Thursday, March 22, 2018

Correction of Ownership Does Not Necessarily Require Direct Evidence from Assignor

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

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

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

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

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

Friday, March 16, 2018

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thursday, March 15, 2018

Promise Doctrine Zombie Watch: Part III

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

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

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

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

Tuesday, March 13, 2018

More Support for Experimental Use Exception to Anticipation

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

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

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

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

Experimental Use Exception to Anticipation

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

Speculative Anticipation

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

Blinding the Witness

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

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

Methods of Medical Treatment

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

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

Monday, March 5, 2018

Gillette Defence (Not Really) Applied

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

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

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

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

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

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

Tuesday, February 27, 2018

Applying for an NOC Does Not Sustain an Action

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

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

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

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

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

Thursday, February 22, 2018

Switching Costs, Path Dependence, and Patent Holdup

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

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

Friday, February 16, 2018

FCA Affirms that Dead Application is Dead

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

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

Patentable Subject Matter when the Inventive Contribution is an Algorithm

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

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

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

Thursday, February 15, 2018

Standing of Plaintiffs Carrying on Activity Outside of Canada

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

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

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

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

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

Tuesday, February 13, 2018

Levofloxacin Liability Decision Affirmed on the Facts

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

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

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

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

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

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

Friday, February 9, 2018

The Infringer Cannot Elect an Accounting

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

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

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

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

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

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

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

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

Sunday, February 4, 2018

No new cases

No new substantive patent cases were released last week.

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

Saturday, January 27, 2018

No new cases

No new substantive patent cases were released last week.

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

Thursday, January 18, 2018

Promise Doctrine Zombie Watch: Update, LLC v Wulftec International Inc 2018 FC 41 Annis J

The promise doctrine was abolished by the SCC in AstraZeneca 2017 SCC 36 (see here). Early indications were that it will not rise from the dead. This decision of Annis J confirms that the promise doctrine is so thoroughly dead that it cannot even survive a motion to strike.

The defendant Wulftec sought to amend its statement of claim to add an allegation that the asserted patents are devoid of utility [2]. While it is a bit difficult to understand exactly what was being alleged by the proposed amendments [5], the plaintiff Lantech argued, inter alia, that the allegations were based on an alleged promise of utility in the patent description [6]. Annis J agreed with this submission [7], and concluded that the proposed utility amendments did not meet the requirement of disclosing a reasonable cause of action [8].

Monday, January 8, 2018

Diagnostic Methods at CIPO

Something strange is going on at CIPO in respect of diagnostic method patents. As discussed in Richard Owens’ op-ed in the National Post and Kathleen Marsman’s article of 2 November in the Lawyer’s Daily, CIPO is systematically refusing to grant patents for some diagnostic methods. The holiday break gave me a chance to look into the issue in a bit more detail (and to read the fascinating IP Fly on the Wall materials that shed light on how those policies were developed), and to write a longer post than usual on the issue.

What is CIPO doing with patent applications related to diagnostic methods?
CIPO is systematically denying certain patents related to diagnostic methods, including, for example, patents related to personalized medicine technologies which tailor medical treatment to an individual patient. So, different kinds of cancer that superficially seem the same, may actually be very different metabolically, and consequently respond differently to different treatments. Before personalized medicine, all a doctor could do would be to try one treatment after another on their patient, and hope that something worked before it was too late. Personalized medicine allows the doctor to tailor the treatment to the disease, and the particular patient. For example, certain breast cancers produce large quantities of a compound known as HER2/neu, and the drug trastuzumab is effective in treating those types of cancer, but not others. Personalized medicine might involve testing the blood of a breast cancer patient and prescribing trastuzumab, if, and only if, elevated levels of HER2/neu were detected. Diagnostic methods generally rely on establishing a relationship or correlation between what CIPO calls the “analyte” (eg HER2/neu), and the existence of a particular disorder, or response to a certain drug (eg trastuzumab).

That CIPO is systematically denying certain patents related to diagnostic methods may not be well known to the public, but the fact itself is not disputed or secret. On the contrary, it is set out explicitly in the Practice Notice Respecting Medical Diagnostic Methods - PN 2015-02, and in the November 2017 update to CIPO’s Manual of Patent Office Practice (MOPOP), Section 17.03.04 that subsumed and elaborated this examining practice.

Friday, December 22, 2017

How Enhanced are Enhanced Costs?

Mediatube Corp v Bell Canada 2017 FC 495 Locke J
            2,339,447 / Internet Protocol Television / Fibe TV, FibreOp

In his substantive decision in Mediatube v Bell 2017 FC 6, Locke J held that costs awarded to Bell should be elevated by 50% for the infringement case (all issues except punitive damages) and awarded on a solicitor-and-client basis for the punitive damages case, essentially on the basis that the plaintiffs could not have had a reasonable belief that they had a good arguable case [234]: see here. This decision clarified the application of this holding. While the decision turns largely on the facts, there are a couple of general points of interest.

First, Locke J held that in the Federal Court, the term “solicitor-and-client costs” generally means a full indemnify basis, not only a substantial indemnity basis: [33].

Second, he noted that in allocating costs between the infringement case and punitive damages case, there was a trade-off between precision and ease of calculation, and he chose to adopt a relatively simple but less precise approach: [13].

Third, a 50% elevation of costs on the infringement case plus solicitor and client costs on the punitive damages case, sounds like a serious costs sanction. If I have done the calculations correctly, Bell’s actual total costs, including legal fees and disbursements, were just over $7.9 million ($7,901,718 - it’s not clear to me whether this figure includes tax) [5]. The grand total actually awarded on the enhanced basis, including tax, was $2,114,582 [97], or $1,931,876 before tax. This means that the costs award, even on this significantly elevated basis, in respect of a case in which the plaintiffs could not have had a reasonable belief that they had a good arguable case, was only about 25% of Bell’s actual costs. Bell is out of pocket by $5 million for having defended a suit which never should have been brought.

It is more than two years ago that the Rules Committee released an ambitious discussion paper on costs. Perhaps I’ve missed it, but I can’t recall having seen any follow-up.

Thursday, December 21, 2017

Prior Use by Inventor Anticipates Patent

Packers Plus Energy Services Inc v Essential Energy 2017 FC 1111 O’Reilly J

The technology embodied in Packers Plus’ 072 patent relates to a method for fracking by selective transmission of fluids to different segments of a wellbore by way of a tubing string consisting of a series of packers and ports which can be operated independently [8]. Yesterday’s post discussed O’Reilly J’s holding that the patent was not infringed. Today’s post discusses his holdings that it was invalid as anticipated and for obviousness.


The anticipation holding presents a classic cautionary tale regarding public disclosure prior to filing. It turned on the fact that the patentee, Packers, had itself used the invention in the field in the fall of 2001, more than one year before the Canadian filing date [65ff]. That use was not really disputed [82]. Rather, Packers argued that the use was not anticipatory, under 28.2(1)(a), either because it was used in circumstances in which all the recipients of the information were required to keep it confidential, or because it came within the experimental use exception [64].

Though there were some indicia of confidentiality, ultimately the confidentiality argument failed on the facts. As I read it, what happened is that in the fall of 2001, Packers, which was already established in the oil-field service industry as a provider of down-hole tools, was asked by a client to do a job in a gas well. Mr Themig, one of the inventors and a principal in Packers, came up with what seemed to be a pretty good solution. The client agreed, and it was implemented. It was only after the fact that Mr Themig began to appreciate just how good a solution it really was, and Packers ultimately set the wheels in motion to apply for a patent. My sense is that in this industry, each hole and every job is a bit different, so it was not out of the ordinary for a high-end firm such as Packers to devise a solution that strictly novel, in the sense of being tailored to the particular job. That of course does not mean that every solution is patentable, and it is perhaps for that reason that Mr Themig did not take all the steps necessary to make it sufficiently clear that the use of the method was to be considered confidential. It seems to me that the one year grace period afforded under the Canadian Patent Act is intended to address this type of situation. In some industries inventions are products of a patent-oriented lab, but in others they emerge from practical innovators in the field, and in the latter case it is not always reasonable to ask a person to keep patent law requirements in mind while trying to solve a problem for a client. The grace period responds to that problem; but the grace period is necessarily limited and in this case the inventor did not proceed to filing quickly enough.

Experimental Use

The experimental use argument turns on the question of what it means for a use to be “experimental.” In some cases, such as clinical trials of a drug prior to commercialization, the answer is clear, but in the case, the use itself was commercial.

Wednesday, December 20, 2017

Slice and Dice to Avoid Infringement?

Packers Plus Energy Services Inc v Essential Energy 2017 FC 1111 O’Reilly J

The technology embodied in Packers Plus’ 072 patent relates to a method for fracking by selective transmission of fluids to different segments of a wellbore by way of a tubing string consisting of a series of packers and ports which can be operated independently [8]. My understanding from general news sources is that the patented technology is widely used in the fracking industry. O’Reilly J held the 072 patent to be invalid as anticipated and for obviousness. These issues are dealt with in subsequent posts.

O’Reilly J also held that even if the 072 were valid, it was not infringed, nor had the defendant, Essential, induced infringement [3]. He held that in light of the claim construction, “it is clear that Essential’s equipment. . . infringes the ‘072 patent when used in an open-hole fracturing operation” [38]. However, the claims in issue were method claims, and Essential only supplied and installed the equipment, but did not carry out the complete method [44], [52], [53]. Packers Plus therefore argued inducement and joint infringement.

On inducement, O-Reilly J noted that the first step of the three-part test for inducement set out in Corlac v Weatherford 2011 FCA 228, [162], requires an act of infringement by a direct infringer. inducer. He then held:

[51] Packers has not produced evidence of direct infringement by anyone. It merely implies that Essential’s main customers, the operating companies who own and operate the wells, are the infringers. However, the evidence shows that there are often numerous entities involved in a fracturing job, including the operating company and the various service entities it hires – drilling companies, pumping companies, cementing companies, tool companies, and fracturing companies. It is unclear who the direct infringer would be in that situation.

[55] Perhaps the collectivity of companies involved in a fracturing operation could be said to work the method claimed in the ‘072 patent. However, each of their respective contributions to the operation would amount to a partial or, at most, an indirect infringement, not a direct infringement of the patent. Therefore, Packers cannot meet the first branch of the test for inducement. It has not proved direct infringement by anyone.

This holding, that inducement requires direct infringement by a single party, appears to me to be novel. The holding in Corlac itself was this:

[162] It is settled law that one who induces or procures another to infringe a patent is guilty of infringement of the patent.

This does not hold that there must be a single direct infringer, but rather implicitly assumes that there is. The question of whether all the acts constituting the patented method must be carried out by a single actor was simply not at issue. The Corlac test assumes that there is direct infringer, and asks when it is permissible for the patentee to pursue the inducer instead. The first prong of the test is (my emphasis):

[162] First, the act of infringement must have been completed by the direct infringer.

Again, this does not hold that there must be a single direct infringer. Rather it assumes (“the”) that there is, and asks whether that direct infringer had completed the act of infringement. So, in Dableh v Ontario Hydro [1996] 3 FC 751 (FCA), cited in this paragraph of Corlac, the first prong was not satisfied because the use by the putative direct infringer had not proceeded beyond experimental use, and so there was no direct infringement at all (though a quia timet injunction was nonetheless granted). In AB Hassle v. Apotex, 2002 FCA 421, also cited in Corlac as authority for this test, the allegation was the drug would be prescribed off-label for an infringing use, and the first prong was not satisfied because the trial judge was not persuaded that this would actually happen [25]. Again, there was no direct infringement at all, regardless of the number of parties involved (In the third case cited in Corlac, MacLennan 2008 FCA 35, inducement was established.)

While I have not reviewed all the Canadian inducement cases, I am not aware of any which holds that the direct infringement must be carried out by a single party. As a general matter, this question is a controversial one. The evident concern with O’Reilly J’s holding is that in industries in which key operations are routinely carried out by a variety of different parties in conjunction, it might be impossible to effectively enforce patent rights. Perhaps of even greater concern, parties might be able to arrange their operations, for example by subcontracting certain tasks, so as to avoid infringement. The issue has been addressed most recently by the US Federal Circuit in Akamai v Limelight 797 F.3d 1020 (Fed Cir 2015), on remand from 134 S.Ct. 2111, holding that in order to find induced infringement, it is not necessary to prove that all the steps were committed by a single entity. I also note that under s 60(2) of the UK Patents Act a party is liable for infringement if "he supplies . . .any of the means, relating to an essential element of the invention, for putting the invention into effect when he knows. . . that those means are suitable for putting, and are intended to put, the invention into effect."  It seems perfectly clear that Essential would be liable under this provision, as there is no requirement for direct infringement, but only that the invention be put into effect, and, as noted above, O'Reilly J clearly held at [38] that the invention would be put into effect by the use of Essential's equipment. That statutory provision is of course not directly applicable in Canada, but it highlights some of the policy considerations related to O'Reilly J's holding.

This is not to say that O’Reilly J was wrong to say that there must be a single direct infringer. Divided infringement raises difficult policy and doctrinal questions, which I won’t explore in this post, as O’Reilly J’s holding on infringement was not crucial in light of his holding that the patents were invalid. Moreover, on the facts of this case, it might well be that even if there was a party who should be held liable for infringement, that party is not Essential. My point here is simply that his holding is novel and controversial, and that it does not follow from Corlac and the cases cited therein.

UPDATE: For an even more recent decision of the US Fed Cir, see Travel Sentry v Tripp, released yesterday, and discussed on Patently-O. Note that, as discussed here, the EWCA in Warner-Lambert [2015] EWCA Civ 556, has a thorough discussion of the European position, which contrasts with the US approach.

See also my blog post here

Tuesday, December 19, 2017

Dependent Claims and Obviousness

Ciba Specialty Chemicals Water Treatments Ltd v SNF Inc 2017 FCA 225 Pelletier JA: Rennie JA, concurring reasons by Woods JA aff’g 2015 FC 997 Phelan J

A post on the McCarty Tetrault snIP/ITs blog has pointed out an issue that I had missed in Ciba Specialty Chemicals Water Treatments Ltd v SNF. The authors note that the FCA held (my emphasis):

[97] The result is that Claim 1 is obvious and, since all other claims are directly or indirectly dependent on Claim 1, the ‘581 Patent is invalid.

They remark that

This holding is difficult to reconcile with prior Federal Court of Appeal jurisprudence not cited by the court. In Zero Spill Systems (Int’l) Inc. v. Heide [2015 FCA 115], the Federal Court of Appeal reversed the Federal Court on this very holding:

The Federal Court was obliged to consider the validity of the ’064 Patent claim-by-claim. Not doing so was a legal error. Notwithstanding that Claim 13 is actually an independent claim, the nature of dependent cascading claims is to narrow the claims upon which they depend: Purdue Pharma v. Pharmascience Inc., 2009 FC 726, 77 C.P.R. (4th) 262 at paragraph 10. The practical effect of this on anticipation or obviousness is that eventually a claim may be sufficiently narrow to escape these prior art-based attacks, even though the broader claims may be invalid. [94]

I suggest that the reason for the apparent conflict may be that in Ciba v SNF, according to the Phelan J’s trial decision:

[26] As a result of the nature of the dependencies and the state of the art, if Claim 1 is invalid, then its dependent claims are likewise invalid. Dr Farrow, Ciba’s principal expert, was correct in his view that there was only one inventive concept that applied to all claims in the 581 Patent. This case rises or falls on Claim 1.

So, the FCA statement at [97] may only be saying that in this particular case none of the dependencies added anything potentially non-obvious. However, this is not entirely satisfactory. Phelan J analyzed obviousness in terms of the inventive concept, and since he concluded all the claims shared a single inventive concept, to hold that in this case all the claims rise or fell together (at least so far as obviousness is concerned), is not inconsistent with Zero Spill. But as discussed here, a key point of the FCA decision in Ciba v SNF was that it is preferable to “avoid[] the inventive concept altogether and pursu[e] the alternate course of construing the claim” [77], which is what the FCA did in undertaking its own obviousness analysis de novo. Since the FCA did not rely on the inventive concept at all in assessing obviousness, much less on there being a single inventive concept, it is not clear why the claims should stand or fall together.

I suspect that what happened is simply that on appeal the parties treated all the claims as standing or falling together, in light of Phelan J’s holding at trial, and consequently so did the FCA, even though the rationale had shifted. In any event, this particular point was tangential in Ciba v SNF, whereas in Zero Spill, as the snIP/ITs authors point out, it was the very issue on which the FCA reversed the court below. Moreover, the holding in Zero Spill is clearly correct as a matter of principle. All things considered, I think it may confidently be said that the FCA’s statement in [97] of Ciba v SNF, turned on the particular facts of the case, and the holding in Zero Spill remains the law.

Monday, December 18, 2017

What is the Jurisdiction of the Federal Court under s 20(2) of the Federal Courts Act?

Alpha Marathon Technologies Inc v Dual Spiral Systems Inc 2017 FC 1119 Kane J

In Alpha Marathon the plaintiff claimed to be the co-inventor of an invention patented by the defendant in the US [4]. The plaintiff sought, in substance, a declaration that it was the entitled to the US patent rights: [4], [20]. Kane J granted the defendant’s motion to strike the statement of claim on the basis that the Federal Court lacks jurisdiction over the dispute [108]. In so doing, Kane J provided an extensive and helpful review of the law related to the jurisdiction of the Federal Court under s 20(2) of the Federal Courts Act. I agree with Kane J's conclusion that the FC lacks jurisdiction in this case, but I must admit that I remain puzzled as to the exact limits of the Court’s jurisdiction in such matters.

As Kane J noted [37], [52], the basic test for the jurisdiction of the Federal Court is set out in ITO-Int'l Terminal Operators v. Miida Electronics [1986] 1 SCR 752, 766:

1. There must be a statutory grant of jurisdiction by the federal Parliament.

2. There must be an existing body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of jurisdiction.

3. The law on which the case is based must be "a law of Canada" as the phrase is used in s. 101 of the Constitution Act, 1867 .

This has been re-affirmed in Windsor (City) v Canadian Transit Co, 2016 SCC 54, which, at [25ff], emphasized the importance of determining the “essential nature” of the claim.

The main question in Alpha Marathon turned on the first branch of the test. The plaintiff relied entirely on s 20(2) of the Federal Courts Act, as interpreted in Kellogg Company v Kellogg, [1941] SCR 242, as providing the necessary statutory grant of jurisdiction [46], [60].

Subsection s 20(2) gives the FC concurrent jurisdiction in all cases “in which a remedy is sought under the authority of an Act of Parliament or at law or in equity respecting any patent of invention.” The defendants argued that s 20(2) is not applicable “because the words ‘any patent of invention’ in that section mean a patent of invention obtained in Canada, not simply an invention or a patent of invention obtained in another country” [38, my emphasis]. This seems right to me. As a matter of statutory interpretation, it would appear that “patent of invention” in s 20(2) means the same thing as “letters patent for an invention” under the Patent Act, s 2, and the Patent Act clearly refers to Canadian patents. This is not express, but clear nonetheless from eg s 4(2) which provides that “The Commissioner shall . . . do all acts and things requisite for the granting and issuing of patents of invention.” That provision is evidently not empowering the Commissioner to grant US patents.

Kane J accepted this point:

[59] In order to fall within subsection 20(2), the Plaintiff must be seeking a remedy that arises from “federal law”. With respect to patents, the only relevant “federal law” is the Patent Act, which does not create remedies respecting the ownership of unpatented inventions or foreign patents.

See also [67], emphasizing the need for a Canadian patent.

The defendant argued that s 20(2) was satisfied because the dispute related to “an invention made in Canada and by Canadians.” But s 20(2) does not require merely that the invention is somehow Canadian; it requires that the remedy sought is in respect of a Canadian patent. In this case no remedy was sought relating to any Canadian patent, nor even to a potential Canadian patent application. I should note that the Plaintiff did not actually seek a declaration as to the ownership of the US patent, but rather a declaration that it was the owner of the invention claimed in the corresponding US patent application; an injunction requiring the defendants to convey their interest in the US patent application to the plaintiffs; and injunction prohibiting the defendants from infringing the US patent application [20]. The reference in the pleadings was to the US application, notwithstanding that the US patent had actually been granted: US Patent No. 6,902,385 [18]. Presumably this was because a request for a declaration as to ownership as to the US patent would be self-evidently absurd; but dressing it up as a request for relief related to the US application does not change the substance.

While that point was enough to dispose of the issue, Kane J undertook a more general review of s 20(2), with the key cases being Kellogg, Radio Corporation of America v Philco Corporation (Delaware), [1966] SCR 296, and Cellcor Corp v Canada v Kotacka [1977] 1 FC 227, 27 CPR(2d) 68 (FCA).

I discussed Kellogg in my post on SALT Canada Inc v Baker 2016 FC 830, in which Boswell J refused to make a declaration as to ownership of a granted patent pursuant to s 52 of the Patent Act, on the view that the FC lacks jurisdiction when the essential issue is the ownership based on the interpretation and application of contract law principles. My post suggested that the parties had overlooked Kellogg , which might be read as holding that the statutory grant could be found in s 22(c) of the Exchequer Court Act, which is substantively the same as the current s 20(2) of the Federal Courts Act.

Kane J held that the jurisprudence subsequent to Kellogg reflects a more constrained approach to the interpretation of the Federal Courts Act [69]. Her conclusion is perhaps best summarized by
Tremblay-Lamer J in Peak Innovations, 2009 FC 661, [9], quoted with approval at [77]:

Section 20(2) of the Federal Courts Act only establishes jurisdiction for remedies where jurisdiction for the underlying cause of action is established elsewhere in a statute.

And see [78] reiterating the point. As I understand it, the point is that s 20(2) is effectively solely to enable the Federal Court to grant the appropriate remedy, after substantive jurisdiction has been established under some other provision.

I’m not sure I’m entirely persuaded that is the correct interpretation of s 20(2). The text of s 20(2) states that “The Federal Court has concurrent jurisdiction in all cases. . . in which a remedy is sought. . . respecting any patent of invention .” It does not say, “The Federal Court has concurrent jurisdiction in all cases . . . to grant a remedy . . . respecting any patent of invention.” I would say that on its face s 20(2) gives jurisdiction to the Federal Court (subject to the other branches of the ITO test). That is the reasoning on which the SCC in Kellogg based its interpretation of the provision.

The primary authorities for a more restrictive interpretation of this proposition were Radio Corp and Cellcor. I acknowledge that in writing my post on SALT Canada v Baker 2016 FC 830 I had overlooked both of those cases. And it is also true, as pointed out by Kane J [73], that in Cellcor at [11] the FCA perceived a possible conflict between Radio Corp and Kellogg, and chose to follow Radio Corp. But I’m not convinced there really is a conflict between Radio Corp and Kellogg.

Kellogg was a conflict proceeding in which the main question was which of the parties, Kellogg Co or Kellogg, was the true inventor. The Commissioner had made a decision in favour of Kellogg, pursuant to the procedure set out in then s 44, and that decision had been duly appealed by Kellogg Co to the Exchequer Court pursuant to s 44(8) of the Patent Act. It was undisputed that the Exchequer Court had jurisdiction in that respect. Kellogg Co had also pleaded in the alternative that even if Kellogg were the true inventor, Kellogg was an employee of Kellogg Co. In that case, the remedy sought was that Kellogg Co should be adjudged to be “the owner of the invention made by [Kellogg], and that the respondent should be directed to execute an assignment to the appellant of the entire right, title and interest in and to the invention and the application relating to it” (246). The Exchequer Court had ordered the alternative pleading struck on the basis of lack of jurisdiction, and the SCC reversed, in part because s 20(2) (then s 22(c)) gave jurisdiction because “the remedy sought by the appellant. . . is evidently a remedy in Equity respecting a patent of invention” (250).

Radio Corp also involved a conflict proceeding, and one of the parties, dissatisfied with the Commissioner’s decision, had appealed pursuant to the same provision (by then 45(8)). But in addition to attacking the Commissioner’s decision on the claims which had been found to be in conflict, the appellant had also attacked a variety of other claims in relation to which no conflict had been found (301). The SCC reviewed the history of the relevant provisions, pointing out that under the Act of 1906, conflict proceedings were to be decided by a board of arbitration, while in Hutchins Car Roofing Co ( 1916), 16 Ex CR 391, Cassells J had held that what is now s 20(2) gave the Exchequer Court concurrent jurisdiction with that board (303). The result was that there were two distinct procedures for dealing with conflicting applications. This led to the enactment of the s 44(8) (originally 22(7)), providing for an appeal procedure from a decision of the Commissioner, and, by implication, depriving the Exchequer Court of original jurisdiction in such matters. As the SCC stated (my emphasis):

This subsection [44(8)] recognized the jurisdiction of the Exchequer Court with respect to conflicting applications for patents, but limited the period during which it might be exercised.

The important point is, however, that, since 1923, Parliament has made it clear in the provisions of the various Patent Acts that, notwithstanding the jurisdiction conferred by the Exchequer Court Act upon the Exchequer Court to deal with conflicting patent applications, the right to seek redress in that Court by an applicant is governed and limited by the provisions of the Patent Act respecting conflicting applications. The conclusion which I draw from the legislative history of the provisions of the Patent Act respecting conflicting applications is that, although jurisdiction is conferred upon the Exchequer Court by s. 21 [now 20(2)] of the Exchequer Court Act in cases of conflicting applications for a patent, the right of a party involved in such a conflict to attack the patent application of another party is governed by s. 45 and such party is restricted to such rights as are conferred by that section. As previously stated, it is the opinion of this Court that proceedings under subs. (8) of that section are limited to the subject matter of the claims found to be in conflict by the Commissioner.

I read this as saying that Cassells J’s interpretation of s 20(2) was not wrong, and indeed was confirmed by s 44(8), which did not grant the Exchequer Court jurisdiction respecting conflicts, but rather limited the jurisdiction that was already conferred by s 20(2). That is, if the Act did not provide any other method for resolving a conflict, the Federal Court would have jurisdiction under s 20(2), but given that an alternative procedure had been established, s 20(2) could not be used to circumvent that alternative procedure.

A purposive analysis arguably also provides some support for a broad reading of s 20(2). It rounds out the statutory scheme in the same way that s 7(b) of the Trade-marks Act rounds out that Act. S 7(b) allows a trade-mark owner to bring an action in Federal Court based on a registered mark, and plead 7(b) in the alternative, rather than being forced to resort to a new proceeding in provincial superior court if its registration should be held invalid. Similarly, as in Kellogg, s 20(2) allows a plaintiff to raise ownership as an alternative to its claim to inventorship, when the factual issues are closely enmeshed, rather than having to resort to a new proceeding in a different court.

It may also be possible to reconcile Cellcor with Kellogg, but not so readily. In Cellcor the plaintiff sought a declaration that it was the party entitled to apply for a Canadian patent on the basis that it was the inventor of the specified invention, which had been stolen by the defendant, who intended to file an application in Canada. However, it appears that the plaintiff had not actually applied for a Canadian patent. Counsel for the defendant did argue that “the Court cannot exercise its jurisdiction under section 20 unless a right to relief exists by virtue of some other statutory provision,” but it is not clear to me that the Court accepted this proposition. The Court held (my emphasis):

Under the Patent Act, the official who must first decide whether a patent may issue to an applicant is the Commissioner. The Act does not empower the Courts to give him directions on the decision he should reach; it is only if he is alleged to have made a wrong decision that, under the statute, the Courts may be seized of the matter. In my view, it would be contrary to the scheme of the Patent Act for the Courts to assume the power, in a case like the present one, to make the declaration sought.

This could be read as saying that the Act provided for a process by which a party may apply for a patent, and to decide who is entitled to the grant of a patent in the case of a dispute, and that specific procedure displaces any general jurisdiction granted by s 20(2). This suggests a distinction between Kellogg and Cellcor on the basis that there is a specific procedure for determining a conflict between inventors, but there is no specific procedure for determining ownership, for example as between an employer and employee. So, in Comstock Canada v Electec Ltd., (1991) 38 CPR(3d) 29, 49-50 (FCTD), the Federal Court held it had jurisdiction under s 20(2) to consider a dispute as to inventorship in respect of a granted patent. Section 52, which allows the FC to order an entry in the patent records to be varied, was invoked purely as remedial authority. (Though note that Muldoon J in Comstock relied on McCracken v Watson, [1932] Ex CR 83, 88, which actually adopts a restrictive view of s 20(2)). In any event, if Comstock was rightly decided, it seems to me that on the same basis, s 20(2) gives concurrent jurisdiction to the FC to determine who, as between the employer and employer is entitled to apply for the Canadian patent, subject to the requirement under the second branch of the ITO test that the question of inventorship is essential to the disposition of the issues.

But these distinctions may be too fine. In Kellogg the underlying issue was the employer / employee relationship, while in Cellcor it was misappropriation of confidential information, both leading to dispute over ownership of a potential Canadian patent application. It strikes me that there is a real distinction between disputed inventorship and ownership, because “inventor” is a concept found in the Patent Act, and inventorship must therefore be defined under that Act, whereas ownership disputes based on contracts, confidential information, or the employer / employee relationship, turn on the proper law related to the dispute. But by the same token, I don’t see any principled distinction between a dispute based on confidential information and one turning on the employer / employee relationship,. If the Federal Court has jurisdiction in the one type of case, I would think it should also have it in the other type, and vice versa.

If Kellogg and Cellcor cannot be reconciled, perhaps it was Cellcor which was wrongly decided. On the other hand, rather than straining to reconcile Kellogg with subsequent cases, maybe it is better to acknowledge, with Kane J [69], that the law has moved on. While Kellogg is SCC authority, it is long in the tooth. Old authority is not necessarily bad authority; indeed, the authority of a case may grow with time, as it is regularly cited. But that is not the case here; while Kellogg itself is regularly cited, as Kane J noted [61], it is cited for the proposition that the Federal Court may resolve “incidental” contractual issues, and not for its holding on s 20(2). Moreover, the holding on s 20(2) was in the alternative, though perhaps not strictly obiter.

In any event, regardless of the theoretically correct interpretation of s 20(2), Kane J’s review of the case law indicates that the Federal Court has generally been reluctant to accept concurrent jurisdiction. It not clear to me why this should be. No doubt there are some cases in which the Federal Court would have concurrent jurisdiction under the Kellogg reading of s 20(2), yet where another court would be more suitable, but in such cases the Federal Court could decline to exercise its jurisdiction on the basis of forum non conveniens.