]-[12]. The LifeCard is flat and much smaller than the original EpiPen — the size of a thick credit card — so it is more easily carried and used [63]. It also has a shield which moves forward once the injection is complete to protect the needle [19]. (See the video here.)

Pfizer’s allegedly infringing device, referred to as the NGA EpiPen (for “Next Generation Auto-Injector”), is an updated version of the original EpiPen (referred to as the “Legacy” EpiPen). Ultimately, when it came to infringement, Grammond J found that while Seedlings and Pfizer had addressed the same problem, they had come up with different solutions: the NGA EpiPen was oval, not flat [196], and the claims of the 935 patent were not to the concept of a needle shield, but rather a particular method of implementing that shield, and Seedlings’ implementation was different from Pfizer’s.

Blinding the experts
Seedlings “blinded” its experts and asked them to provide their opinion on various issues of claim construction, including the proper interpretation of some claim terms, with little knowledge of the actual dispute and without telling them which party was retaining them [41], [43]. Grammond J shared the skepticism regarding blinding expressed by Locke J 2016 FC 382 [42]–[48] (see here) and Phelan J 2019 FC 1355 [57]–[59], saying “[w]hen courts assess arguments, they focus on the validity of the reasoning, not on the credibility of the person who puts the argument forward. Thus, when assessing expert testimony, the logical character of their reasoning is much more important than the fact that some of them were blinded” [44]. With that said, one of the infringement issues was easily disposed of because Seedlings’ blinded expert had construed the term “flat” in a way that clearly supported Pfizer’s position [196].

Claim Construction
Presumption that disclosed embodiments are claimed
Grammond J noted that presumptions of interpretation are often helpful in claim construction [59]. First, he noted and applied the presumption that the inventor would have intended to claim the embodiments that are disclosed in the specification [58], [70]. “[A]n interpretation of the claims that would exclude the embodiment shown in the drawings or described in the specification is suspect, as it is unlikely to reflect the inventor’s intention,” (citing 2016 FC 580 [335]). Note that Grammond J’s application of the rule made it clear that this presumption applies to any embodiment that is disclosed in the specification, not just the preferred embodiment: see also [2009] EWHC 55 (Pat) [92].

Presumption that claims should be interpreted to preserve validity?
On the other hand, Grammond J rejected Seedlings’ argument that there is a presumption “that patents should be interpreted in a way that ensures their validity” [59]. That proposition was based on the statement by the SCC in Consolboard [1981] 1 SCR 504, 521, quoting with apparent approval Sir George Jessel’s statement in Hinks & Son v Safety Lighting Co (1876) 4 ChD 607, that “the patent should be approached ‘with a judicial anxiety to support a really useful invention’.” Grammond J noted that this statement seems to be in tension with the SCC’s statement in Whirlpool 2000 SCC 67 [49a] that “[a] patent must not of course be construed with an eye on the allegedly infringing device in respect of infringement or with an eye to the prior art in respect of validity to avoid its effect.” Grammond J suggested that “the reference to ‘judicial anxiety’ appears to relate to the idea that a patent should not be invalidated on a technicality,” [59] citing Burton Parsons [1976] 1 SCR 555, 563. While it is certainly true that a patent should not be invalidated on a technicality, as Burton Parsons states, I doubt this is all that the SCC had in mind in Consolboard, where the Court explained that “where the language of the specification, upon a reasonable view of it, can be so read as to afford the inventor protection for that which he has actually in good faith invented, the court, as a rule, will endeavour to give effect to that construction” (quoting with approval Western Electric Co v Baldwin Int’l Radio [1934] SCR 570, 574). This seems to say something more than merely disfavouring technical attacks.

I suggest that a way to reconcile Consolboard and Whirlpool is to consider Consolboard as stating a presumption that the patentee intended to claim the inventive concept that was disclosed in the specification. This is very similar to the presumption that the patentee intended to claim the specific embodiments that were disclosed, except it looks to the inventive contribution, rather than the embodiments. As the Supreme Court pointed out in Whirlpool [37] “the bargain between the patentee and the public is in the interest of both sides only if the patent owner acquires real protection in exchange for disclosure.” An inventor who has disclosed a new and useful invention and who frames a claim that is too broad or otherwise invalid receives nothing in return for their valuable disclosure. Conversely, a claim that is too narrow will be valid, but will deprive the inventor of the bulk of his due reward: see Burton Parsons at 565. A presumption that the inventor intended to claim the invention that they disclosed is no less consistent with Whirlpool, that is the presumption that the inventor intended to claim the embodiments that were disclosed. It also seems to be a realistic reflection of the inventor’s intent, and not a mere legal fiction. As Buckley LJ pointed out in the EWCA in Catnic [1982] RPC 183, 227, “An applicant for a patent will want his leading claim to be as wide as is possible consistently with its validity. He will wish to avoid any unnecessary restriction of it.”

Thursday, January 16, 2020

Period for Assessing Reasonable Compensation

Western Oilfield Equipment Rentals Ltd v M-I LLC 2019 FC 1606 O'Reilly J
            2,664,173 / Shaker and Degasser Combination

Previous posts have given an overview of Western Oilfield Eqpt v M-I and discussed the best mode requirement and an objection based on added mater. A final point of interest from the decision is the question of the period for assessing reasonable compensation under s 55(2) of the Act.

M-I claimed reasonable compensation under s 55(2) of the Act for acts that “would have constituted an infringement of the patent if the patent had been granted on the day the specification became open to public inspection.” There is not a great deal of case law on this provision. Prior case law has indicated that “reasonable compensation” will normally be equated to a “reasonable royalty” (see 2007 FC 358 [122]; 2010 FC 361 [337]) and that approach was also adopted in this case: [258].

A question that does not appear to have been previously considered is when the period for assessing reasonable compensation runs. In this case, the claims had changed between the date the patent was laid open and the date it was granted; in particular, it appears that the infringed claims were added during prosecution after the patentee became aware of the defendant’s system, though it appears that the defendant had been selling its system for some time preivously: [14], [89]. O’Reilly J’s analysis takes it for granted that reasonable compensation would be due for the period starting when the claims were amended to encompass the defendant’s product, and not before. I take it that this was common ground between the parties, which is why O’Reilly J did not consider the point explicitly. It is not clear to me that this approach is correct.

Wednesday, January 15, 2020

Added Matter Objection Considered

Western Oilfield Equipment Rentals Ltd v M-I LLC 2019 FC 1606 O'Reilly J
            2,664,173 / Shaker and Degasser Combination

Previous posts have given an overview of Western Oilfield Eqpt v M-I and discussed the best mode requirement. Western Oilfeild also considered an objection based on added mater. The specification of the 173 patent was amended after the application was filed, and Western argued that the amendment added new subject matter that could not reasonably be inferred from the original specification, contrary to s 38.2(2) of the Act and (then applicable) Rule 181. (Rule 181 has since been removed, presumably because it is redundant in light of 38.2(2).) O'Reilly J noted that “there is little Canadian law on the point” [238], and I must say that I am not aware of any at all. While O'Reilly J’s decision on the point largely turned on the facts, a brief discussion is warranted given the paucity of case law dealing with this provision.

O'Reilly J began by noting that:

[236] At trial, I ruled that the factual circumstances surrounding the amendments were not relevant to this issue. It is a matter of logic, not fact, whether the amendments are reasonably inferable.

In the first sentence of the paragraph O'Reilly J appears to be saying that the patentee’s motivation for introducing the amendments is not relevant. The second sentence is a bit confusing. As a general matter, I would have thought that whether the amendments would be reasonably inferable would be a matter of mixed fact and logic, as the question is to be answered by looking through the eyes of a skilled person. And indeed, in the subsequent analysis, O'Reilly J referred extensively to the evidence of the experts as to what could have been inferred.

As noted, O'Reilly J’s decision otherwise turned on the facts, but it is perhaps worth quoting one paragraph from the decision to illustrate the analysis.

Recall from my previous post that The invention relates to a machine called a “shale shaker,” used in the oil and gas industry to remove solids, aka “cuttings,” from the slurry that emerges from an active well, in order to separate the drilling fluid for reuse [6]. A shale shaker shakes the slurry over a screen to allow the fluid to fall through while the rock cuttings are carried away. Shaking alone does not remove all of the fluid, and the cuttings remain wet after passing through a standard shaker [33]. The invention consisted of a method and system for applying a vacuum (“pressure differential generator”) to the cuttings to recover more of the drilling fluid [35].

The prior art had disclosed a similar system using a continuous vacuum to suck fluid from the cuttings. The problem with that technique is that the continuous suction could cause cuttings to stick to the screen, clogging it and preventing fluid flow. The invention addressed this problem by varying the pressure, so that fluid would be sucked off in the high pressure intervals, and the rock cuttings would be released from the screen when the pressure dropped. This was described as “toggling” in the original claims, and “controlling air flow” in the amended claims. The point was crucial because Western’s product did not “toggle” the pressure differential, and so did not infringe claims limited to “toggling,” but it did control the air flow, and so infringed the amended claims [239]. O’Reilly J held as follows:

[251] First, while toggling was indeed an essential element of the original claims (and for that reason, Western did not infringe them), the original specification contemplated something broader. Paragraph 34 mentioned pulsing and toggling, but it went on to refer to the fact that “[m]anipulating the valve by opening and/or closing the valve, at least partially, may disrupt the flow of vapour from the sump, thereby affecting the pressure differential.” The concept of controlling air flow, not just pulsing and toggling, is reasonably inferable from this passage.

Tuesday, January 14, 2020

What Is a “Machine”?

Western Oilfield Equipment Rentals Ltd v M-I LLC 2019 FC 1606 O'Reilly J
            2,664,173 / Shaker and Degasser Combination

A previous post described the facts and some miscellaneous legal points raised by Western Oilfield Eqpt v M-I. This post consider the best mode requirement, and in particular the question of what it means for an invention to be “a machine.”

Best Mode
O'Reilly J rejected Western’s insufficiency arguments on the basis that all of the putative defects in the disclosure were within the ability of a skilled person to address without inventive ingenuity: [141]-[144].

He also summarily rejected an attack based on failure to disclose the best mode, per s 27(3)(c), on the ground that:

that provision relates solely to machines and, as I understand the patent, it claims a method and a system, not a machine [146].

That the provision relates solely to machines is well established. It is clear on the face of the provision, which applies “in the case of a machine,” and has been confirmed in a few cases: see 2009 FC 676 [328-33]; 2010 FCA 242 [72-73]; 2014 FC 844. But what is a “machine”? To my knowledge, the question did not arise in the prior cases, all of which concerned a composition of matter (to use the statutory term), namely ramipril, sildenafil and polyethylene copolymers, which are clearly not machines.

It seems clear enough that a method is not a machine, but what about a system? The mere fact that the claim uses the word “system” cannot be enough to settle the point, or it would be easy to avoid application of the provision by appropriate wording. Indeed, most claims to what would normally be considered a machine do not use that term, but rather claim eg “a vertical feed mixer.”

On the facts, Claim 19 was as follows:

19. A system comprising:
a first screen having an upper side and a lower side for separating drill cuttings and
drilling fluid within a shaker; and
a pressure differential generator configured to pull air or vapor through the first screen to enhance the flow of drilling fluid through the first screen with respect to a second screen within the shaker in which the pressure differential generator does not create a pressure differential between an area above and an area below the second screen

It’s not entirely clear to me that this does not describe a machine. That is not to say that I disagree with O’Reilly J’s conclusion, but only that there is a puzzle. Screens and a vacuum pump are fairly ordinary components of a machine. Perhaps it is a system rather than a machine because the shaker itself is a machine, and the invention additionally comprises drilling fluid, which is not part of the shaker? While that seems reasonable enough, it is not particularly compelling, and it would desirable to have this interpretation buttressed by purposive considerations.

Turning to the Act, s 2 defines an “invention” to mean any new and useful “art, process, machine, manufacture or composition of matter.” The question then is whether the “system” at issue should be considered a “machine” rather than an “art” or perhaps a “composition of matter.” The answer does not seem clear as a matter of ordinary language. Unfortunately, purposive considerations do not help much in interpreting the provision, as there is no obvious policy for confining the best mode to machines (even though the text clearly does so). It seems this provision, introduced in the Patent Act, 1935 s 35, was modeled on the US Patent Act in effect at the time, which was similarly restricted to a machine, but the US Act has subsequently been amended to provide for a broader best mode requirement which is generally applicable. This makes it difficult to invoke purposive considerations in drawing the distinction between a “machine” and any other type of invention.

I’m inclined to think that confining the best mode requirement to machines is arbitrary. It would be better to either expand it to encompass all types of inventions, as was done in the US Act, or (preferably) eliminate it entirely. Until there is some clear purposive rationale for confining the best mode requirement to “machines,” the scope of the provision will necessarily be uncertain, and a restrictive approach to the interpretation of the provision, such as that applied by O'Reilly J, is probably the best approach, as it has the virtue of minimizing uncertainty. It would be very unfortunate if an expansive yet unclear definition of “machine” became a trap for unwary drafters.

Monday, January 13, 2020

Inducement Does Not Require Knowledge That Acts of the Third Party Amount to Infringement

Western Oilfield Equipment Rentals Ltd v M-I LLC 2019 FC 1606 O'Reilly J
            2,664,173 / Shaker and Degasser Combination

In Western Oilfield Eqpt v M-I, O'Reilly J found most of the claims of M-I’s 173 patent to be valid and several to have been infringed by Western. The decision largely turned on the facts, but there are a few legal points of interest. This post will summarize the case and discuss inducing infringement, utility and obviousness, where the decision illustrates the application of established law. A subsequent post will deal with the best mode requirement, and another post will deal with added matter and the period for assessing reasonable compensation, where the decision raises more interesting legal issues.

The Invention
The invention relates to a machine called a “shale shaker,” used in the oil and gas industry to remove solids, aka “cuttings,” from the slurry that emerges from an active well, in order to separate the drilling fluid for reuse [6]. A shale shaker shakes the slurry over a screen to allow the fluid to fall through while the rock cuttings are carried away. Shaking alone does not remove all of the fluid, and the cuttings remain wet after passing through a standard shaker [33]. The invention consisted of a method and system for applying a vacuum (“pressure differential generator”) to the cuttings to recover more of the drilling fluid [35].

Claim Construction and Infringement
There were a number of contentious issues  on claim construction, but these turned on the evidence and ultimately O'Reilly J construed the claims in favour of the patentee. The finding that Western infringed and induced infringement followed directly from the construction of the patent: [91]-[92]. This result is not very surprising, as it appears that the infringed claims were added during prosecution after the patentee became aware of the defendant’s system: [14], [89].

Western directly infringed the system claims [116], but did not directly infringe the method claims, which required the step of introducing slurry to the shaker [117]. M-I argued that Western induced infringement of the system claims by the drilling companies, who were the end users of the system. The established test for inducement was set out in Weatherford 2011 FCA 228 [162]. The first branch requires an act of direct infringement, and it was not disputed that the drilling companies were direct infringers [129]. The second prong requires the patentee to establish that the defendant’s influence caused the direct infringement. This is often the main hurdle, but in this case the instructions and assistance given by Western to its clients were so extensive that it was clear that this aspect of the test was satisfied [130]-[132].

The third prong of the test from Weatherford requires that “the influence must knowingly be exercised by the inducer, that is, the inducer knows that this influence will result in the completion of the act of infringement” [162]. O'Reilly J held that this branch had also been made out, noting that:

[133] Western (and its experts) has misunderstood the third branch of the test for inducement. It does not require the alleged inducer to know that the actions of the third party amount to infringement. That would require a legal analysis of the patent’s claims. What is required is knowledge on the inducer’s part that the influence it wields will cause the third party to carry out the acts that amount to infringement. In other words, the alleged inducer simply has to know what the third party is likely to do in response to its influence.

O'Reilly J’s holding on this point is consistent with the formal statement of the test in Weatherford, but there are surprisingly few cases that turn on this point. While O'Reilly J did not review the case law, his holding on this point is consistent with the view expressed by Gauthier J in her more extensive discussion of the issue in Bauer v Easton 2010 FC 361 [195]-[203]. It’s interesting to note that in US law it is now established that knowledge of the patent is needed, both for contributory infringement and for inducement: see Aro II 377 US 476, 488 (1964) regarding contributory infringement and Global–Tech Appliances, Inc v SEB SA 563 US 754, 766 (2011) regarding inducement. However, the US Supreme Court has not provided any clear rationale for its approach.

Utility
O'Reilly J rejected Western’s utility challenge. His decision raises no new points of law, but his brief discussion at [139] provides a useful summary:

● First, the focus must be on the claims, not on embodiments that are [described in the specification but] not claimed;
● Second, a claim will not be found to lack utility for failure to mention a component that a skilled person would recognize as necessary; [see also Metalliflex [1961] SCR 117];
● Third, the fact that [the inventor] did not initially arrive at a prototype that could immediately be commercialized does not mean that his testing did not reveal a useful invention.

Obviousness
The second step of the Windsurfing/Pozzoli framework, endorsed by the SCC in Sanofi 2008 SCC 61 [67], is to “[i]dentify the inventive concept of the claim in question or if that cannot readily be done, construe it.” In many cases identifying the inventive concept can lead to an unproductive satellite debate, and in Ciba v SNF 2017 FCA 225 the FCA (see here) stated that:

[77] There may be cases in which the inventive concept can be grasped without difficulty but it appears to me that because “inventive concept” remains undefined, the search for it has brought considerable confusion into the law of obviousness. That uncertainty can be reduced by simply avoiding the inventive concept altogether and pursuing the alternate course of construing the claim.

As noted by the FCA in BMS v Teva 2017 FCA 76 (see here), in Pozzoli itself, [2007] EWCA Civ 588 [19], the EWCA struck a “cautionary note” in respect to the use of the inventive concept:

In some cases the parties cannot agree on what the concept is. If one is not careful such a disagreement can develop into an unnecessary satellite debate. In the end what matters is/are the difference(s) between what is claimed and the prior art. It is those differences which form the "step" to be considered at stage (4). So if a disagreement about the inventive concept of a claim starts getting too involved, the sensible way to proceed is to forget it and simply to work on the features of the claim.

The analysis of obviousness in Western Oilfield v M-I proceeded entirely in terms of the inventive concept, which allowed the claims at issue to be addressed in three categories, which reflected different inventive concepts [212]-[226]. This illustrates that there are indeed some cases in which “the inventive concept can be grasped without difficulty,” and in such cases, focusing on inventive concept can streamline the obviousness analysis.

Novelty
The anticipation attack largely failed on the facts, with O'Reilly J generally preferring the evidence of the patentee’s expert witness. However, the patentee’s own expert concluded that one item of prior art anticipated four claims, which were accordingly held to be invalid [148].

An overbreadth attack failed on the facts: [227]-[234].

Thursday, January 9, 2020

Demystifying Patent Holdup

My paper with Tom Cotter and Erik Hovenkamp, titled Demystifying Patent Holdup, 76 Wash. & Lee L. Rev. 1501- 65 (2019), is now out and available here (and here for a direct link to the pdf). Here's the abstract:

Patent holdup can arise when circumstances enable a patent owner to extract a larger royalty ex post than it could have obtained in an arms length transaction ex ante. While the concept of patent holdup is familiar to scholars and practitioners—particularly in the context of standard-essential patent (SEP) disputes—the economic details are frequently misunderstood. For example, the popular assumption that switching costs (those required to switch from the infringing technology to an alternative) necessarily contribute to holdup is false in general, and will tend to overstate the potential for extracting excessive royalties. On the other hand, some commentaries mistakenly presume that large fixed costs are an essential ingredient of patent holdup, which understates the scope of the problem. In this Article, we clarify and distinguish the most basic economic factors that contribute to patent holdup. This casts light on various points of confusion arising in many commentaries on the subject. Path dependence—which can act to inflate the value of a technology simply because it was adopted first—is a useful concept for understanding the problem. In particular, patent holdup can be viewed as opportunistic exploitation of path dependence effects serving to inflate the value of a patented technology (relative to the alternatives) after it is adopted. This clarifies that factors contributing to holdup are not static, but rather consist in changes in economic circumstances over time. By breaking down the problem into its most basic parts, our analysis provides a useful blueprint for applying patent holdup theory in complex cases.

Monday, January 6, 2020

"Patent Remedies for Complex Products" Wins IPKat Patent Book of the Year Award

I am very pleased to announce that the IPKat Blog has bestowed its 2019 Book of the Year Award on the edited volume Patent Remedies and Complex Products: Toward a Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds., Cambridge Univ. Press 2019). As well as being an editor and a member of the project steering committee, I was a co-author on the chapters on Ch 1 Reasonable Royalties; Ch 2 Lost Profits and Disgorgement; Ch 3 Enhanced Damages, Litigation Cost Recovery, and Interest; Ch 4 Injunctive Relief; Ch 5 The Effect of FRAND Commitments on Patent Remedies; and I was the sole author of Ch 7 Holdup, Holdout, and Royalty Stacking: A Review of the Literature.

Readers can obtain a hard copy from CUPAmazon, or other sellers, or download the individual chapters for free using this link.

Monday, December 30, 2019

No Right to Appeal Determination That a Substantial New Question of Patentability Is Raised by Re-examination Request

Cusitar v. Canada (Attorney General) 2019 FC 1641 McVeigh J
2,876,770 / Oil Sand Mining and Haulage Method

This decision, affirming a decision of the re-examination board cancelling all 15 claims of the 770 patent for obviousness [23], turned largely on the facts, but the patentee did raise one novel argument relating to the scope of an appeal. 

Re-examination is governed by s 48.1-48.5 of the Act. A request for re-examination may be made by any person who submits prior art and pays the required fee: s 48.1(1). After such a request is made and the re-examination board is established, the first task of the Board is to determine whether the request raises a “substantial new question of patentability” (SNQP) affecting any claim: 48.2(2). If not, the person who made the request is so notified, and the re-examination proceeding is closed. A negative decision is final, expressly without right of appeal or review: 48.2(3). (Dismissal of the re-examination request does not bar the requesting party from bringing a subsequent impeachment action.) If, as in this case, the Board finds that an SNQP is raised, the Board notifies the patentee and the re-examination goes ahead. At the conclusion of the process, the Board issues a certificate that may cancel, confirm or amend the claims: s 48.4(1). This is subject to appeal: specifically, the patentee may appeal any decision “set out in a certificate issued under subsection 48.4(1)” to the Federal Court: 48.5(1).

In this case, the patentee appealed the adverse decision pursuant to 48.5(1), but one of the grounds of appeal was the threshold determination by the Board that the request raised a substantial new question of patentability [29.A.1]. McVeigh J held that this is not a proper ground of appeal. As noted, the Act provides expressly that there is no appeal from a determination that there is not an SNQP; but it does not expressly state that there is no appeal from a determination that there is an SNQP. However, as McVeigh J noted, the Act only provides for an appeal from “[a]ny decision of a re-examination board set out in a certificate issued under 48.4(1) [34, original emphasis], and the decision that there is an SNQP is not a decision set out in the certificate, which merely states (in this case) that “claims 1-15. . . are unpatentable” [35]. Moreover, re-examination is intended to be a “relatively summary and inexpensive alternative to an impeachment process by litigation,” and allowing an appeal from the SNQP determination would introduce delay and undermine this aim [36]. Thus textual and purposive considerations both support the conclusion that there is no right of appeal of a determination by the Board that the re-examination request raises an SNQP.