Bill C-86 and the Use of Prosecution History in Claim Construction

Bill C-86 has introduced several proposed amendments to the Patent Act. The most problematic, in my view, is the proposed s 53.1 (introduced by s 191 of the Bill), which makes prosecution history relevant in claim construction. More specifically, the proposed s 53.1 provides a statutory definition of communications constituting the prosecution history, and provides that such communications “may be admitted into evidence to rebut any representation made by the patentee in the action . . . as to the construction of a claim in the patent.” (Section 187 of the Bill has an apparently related amendment to s 10(1) which would make the file history available to the public when the patent is laid open; and s 197 of the Bill introduces a new s 123.1 which provides that the same principle applies in respect of a certificate of supplementary protection.)

The proposed s 53.1 raises two questions: What is the intended effect? Is the change desirable? One might have thought that whether the effect of an amendment would be clear, and the difficult question is whether it is sounds as a matter of policy. But s 53.1 is not entirely transparent, in part because “representation” is neither a term of art, nor even a commonly used term, in patent law. In Canadian law, at least at present, claim construction is an inquiry as to how a person of ordinary skill in the relevant art (the POSITA) would understand the claim, in light of the relevant context. The relevant context includes things such as the common general knowledge of a person skilled in the art, but not, under current law, the prosecution history. The relevant context is established on the basis of evidence, such as expert witnesses or textbooks. With the context established, the parties make submissions to the court (aka arguments) based on this evidence, as to how the POSITA would understand the claim. Does “any representation” in the proposed amendment refer to the evidence, or the arguments? And what would it mean to “rebut” a representation? Consider the parallel with the question of using legislative history in statutory interpretation – a patent is deemed to be a regulation by s 2(1) of the Interpretation Act, claim construction is like interpreting the statute (Whirlpool 2000 SCC 67 [49(e)]), and the prosecution history corresponds to the legislative history. Suppose that legislative history could not be used in statutory interpretation, and an amendment were made to the Interpretation Act saying that legislative history may be admitted into evidence to “rebut representations” made by a plaintiff in litigation as to the interpretation of the statute. What effect would that have?

Rather than trying to further parse the proposed s 53.1 directly, I will consider the various ways in which prosecution history is used in other legal systems which permit its use; whether s 53.1 might be understood as amending Canadian law analogously; and whether such a change would be desirable. (To emphasize the main points, I am overstating the distinction between these various approaches, which may run together at the margins.)

Lump Sum Costs and Experts Who Do Not Testify

Apotex Inc v. Shire LLC 2018 FC 1106 Fothergill J
            2,527,646 / lisdexamfetamine [LDX] / VYVANSE

This costs decision is consequent on 2018 FC 637 (see here), in which Fothergill J held Shire’s 646 patent to be valid and infringed. Forthergill J’s decision is interesting on two points: the award of lump sum costs, and recovery of fees for experts who provide litigation assistance without appearing as a witness.

Costs
Fothergill J awarded lump sum costs in favour of Shire, reinforcing the apparent trend to lump sum costs in complex patent cases.

While Shire requested 50% of actual fees plus all reasonable disbursements, Fothergill J remarked that this request “is a departure from the usual partial indemnity rate of one-third,” citing Philip Morris Products SA v Marlboro Canada Limited, 2015 FCA 9 [6]. This contrasts with the 50% awarded by Phelan J in Hospira v Kennedy Trust 2018 FC 1067 (discussed here). In Philip Morris, the FCA notes as follows (my emphasis):

[6] The appellants also argue that if a departure from Tariff B was appropriate, the lump sum awarded was excessive in view of prior jurisprudence of this Court on lump sum costs in intellectual property disputes. The cited case law does not set boundaries that limit the costs award the judge was entitled to make under the circumstances of this case. In fact, the judge's award is consistent with the percentage of actual costs requested by the appellants when they made representations in respect of the amount of costs that they should be awarded back in 2011. At that time, presumably, the appellants had examined the case law and were satisfied that they could request about one third of their actual cost. The judge was prepared to grant that percentage (paragraph 39 of the 2011 costs decision). The only reason he reduced it slightly was that appellants failed to explain why their legal fees were so much higher than their opponents'. As the saying goes: what is sauce for the goose is sauce for the gander.

I don’t read that as a statement that there is a usual partial indemnity rate of one-third. This decision of FCA was a review of the costs award of the trial judge. A trial judge has broad discretion regarding costs, as Forthergill J noted at [18], and the FCA in Philip Morris noted that “[t]he cited case law does not set boundaries that limit the costs award the judge was entitled to make.” The reference to an award of one-third was not based on the FCA’s own assessment of what the case law said, but only on an inference as to what the appellants might have concluded from the case law; it was really only meant to buttress the conclusion that the award of one-third was within the discretion of the judge.

Of course, that is not to say that Forthergill J was wrong to exercise his discretion to limit the award to one-third (in fact 29%, in the end), or even there isn’t a general practice of awarding a lump sum of one-third of actual costs, but only that Philip Morris itself is not strong authority for the view that a one-third being the usual rate for a lump sum.

Experts providing litigation assistance
Fothergill J also considered issues related to recovery of expenses for experts. In particular, Apotex relied on the decision of Hughes J in Janssen-Ortho 2006 FC 1333 [25], for the proposition that the expenses of an expert who did not appear as a witness but assisted in other capacities should be borne by the client [19]. Notwithstanding the view of Hughes J, after reviewing other relevant case-law, Fothergill J was generally not persuaded by this point [20]-[25]. Fothergill J noted that “Fees for scientific experts who assist counsel in reviewing and understanding other experts’ reports, preparing for cross-examination of opposing experts and, where applicable, assisting in preparation for discoveries, may be recoverable on an assessment of costs” [22], and his decision suggests that such expenses should normally be recoverable unless “clearly superfluous” [25].

Indemnity Principle for Costs Approved and Applied

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2018 FC 1067 Phelan J
            2,261,630 / infliximab / INFLECTRA

This is the costs decision arising from the declaratory judgment action in 2018 FC 259, in which Phelan J held Kennedy’s 630 patent to be valid and infringed: see here and here. Dissatisfaction with the outdated scale of costs set out in the Tariff had resulted in something of a trend towards awarding costs which go above the Tariff, either in the form of enhanced costs where appropriate, or a lump sum award. This decision reinforces that trend, both in the lump sum award of 50% of fees plus actual disbursements, and in Phelan J’s general comments regarding costs in complex litigation. There are two broad take-away messages. First, awarding costs on the Tariff scale of costs would have been unfair in this case, and by extension, will likely often be unfair in the context of complex litigation. Second, disruptive and unnecessary litigation tactics will have costs consequences, even if enhanced costs are not awarded on a line-by-line basis or on the motions themselves.

Phelan J began by noting that “Rule 400(1) gives the Court full discretionary power over the amount and allocation of costs” [5], and then continued:

[7] With respect to the approach to costs in complex litigation involving sophisticated large corporations, I concur with Justice Hughes in his cost decision in Air Canada v Toronto Port Authority, 2010 FC 1335, 196 ACWS (3d) 640, to favour the indemnity (whole or partial) principle and his reasoning in paragraphs 14 and 15.

Here are Justice Hughes’ remarks:

[14] Traditionally, the Federal Court of Canada has been laggard in comparison with other Canadian superior courts, such as Ontario, in escalating an appropriate scale of costs. Many cases in the Federal Court involve persons of limited means who engage the federal government in litigation of one kind or another. The scale of costs is usually modest in such circumstances or usually non-existent in cases such as immigration. Complex commercial cases are frequently those involving intellectual property such as patent infringement actions or applications made pursuant to Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 as amended. Still costs in such matters are assessed largely with reference to the Tariff on one of the higher levels such as Column IV or V.

[15] Other jurisdictions, such as Ontario, have moved away from a tariff toward concepts of full indemnity or partial indemnity based upon the actual costs and disbursements incurred in the proceeding. The theory is that a successful party should not be penalized just because they become engaged in, or had to resort to, litigation. In so doing however, a Court has to be mindful that a party, while successful, may not have been entirely successful or, that the matter was a close call, or that it was one in which the assistance of a Court in its resolution was essential. Therefore an unsuccessful party should not be unduly punished by having to bear not only its own expenses but a large proportion of those of the other parties as well.

Phelan J continued:

[8] There is a public interest served by lump sum awards based on the indemnity principle, particularly in cases like these. Such awards show the real cost of initiating litigation – which Hospira/Celltrion did. Such awards also show the consequences of bringing multiple proceedings, failing to behave reasonably and efficiently in the conduct of the litigation – that there are real consequences to the various steps available in the litigation process.

[9] I intend to follow the indemnity principle, the issue remains as to what level of indemnity – 50% as proposed, 30% as a proposed alternative or some other percentage.

On the facts, Phelan J noted that Kennedy/Janssen had won on every major point [11], and had conducted the trial “with efficiency and effectiveness” [12]. 

Phelan J also noted that application of the Tariff, even the high end of Column V, would result in "an unfair discount" of less than 10% of reasonable fees. Consequently:

[13] While costs seldom are awarded on a full indemnity basis, it would be unsatisfactory to deprive Kennedy/Janssen’s clients of the fruits of their victory by a paltry cost award and would be a windfall of cost savings for the losing side. The disincentive to a losing party pursuing an unsustainable case would be eliminated where the cost award is so far removed from the reality of actual costs.

Regarding disbursements, Phelan J said there was nothing unreasonable or excessive about the disbursements, and he noted that “It is not for the losing party to tell the winning party how they could have succeeded by doing or spending less” [24].

In the result he granted Kennedy / Janssen’s motion for costs at 50% of fees plus actual disbursements [26]. In part this was due to the complexity of the litigation, but Hospira/Celltrion’s generally unreasonable conduct of the litigation was also a significant factor [20]-[22]. Phelan J warned that costs consequences should be taken into account “in terms of both the strategic and tactical decisions the clients and counsel must make and the potential consequences of their choices” [25].

Did Ciba Change the Windsurfing / Pozzoli Test?

Frac Shack Inc v AFD Petroleum Ltd 2018 FC 1047 Manson J on remand from 2018 FCA 140 Gleason JA: Webb, Laskin JJA

At trial in Frac Shack v AFD 2017 FC 104 (here) Manson J held several claims of Frac Shack's 567 patent to be valid and infringed. On appeal, the FCA reversed in part, holding that Manson J made a palpable and overriding error in his definition of the POSITA [FCA 41] (see here), and conseqeuntly returned the matter for redetermination of a number of issues related to claim construction and obviousness. Mason J was evidently somewhat miffed: he reminded us all that “an Appeal Court must read all relevant portions of the Trial Court’s reasons holistically and with an open mind” [12], and he might be taken to have suggested that the FCA itself conflated the question of who the POSITA is and what that notional person would know [13]. In the end, he clarified his initial decision by making explicit what he considered had already been implicit [24]. Unsurprisingly, then, none of his conclusions changed.

Of more general interest, Manson J dismissed arguments by the defendant that the decisions in Ciba 2017 FCA 225 (see here) and AstraZeneca 2017 SCC 36 (here), had changed the Windsurfing/Pozzoli test for obviousness.

In particular, in Ciba [77], in the course of discussing the second step of the Windsurfing/Pozzoli test for obviousness which was adopted in Sanofi 2008 SCC 61, [67], the FCA said:

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

Manson J remarked that “the FCA’s comments are recognition of the difficulties that a court may face when attempting to identify the inventive concept of a claim. They do not suggest that the proper approach is to bypass this analysis as a matter of course and proceed directly to construing the claim” [52]. I don’t disagree with this statement, and I entirely agree with how Manson J applied it in Frac Shack itself, but I might elaborate slightly. Step 2 as set out in Sanofi is as follows:

(2) Identify the inventive concept of the claim in question or if that cannot readily be done, construe it;

There is a lot of latitude as to what “readily” means. How much effort should the court and the parties devote to identifying the inventive concept before turning to claim construction? The trend in a number of FC cases prior to Ciba had gone quite far to one extreme. The debate over the inventive concept could get very involved, to the point that the outcome of the obviousness analysis would turn on a dispute as to the “correct” inventive concept; it was almost as if step (2) had said nothing but “Identify the inventive concept.” As I see it, the FCA was strongly disapproving of this trend. The question then is how far to the other way we should go. As I read it, in Ciba the FCA was indeed suggesting that the proper approach is quite far towards the other end, on the view that the notion of the “inventive concept” is so poorly defined that it may be useful only in cases in which it can be “grasped without difficulty.” So, I agree with Manson J that Ciba did not say that identification of the inventive concept should be bypassed as “a matter of course,” but on the other hand, it did warn against devoting any substantial effort to the problem. 

It is perhaps worth repeating the key passage from Pozzoli [2007] EWCA Civ 588 [19]-[20] itself:

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

In other cases, however, one need not get into finer points of construction – even without them the concept is fairly apparent – in Windsurfing, for instance, it was the “free sail” concept. In yet other cases it is not even practical to try to identify a concept – a chemical class claim would often be a good example of this.

On the one hand, we may look to the inventive concept if it is “fairly apparent,” but should avoid it if the task becomes “too involved.”

Both Pozzoli and Sanofi describe step (2) in terms which leave broad latitude as to how much effort is too much when trying to identify the inventive concept. I see the FCA in Ciba indicating that the lower end of that broad range is appropriate. This is not inconsistent with anything in Pozzoli and Sanofi, but neither is it merely restating exactly same test; it is a refinement of step (2) in light of experience. That is how the common law is supposed to work. And it is also a suggestion to the SCC that step (2) of the Windsurfing / Pozzoli test may need even more fundamental revision.

Security for Costs Against Foreign Patent Assertion Entity

Safe Gaming System Inc v Atlantic Lottery Corp 2018 FCA 180 Woods JA
             2,331,238

Patent assertion entities, often pejoratively referred as patent trolls, are prominent in the US patent litigation landscape, but they have been less prominent in Canada and Europe, at least in terms of cases litigated to judgment. It is often suggested that one reason for this difference is that in the US each party normally bears its own costs, while we follow the English rule for costs. This motion for costs on appeal touches on some of these issues.

Safe Gaming System Inc is “a Wyoming corporation that does not carry on any business and appears not to have assets of material value” [11]. It is therefore a non-practicing entity (NPE), and given that it appears not to have substantial assets, it would appear to be a patent assertion entity (PAE). (NPEs also include entities such as universities, which develop new technology with the intent of licensing it to another for commercialization, but such research organizations typically have substantial assets.) Safe Gaming System brought an action against the Atlantic Lottery Corporation and others alleging infringement of the 238 patent in respect of Nova Scotia's Responsible Gaming technology known as "My-Play”: 2018 FC 542 (blogged here). Safe Gaming System lost, and lump sum costs of $1,175,000 were awarded to the defendants, “payable forthwith”: 2018 FC 871.

Safe Gaming System has now appealed, and Atlantic Lottery Corporation brought this motion seeking security for costs for the trial judgment, plus security for costs on appeal, both to be provided by payment into court, with the appeal to be stayed until such security is provided [5]. The FCA granted the motion [13].

Woods JA held that payment for security for costs at trial is not premature because it has been over a month since the Federal Court fixed costs payable forthwith [9]. Nor was it premature on the basis that Safe Gaming System has appealed the costs award [10].

Safe Gaming System also argued that “the respondents are inappropriately using section 416 of the Rules as an alternative to enforcement under Part 12 of the Rules” [11]. This is the only point where Woods JA referred to Safe Gaming System’s status as an apparent PAE: “it is appropriate to use section 416 in these particular circumstances. The appellant is a Wyoming corporation that does not carry on any business and appears not to have assets of material value” [11].

Finally, Safe Gaming System suggested that it did not have the resources to pay security in the near term. Woods JA dismissed this argument: "I would comment that the appellant had the resources to prosecute lengthy and complex litigation and the Federal Court ordered that the costs be paid forthwith. In these circumstances, greater evidence is needed to demonstrate of lack of resources” [12].

Actavis Extended Protection Applied by EWCA

Icescape Ltd v Ice-World International BV & Ors [2018] EWCA Civ 2219 var’g [2017] EWHC 42 (Pat) Baldwin QC

EP (UK) 1,462,755 / “Cooling member for a mobile ice rink"

In Icescape, the EWCA applied the Actavis approach to infringement for the first time, holding that the defendant's product did not infringe as a matter of "normal" construction, but that it did infringe as a matter of extended protection. The main take-away is that it appears that the Actavis approach is here to stay: the EWCA applied it easily and without qualification. 

In Actavis [2017] UKSC 48 Lord Neuberger, writing for a unanimous UKSC, held that infringement should be approached by addressing two issues: (i) first, whether the defendant’s product falls within the scope of the claims as a matter of “normal” interpretation — that is, the words of the claim, purposively construed; and (ii) if the product nonetheless infringes as a matter of protection which extends beyond that meaning [54], [56]. This effectively reversed Kirin-Amgen [2004] UKHL 46, in which Lord Hoffmann had held that the law “shuts the door on any doctrine which extends protection outside the claims” [44], with Lord Neuberger remarking that Lord Hoffmann had “effectively conflated the two issues” [55]. Lord Neuberger held that extended protection would be limited to immaterial variations [54], and he set out a three-part test for determining when the variant should be considered immaterial [59]-[66].

In many cases, the two-stage approach will not make any difference: if the defendant’s product infringes as a matter of normal interpretation, there is no need to consider extended protection; and if it does not infringe as a matter of normal interpretation, it will often not infringe as a matter of extended protection either. But the two-stage Actavis approach has had an impact in Icescape, the first case in which the EWCA has applied the Actavis approach [91]. The EWCA held that Ice-World’s product did not infringe on normal interpretation, but that it did infringe as a matter of extended protection. (Though in the end, the infringement point was moot, as the patent was invalid as it was not entitled to priority, which was acknowledged to be crucial [3], [44].)

Ice-World’s 755 patent relates to a mobile system for cooling ice rinks, and in particular the system of pipes for delivering and recovering coolant. A typical prior art system comprised a feed manifold and a discharge manifold running parallel to one another, with a series of orthogonal cooling pipes running the length of the field [6], substantially as shown in Fig 8 (with one exception). The problem with the prior art is that the cooling pipes had to be assembled and disassembled on site, which was time-consuming, both because of assembly time and because of the need to check for leaks. The solution provided by the invention was to use flexible joint members (element 70 in Fig 8) to construct the cooling pipes, so that the pipes could be folded for transportation. This reduced assembly and disassembly time, and allowed leak-checking to be done prior to transport. Thus, the “inventive core” of the patent was the use of a flexible joint member, which allowed the system to be folded [72].

The defendant Icescape’s system was substantially the same as that described in the patent, including the flexible joint members, with one difference which was at the heart of the case on infringement. Icescape’s system used three cooling elements connected in parallel, as shown below [49], in contrast with the series connection shown in the patent specification and illustrated in Fig 8 [49]. Icescape’s system is therefore a variant of the system described in the patent, in that it uses a parallel rather than series connection. Icescape accepted that its system incorporated all of the other features of the claim [45], and the question was therefore whether infringement was avoided by the fact that the elements in its system were connected in parallel rather than in series.

Claim 1, the only claim at issue, claimed a system of course comprising a flexible joint member (integer C), to capture the inventive core of the invention [27]. The other elements of Claim 1 were common general knowledge, including integers D and E, which on a “normal” interpretation of Claim 1 specified a series connection [70]. (Note that 1 Kitchin expressly equated “normal” interpretation with “purposive” interpretation [70].) Because Icescape’s system used a parallel connection, it therefore did not infringe on a normal or purposive interpretation of the language of claim. This is a classic scenario, reminiscent of McPhar Engineering v Sharpe Instruments [1956-60] Ex CR 467, 35 CPR 105 (Ex Ct). In addition to the novel integer, the patentee also had to include other ancillary integers, which were part of the common general knowledge, in order to claim an operative system. The defendant had taken the novel integer, but implemented a variant of the conventional integers, so as to avoid coming within the language of the claims [72].

After concluding that Icescape’s system did not infringe as a matter of normal interpretation, Lord Kitchin then went on to apply the three part test set out in Actavis. The first Actavis question asks whether the variant “achieves substantially the same result in substantially the same way as the invention,” or more briefly, whether the variant takes the “inventive core” of the invention [72]. The answer was clear: “I do not think there can be any doubt about the answer to this question,” as the “inventive core of the patent” is the flexible member (70), which was taken by Icescape [72].

The second Actavis question asks not just whether the variant took the inventive core, but further whether it would be obvious to a skilled person that the variant took to the inventive core. Again, Lord Kitchin had no hesitation answering this question in the affirmative: “it would be entirely obvious to the skilled person that, so far as the inventive core of the patent is concerned, the Icescape system achieves substantially the same result. . . in precisely the same way” [73].

The third Actavis question is whether strict compliance with the language of the claims is nonetheless required. Lord Kitchin noted that “the fact that the language of the claim does not cover the variant is certainly not enough to justify holding that Icescape does not satisfy this question” [74]. Lord Kitchin concluded that the answer to this question is “plainly ‘no’,” essentially because it was obvious that the inventive core had nothing to do with integers D and E.

Icescape is important as being the first application by the EWCA of the extended form of protection set out Actavis; and it is all the more important because the application of the test was so routine. The EWCA applied Actavis without difficulty and without hesitation. There was no attempt to find a loophole, perhaps through the third Actavis question, the precise ambit of which remains unclear. It is significant that Lord Kitchin, an experienced and eminent patent law judge, wrote the main decision. Moreover, Floyd LJ, the other experienced patent law judge on the panel, wrote a brief concurring opinion devoted largely to explaining how the Actavis approach is consistent with Art 69(1) of the EPC and the Protocol on its interpretation. The Protocol seeks a middle ground between two extremes. Floyd LJ explained that purposive construction of the language of the claims “now represents the minimum protection afforded by the patent” [96], but the Actavis approach still avoids the other extreme, where the claims are a mere guideline:

[97] It should not be thought, however, that the claims do not continue to have an important function. It is variants from the claim which have to achieve substantially the same effect in substantially same way as the invention. The claims remain the starting point for the subsequent analysis of variants. Although we may have edged closer to it, the new approach does not transgress the second of the outlawed approaches in the Protocol, which treats the claim merely as a somewhat vague guideline.

While it would be wrong to extrapolate with too much confidence from a single decision, the early signs are that the Actavis approach will be accepted and indeed embraced, by the EWCA, and, with Lord Kitchen’s appointment to the UKSC, at that level as well.

Icescape also illustrates that extended protection under Actavis does not necessarily lead to uncertainty. On the facts of this case, as Floyd LJ pointed out, the application of these new principles does not create any difficulty” [98]. Indeed, in this case the normal interpretation was “not...an easy question to answer” [70], while the analysis of extended protection under Actavis was straightforward.

Another significant point concerns the use of prosecution history. In addition to setting out a new approach to claim construction, Lord Neuberger in Actavis held that the prosecution history might be used, albeit in limited circumstances [87], though on the facts he concluded that the prosecution history did not justify departing from his initial conclusion based on the patent itself [89]. In Icescape Lord Kitchin accepted that Ice-World should be permitted to rely on the prosecution history [76], but, like Lord Neuberger in Actavis, he concluded that the prosecution history did not change his initial conclusion, as the contents of the file “do not unambiguously resolve the point with which we have to deal as to the scope of protection conferred by claim 1" [79]. He concluded that “this is a very good illustration of why it is generally so unprofitable to explore the prosecution history” [79]. In Canada, of course, prosecution history may not be used (Free World [66]), but I have written some posts suggesting that it may be time to revisit that rule: see here and generally here. I have to say that I am beginning to reconsider that position. The argument in favour of using prosecution history is that it is unfair to allow a patentee to explicitly give up subject-matter during prosecution, and then reclaim it during litigation. I remain sympathetic to the argument. However, there is also a fairness consideration on the other side, as the use of prosecution history can put the patentee between a rock and hard place, when, as happened in Actavis, the examiner is probably wrong on the merits, but the patentee needs to get its patent granted in order to effectively protect its product. And aside from fairness arguments, there is the point made by the SCC in Free World [66], and illustrated by Icescape, that use of prosecution history estoppel will often be a Pandora’s box, which adds complexity and uncertainty without improving the result. Since writing my earlier posts on prosecution history, I have read more about the mess that is the US doctrine of prosecution history estoppel, and I have come to have greater appreciation for the force of that argument.

Kellogg Co v Kellogg and Jurisdiction of the Federal Court to Interpret Contracts Related to Patent Ownership

Farmobile, LLC v Farmers Edge Inc 2018 FC 915 Ring J
            2,888,742 / Farming data collection

Farmobile brought an action against Farmers Edge for infringement of the 742 patent. Farmers Edge wants to defend on the basis that it is the rightful owner of the 742 patent. On this motion to strike, Ring J has held that the Federal Court lacks jurisdiction, because determination of ownership is essentially a matter of interpretation of the contracts of assignment. This means that in order to effectively defend against this action brought against it, Farmers Edge will have to bring a separate action in a different forum seeking a declaration that it is the true owner [55].

The jurisdiction of the Federal Courts in such matters is governed by s 52 of the Act, which (in combination with s 20) gives the Court jurisdiction “to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.” Ring J stated that “It is well-established that this Court lacks jurisdiction to entertain a claim under section 52 of the Patent Act where the issue to be decided is the proper owner of a particular patent, and the determination of ownership depends on the interpretation of various contract documents between the parties and the application and interpretation of contract law principles” [27].

There is indeed a well-established line of authority in the Federal Court to that effect. In my post on SALT Canada Inc v Baker 2016 FC 830, I suggested that this line of authority had overlooked the SCC decision in Kellogg Co v Kellogg, [1941] SCR 242, or interpreted it too narrowly. Kellogg also involved a motion to strike, where the underlying action was a conflict between pending applications. It is worth setting out the pleading (246) which was allowed to stand by the Supreme Court:

8. In the event that the Court should find as a fact that the said John L. Kellogg, Jr., was the first inventor of the subject-matter of the said application serial No. 450,047, then the plaintiff alleges

(a) That the late John L. Kellogg, Jr., was employed in the Experimental Department of the Kellogg Company from October 15, 1936, until December 19, 1936;

(b) If any invention was made by the said John L. Kellogg, Jr., which is not admitted but denied, it was made during and in the course of his employment by the plaintiff and when he was carrying out work which he was instructed to do on the plaintiff's behalf. By virtue of the contract of employment and the circumstances under which the invention was made the said John L. Kellogg, Jr., became and was a trustee of the invention for the company which was and is entitled to the benefit of it.

(c) The said John L. Kellogg, Jr., was by reason of his being such a trustee unable to transfer any right, title or interest in the invention to any other party and the plaintiff is now the owner of any invention covered by the application serial No. 450,047.

Compare this with the allegations which were stuck in Farmobile (reformatted for clarity)

[4] In support of its assertion that all rights to the invention claimed in the ‘742 Patent were ultimately assigned to it, Farmers Edge pleads that

(a) the three individuals who incorporated Farmobile, Heath Gerlock, Randall Nuss, and Jason Tatge, had previously been employed by Crop Ventures Inc., the corporate predecessor of Farmers Edge;

(b) Ron Osborne, who was the CEO of Crop Ventures, and Gerlock and Nuss jointly conceived and developed the invention claimed in the ‘742 Patent while they worked for Crop Ventures;

(c) Gerlock and Nuss each signed confidentiality and non-competition agreements whereby they assigned all rights and interests in the intellectual property to the inventions claimed in the ‘742 Patent to Crop Ventures; and

(d) Tatge signed an employment terms letter agreement whereby he agreed to sign Crop Venture’s standard Proprietary Information and Inventions Agreement [collectively the “Agreements”].

The allegations are substantively virtually the same: they are both to the effect that the invention was made during the course of employment and therefore belong to the employer.

Ring J distinguished Kellogg as follows (original emphasis):

[33] Further, I am of the view that the Supreme Court’s decision in Kellogg Co v Kellogg, [1941] SCR 242, is distinguishable and does not assist Farmers Edge in responding to Farmobile’s motion to strike. In Kellogg, the moving party sought an order striking out a claim, pled in the alternative, that the plaintiff was entitled to the benefit of an invention by virtue of an employment contract. In the present case, the essence of the Amended Counterclaim, namely the claim of ownership to the subject matter of the ‘742 Patent based on a series of Agreements, is sought to be struck out.

The distinction being drawn by Ring J is evidently that in Kellogg the disputed pleading was in the alternative, whereas in Farmobile it was by way of counterclaim. While that is true, I do not see it as a satisfactory distinction, for two reasons.

First, in the preceding section of her decision, Ring J had made the point that jurisdiction over the counterclaim has to be assessed separately from jurisdiction over the main action, relying on Innotech (1997) 74 CPR (3d) 275 (FCA) rev’g 72 CPR (3d) 522 (FC). In Innotech, the FCA held that “The counterclaim, when viewed by itself, would stand alone as an action for breach of contract and as such is not within the jurisdiction of this Court.” The same principle would appear to apply to the alternative claim in Kellogg, as the issue raised in the disputed pleading would have been capable of standing alone as a separate action. That is, if the pleading in Kellogg had been struck, and the plaintiff had subsequently lost and the patent issued to the defendant, nothing would have prevented the plaintiff from bringing an action to establish its ownership of the patent based on the facts alleged in the pleading at issue.

Secondly, and more importantly, there is not the least hint in Kellogg itself that the fact that the pleading was in the alternative is at all relevant; it was mentioned in the description of the facts, but never even adverted to in the Court’s reasoning.

Ring J then stated:

[34] Kellogg stands for the proposition that the Federal Court may resolve incidental contractual issues where the overall claim is, in “pith and substance”, within the Court’s jurisdiction. However, this Court has no jurisdiction to adjudicate a claim (or in this case, a counterclaim), where the claim is “purely and simply” a contractual dispute (Kellogg), or where an issue over which the Court may have jurisdiction is “secondary to and dependent upon” the resolution of a contractual issue (Salt).

[35] Since the relief sought by Farmers Edge in its Amended Counterclaim is dependent on a prior determination of the rights conferred by the Agreements described in the Amended Counterclaim, and the interpretation of these Agreements is clearly a matter of contract, rather than patent law, it is plain and obvious that the Court lacks jurisdiction to adjudicate the impugned portions of the Amended Counterclaim, and those pleadings must be struck out.

Ring J’s point is that the interpretation of the agreements is “purely and simply” a contractual dispute. One could certainly say that the dispute is over the interpretation of a contract, which just happens to involve ownership of a patent; but one could also say that the dispute is over the ownership of a patent, which just happens to turn on contractual interpretation. In my view, the SCC decision in Kellogg makes it quite clear that the second way of looking at the matter is correct. 

Here is the crux of the SCC’s reasoning in Kellogg (249-50):

It is undoubtedly true, as stated by the learned President, that the Exchequer Court has no jurisdiction to determine an issue purely and simply concerning a contract between subject and subject (His Majesty the King and Hume and Consolidated Distilleries Limited and Consolidated Exporters Corporation Limited); but here the subject-matter of the appellant's allegation only incidentally refers to the contract of employment between John L. Kellogg, Jr., and the appellant. The allegation primarily concerns the invention alleged to have been made by him and of which the appellant claims to be the owner as a result of the contract and of the other facts set forth; in the allegation. The contract and the claims based thereon are advanced for the purpose of establishing that the appellant is entitled both to the rights deriving from the invention and to the issue of a patent in its own name. That is precisely the remedy which the Exchequer Court of Canada has the power to grant under paragraph (iv) of subs. 8 of sec. 44 of the Patent Act

That is, in Kellogg the claim was allowed to stand because it was primarily about who owned the patent – even though the answer to that question turned entirely on the contract of employment. On its face, Kellogg says that a contractual dispute over ownership of an invention is primarily a dispute about the invention, not primarily about the contract. This holding was not obiter: the result in Kellogg itself is that Court had jurisdiction over a contractual dispute concerning the ownership of a patent, because of the subject matter of the dispute, ownership of the patent, meant it was more than “purely and simply” a contract between a subject and subject. An example of a dispute which is purely and simply between subject and subject is Consolidated Distilleries, in which the SCC held that the Exchequer Court did not have jurisdiction to hear a claim for indemnity for loss suffered by reason of certain bond agreements; it was a contractual dispute about a underlying issue which was itself unrelated to any head of federal power.

While I don’t find Ring J’s attempt to distinguish Kellogg to be at all persuasive, I again acknowledge that she was right to say that her decision is consistent with a well-established line of Federal Court authority. In my view, Farmobile illustrates the inconsistency between Kellogg and that line of cases. At the very least, there is a real tension. We should keep in mind that this was a motion to strike. It may be plain and obvious that the Court lacks jurisdiction based on the recent line of Federal Court cases; but the real question is whether it is plain and obvious that those cases are consistent with with Kellogg. Even if my interpretation of Kellogg is wrong, I would like to think that it is not “plain and obvious” that I am wrong. Ring J’s attempt to distinguish Kellogg implies that if the facts were such that the claim at issue in Farmobile had been pleaded in the alternative, it would have been allowed to stand. Is it plain and obvious that there is a crucial principled distinction between a counterclaim and a claim in the alternative?

Ring J, and the Court of Appeal, have said that the fact that the parties whose claim is struck will have to bring its action in a different forum is an “inconvenience,” but “such inconvenience ‘is not, of itself, a basis for this Court assuming jurisdiction.” [39], [55]. No doubt it is true that the Court cannot assume jurisdiction simply because it would make good practical sense for it to do so, but the problem should not be dismissed as a mere inconvenience. It is a defect in our patent system — indeed, a scandal worthy of Dickens — that a party seeking to defend a patent action should have to bring a separate action based on overlapping facts in a different court. If the law requires such a scandalous result, so be it, but I remain unconvinced.

"Whack the Zombies Dead Once and for All"

Apotex Inc v Abbott Laboratories, Ltd 2018 ONSC 5199 Quigley J

The now defunct rule that a patent would be invalid for lack of utility under s 2 of the Act if the invention failed to meet the promise of the patent is known as the Promise Doctrine. The Promise Doctrine was abolished by the SCC in AstraZeneca 2017 SCC 36 (see here). In a series of cases, defendants have sought to resurrect it in another guise, with almost uniform lack of success. In this decision, another attempt to revive the promise doctrine was rejected by Quigley J in the strongest possible terms.

The decision concerned a motion by Apotex to amend its pleadings in litigation in which Apotex has been seeking damages under s 8 of the NOC Regulations against Abbott and Takeda in the Ontario courts, in respect of lansoprazole [1]. (Some of the history of this very complex litigation is provided here.) Abbott and Takeda have counterclaimed against Apotex for patent infringement, and hence a central issue is the validity of Abbott and Takeda’s patents relating to lansoprazole; if the patents are valid, then damages on the counterclaim will substantially reduce or even entirely negate Apotex’s s 8 damages [4].

Apotex had defended against the counterclaim by alleging the patents were invalid for failure to meet the promise of the patent. Apotex has conceded that as a result of AstraZeneca, these allegations are not longer capable of supporting an argument for invalidity [19]. In this motion, Apotex therefore sought to amend its pleadings to allege invalidity for insufficiency, overbreadth, and material misrepresentation under s 27(3) and s 53 [23], without any changes to the underlying factual allegations [18]. Consequently:

[22] The question on this motion is clear: While abolishing the “Promise Doctrine”, did the Supreme Court nevertheless intend that promise based claims of patent invalidity could now be brought under ss. 27 and 53 of the Act? Apotex says yes. Abbott and Takeda say no.

It is, I think, uncontroversial that prior to AstraZeneca, the Promise Doctrine was not legally coextensive with insufficiency and material misrepresentation. That is, facts which would support an allegation of invalidity for failure to meet the promise of the patent would not necessarily support an allegation of insufficiency or material misrepresentation. For example, in the Olanzapine litigation an attack based on s 53(1) was rejected 2009 FC 1018, [150-53], even though the patent was ultimately held invalid, by the same judge, for failure to satisfy the promise of the patent: 2011 FC 1288, [209]-[210] aff’d 2012 FCA 232. Of course, in some cases the same facts might support multiple grounds for invalidity, just as a single piece of prior art might render a patent invalid for both anticipation and obviousness. 

Apotex therefore argued that AstraZeneca substantively changed the law of insufficiency and material misrepresentation [6]. The argument was effectively that the substance of the Promise Doctrine is still good law, and the only change wrought by AstraZeneca is that it must be pleaded as a matter of s 27(3) or s 53, rather than as a matter of s 2, which is what Apotex's proposed amendments sought to do. In contrast, Abbott and Takeda argued that “AstraZeneca had no effect on the law as it relates to any other ground of invalidity (including insufficiency, overbreadth, or fraud on the Commissioner of Patents)” [17, original emphasis]. 

In support of its position, Apotex relied on the following passage from AstraZeneca (my emphasis):

[45] Supporters of the doctrine assert that the consequences of the Promise Doctrine play a key role in ensuring patentees do not “overpromise” in their patent applications. That is, a patentee will be dissuaded from stating the invention can be used for things that are not sufficiently established at the time of filing if doing so would risk invalidating the entire patent. The utility requirement should not be interpreted, however, as the Federal Courts have done, to address such concerns. Nonetheless, overpromising is a mischief.

[46] The scheme of the Act treats the mischief of overpromising in multiple ways. There are consequences for failing to properly disclose an invention by claiming, for instance, that you have invented more than you have. A disclosure which is not correct and full, or states an unsubstantiated use or operation of the invention, may be found to fail to fulfill the requirements of s. 27(3). An overly broad claim may be declared invalid; however, under the operation of s. 58 of the Patent Act, remaining valid claims can be given effect. As well, this mischief may result in a patent being void under s. 53 of the Act, where overpromising in a specification amounts to an omission or addition that is “wilfully made for the purpose of misleading”.

The question is whether this passage was intended to change the law of sufficiency, overbreadth and material misrepresentation, as Apotex argued, so that they would now reflect the promise doctrine; or merely to acknowledge that some forms of overpromising had always been addressed by those doctrines, as Abbott and Takeda argued. My view is that the latter interpretation is correct. For example, s 53 has an intent requirement of wilful misleading that was never part of the promise doctrine. Wilfully overpromising for the purpose of misleading is undoubtedly a “mischief.” Prior to AstraZeneca it might have engaged both s 53 and the Promise Doctrine; after AstraZeneca it will still engage s 53. But that does not mean that overpromising that was neither willful nor for the purpose of misleading will now engage s 53, even though it might have engaged the defunct Promise Doctrine.

Quigely J held unequivocally in favour of Abbott and Takeda on this issue.

[27] Having specifically overruled the Promise Doctrine as bad law, it is not evident and indeed is counterintuitive that the Supreme Court intended that promise based arguments would simply be imported into claims of overbreadth or misrepresentation under those sections.

Quigley J found support in this conclusion in the consistent holdings to the same effect in the Federal Court [28] (and see here, discussing these holdings). He also cited my blog posts for the position that “we should ‘whack the zombies dead once and for all’” [28]. While I don’t believe I ever said exactly those words, I wish I had, and the statement certainly captures the gist of my comments.

Quigley J then went on to consider whether the factual allegations made by Apotex would nonetheless support an allegation of invalidity under s 53, notwithstanding that it had not initially been pleaded as such [31]-[32]. He concluded that they did not [33], [39].

Further, he awarded costs on the motion on a substantial indemnity basis [48]:

[47] “the caselaw is plain that any party against whom such unfounded and deficient s. 53 fraud allegations are made, in this case Takeda, will be severely prejudiced if they are permitted to be advanced. . . . The allegation alone may severely damage Takeda’s reputation, as well as the reputation of its inventors. The mere publication of fraud allegations causes reputational harm. As such, I agree that the making of the allegation without foundation must entitle Takeda to heightened costs on this motion.

Preferred Embodiments do not Limit the Claims

Bombardier Recreational Products Inc v Arctic Cat, Inc 2018 FCA 172 Gauthier JA: Pelletier, de Montigny JJA var’g 2017 FC 207 Roy J
            2,293,106 / 2,485,813 / 2,411,964 / 2,350,264

As noted in my post on Roy J’s trial decision, in the late 1990s, Bombardier Recreational Products (BRP) made a “significant breakthrough” in snowmobile design [FC 415]. Its so-called radical evolution vehicle (REV), introduced in 2002, moved the rider weight forward, so that instead of sitting back as if on a couch, the rider is balanced forward, as if riding a dirt bike [FC 414]. BRP obtained four patents related to its new design. The three Rider Position Patents (106, 813 and 964), claimed a snowmobile with a rider forward position; the 264 patent, aka the Frame Construction Patent, claimed a new frame design with enhanced rigidity [FC 100]. At trial, Roy J held the 264 patent was not infringed. The FCA has now reversed on this point, and returned the matter to Roy J for determination of the outstanding issues relating to the 264 patent, namely validity and remedies [57]. The FCA affirmed Roy J’s holding that the Rider Position Patents were invalid for insufficiency.

Frame Construction Patent / 264 patent
The 264 patent claimed a pyramidal frame assembly with “a frame including a tunnel and an engine cradle forward of the tunnel” [19]. The key question was the meaning of the term “engine cradle”. Roy J held that this meant a cradle with walls, which plays a role in enhancing the rigidity of the vehicle [FC 348, 350, 372, 377, 380, 382] [50], and so excluded the defendant’s snowmobiles, in which the engine cradle was not walled [FC 378-79]. The FCA reversed on this point, essentially on the ground that Roy J had wrongly used the description of the preferred embodiment to limit the claims: the FCA noted that the Roy J’s comments “appear to ignore the basic principle that the description of the preferred embodiments is not meant to include all the possible embodiments of the invention claimed”: [54], and see generally [40]-[55]. This holding did not involve new law. As the FCA noted, it is well-established that the description of the preferred embodiments does not exhaust the invention claimed: [41] (quoting Whirlpool 2000 SCC 67 [54]), [47]. It is possible to have a definition in the disclosure which would limit the ordinary meaning of a term of art, but that was not the case here [43].

On a preliminary point, the FCA also emphasized that claim construction, including purposive construction, is objective:

[23] although purposive interpretation can be viewed as an attempt to determine the intention of the inventor, one does not seek to establish the subjective intention of the inventor. Rather, one must seek to determine the objective intention as it was expressed in the patent itself, and as would be understood by the person to whom it is addressed.

(See to the same effect, Kirin-Amgen [2004] UKHL 46, [32], noting “[t]here is no window into the mind of the patentee,” and "[c]onstruction is objective in the sense that it is concerned with what a reasonable person to whom the utterance was addressed would have understood the author to be using the words to mean.") Thus, evidence of the inventor’s subjective intent, such as whether inventor considered a particular claim element to be important, is irrelevant [22].

Further, reference to other extrinsic evidence, such as other patents or patent applications, is also “inappropriate and cannot inform the construction of the claims” [51]:

[24] Thus, apart from the specification itself, the only evidence that should be considered to inform a court’s analysis of a claim is proper evidence as to how the POSITA would understand it in light of his or her relevant common general knowledge in the context of the specification as a whole.

Rider Position Patents
As noted, at trial Roy J had held the disclosure of how to make the invention in the Rider Position Patents (which shared the same description), to be insufficient. I had interpreted Roy J’s decision as turning on the view, based on Teva v Pfizer [Viagra] 2012 SCC 60, that the specification would be insufficient if even a “minor research project” were required to put the invention into practice. I noted that this view was an error of law, albeit understandable in light of Viagra.

On appeal, the FCA reiterated that the SCC decision in Teva v Pfizer [Viagra] 2012 SCC 60, did not change the law of enablement (as opposed to disclosure of the invention) [78], a point the Court had originally made in Teva v Leo Pharma 2017 FCA 50 [58]. The Court at [78] emphasized that “Enablement (how to practice the invention) is a concept completely distinct from the disclosure of the invention itself, the latter of which was at issue in Pfizer.” The Court noted that Leo Pharma had been released only after Roy J’s decision [78].

Nonetheless, the FCA affirmed Roy J’s holding on this point, on the view that he had also applied the correct standard [79]. The Court noted that “[t]he extent of the effort required in any given case is a pure question of fact,” and despite Roy J’s error in interpreting Viagra, the FCA cannot substitute its own assessment of the evidence. After reviewing the evidence, the Court held that it was open to Roy J to conclude that a major research project would have been required to work the invention [95].

Two points mentioned by the FCA in arriving at this conclusion are worth noting.

First, the patent did not contain even a single clear example of the full configuration. While an example does not serve to limit the claims, it may nonetheless be important to proper disclosure [85]. Moreover, there was “no evidence that anyone was ever able to make a configuration of the invention on the sole basis of the information contained in the disclosures without the pyramidal frame assembly claimed in the 264 Patent” [86]. This suggests that a pyramidal frame assembly, which was not disclosed in the Rider Position Patents, might have been necessary to solving the problems associated with the new rider position.

Second, in my post on this aspect of Roy J’s decision, I had noted that Roy J seemed to suggest that the specification should have explained how the new invention was different from the prior art, even though that is not required as a matter of law. The FCA reaffirmed that “an inventor does not have to describe the differences between an embodiment of the invention and those of the prior art” [84].

Sierra Club Test Governs Protective Orders

Seedlings Life Science Ventures LLC v Pfizer Canada Inc 2018 FC 956 Ahmed J rev’g 2018 FC 443 Tabib J

In the decision under appeal, Tabib J refused to issue a protective order, essentially on the basis that the implied undertaking rule, supplemented by a private agreement between the parties, would provide adequate protection: see here. In so holding, Tabib J held that the test set out in Sierra Club of Canada v Canada (Minister of Finance), 2002 SCC 41 was not applicable. In her view [15], Sierra Club was applicable only to confidentiality orders, which allow parties to file confidential information under seal with the Registry, and not to protective orders, which govern the way parties may designate as confidential, and must thereafter treat, information that they will exchange between themselves in the pre-trial phase of an action. On appeal, Ahmed J held that Tabib J erred in distinguishing Sierra Club, and that the test set out in Sierra Club is applicable to both confidentiality orders and protective orders [26]. He noted that nothing in the text of Sierra Club itself supports the distinction [26]. Further, since the rationale for a protective order, a confidentiality order, or a hybrid order, is the same — namely “the protection of sensitive information – whether from the general public or other business adversaries – from abuse or use in activities collateral to the litigation” — there was no basis for applying different tests to the different types of orders [26].

Aside from the issue of the binding nature of Sierra Club, Ahmed J noted that Tabib J had been motivated by “a desire to respond to a problem in contemporary patent litigation. In her view, routine motions for protective orders do not add substantial protection above and beyond what is already available under the implied undertaking rule or achievable through private agreements, and the judicial processing of these orders constitutes a substantial burden to the Court” [30]. Ahmed J was sympathetic to this concern: “Surely those observations are not without merit and it may well be the time for change” [30]. But in his view, it is not appropriate to implement “a fundamental shift in longstanding practice” through the jurisprudence of “this Court”: “That is the role of the legislature, or perhaps the courts above” [30]. I’m not sure I agree with that observation. The law must evolve to meet changed circumstances, and some of that evolution must come at the hands of the courts, as the legislature simply does not have the capacity to address every desirable change, no matter how minor. The same is true of the Supreme Court. Moreover, even if the Supreme Court could deal with every issue, it is arguably preferable to have some changes initiated by a lower level of court, which may, as in this case, have more practical expertise on the issue. Ahmed J stated that “in my view, it would be unjust to the litigants in the case at bar to have the so-called ‘rules of the game’ changed partway through these proceedings” [30]. That is an important point, but it is not determinative. It is the nature of the common law that the law evolves in light of decisions on the facts of particular cases, and the rules of the game are changed mid-course whenever an appeal to the SCC results in a change in the law. It is no more or less fair to have the rules changed simply because it is the SCC that changes them. To be sure, it is important to respect the settled expectations of the parties, and courts should therefore be more reluctant to change the law or practice, the more firmly it is established. But that is a matter of balancing the need for change against the importance of the settled expectations.

The test set out in Sierra Club [60] has two branches: 1) the information has been treated as confidential and that on a balance of probabilities its proprietary, commercial and scientific interests could reasonably be harmed by the disclosure of the information, and 2) it is of a confidential nature with a reasonable expectation that it be kept confidential [23]. [24]. Ahmed J held that in matter at hand, both criteria were met [28], and he therefore allowed the appeal and order the protective order be issued [29].

Patent Remedies and Complex Products: Toward a Global Consensus

For the past three (plus) years I have been involved in the International Patent Remedies for Complex Products (INPRECOMP) project, which brought together twenty patent scholars from around the world to address remedial issues related to patents for products containing multiple patented technologies, such as smartphones, robotics and the Internet of Things. The manuscript of our resulting volume, Patent Remedies and Complex Products: Toward a Global Consensus (Brad Biddle, Jorge L. Contreras, Brian J. Love & Norman V. Siebrasse eds.) is now in the hands of Cambridge University Press. It is being published under an open access model, and individual chapters are now available on SSRN (links below). As well as being an editor, I was a member of the steering committee, and I am also an author on all of the chapters except chapter 6.

The aim of the project was to arrive at a consensus and make recommendations regarding best practices, where that was possible, and to make recommendations for further research which might help resolve outstanding issues. Most of the individual chapters were written as multi-author collaborations to ensure a diversity of perspectives on the issues. The process of arriving at a final version of each chapter was challenging, thought-provoking, and sometimes contentious. I would like to thank all of the authors with whom I collaborated on the various chapters. I would also like to extend a special thank you to my co-editors, Brad Biddle, Jorge Contreras, and Brian J Love, who were always a pleasure to work with.

The INPRECOMP project was primarily funded by a gift from Intel Corporation to the Center for Law, Science and Innovation (CLSI) at Arizona State University's Sandra Day O'Connor College of Law. CLSI provided logistical and administrative support for the project.

Patent Remedies and Complex Products: Toward a Global Consensus

Ch 1 Reasonable Royalties

Ch 2 Lost Profits and Disgorgement

Ch 3 Enhanced Damages, Litigation Cost Recovery, and Interest

Ch 4 Injunctive Relief

Ch 5 The Effect of FRAND Commitments on Patent Remedies

Ch 6 The Effect of Competition Law on Patent Remedies

Ch 7 Holdup, Holdout and Royalty Stacking: A Review of the Literature

Functional Analysis in Claim Construction

Valeant Canada v Ranbaxy Pharmaceuticals Canada, 2018 FC 847 McVeigh J
            2,524,300 / bupropion XL / WELLBUTRIN XL

This decision raises an interesting point about “functional” claim construction. In this NOC proceeding Valeant sought an order of prohibition to prevent Ranbaxy from launching its generic version of extended release bupropion. The only issue was infringement [6]. The 300 patent claimed a modified-release tablet comprising (i) a core, (ii) a control-releasing coat, and (iii) an outer moisture barrier comprising an enteric polymer, a permeation enhancer and optionally a plasticizer, wherein the permeation enhancer is about 20% to about 40% of the dry weight [8]. The key element at issue was (iii). The preferred permeation enhancer disclosed was silicon dioxide. Ranbaxy’s formulation also used silicon dioxide as a permeation enhancer, but in less than the claimed range (which was ultimately construed as being 18%-44% [103]). Ranbaxy’s formulation also polyethylene glycol [PEG] and triethyl citrate [TEC], which Ranbaxy characterized as plasticizers. Valeant argued that PEG and TEC should also be considered to be permeation enhancers, in which case the Ranbaxy formulation would fall within the claimed range [10]. The key question, therefore, was whether PEG and TEC could be considered to be permeation enhancers as a matter of claim construction.

My understanding is that PEG and TEC are conventionally used as plasticizers, and Valeant did not dispute this, but Valeant argued that the “practical reality is that PEG and TEC are permeation enhancers” [50]. So, Valeant’s experts testified that PEG served as a permeation enhancer in Ranbaxy’s product and that the term “permeation enhancer” should be construed to include PEG [52]-[53], [62]. McVeigh J held that this constituted a “functional approach” to claim construction, rather than a “purposive construction,” and this functional approach was an error of law [51], [52], [56], [61], [68].

As I understand it, in McVeigh J’s view, a functional approach is one that looks to the function of the claim element in the context of the invention, while a purposive construction looks to the language of the claim and the specification: see [57], [61], [68]. That is, the proper question is not whether PEG in fact serves as a permeation enhancer, but whether the 300 patent itself says that PEG serves, or can serve, as a permeation enhancer.

In my view, McVeigh J’s apparent refusal to consider evidence of the functional characteristics of PEG and TEC, in favour of an exclusive focus on the specification, is not consistent with purposive construction. A functional analysis is part of purposive construction, not an alternative to it. In Catnic [1982] RPC 183 (HL), the question was whether “extending vertically” should be construed to encompass a support angled at 6-8°. In holding in the affirmative, Lord Diplock emphasized, at 242-43, that “From the point of view of function a reduction of this order in vertical support provided for the upper horizontal plate is negligible.” In a famous passage at 244, he said (my emphasis):

It may be that when used by a geometer addressing himself to fellow geometers, such expressions descriptive of relative position as "horizontal", "parallel", "vertical" and "vertically" are to be understood as words of precision only; but when used in a description of a manufactured product intended to perform the practical function of a weight-bearing box girder in supporting courses of brickwork over window and door spaces in buildings, it seems to me that the expression "extending vertically" as descriptive of the position of what in use will be the upright member of a trapezoid-shaped box girder, is perfectly capable of meaning positioned near enough to the exact geometrical vertical to enable it in actual use to perform satisfactorily all the functions that it could perform if it were precisely vertical...

Note that in Catnic this functional analysis actually trumped the language of the specification. The courts below had held that the phrase meant exactly vertical, not primarily because that was the literal meaning, but rather because the claim itself distinguished between a member that extended “vertically” and one which was “inclined” with the latter being described in the disclosure as being an angle of only 13° from exactly vertical: Catnic, at 212–13, 228–29. That is, a focus on the language of the specification alone led to the conclusion that the term “vertically” did not include the inclined support, and Lord Diplock came to the opposite conclusion on the basis of the functional role of the support member. Thus, it is perfectly clear from Catnic that the function must be considered in addition to the language of the specification.

To take a hypothetical loosely modeled on the present case, suppose the presence of the specified ratio of permeation enhancer was the central inventive concept enabling effective extended release. Suppose PEG was conventionally used as a plasticizer, and the specification therefore discussed it solely as being a plasticizer, in the context of the control-releasing coat. The generic discovers that PEG actually is also an acceptable permeation enhancer – perhaps not as good as silicon dioxide, which is why it is not used as such, but good enough to get the job done. The generic uses PEG in its formulation of the outer moisture-releasing cost, solely as a permeation enhancer, since a plasticizer is not necessary in the outer coating at all. In that case, I would suggested that reading “permeation enhancer” to exclude PEG would be to improperly import a limitation from the disclosure into the claims, enabling the generic to take the inventive concept.

The only authority cited by McVeigh J for rejecting functional considerations is the FCA decision in Eurocopter 2013 FCA 219, specifically [84], [96], cited by McVeigh J at [68]. Paragraph [84] simply endorses purposive construction, so the key discussion is at [96] (emphasis added, citations omitted):

Third issue: Did the Judge err by not considering the functional equivalency of the landing gear disclosed by the ‘787 Patent?

[95] However, Eurocopter’s submissions go far beyond the construction of the claims. It is also of the view that a party can be found to infringe a patent even though it omitted or changed an element that the patent itself identifies as essential. It submits that the invention should be considered and compared, for infringement purposes, from the perspective of its functional equivalence with other landing gears, such as Bell Helicopter’s Production landing gear: Eurocopter’s Memorandum at paras. 114 to 117, 123 and 129.

[96] This approach is clearly inconsistent with the teachings of Free World Trust since it fails to recognize the primacy of the language of the claims in determining the essential elements, which the Supreme Court has clearly indicated as the foundation of claims construction.

As the emphasized sentence makes clear, Eurocopter did not hold that functional characteristics are not to be considering in construing a claim, but rather than functional equivalence does not justify going beyond the claims.

While the details of Eurcopter’s submissions were not specified in the decision, they seem to have been quite extreme. The invention at issue in Eurocopter was “sleigh-type” landing gear, which the claims characterized as having an inclined transition zone “with double curvature.” The defendant Bell’s “Legacy” gear (ultimately held to infringe), did have this double curvature, but the “Production” gear (ultimately held not to infringe), did not. Eurocopter evidently wanted to argue that Bell’s Production gear should be held to infringe because it achieved the same functional landing characteristics, eg ground resonance, as Eurocopter’s patented gear. The FCA noted that

[97] As aptly noted by Binnie J. in Free World Trust at para. 32:

As stated, the ingenuity of the patent lies not in the identification of a desirable result but in teaching one particular means to achieve it. The claims cannot be stretched to allow the patentee to monopolize anything that achieves the desirable result. It is not legitimate, for example, to obtain a patent for a particular method to grow hair on bald men and thereafter claim that anything that grows hair on bald men infringes.

That is, Eurocopter had disclosed and claimed one way of achieving desirable landing characteristics. This did not justify it claiming a monopoly over a completely different way of achieving the same desirable landing characteristics.

No doubt in some cases there may be difficulties in deciding whether a functional analysis is being invoked to construe the claims, or go beyond them. But in most cases the distinction will be clear enough. Part of the problem is the level of generality at which “functionality” is defined. Eurocopter had been arguing for a functional analysis at a very high level of generality — did the Production gear perform the same function as the patented landing gear, such as effectively allowing a helicopter to land without excessive ground resonance? In Catnic, and in this case, the level of generality is much lower: is the support inclined at 6°functionally vertical within the context of the invention? Is the role of PEG in the moisture barrier functionally that of a pemeation enhancer? Ultimately, I would suggest that the correct level of generality turns on the nature of the inventive concept, and is related to the essentiality analysis, but that is more than I can discuss in this post.

This is not to say that the McVeigh J’s construction was wrong, as purposive construction also depends on the language of the claims and specification, not just on the function. Moreover, there is a separate factual issue as to whether PEG and TEC really do function as permeation enhancers [63]. My point is only that it is wrong to focus solely on the language of the specification, to the exclusion of functional considerations.

I should also say that my post on this aspect of the FCA Eurocopter decision largely missed the point being made by the FCA, particularly when the Court quoted Binnie J’s analogy to a patent for a particular method of growing hair on bald men. While I quibbled with this aspect of the FCA decision in that post, on re-reading it strikes me as straightforwardly correct.