When is an Allegation an Undertaking?

Apotex Inc v Takeda Canada Inc / pantoprazole (NOC s 8) 2013 FC 1237 Phelan J
            PANTOLOC / pantoprazole / 2,092,694 and 2,089,748

Underling NOC decision Solvay Pharma Inc v Apotex Inc / pantoprazole (NOC), 2008 FC 308 Gauthier J

Takeda’s ‘748 patent claims the use of pantoprazole in combination with a helicobacter-inhibiting anti-microbial (so-called triple therapy). Apotex’s NOA stated that Apotex’s product would not be marketed for triple therapy [178]:

Each of the claims of the ’748 Patent includes as an essential element a Helicobacter-inhibiting anti-microbial agent. Our sodium pantoprazole tablets shall not contain said agent, as that term is construed in accordance with the claims of the ’748 Patent, nor shall our tablets be marketed or promoted to doctors, pharmacists or others to be used in combination with a Helicobacter-inhibiting anti-microbial agent or as part of a medicament package comprising said agent. As such, our tablets shall not infringe any of the claims of the ’748 patent.

Takeda argued that (1) this and other similar assertions in the NOA amounted to an undertaking; (2) Gauthier J relied on this undertaking in concluding that Takeda had not succeeded in establishing infringement; (3) Apotex in fact acted in breach of the undertaking, and (4) the Court should therefore exercise its discretion under s 8(5) to deny Apotex any damages [176].

Phelan J held against Takeda on the first point:

[182] While statements in an NOA may rise to the level of an undertaking to be relied on by a court, such statements must be clear and unequivocal undertakings specifically or by inference.

Phelan J discussed two cases in which an allegation did amount to an undertaking, and then continued:

[186] The case law does not support the proposition that a bare pleading in an NOA constitutes an enforceable undertaking. In my view, there must be more than just the allegation unless it is phrased as an undertaking.

[187] If an undertaking was so clearly in Justice Gauthier’s mind or if an undertaking was critical to her decision, she would have so stated it. I cannot believe that such a knowledgeable and experienced judge would not have stated an undertaking as the basis for the decision if that had been intended.

While Phelan J did not say so explicitly, his decision suggests that the gravity of an allegation of a breach of an undertaking [177] is the reason why such specificity is required.

Phelan J did not make a clear determination on the remaining issues, in party because he considered the terms of the putative undertaking to be unclear [202], but his discussion suggests that Takeda had at least a good arguable case on the other point. His holding that there was no undertaking was determinative [202].

Double Ramp-up Revisited

Apotex Inc v Takeda Canada Inc / pantoprazole (NOC s 8) 2013 FC 1237 Phelan J
            PANTOLOC / pantoprazole / 2,092,694 and 2,089,748

Underling NOC decision Solvay Pharma Inc v Apotex Inc / pantoprazole (NOC), 2008 FC 308 Gauthier J

The problem of double ramp-up was explained by Phelan J as follows:

[122] Ramp up is the initial period during which the generic drug has to be made or acquired, orders received from customers and the drugs shipped to those customers. It covers the period before Apo-pantoprazole achieves steady state sales.

[123] In the real world, Apotex experienced ramp up after it was successful in resisting Takeda’s attempt to obtain a prohibition order which lasted until it reached steady state.

[124] In the hypothetical world, the calculation of Apotex’s loss reflected this ramp up incurred or experienced in the Relevant Period.

[125] The effect of the calculation is that Apotex experiences the effect of ramp up in the hypothetical world resulting in a deduction from what would be steady state revenue and then in the real world it experiences the same ramp up consequences. This is double counting for the same circumstance; a disadvantage to Apotex and an advantage to Takeda.

In Apo-ramipril 2012 FC 553 [265-270] Snider J refused to allow Apotex to deduct the ramp-up loss that occurred in the real world, holding that this was precluded by the FCA Alendronate 2009 FCA 187, which held that losses incurred after the statutory period are not compensable as a matter of law. In his subsequent Alendronate 2012 FC 1235 decision assessing s 8 damages, Hughes J disagreed with Snider J, saying “I am not satisfied, particularly given the common view of the accounting experts that, normally, compensation would be made to prevent a double ramp-up loss, that the Court of Appeal had this situation in mind” [86]. He nonetheless followed Snider J, citing “the interests of comity and in the expectation of an inevitable appeal.” In my post on Hughes J’s decision, I remarked that “I am not sure that the principle of comity required him to follow Snider J” and “a novel point of law should not be considered settled by a single decision.” 

In Pantoprazole, Phelan J declined to follow Hughes J and Snider J on this point, saying, rightly in my view, that

[131] With the greatest respect, I do not view the determination of “double ramp up” in the present case as resolvable under judicial comity nor a matter on which one can presume to be eventually resolved on appeal.

Phelan J then undertook a purposive analysis of s 8, noting that the NOC Regulations “are not tools to penalize generic drug manufacturers where they have been successful against a brand company,” and “[t]he intent under the Regulations as under injunction law is to return the enjoined party to the position it would be in if the injunction/stay had not been granted (assuming the enjoined party is ultimately successful)” [134], [135]. He pointed out that in Alendronate the FCA had been dealing with springboard damages, not double ramp-up [136], and springboard damages are more clearly suffered outside the compensible period [137]. He therefore held that Apotex’s losses during the ramp-up period should not be included in the but for world, where such losses were experienced in the actual world [148].

I can see both sides of this argument. Phelan J’s purposive analysis is compelling, but the thrust of the FCA’s Alendronate was that the NOC Regulations aim at statutorily defined compensation, rather than full compensation in fact, so the question is as to exactly how far the FCA intended this principle to extend. But however this point is eventually resolved, I do feel that it is best to fully explore a contentious legal issue such as this at the FC level, rather than having all subsequent decisions simply follow whichever opinion happens to be first. As Phelan J pointed out, there is no particular legal basis for presuming there will be an appeal [131], and if there is an appeal and the FCA were to reverse, it seems wrong that the intervening parties should be burdened with launching an appeal to reverse the trial decision on a point on which the trial judge him or herself felt was wrongly decided.

How Do the NOC Regulations Apply in the But For World of S 8 Damages?

Apotex Inc v Takeda Canada Inc / pantoprazole (NOC s 8) 2013 FC 1237 Phelan J
            PANTOLOC / pantoprazole / 2,092,694 and 2,089,748

Underling NOC decision Solvay Pharma Inc v Apotex Inc / pantoprazole (NOC), 2008 FC 308 Gauthier J

Phelan J’s Pantoprazole decision is the fourth decision on damages under s 8 of the NOC Regulations to go (almost) all the way to quantum, after the companion cases decided by Snider J, Teva-ramipril 2012 FC 552 and Apo-ramipril 2012 FC 553 (blogged here, here and here), and Hughes J’s Alendronate decision, 2012 FC 1235 (blogged here), supplementary reasons 2012 FC 1418 (blogged here). The legal questions relating to s 8 damages are well on their way to becoming established, but it is now apparent that the assessment of s 8 will require a complex and difficult factual inquiry. (The parties did not ask Phelan J to determine the quantum of damages, but only to settle some disputed issues which, it is hoped would allow the parties to arrive at a figure without the need to return to court.)

The general approach to s 8 damages set out in the cases, including Pantoprazole, is consistent with the “but for” approach to damages generally: damages are assessed as the difference between Apotex’s actual profits and the profits it would have made in the “but for” world in which it would not have been subject to the order of prohibition [14]. As discussed here, construction of the hypothetical world is almost entirely as a matter of determining what would in fact have happened but for the order of prohibition.

One established exception to this purely factual inquiry is that the FCA has held that the generic is not entitled to so-called springboard damages, on the basis that as a matter of statutory interpretation, losses incurred after the statutory period are not compensable as a matter of law even if they were in fact caused by the statutory stay: Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187.

A second legal question concerns the construction of the but for world. How do the NOC Regulations themselves apply in the but for world [33]? Should we assume that in the but for world the NOC Regulations do not exist at all? Should we assume that they do not exist for the s 8 claimant, but they exist for everyone else? Should we assume that they are fully operative even for the s 8 claimant, except that the statutory stay is not triggered? (That would imply that the s 8 claimant would still be required to file an NOA in the but for world.) Should we assume that the NOC Regulations do not exist for the section 8 claimant, and all other generics are prohibited from entering? All of these answers are equally consistent with the principle of “but for” compensation, because the question is how to construct the but for world itself. The Regulations do not answer this question directly. They tell us that the stay would not have been triggered in the but for world, but apart from that they do not tell us what parts of the Regulations would be effective. Section 8 states that the generic is entitled to recover “any loss suffered” during the period beginning on the date on which an NOC would have been issued “in the absence of these Regulations,” and in Teva-ramipril Teva argued that this means that in the but for world, the NOC Regulations would not exist at all. Snider J rejected this, noting that “the phrase ‘in the absence of these Regulations’ only modifies the certification date” [50]. That is, “in the absence of these Regulations” tells us when the start period is, not what the but for world is like.

Phelan J followed Snider J in holding that in the but for world, the generic does not have to file its NOA [35], [37], [Apo-ramipril [194]]. This is important to the damages calculation, because it means that the patentee will not be alerted to the possibility of generic entry by the NOA, and so will not have time to prepare to launch an AG, unless, on the facts, it would have known of the generic launch for some other reason [39].

However, while “in the hypothetical world, [the s 8 claimant] acts without the obligations and limitations of the Regulations” [40], all of the other generics are subject to the Regulations [56]: “Takeda does not enjoy the benefit of claiming that because Apotex was successful, all other generics are, for purposes of hypothetical world analysis, free to enter the market.” This is important to the damages calculation, because entry by other generics will cut the claimant’s profits. (Multiple generic entry may be bad for the patentee in the real world, but it is good for the patentee in the but for world.)

The question of how the NOC Regulations apply in the but for world is surely a question of law, and, as Phelan J noted, Apo-ramipril is under appeal, so the answer may change, but for now the answer is that the NOC Regulations are assumed not to apply to the claimant, but they do apply to all other market entrants. This seems to me to be as sensible an answer as any. As Snider J pointed out in Apo-ramipril [194], regulatory activity is generally kept confidential, so if the generic is assumed not to be subject to the stay, there is no reason for it to serve an NOA. On the other hand, the NOC Regulations cannot be assumed to be non-existent. Suppose generic A wins in its NOC proceedings, but generic B loses in its NOC proceedings relating to the same product, and so was subject to an order of prohibition. It seems wrong to suppose that generic B would have been able to enter the market for the purposes of generic A’s s 8 damages, when had tried and failed to obtain an NOC in respect of that very product. This was essentially what had happened in relation to Apotex’s entry as a second generic in Teva-ramipril, and this is why Snider J held that the other generics remained subject to the NOC Regulations [148]. The assumption that all generics except the s 8 claimant are prohibited from entry has the virtue of simplicity – the but for world will be easy to construct – but it would imply that multiple generics could get compensation from the same patentee in respect of the same drug, all on the basis that they would have been the sole generic.

It is the possibility of multiple generic entry that makes assessment of s 8 damage factually complex, as it is necessary to explore and dispute a number of possible but for worlds, in which various parties might have entered at various times. This is in contrast to a patent infringement action in which the patentee prevails; in that case, there is a single possible but for world, namely one in which everyone but the patentee is in the market. The NOC world is like a tort claim in which the defendant wrongly hit the plaintiff with a crippling blow, but we know that even in the absence of that wrong, several other, weaker, opponents would have legitimately entered the fray. We can’t make the easy assumption that but for the tort, the plaintiff would have been healthy; the question is how many other opponents he would have faced, and exactly how battered he would otherwise have been. As Phelan J and the parties acknowledged [116], [167], Apo-ramipril [128], Alendronate 2012 FC 1418 [8], the complexity of the inquiry means that, as Lord Shaw pointed out in Watson Laidlaw (1914), 31 RPC 104, 117-118, "[t]he restoration by way of compensation is therefore accomplished to a large extent by the exercise of a sound imagination and the practice of the broad axe."

Draft Trans-Pacific Partnership Treaty – Nagoya Protocol and Genetic Resources

The Nagoya Protocol to the Convention on Biological Diversity has been in the news lately as it is currently on its way to being enacted into European Union legislation (see IPKat posts here and here – and yes, I am the “Norman” who commented on those posts). So I’ve decided to post some observations on the leaked draft TPP treaty proposed provisions dealing with genetic resources, which I drafted in my spate of blogging on the TPP, but never got around to posting at the time.

Understanding these provisions requires some background on the Nagoya Protocol to the Convention on Biological Diversity. The Nagoya Protocol mandates a system in which the benefits of exploitation of genetic resources are shared with the party providing that resource. The basic idea is nothing novel. If company A wants access to a novel organism or compound X owned by company B, A would normally enter into a material transfer agreement with B, which might well require A to pay B royalties on any patented invention derived from X. The Nagoya Protocol contemplates that if company A wants to, for example, go bioprospecting in the Amazon rain forest, it would get prior consent from a competent national authority (Art 13) and enter into an access and benefit sharing (ABS) agreement to share any benefits on mutually agreed terms (Art 5). Traditional knowledge is treated in a similar way. In other words, the effect is that countries would be deemed to own the genetic resources within their territory, and company A seeking to exploit those would contract with the national authority over the terms of access in the same way that it would contract with company B. A great deal of the Nagoya Protocol describes the structure of this contracting process.

How High a Bar for Overruling Prior FCA Decisions?

Eli Lilly Canada Inc. v. Apotex Inc. / olanzapine (NOC) No.2 2013 FCA 282 Evans JA: Stratas, Webb JJA aff’g 2010 FC 952 Gauthier J

 Under the “no reach back” rule established in Apotex v Syntex / naproxen (NOC) 2010 FCA 155 aff’g 2009 FC 494 and re-affirmed in Pfizer Canada Inc. v Ratiopharm / amlodipine besylate (NOC) 2011 FCA 215 (blogged here) the Court will not reach back and retroactively set aside an order of prohibition obtained in an NOC proceeding solely because the patent has been held invalid in a subsequent action. The consequence is that the generic will not be entitled to damages under s 8 of the NOC Regulations, which is triggered by success in the NOC proceeding itself, even though it will have been held off the market by an invalid patent. (See here for my posts on related cases).

In this proceeding, Apotex asked the FCA to reconsider this rule. The FCA declined, on the basis of stare decisis:

[8] Because this Court is normally bound by its own decisions, Apotex can only succeed in this appeal if it satisfies us that Syntex and Ratiopharm should not be followed because they are "manifestly wrong" within the narrow meaning of Miller v. Canada (Attorney General), 2002 FCA 370 at paras. 8, 10, and 22 (Miller). They were not per incuriam, nor subsequently overruled or seriously attenuated by decisions of the Supreme Court of Canada.

It is interesting to contrast the “manifestly wrong” standard applied by the FCA in overruling its own decisions, with the standard set out by the SCC in Canada v. Craig, 2012 SCC 43 [24]-[28] for overruling the SCC’s own decisions. The SCC does not provide a rule, but rather (unsurprisingly, from the SCC) engages in “a balancing exercise between the two important values of correctness and certainty,” [27], giving “careful and respectful consideration” [26] to the earlier decision. This appears to be a significantly lower standard than “manifestly wrong.” That impression is confirmed by the result in Craig, which the SCC overruled a prior decision on the basis that it was wrong (though there was no suggestion that it was manifestly wrong), and there had been significant judicial and academic criticism of the prior decision.

Broad Functional Biotech Claims in the BGH and EPO

Kluwer Patent Blog has a very interesting post by Dr Thorsten Bausch et al on a split between the German Federal Court of Justice (Bundesgerichtshof) and the EPO on the validity of broad functional claims. As the post describes it:

one can paraphrase [the claim at issue] as "the use of DP IV inhibitors for the preparation of a medicament for treating diabetes". The claimed inhibitors were not structurally limited, just by their function. The description of the patent contained a single working example with data. However, as the claims were so broad and Prof. Demuth's concept proved to be unusually successful, it happened, unsurprisingly, that both patents were opposed by various major pharmaceutical companies. Indeed, the patents were arguably covering a whole new class of anti-diabetes drugs under development, which today are collectively referred to as gliptins. Marketed actives of this class include Sitagliptin, Vildagliptin and Saxagliptin.

The EP patent was revoked by the EPO BoA, but the equivalent German patent was subsequently upheld by the BGH, which explicitly disagreed with the BoA decision. The authors provide an English translation of BGH decision, which cites extensively from German, UK and EPO case law. The BGH held, inter alia, that

The fact that such a claim also covers compounds which do not yet exist, or which have not yet been identified, does not give grounds for concern. If employing them makes use of the invention, it does not matter if compounds are also covered which cannot be identified without inventive activity.

There is no conflict between this and the fact that a functional definition of the feature encompasses the use of currently unknown possibilities which might only be provided or invented in the future, if this is the only way to ensure appropriate protection In such a case, the invention is in principle sufficiently disclosed if it provides the skilled person with at least one way of carrying it out.

Holding on Disclosure of Line of Reasonsing is Strictly Obiter

Bell Helicopter Textron Canada Limitée v. Eurocopter 2013 FCA 261 Mainville JA: Noël, Trudel JJA refusing a motion for reconsideration of 2013 FCA 219

2,207,787

In previous litigation in this action, Eurocopter’s claims to helicopter landing gear with a forward offset front cross-piece had been held to be valid and infringed, but Claim 16, to landing gear with a backward offset front cross-piece, had been held invalid for lack of utility. In this motion under Rule 397, which permits reconsideration when “(a) the order does not accord with any reasons given for it; or (b) a matter that should have been dealt with has been overlooked or accidentally omitted,” Eurocopter has asked the FCA to modify two paragraphs of its reasons ([157]-[158]), in a way that Eurocopter apparently hoped would have the effect of reversing the judgment with respect to Claim 16, rendering that claim valid [4]. The FCA rejected this motion on the basis that (1), Rule 397 cannot be used to re-argue an issue [15]; (2) the paragraphs in question were not inadvertent and indeed were not incorrect [16]-[17]; and (3) the motion was pointless as even if the paragraphs in question were “corrected,” Claim 16 would still be invalid.

This last point is of some general interest. As I discussed in a post on the original FCA decision, the FCA held that the line of reasoning supporting sound prediction must be disclosed in the patent. If the decision has been amended as sought by Eurocopter, it would have held that the line of reasoning was indeed disclosed in the patent [4]. But the FCA noted that this would not have saved the claim, because Bell had brought evidence that the backward offset embodiment lacked utility, and “It would therefore have still been incumbent on Eurocopter to rebut that evidence through its own evidence of testing or through calculations supporting a sound line of reasoning for that embodiment at the time the `787 Patent was applied for. Eurocopter failed to do so. As a result, its cross-appeal would still fail” [18]. In other words, the FCA has recognized that its holding that the line of reasoning must be disclosed in the patent was obiter, because the more fundamental problem is that Eurocopter had not supplied any evidence of utility, whether in the patent or not. This is significant, as there is some suggestion of a disagreement at the FCA as to whether the heightened disclosure requirement in respect of sound prediction is sound, and to the extent that the holding in Eurocopter affirming this doctrine is obiter, it has less weight than if it were determinative. That is, it would be possible for a subsequent decision of the FCA to distinguish Eurocopter on this point as being obiter. With that said, there obiter, and there is obiter; while the Eurocopter panel of the FCA has acknowledged that its holding on this point was strictly obiter, it was clearly thoroughly considered, and so will not be lightly distinguished or ignored.

Draft Trans-Pacific Partnership Treaty – Data Protection

Unsurprisingly, data protection is being negotiated in the leaked draft TPP treaty. And also unsurprisingly, the main debate is between the US, which proposes a fairly strong mandatory data protection regime (Art E.16), a group of seven countries, including Canada, which propose a weaker regime (“the majority proposal”) (Art E.XX.4), and the rest, who apparently would prefer no data protection requirement at all. The notes indicate that both Canada and Japan are considering the US proposal, which is not strictly inconsistent with the majority proposal, as it sets a higher standard.

The gist of the US proposal is that when data is submitted for pharmaceutical marketing authorization for a new product, a third party cannot piggy back on that data for at least five years: E.16(a). If the chemical entity has previously been approved as part of another product, the period is reduced to three years: E.16(c). The majority proposal simply requires that such data be protected against “unfair commercial use.” No minimum period of data exclusivity is specified. Furthermore, under the majority proposal, the protection may be limited to new chemical entities – that is, no protection at all would be permitted if the chemical entity has been previously approved as part of another product, even if new data is required – and it may also be limited so that data protection is not available for new uses, or dosage forms, again, even if new data is required. There are also some other potential limitations on the data exclusivity. (Both proposals safeguard any measures necessary to implement the Doha Declaration on the TRIPS Agreement and Public Health.)

I am generally inclined to think that data protection is sound as a matter of policy. The argument for data protection is the same as the argument for intellectual property generally; the data is difficult and expensive to create (both proposals are limited to data “the origination of which involves a considerable effort”), and it is easy to copy, and without some form of protection no one will have an incentive to originate the data in the first place. Unlike patent protection, data protection does not have any requirement of an inventive step, but on the other hand, it does not provide a true monopoly either. In my view the inventive step requirement in patent law is designed to ensure that a monopoly is not granted over inventions that would have been independently developed in any event: Graham v John Deere Co, 383 US 1 at 11 (1966). Since data protection does not prevent applications for marketing authorization based on independently created data, this problem does not arise. On this logic, the potential exclusions for new uses of known entities, drugs that have not been approved in other formulations, or new dosages, are difficult to justify. If the data required significant effort to originate, and it is susceptible of piggy-backing, then it should be protected.

Of course, the bigger debate between the two positions is as to whether there should be a minimum period of data protection. If we accept the basic justification for data protection, which the majority proposal apparently does, then a minimum period of protection seems necessary in practice to make that protection effective.

The positions are set out below for convenience:

Draft Trans-Pacific Partnership Treaty – Regulatory Review Exception

The leaked TPP treaty contemplates a regulatory review exception in Art E.13, but there is some controversy over the scope. There is considerable debate over the precise wording (which makes the annotated draft difficult to read), but main debate is over whether the exception should be confined to getting marketing authorization for pharmaceuticals, or whether it should extend to any kind of  regulatory approval. The US proposal is representative of the more restrictive position, and the Canadian proposal is representative of the broader position. I have parsed out their positions below, with my underlining to highlight the differences. (No other countries support either of these positions exactly, but several support each of them with some deviations.)

Draft Trans-Pacific Partnership Treaty – Written Description and Overbreadth

Two very different versions of Article E.9 are proposed in the leaked draft TPP treaty. The proposed of the US and Peru provides for a US-style written description requirement:

US version:

Article QQ.E.9

Each Party shall provide that a claimed invention is sufficiently supported by its disclosure if the disclosure reasonably conveys to a person skilled in the art that the applicant was in possession of the claimed invention as of the filing date.

Australia proposes a very substantially different version:

Article QQ.E.9

Each Party shall provide that a claimed invention shall be sufficiently supported by its disclosure.

All others except Japan oppose this provision. Japan is considering.

While this provision raises complex issues – this is a familiar refrain by now – in my view the Australian proposal is sound and desirable, while the US proposal verges on the absurd.