Wednesday, February 10, 2016

Failure to Disclosure Status as Public Servant Not Material for Purposes of s 53

Brown v Canada 2016 FCA 37 Boivin JA: Webb, de Montigny JJA rev’g 2014 FC 831 Kane J

Mr Brown was a member of the Canadian Forces Supplementary Reserve when he filed his application for the 748 patent. The patent related to technology used for decontamination and containment of biological and chemical hazards, which has military applications [9]-[10]. After the firm started by Mr Brown failed to win a contract with Public Works to supply related technology, Mr Brown launched infringement proceedings against the Crown and the winning bidder. The Crown defended by bringing a motion for summary judgement on the basis that (a) Mr Brown was a “public servant” as defined by s 2 of the Public Servants Inventions Act, and as such he was required by s 4(1)(c) of that Act to disclose that he is a public servant in his patent application; and (b) Mr Brown’s failure to make such a disclosure was an untrue material allegation which invalidated the 748 patent pursuant to s 53 of the Patent Act. In the Federal Court, Kane J held that Mr Brown was a public servant, and that the failure to make that disclosure was an untrue material allegation, but whether it was wilfully made for the purpose of misleading was a matter for trial. On appeal, the FCA held that Mr Brown was indeed a public servant, but the failure to disclose was not material to the Patent Act.

On the first issue, the FCA held that “the purpose of the PSIA, all members of the Canadian Forces are ‘public servants’ whether they are in the Regular Force or the Reserve Force” [27]. While the English version of s 2 is somewhat ambiguous, saying that a public servant means an employee “and includes” a member of the Canadian Forces, the French version of s 2 is perfectly clear that public servant means an employee and a member of the Forces [25].

On the second issue, the FCA held that there was an “apparent conflict and lack of consistency” between the forms and regulations under the PSIA and the Patent Act, in that the former require disclosure of the public servant status and the latter do not. The FCA concluded that the Patent Act prevails and hence there was no requirement on the Patent Act for the applicant to disclose their status a public servant [45]. Moreover, even apart from this inconsistency, a reading of the two Acts together supports the conclude that Parliament did not intend that a patent could be void for a failure to disclose public servant status [46], as penalties for failure to make that disclosure are provided by s 11 of the PSIA [48]. This second point strikes me as entirely compelling. Indeed, the contrary conclusion would be perverse. The purpose of the PSIA is to vest in the Crown inventions that are made by public servants: s 3. If the position advanced by the Crown was correct, then any public servant inventor could unilaterally deprive the Crown of a valid patent to which the Crown was entitled by law, simply by failing to disclose their status as a public servant. Yes, the sanction of invalidity would provide an incentive to disclose, but not a very strong one, since the inventor would not be entitled to the invention either way: if the inventor didn’t disclose, the inventor would run the risk that the patent would be held invalid, and if the inventor did disclose, the inventor would run the risk that the patent would be vested in the Crown. And in any event, the sanction of invalidity puts the victim and the wrongdoer together in front of the firing squad. The offences of s 11 of the PSIA, which are target the public servant, are a far more sensible sanction. I can’t help but think that there was a failure of communication between the Crown’s litigation team and those responsible for longer term policy.

Friday, February 5, 2016

$2.9 Million Award Is 30% of Actual Legal Fees

Dow Chemical Co v NOVA Chemicals Corp 2016 FC 91 O'Keefe J here
            2,160,705 / film-grade polymers / ELITE SURPASS

I don’t normally blog on procedural issues, but I’ve made a partial exception for costs because of the interesting disparity between the Federal Court tariff and the actual costs of patent litigation. Awards for fees in the range of 10% of actual fees, which is not uncommon if the tariff is applied, are effectively a hybrid between the English rule (substantial costs in the cause) and the American rule (each party bears their own costs), which strikes me as the worst of both worlds: big enough to fight over (thus increasing costs), but not big enough to make any difference to litigation strategy. We have seen the courts gradually move from Column III of the tariff to Column IV or V in complex patent cases (see here for a review of the trends), but even that is often not enough to make a real difference: in this case fees assessed under Column V would amount to only 11% of actual legal fees. Even if “an award of costs represents a compromise between compensating a successful party and not unduly burdening an unsuccessful party” [10, quoting 2011 FC 1113 [11]], 11% is a distraction rather than a compromise.

O’Keefe J held that costs awarded pursuant to Column V of the tariff “would be totally inadequate as an amount of costs for the plaintiffs in this case. To only recoup 11% of your costs in such a complex case is not acceptable” [26]. Accordingly he exercised his discretion to depart from the tariff and award lump sum costs for legal fees in the amount of $2.9 million, which is
approximately 30% of the actual legal fees [29], for a total award, including disbursements, of $6.5 million [36].

It seems to me that this award of 30% of fees is entering the range where it is reasonable to view the award as actually being a compromise between the English and American rules. I don’t have an opinion as to whether such a compromise is better than the applying a pure version of either of the alternatives, but at least it is a substantive alternative, as opposed to the fee structure of the tariffs, which increasingly appears to reflect no principle other than historical accident. It will be very interesting to see what emerges from the discussion paper on costs that was issued by the Rules Committee.

Wednesday, February 3, 2016

Section 52 Allows Correction of Ownership

Gray Manufacturing Company, Inc. v. Canada (Attorney General) 2016 FC 55 Shore J
            2,406,340

This was an uncontested application under s 52 of the Act, which gives the Federal Court broad jurisdiction to vary or expunge Patent Office records related to the title to the patent, to correct the ownership of the patent. The inventor had intended to assign his rights in the invention to Gray Automotive Products Co., but the assignment document (which was attached to the patent application) inadvertently specified Gray Automotive Products, Inc., and the Patent Office consequently registered it against that name [4]. The mistake was unintentional, made in good faith, and, was made without any attempt to mislead or cause delay [10]. Shore J held that the broad jurisdiction conferred by s 52 includes the power to vary errors relating to the ownership of a patent [9] and he ordered the appropriate correction.

For a slightly more extended discussion of s 52, see here.

Update: Here is an interesting note by Ken Bousfield describing Gray Manufacturing as symptomatic of a secular shift in CIPO's attitude towards clerical errors.

Wednesday, January 27, 2016

Inequitable Conduct by Patentee: Defence v Reduction of Damages

Alcon Canada Inc v Actavis Pharma Co 2015 FC 1323 Locke J
            2,447,924 / olopatadine solution / PATADAY

As a partial defence to Alcon’s infringement action, Actavis alleged that Alcon engaged in inequitable conduct. This pleading has survived a motion to strike, and Locke J’s decision is interesting both on the substantive issue and for his thorough analysis of the case law relating to the standard of review of the Prothonotary’s decision.

The ‘924 patent covers a formulation of 0.2% olopatadine, as found in Alcon’s PATADAY. Actavis alleged that Alcon conspired, in breach of the Competition Act, to ensure that Actavis could not sell its non-infringing 0.1% olopatadine product, and this inequitable conduct by Alcon should partially offset any damages resulting from Actavis’s (alleged) infringement [5]. (The exact nature of the conduct was not specified – perhaps product hopping?) It was this pleading that was the subject of the motion to strike.

This is an intriguing argument, which I discuss in more detail below, but Locke J first had to deal with the almost equally complex question of the standard of review to be applied to the Prothonotary’s decision.

Under Aqua-Gem [1993] 2 FC 425 discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless [8]:

a. they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or

b. they raise questions vital to the final issue of the case.

If the prothonotary refuses to strike a pleading, can this ever be vital to the final issue? After all, if the pleading stands, the result of the motion will never be determinative of the outcome; but on the other hand, a motion on a central issue might reasonably be said to be “vital”. As Locke J put it, “If one focuses on what was sought in Alcon’s motion, it is final. However, if one focuses on the result of the motion, it is interlocutory” [12, original emphasis].

Locke J reviewed the case law on this issue, noting an apparent split within the Federal Court [18], and concluded that the proper question is whether what was sought was vital [19]. This means that even a refusal to strike might in principle be “vital” to a final issue.

What, then, is meant by “vital”? Again Locke J thoroughly reviewed the case law. He concluded that the question is whether “the paragraphs that Alcon seeks to have struck in the present case are more in the nature of ‘isolated allegations’ or rather ‘important or central allegations’” [24]. On the particular pleadings at issue, Locke J held that the paragraphs Alcon sought to have struck were isolated allegations not vital to the case [26]. Consequently, a deferential standard of review should be applied; the order of the prothonotary should not be disturbed unless it is “clearly wrong” [27].

Locke J then turned to the second branch of the conjunctive Aqua-Gem test: was the refusal to strike “clearly wrong”? On the substantive point, Alcon relied on Sanofi FCA 2008 FCA 175 [16], [18], where the FCA said that “a party claiming equitable relief will not be disentitled to that relief by virtue of inappropriate conduct on its part unless that conduct relates directly to the subject matter of that party's claim and the equitable relief sought,” and in a patent case this means that the alleged conduction must “cast a shadow” over the patent rights themselves, or the question of whether infringement occurred [29]. It was not disputed that the conduct alleged in this case did not do either of these things [30], and so Alcon argued that the pleading must be struck.

Locke J rejected this, saying that the Sanofi test was only applicable to equitable relief, and the allegations in this case concerned damages [32]. On its face, this makes sense. Equitable relief is discretionary, and inequitable conduct or “unclean hands” is one factor that a court may take into account in exercising its discretion. Damages are as of right, and without any discretion to be exercised, so unclean hands are not relevant. Ex turpi causa might still be relevant, as a rule of law, but the bar is probably substantially higher than unclean hands, at least according to the UKSC in Servier v Apotex [2014] UKSC 55, though see here suggesting that simple illegality is enough. Ex tupri causa was not raised in this case, as Actavis alleged only “inequitable conduct.”

But a holding based on the distinction between law and equity tends to seem formalistic, particularly when parallel doctrines such as unclean hands and ex turpi causa are available. Actavis clearly raised an allegation of contravention of the Competition Act, and it would be unsatisfactory if the whether pleading stood turned on whether it used the words “unclean hands” or “ex turpi causa.” Similarly, Locke J’s holding on this point implies that if Alcon had sought an accounting of profits, Actavis’ defence would have been struck. It is not evident why unclean hands should bar one monetary remedy but not another, and to say one remedy is legal while the other is equitable is a formalistic answer.

Locke J gave another reason for allowing the pleading to stand which I find more satisfactory. He noted that [37, my emphasis]:

Actavis has indicated that its allegations in issue are not intended to deny Alcon damages for infringement simply because Alcon engaged in the alleged inequitable conduct. Rather, Actavis’ allegations seek to reduce (or eliminate) those damages to reflect the effect of any improperly increased sales of Alcon’s patented product.

There is an important distinction between reducing damages and raising a complete defence. As the UKSC said in Servier, [13] “The doctrine [of ex turpi causa] necessarily operates harshly in some cases, for it is relevant only to bar claims which would otherwise have succeeded. For this reason it is in the nature of things bound to confer capricious benefits on defendants some of whom have little to be said for them in the way of merits, legal or otherwise.” Denying a claim entirely may be disproportionate to the wrong, unless the wrong is very serious, which is largely why the USKSC set a high bar for what constitutes “turpitude.” The same logic applies equally in the case of equitable remedies – in a way, even more so, since it is hardly equitable to deny a patentee’s claim entirely as a punishment for a relatively minor fault. That reasoning is consistent with the caselaw holding that inequitable conduct will only be allowed to stand as a defence if it casts a shadow on the title to the patent. That is a high bar, and it would be wrong to allow any recovery if the patentee would not have a patent at all but for its wrongful conduct.

But if the patentee has indeed committed some wrong that is related to its claim, neither is it appropriate to ignore that wrong entirely. The answer lies in the damages calculation. As I said in my post on Servier, “Instead of using the blunt hammer of ex turpi causa, the tension should be resolved with the finer sword of damages.”

In this case, Actavis’ argument can be cast in terms of “but for” causation. Actavis in effect alleged that Alcon had wrongly increased its sales of its PATADAY product at the expense of Actavis’ non-infringing product, and to the extent that Actavis’ infringing sales captured some part of the PATADAY sales that Alcon would not have obtained but for its wrongful conduct (because the sales would have been captured by Actavis’ non-infringing product), Alcon should not be able to recover damages in respect of those sales [6]. In constructing the “but for” world for the purpose of assessing damages caused by the infringement, the infringer is assumed to have acted properly, either by avoiding infringement or taking a licence. The question is whether, in constructing the but for world, we should also assume that the patentee acted properly, by not breaching the Competition Act, or avoiding whatever other wrong is alleged. When the wrong is independently actionable, as was the case in Servier (infringement in Canada, raised as defence to an undertaking in damages in respect of UK sales), or under s 45 of the Competition Act, as alleged in this case, there is a judicial economy argument for saying that all parties should be assumed to have acted properly, so as to avoid the need for a separate action. This is particularly so when the evidence relevant to the remedy in both cases is related. On the other hand, when the wrong is not independently actionable, as with the allegations in this case based on ss 75, 76 and 78 of the Competition Act, the question is more difficult, as taking into account the patentee’s wrong would effectively give the infringer a private remedy that it would not otherwise have had, but refusing to take it into account would allow the patentee to compound the harm done by its wrongful conduct.

This analysis is largely consistent with the prior cases. In Procter & Gamble (1990), 29 CPR(3d) 545 (FCA) the allegation was predatory pricing which harmed the defendant, and so might have been relevant to quantum of damages; but it was pleaded as a complete defence, and the pleading was struck. In Visx (1994), 58 CPR(3d) 51 (FCTD) the allegation was that the patentee had made unjustified allegations of infringement against third parties, so it would not even have been relevant to quantum, and it was pleaded as a complete defence. The pleading was struck. Volkswagen [2001] 3 FC 311 (FCA) is a bit different. It was a grey marketing case in which VW pursued the grey marketer for copyright infringement. The allegation was that VW’s actions in seeking to prevent grey marketing were a restraint of trade in breach of the Competition Act, and the pleading was allowed to stand as a complete defence. The FCA distinguished Visx and Procter & Gamble on the view that “it is at least arguable that in this case there is a sufficient relationship between the copyright and the unclean hands defence that the equitable remedy might not be granted.” In my view there is a more direct distinction. If the copyright owner’s rights are exhausted by the authorized foreign sale, which was the essence of the defendant’s pleading, then this would indeed serve as a complete defence, so there is nothing wrong with allowing it to stand as such.

Friday, January 22, 2016

Role of Product Monograph in Inducing Infringement

Bayer Inc. v. Pharmaceutical Partners of Canada Inc. / moxifloxacin (NOC) 2015 FC 797 Strickland J aff’d 2016 FCA 13 Stratas JA (sub nom Bayer Inc v Fresenius Kabi Canada Ltd) aff’g 2015 FC 388 Lafrenière J
            2,378,424 / moxifloxacin / AVELOX IV

In Wednesday’s post I noted that it was difficult to put FCA’s holding in this case in context, without the benefit of Strickland J’s FC decision. Today, the court has belatedly released Strickand J’s decision, which is indeed very helpful.

As outlined in my previous post, the ‘424 patent is a formulation patent claiming an aqueous formulation of moxifloxacin and from 0.4% to 0.9% (w/v) of sodium chloride [6]. The moxifloxacin for injection product for which PPC (since rebranded to Fresenius Kabi Canada) was seeking an NOC is capable of being used post-sale to make the formulation, though it can also be used for non-infringing uses. In the motion giving rise to this appeal, Lafrenière J struck the portions of Bayer’s application for an order of prohibition alleging infringement or inducing the infringement of the ‘424 patent. Only the inducement issue was appealed [4].

As discussed at length in my post on Lafrenière J’s decision, the law of inducement raises some very difficult issues in a case such as this one where the allegedly infringing product is capable of both infringing and non-infringing uses. On the one hand, the public should not be denied the benefit of competition for non-infringing uses, but on the other hand, the patentee should be able to effectively enforce its patent rights. Because of the first consideration, if a product is capable of substantial non-infringing use, the mere fact that it can also be put to an infringing use, or even that it will inevitably be put to an infringing use in some instances, is not sufficient to establish infringement. As the FCA explained in AB Hassle v Apotex / omeprazole, 2002 FCA 421:

[57] Thus Apotex cannot be prevented from obtaining a NOC solely on the basis that it will sell omeprazole. If it were otherwise, then serious policy issues would arise. If there was any likelihood that a patient would consume a generic product for a patented use, then the generic product would not be approved. This would prevent new uses from being approved for existing drugs because there is always the possibility that someone somewhere will use the drug for the prohibited, patented purpose. This would result in a real injustice: since a generic company cannot possibly control how everyone in the world uses its product, the prevention of the generic from marketing the product would further fortify and artificially extend the monopoly held by the patent holders. The patent holder would, therefore, effectively control not just the new uses for the old compound, but the compound itself, even though the compound itself is not protected by the patent in the first place. The patent holders, as a result, would obtain a benefit they were not meant to have. In the end, society would be deprived of the benefit of new methods of using existing pharmaceutical medicines at a lower cost.

For this reason, even though the generic’s sale of its product might inevitably result in direct infringement by another party, “something more” is required to establish that the generic has induced infringement [49]. Under the second branch of the test in Corlac v Weatherford 2011 FCA 228, [162], there must be some act by the accused inducer which can be said to be the cause the direct infringement. That act may consist of instructions accompanying the product which direct or instruct the purchaser to use the product in an infringing manner, as with the instruction manual included in the package of parts shipped to the purchaser in Windsurfing, which instructed the purchaser to do only one thing with the enclosed parts, namely to assemble them into an infringing windsurfer.

It is now well established in Canadian law that product instructions can constitute the necessary act of inducement, as in Windsurfing, where the sole and inevitable result of carrying out the enclosed instructions was to construct an infringing windsurfer. But in less extreme cases, where the product has substantial non-infringing uses and the directions are more equivocal, the question as to whether the instructions constitute inducement is fact specific.

In the pharmaceutical context, the product monograph corresponds to the product instructions more generally, and it may suffice to establish inducement: 2007 FCA 167, [11]. But whether a particular monograph does actually constitute inducement is a matter of fact, and there is no bright line rule. Even “subtle” references in a monograph may cumulatively establish inducement, as in Genpharm 2003 FC 1443 [155] aff'd 2004 FCA 413; and see also Abbott Laboratories 2006 FC 1411 aff’d 2007 FCA 251. But on the other hand “an inducement to infringe generally cannot be inferred from a mere reference to the new use in the product monograph, for example, in the course of explaining contraindications or drug interactions, or as part of a list of scientific references” Sanofi-Aventis v Novopharm 2007 FCA 167 [11] rev’g 2006 FC 1547; and see also Lundbeck v Ratiopharm 2009 FC 1102.

In this case, the key passage was one in which the product monograph described PPC’s moxifloxacin injection product as being “compatible” with six different intravenous solutions, one of which, sodium chloride, would have resulting in an infringing formulation:

Moxifloxacin injection is compatible with the following intravenous solutions at ratios from 1:10 to 10:1:

•→0.9% Sodium Chloride Injection, USP
•→IM Sodium Chloride Injection
•→5% Dextrose Injection, USP
•→Sterile Water for Injection, USP
•→10% Dextrose for Injection, USP
•→Lactated Ringer’s for Injection

Strickland J held that “the PPC Product Monograph does not direct nor does it instruct the co-administration of PPC-Moxifloxacin with 0.9% sodium chloride. It merely identifies that it is compatible with that solution” [61] (and see also [65]), and this therefore did not rise to inducement. Strickland J distinguished Genpharm and Abbott Laboratories on the facts.

While it is always difficult to compare different factual situations, in my view, Strickland J’s finding is consistent with the prior case law. The product monographs in Genpharm and Abbott Laboratories went further toward encouraging or instructing the infringing use, and the statement in this case was closer the passing references disparaged in statements in Sanofi-Aventis.

We now have a number of cases assessing inducement by statements in the product monograph, and it seems to me that on the whole the law is reasonably coherent and consistent, though fact-specific. Statements in a product monograph may suffice to establish inducement, but not any reference to an infringing use will suffice; the references in the product monograph must pass a threshold before they was be sufficient on their own to establish inducement. While there is no specific verbal formulation for that threshold, the cases strike me as being reasonably consistent in that statements that have been held to establish inducement have pointed more strongly to the infringing use that those where the inducement argument has failed.

On a final point, Strickland J made the following remarks almost in passing (my emphasis):

[65] Bayer has also submitted that PPC should have refrained from including 0.9% sodium chloride in the PPC Product Monograph. However, as seen from the above, Dr. Dresser’s Affidavit clearly states that the list of compatibilities with other drugs or solutions “is required to be set out in the Product Monograph” (Dresser Affidavit at para 12). Therefore, omitting this information was not an option open to PPC. Nor do I view the stating of this necessary information as encouraging or directing infringement.

If it is true that the impugned statement is required for marketing authorization, this strikes me as a very strong argument in favour of saying there is no inducement. The central problem of the law of inducement is to ensure that the public is not deprived of the product for the non-infringing uses. If the statement that is relied on as establishing inducement must be included for the product to be sold, then a finding of inducement would mean that the public would necessarily be deprived entirely of the non-infringing uses. In such a case, there is a strong argument that it is better to leave the patentee to its remedy in direct infringement, or to require it to establish inducement by other facts, such as direct marketing.

Wednesday, January 20, 2016

On the Facts, Product Monograph Does Not Induce Infringement

Bayer Inc v Fresenius Kabi Canada Ltd / moxifloxacin (NOC) 2016 FCA 13 Stratas JA, aff’g 2015 FC 797 Strickland J aff’g 2015 FC 388 Lafrenière J (here) (sub nom Bayer Inc v Pharmaceutical Partners of Canada Inc)
            2,378,424 / moxifloxacin / AVELOX

The ‘424 patent is a formulation patent claiming an aqueous formulation of moxifloxacin and from 0.4% to 0.9% (w/v) of sodium chloride. Fresenius Kabi’s moxifloxacin product is capable of being used post-sale to make the formulation, though it can also be used for non-infringing uses. In the motion giving rise to this appeal, Lafrenière J struck the portions of Bayer’s application for an order of prohibition alleging infringement or inducing the infringement of the ‘424 patent. Only the inducement issue was appealed. While Strickland J’s decision does not appear to be publicly available, we are told that “the Federal Court reached the same result as the Prothonotary for substantially the same reasons” [3]. As discussed at length in my post on Lafrenière J’s decision, the law of inducement raises some very difficult issues, particularly in a case such as this one, where the allegedly infringing product is capable of both infringing and non-infringing uses.

While the law on inducement is complex, those complexities are not necessarily raised on the facts of any particular case. In my post on Lafrenière J’s decision I pointed to the statement in the Product Monograph that “Moxifloxacin injection is compatible with the following intravenous solutions at ratios from 1:10 to 10:1: [including] 0.9% Sodium Chloride Injection, USP,” saying that “As I understand the facts, the first use would be infringing, though the following five would not.” But reading a decision is not the same thing as reading the full record, and in this case the FCA stated that the FC “found as a factual matter that the product monograph in question does not instruct or direct that Fresenius’ product is to be co-administered or co-administered with 0.9% sodium chloride (at paragraphs 59-61).” That being the case, the appeal was dismissed. This would seem to imply that a statement on a Product Monograph that a product can be used for an infringing purpose does not in itself constitute “instruction or direction” and therefore cannot constitute inducement. However, without Strickland J’s decision, it is difficult to put this holding in context.

Stratas JA also discussed the standard of review. He noted that on the authority of Housen 2002 SCC 33, the appropriate standard of review would be palpable and overriding error, but Federal Court precedent is that the standard of review is different in an appeal from a Rule 51 appeal; the FCA “may interfere with the Federal Court’s decision where the Federal Court had no grounds to interfere with the Prothonotary’s decision or, in the event such grounds existed, if the decision of the Federal Court was arrived at on a wrong basis or was plainly wrong” [6]. Stratas JA strongly suggested that the time has come to abandon this different standard of review and apply the Housen standard [7], but given that he had not received full argument on that issue, the lower standard would be applied, and in any event the standard of review made no difference in the result [8]. This is a clear invitation to argue that the Housen standard should apply in an appeal from a Rule 51 appeal.

UPDATE: Strickland J's FC decision has not been released: see here.

Wednesday, January 13, 2016

Siebrasse & Cotter on Judicial Determinations of FRAND Royalties

Tom Cotter and I have just posted on SSRN a draft of a paper titled Judicial Determinations of FRAND Royalties, which will be a chapter in the forthcoming Cambridge Handbook of Technical Standardization Law (Jorge L. Contreras ed., Cambridge University Press). Here is the abstract:

This chapter from the forthcoming Cambridge Handbook of Technical Standardization Law reviews the principles and methodologies courts have used for calculating royalties for the infringement of standard-essential patents (SEPs) that the owner is obligated to license on fair, reasonable and non-discriminatory (FRAND) terms. As we show, the decisions thus far -- including the U.S. decisions in Microsoft, Innovatio, Ericsson, and CSIRO, the Japanese Apple v. Samsung judgment, and Chinese Huawei v. InterDigital matter -- have tended to focus on a relatively small number of additional considerations beyond the generally applicable principles used for calculating reasonable royalties. Although reasonable minds may disagree with specific features of the relevant decisions, overall the courts (correctly, in our view) have emphasized that the owner of an SEP should receive a royalty that is proportionate to the technology’s contribution to the value of standard—a principle which, when properly applied, reduces concerns over the potential for SEPs to induce holdup and royalty stacking.

Comments welcome.

Friday, January 8, 2016

No New Cases Released over the Holidays

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

Tuesday, December 22, 2015

A New Framework for Determining Reasonable Royalties

Tom Cotter and I have posted on ssrn a revised version of our paper A New Framework for Determining Reasonable Royalties in Patent Litigation, which is forthcoming in the Florida Law Review. Here is the abstract:

Conventional analysis often assumes that there are only two theoretical options for calculating a reasonable royalty in patent disputes: a “pure ex ante” approach, under which a court reconstructs the hypothetical bargain the parties would have struck prior to infringement, based on the information available to them at that time; and a “pure ex post” approach, under which the court considers the bargain the parties might have reached as of some later date such as the date of judgment. The first approach avoids patent holdup — basing the royalty partly on the infringer's sunk costs — but cannot easily explain other longstanding features of how royalties are calculated, and can lead to awards that reflect the parties’ erroneous ex ante expectations. By contrast, the pure ex post approach uses more accurate information about the invention’s actual value, but it also enables the patentee to capture some of the patent’s ex post holdup value. In this Article, we show that a “contingent ex ante” framework, under which the court reconstructs the bargain the parties would have reached ex ante, based on all relevant information that is available ex post, is superior to both of the conventional approaches. More specifically, our framework enables courts to base the royalty on the most accurate information available of patent value while avoiding the holdup risk arising from the pure ex post approach. We analyze how courts can apply our approach in various settings, including cases involving SEPs, sequential infringement, regulatory uncertainty, and unexpected exogenous events.

Thursday, December 17, 2015

Invalidity of Tadalafil Formulation Patent Upheld

Eli Lilly Canada Inc v Mylan Pharmaceuticals ULC (NOC) 2015 FCA 286 Dawson JA: Near, Boivin JJA 2015 FC 178 aff’g de Montigny J
            2,379,948 – Tadalafil formulation – CIALIS

In my post on de Montigny J’s Tadalafil formulation (NOC) decision, which held Lilly’s ‘948 patent to be invalid and not infringed, I noted that “The decision turned entirely on the facts. As counsel for Lilly stated at one point, ‘a lot of it just comes down to which expert the Court is going to go with’.” It is accordingly unsurprising that the FCA, in very brief reasons, has now affirmed “substantially for the reasons given by the Judge” [5]. The main legal ground of attack was that at one point de Montigny J had incorrectly articulated the “obvious to try” test, but the FCA held that on the whole it was clear that de Montigny J understood and applied the correct test, and so the error in his initial articulation of the test was immaterial [4].

Friday, December 11, 2015

Complete Code Bars Class Action for Recovery of Profits from to Invalid Patent

Low v Pfizer Canada Inc, 2015 BCCA 506 Garson JA: Bennett, Savage JJA rev’g 2014 BCSC 1469 Smith J (blogged here).
            2,163,446 / VIAGRA / sildenafil

In Low v Pfizer, the BCCA refused to certify a class action seeking disgorgement of the excess profits earned by Pfizer on sales of Viagra during the period when Pfizer’s market position was protected by a patent which was ultimately held to be invalid. The BCCA decision was based on three points: (1) the plaintiff was essentially seeking to create a tort a breach of statute, contrary to Saskatchewan Wheat Pool [1983] 1 SCR 205; (2) the patent regulatory regime is in any event complete code; (3) and the claims in unjust enrichment and unlawful interference with economic relations would fail on their own merits independently of the complete code argument. From a policy perspective, the BCCA was concerned about “tortifying” regulatory law and upsetting the complex balance of patent incentives that have been established by the legislature.

Wednesday, December 9, 2015

Pre-Amalgamation Settlement Agreement Does Not Bar Action by Amalgamated Entity

Pfizer Canada Inc v Teva Canada Ltd 2015 FCA 257 Gauthier JA: Webb, Near JJA
            2,163,446 / VIAGRA / sildenafil

In this decision the FCA held that a pre-amalgamation settlement agreement entered into by one of two subsequently amalgamated entities does not bar an action by the amalgamated entity based on pre-amalgamation events affecting the other entity.

In 2006-08, Teva (then Novopharm) and ratiopharm both filed ANDS for sildenafil. Pfizer sought orders of prohibition in respect of both under s 6 of the PM(NOC) Regulations. Pfizer and ratiopharm settled, and under the terms of the Agreement ratiopharm agreed not to launch until expiry of the patent. Teva and ratiopharm then amalgamated. The s 6 action against Teva proceeded, and Teva ultimately prevailed: Viagra 2012 SCC 60. The Minister granted an NOC in respect of Teva-sildenafil and Teva then brought a s 8 action for damages for having been keep out of the market by the NOC proceeding. Teva did not claim any damages relating to ratio-sildenafil, but only in respect of Teva-sildenafil. Pfizer brought a motion for summary judgment on the basis that Agreement entered into with ratiopharm barred the action by Teva. Pfizer acknowledged that when the Agreement was entered into, the parties did not intend to cover Teva’s product, but it argued that the scope of the Agreement changed as a result of the amalgamation [21]-[22]. Not very surprisingly, the FCA, affirming O’Keefe J, held that the Agreement only bars Teva from seeking s 8 damages in respect of ratio-sildenafil, and Teva's action in respect of Teva-sildenafil can proceed: [25].

Tuesday, December 8, 2015

Whether HAL HCl is an ester of ALA HCl is a Matter of Fact

Photocure ASA v Canada (Health) 2015 FC 959 Kane J
            hexaminolevulinate hydrochloride / CYSVIEW [aka HEXVIX]

In this application for judicial review Kane J declined to interfere with the Minister’s decision refusing to add Photocure’s drug CYSVIEW to the Register of Innovative Drugs. The key issue was whether the Minister’s decision involved matter of law or matter of fact. The case does not really raise any questions of general legal interest, though there was some suggestion by Kane J that whether the Minister’s interpretation of the Data Protection Regulations is to be reviewed on a correctness standard turns on the particular legal issue.

Wednesday, December 2, 2015

Is Minerals Separation Still Good Law?

Leo Pharma Inc v Teva Canada Ltd 2015 FC 1237 Locke J
            2,370,565 / calcipotriol & betamethasone / DOVOBET

In this NOC proceeding Locke J granted an order of prohibition as infringement of multiple claims was conceded, and he held that Teva’s allegations of obviousness, lack of utility and insufficiency were not justified [193]. The holding turned on the facts of the case, but the claim construction argument raises the question of the continued vitality of Minerals Separation.

The claimed invention is a dermal cream formulation for the treatment of psoriasis. Vitamin D and vitamin D analogues, specifically calcipotriol, were previously known for treatment of psoriasis, as were corticosteroids (such as betamethasone), and these were commonly used sequentially. There was consequently a motivation to develop a combined formulation, but the two drugs could not simply be mixed because they were pH incompatible, which is to say that calcipotriol was unstable at any pH value which was favourable to the stability of a corticosteroid, and vice versa [54], [55], [108]. Leo discovered a stable formulation containing these compounds plus the solvent POP-15. Claim 1 was to a formulation comprising vitamin D or a vitamin D analogue (component A), a corticosteroid (component B) and a solvent selected from a large class, while Claim 17 specified POP-15 as the solvent. (Claim 17 was the only claim held to be useful and infringed. The utility of the other infringed claims was not addressed.)

The patent itself disclosed that a formulation using propylene glycol as a solvent was unstable [19]. Teva argued that because the wording of the claims is non-exhaustive (using "comprising") and there is nothing in the claims to suggest that they are limited to compositions that are useful in treating psoriasis, the claim should therefore be construed as encompassing formulations with an additional  component, such as propylene glycol, which would not be useful [89]. More generally, if Teva’s argument were sound, any claim using “comprising” language would be invalid unless it was expressly limited to safe or effective formulations, as a claim not so limited would encompass the formulation plus Compound X, where Compound X is a poison.

Tuesday, November 17, 2015

Can a Compound Claim Be Supported by an Inventive Process?

Amgen Canada Inc v Apotex Inc (NOC) 2015 FC 1261 Hughes J
            1,341,537 / filgrastim / NEUPOGEN

In Amgen / filgrastim Hughes J held Claim 43 of the Amgen’s ‘537 patent to be invalid for obviousness, though it survived novelty and utility attacks. This post focuses on Hughes J’s obviousness analysis, which seems to me difficult to reconcile with Sanofi 2008 SCC 61.

Human granulocyte colony-stimulating factor (G-CSF) stimulates the growth of white blood cells. Naturally occurring G-CSF was first isolated and purified in small quantities by Welte and others at Sloan-Kettering Institute [16]. However, Welte had not determined any of the amino acid sequence [18]. If the DNA sequence of the naturally G-CSF could be determined with sufficient precision, G-CSF could be produced in commercial quantifies by recombinant DNA technology. Amgen was ultimately successful in doing so, leading to the invention of filgrastim, sold by Amgen as NEUPOGEN, which is used to boost the production of white blood cells and therefore help prevent infection in people whose immune system is compromised as a result of chemotherapy.

Monday, November 16, 2015

I G Farbenindustrie Strikes Again

Amgen Canada Inc v Mylan Pharmaceuticals ULC 2015 FC 1244 Phelan J
            2,202,879 / cinacalcet / SENSIPAR

In Amgen / cinacalcet Phelan J held the ‘879 patent invalid over the 2,115,828 patent (which shares most of the same inventors). While this conclusion is clearly correct on the facts as found by Phelan J, there were some difficulties along the way which illustrate that the law of selection patents in Canada remains in need of clarification – or, preferably, as I have suggested in a previous post, the concept should be abandoned entirely.

The facts are reasonably straightforward. The parathyroid gland regulates calcium levels in the body through the secretion of parathyroid hormone [6]. At one time it was thought that parathyroid cells respond to calcium through a “calcium channel.” The inventors discovered that the true mechanism was a calcium-sensing receptor. This was a real breakthrough [15]. It lead to the realization that compounds that mimic the effect of calcium at the parathyroid calcium receptor could be effective in treating diseases related to poor calcium regulation [8]. Accordingly, the ‘828 patent claimed a large genus of such compounds [25].

Claim 5 of the subsequent ‘879 patent claims cinacalcet, which falls within the claims of the ‘828 patent. On the evidence, cinacalcet had no particular advantage over any of the other compounds disclosed and claimed by the ‘828 patent [70]. The patentees had initially pursued a different compound, which was specifically disclosed in the ‘828 patent [69], but when that turned out to have toxicity problems, they picked another, namely cinacalcet, with comparable properties [70]. The patentees had no particular reason to believe cinacalcet had any special properties as compared with the other compounds of the genus, as it had not even been synthesized as of the claim date of the ‘879 patent [71].

Saturday, November 14, 2015

Data Protection Regulations Apply to Post-NDS Supplementary Information

Hospira Healthcare Corporation v Canada (Health) and Sanofi-Aventis Canada Inc 2015 FC 1205, 2015 FC 1206 Gagné J
            2,196,922 / oxaliplatin / ELOXATIN

The main decision in these companion cases is the 1205 decision, in which Gagné J held that the data protection provisions of the Food and Drug Regulations (C.08.004.1) apply to supplementary submissions made after the filing of an NDS. In my view this holding was clearly correct, though the unusual facts may illustrate some problems with other aspects of Canada’s drug approval regime.

Oxaliplatin has long been a “standard of care” drug in the treatment of colorectal cancer. Oxaliplatin was discovered in Japan and subsequently licensed to and acquired by Sanofi [14].* However, until 2006 Sanofi did not seek an NOC for its oxaliplatin product, ELOXATIN, which had been sold in Canada since 1999, but only under the Special Access Program [14]. From 2004 to 2006, Hospira sought to file an NDS for its OXALIPLATIN FOR INJECTION product. However, Hospira did not have clinical trial data, and because by that time oxaliplatin was internationally recognized as the most therapeutically effective treatment for colorectal cancer, clinical trials could not ethically be performed. Nor could it file an ANDS referencing Sanofi’s product, because Sanofi had not yet obtained an NOC for sale in Canada. Consequently, in late 2006 Hospira filed its NDS without any clinical data, but only literature references and reports of post-marketing experience.

After various exchanges and litigation, Hospira’s NDS was rejected in 2012 because the literature references were not sufficiently robust to establish the clinical safety and efficacy required under C.08.002(2)(g), (h) [31]. Meanwhile, in the fall of 2006, within a month Hospira’s submission, Sanofi also filed an NDS which did include clinical trial data [18]. Sanofi’s submission was given priority status and an NOC was issued for ELOXATIN in 2007 [18], [21]. Hospira responded to the 2012 Notice of Noncompliance with new information, including, ultimately, the ELOXATIN Product Monograph [33], [34]. While this was enough to satisfy the safety and efficacy requirements, Hospira was then informed that because Hospira had made comparisons in its submission to ELOXATIN which was listed on the Register of Innovative Drugs by 2012 (though not in 2006), the data protection provisions Food and Drug Regulations (C.08.004.1) applied and the NOC for OXALIPLATIN FOR INJECTION would not be issued until the expiry of the term of market exclusivity for ELOXATIN [40].

It was uncontested that Hospira had indeed made comparisons in its submission to ELOXATIN [75], but Hospira argued that the data protection provisions, in particular C.08.004.1(3) do not apply to post-filing amendments made pursuant to subsection C.08.004(2), which permits the manufacturer to file additional information. The basic argument was textual: C.08.004.1(3) provides that data protection is invoked if a manufacturer “seeks a notice of compliance” for a new drug on the basis of a direct or indirect comparison with an innovative drug, and para (a) provides it cannot “file a new drug submission” until the data protection period expires. Since Hospira did not originally “seek” its NOC on the basis of a comparison, it was not barred from submitting its NDS and so, argued Hospira, the Minister could not refuse to issue the NOC under para (b), even though the approval would ultimately have been granted on the basis of such a comparison [65], [75].

Gagné J applied the standard approach to statutory interpretation, which requires consideration of the text, context and purpose surrounding the provisions at issue [77]. She noted that the purpose of the data protection provisions is in part to prevent unfair use of undisclosed clinical or other data generated by an innovative manufacturer to support its drug submission [73], [83]. This purpose clearly supports the view that the data protection provisions should apply to supplementary information, and the text was not sufficiently clear to override this purposive analysis, particularly when read in context [79], [83].

Because of the unusual facts, Hospira was in a difficult position, and it does seem problematic that Sanofi enjoyed a de facto market exclusivity under the SAP program from 1999 to 2007, and then obtained an additional 8.5 years of data protection starting from 2007 when its NOC was issued (though I’m not familiar with the background, so perhaps there is some good reason for this). But as a matter of statutory interpretation and the policy underlying the NOC Regulations, Gagné J’s holding is certainly correct.

Note that Gagné J also re-affirmed that the applicable standard of the Minister’s interpretgation of the data protection provisions is correctness [49], relying primarily on Takeda Canada 2013 FCA 13 [26]-[30], and also Pfizer Canada 2014 FC 1243 [57]-[104].

The sister decision 2015 FC 1206 concerned Hosipra’s difficulties with the PM(NOC) Regulations. Injectable oxaliplatin was also covered by the ‘922 patent, and the Minister had required Hospira to address that patent before an SNDS for Hospira’s ready-to-use injectable oxaliplatin solution would be considered [12]. Gagné J held that the refusal was moot issue, as the patent has expired and in any event the Mininster is prevented from issuing the NOC due to the data protection provisions, as discussed above.

*While not specified in the 1205 decision, when Gagné J stated that Sanofi “acquired” oxaliplatin, presumably she meant it acquired the ‘922 patent.

Friday, November 13, 2015

Authorized Generics Are Subject to PMPRB After All

Canada (Attorney General) v Sandoz Canada Inc 2015 FCA 249 Noël CJ: Pelletier, Rennie JJA rev’g 2014 FC 501, 2014 FC 502 O’Reilly J partially aff’g PMPRB-10-D2, PMPRB-08-D3

In this decision the FCA has held that authorized generics fall within the jurisdiction of the Patented Medicine Prices Review Board, reversing O’Reilly J’s decision (blogged here). The FCA also reaffirmed the constitutionality of the provisions of the Patent Act setting up the PMPRB and giving it the authority to regulation prices of patented medicines, affirming O’Reilly J on this point. While the FCA’s ultimate holding is important, the argument turned on points specific to the relevant statutory provisions.

Two appeals were heard together. In the first case, ratiopharm sold an anti-asthmatic medicine called ratio-salbutamol HFA, which is the generic equivalent of the Ventolin HFA, a patented medicine manufactured and sold in Canada by GlaxoSmithKline (GSK). GSK sold ratio HFA to ratiopharm and granted ratiopharm an exclusive licence to set the price and sell ratio HFA in Canada without any right to sub-licence [6]. The second case involved Sandoz, a wholly owned subsidiary of Novartis. Sandoz sold medicines covered by patents owned by Novartis, which allowed Sandoz to sell the generic version and to refer to those medicines in obtaining the required NOCs. There was, however, no express licensing agreement [9].

The Board requested information from both ratiopharm and Sandoz pursuant to ss 80, 81 and 88 of the Act, which require a “patentee” to provide pricing information. The Board also held that ratiopharm had sold ratio HFA at excessive prices, contrary to s 83 of the Act which applies to a “patentee.” Sandoz and ratiopharm appealed the Board decisions, primarily on the basis that they were not “patentees” within the meaning of the provisions. The constitutionality of the provisions was also challenged, as trenching on provincial jurisdiction over property and civil rights, and Sandoz also argued that the Board erred in finding that it had an implied licence.

The main question turned on the definition of “patentee” in s 79(1), which applies to the relevant sections (my emphasis):

“patentee”, in respect of an invention pertaining to a medicine, means the person for the time being entitled to the benefit of the patent for that invention and includes, where any other person is entitled to exercise any rights in relation to that patent other than under a licence continued by subsection 11(1) of the Patent Act Amendment Act, 1992, that other person in respect of those rights;

The Board noted that the definition does not on its face require ownership, and in light of the purpose of the provisions, which is to protect consumers from unreasonable pricing, the definition should be interpreted to include licensees. Applying a deferential standard of review of the Board’s interpretation of its home statute [63], the FCA upheld as reasonable both the Board's understanding of the purpose of the provisions [67], and its determination that both ratiopharm and Sandoz, as licensees, were "patentees" within the meaning of s 79(1) [91]. The FCA also re-affirmed the constitutionality of the relevant provisions, essentially on the basis of well-established precedent [116], and affirmed the Board’s finding that Sandoz was an implied licensee as being a factual determination which was supported by evidence and therefore entitled to deference [108].

In the result, it is clear that authorized generics will fall under the jurisdiction of the Board. However, neither the Board nor the FCA provided an explicit definition of the scope of the provision. The Board’s key reasoning in ratiopharm [08-D3, 42] is as follows:

The Agreements gave ratiopharm the exclusive right to set the price of and to sell ratio HFA and to obtain the necessary regulatory approvals to do so. Absent the licence granted, these acts would have violated rights held exclusively by GSK pursuant to section 42 of the Act.

In Sandoz, after reviewing the facts, the Board concluded [10-D2, 57], that “Sandoz is a patentee, within the meaning of subsection 79(1) of the Act, of any patent owned directly or indirectly by Novartis AG, where that patent is for an invention pertaining to a medicine that Sandoz is authorized by its parents to sell in Canada.” The FCA concluded that the Board correctly held that including persons "who exercise selling rights under a patent" is within the ambit of subsection 79(1) [122]. The FCA also made it clear that in order to be a licensee it is not necessary that a party’s products would actually infringe the patent but for the licence; it is enough that a licence agreement exists which would protect the party if infringement were alleged [103]. 

The parties raised a variety of arguments as to why a narrower interpretation was warranted. I will not review these arguments in detail, as most were not particularly powerful, in my view. The most interesting was that the Board's definition would capture wholesalers, retailers and pharmacies [79]. This argument was rejected by the Board, on the basis that “subsection 79(1) only captures persons who sell to consumer classes protected by the Board, and wholesalers, hospitals and pharmacies do not come within that class.”* The FCA affirmed this point as well, saying "The fact that the respondents operate under a licence to sell the patented medicine whereas wholesalers, retailers and pharmacies derive their right qua owners of the products which they purchase for re-sale provides a principled basis for the distinct treatment" [79].

Thus even though a patent confers an exclusive right to make, sell and use the invention (s 42), the "benefit of the patent" in s 79(1) encompasses only a restricted subset of those rights, namely the right to sell to persons selling to consumer classes protected by the Board. It does not encompass the right to use, or even the right to sell to the public generally. This is certainly an awkward distinction to draw on the basis of the text of the provision, as "benefit" is prima facie a broad term, as the Board emphasized. I am not really persuaded by the FCA's reasoning that there is a principled distinction between a licensee and a party having rights as an owner of the tangible embodiment of the patented invention, as ownership of the tangible embodiment does not in itself give any rights under the patent, unless by express licence, implied licence or exhaustion. With that said, the distinction is sound on a purposive interpretation of the provision, and given that a purposive analysis informs and can even dominate the textual analysis (Canada Trustco 2005 SCC 54 [10]), I do agree that the distinction is sound. This is a case in which text itself is not ideally drafted, but the interpretation given by the Board and FCA best accords with the purpose of the provision. 

I must say that I am very skeptical of the basic mandate of the PMPRB, which strikes me as antithetical to the purpose of the patent system. But the legislature was evidently of a different view, as the provisions setting up the Board are in the Patent Act itself. And if we accept that policy decision, as we must (at least for the purposes of statutory interpretation), it seems to me that the FCA decision is clearly correct. 

* The FCA cited the Board’s decision [08-D3, 15, 16] as stating that [21], but the cited paragraphs are not to that effect, and while that position is certainly consistent with the Board’s reasoning, I was unable to find any express statement to that effect in the Board decision.

Friday, November 6, 2015

Inventorship Not Material for Purposes of S 53

Gilead Sciences, Inc v Idenix Pharmaceuticals, Inc 2015 FC 1156 Annis J
            2,490,191 2,527,657 / sofosbuvir / SOVALDI

Previous posts have discussed Gildead’s utility and sufficiency attacks on Idenix’ 191 patent. This post deals primarily with Idenix’ s 53 attack on Gilead’s 657 patent. Section 53 provides that a patent is void if “any material allegation” in the application is untrue and wilfully misleading. Annis J’s decision adds to the growing body of case law holding that an error in inventorship is not a “material” allegation giving rise to invalidity under s 53. While we are still not at the point of a per se rule that errors in inventorship can never be material, we are getting close.

Idenix argued that the ‘657 Patent was invalid under s 53 for knowingly omitting naming Dr Lieven Stuyver as inventor [877]. The first question was whether he was an inventor at all. The argument failed on the facts on this point, as Annis J held that it had not been established that Dr Stuyver contributed to the inventive concept [904], [916]. 

Annis J nonetheless went on to consider whether the omission would have been material if Dr Stuyver had been an inventor. He noted that “a fair reading of Corlac [blogged here] indicates that the Court very much minimized the impact of improperly omitting a co-inventor on the determination of materiality in section 53(1)” [919] He also pointed out that the FCA in both Corlac and in Wellcome /AZT [2001] 1 FC 495, had noted that it would illogical to hold a patent invalid for failure to name an inventor, because that would deprive that inventor of any effective remedy [921], [922]. Annis J summarized the FC and FCA decisions in Corlac as being to the effect that failure to name an inventor will only be material for the purposes of s 53 if that failure affects “the term, substance or ownership of the ‘657 Patent, or the public’s ability to use the invention” [923] (and there was no such detriment in this case). That is, there must be some detriment to the public to warrant invalidating the patent. That strikes me as a sound view of this provision.

Thursday, November 5, 2015

"Retrosynthetic Analysis" Fails to Establish Sufficiency

Gilead Sciences, Inc v Idenix Pharmaceuticals, Inc 2015 FC 1156 Annis J
            2,490,191 2,527,657 / sofosbuvir / SOVALDI

Yesterday’s post provided an overview of the facts in Gildead v Idenix and dealt with Gilead’s successful utility attack on Idenix’ 191 patent. Today’s post deals with Gilead’s sufficiency attack, which was also successful.

Recall that as of the filing date Idenix had not made any of the 2’-C-Me/F compounds which it claimed, and the disclosure dealt primarily with 2’-C-Me/OH compounds, which had been synthesized. Consequently, Gildead argued straightforwardly that the disclosure was not sufficient to allow a skilled person to make any of the compounds falling within the claims [413]. This is a classic "how to make" attack, which was perhaps the most common reason for invalidating a patent in the early days of UK patent law, but which we don’t often see anymore. As with utility, the result turned on the facts. This case does provide a good illustration of the point that making the invention may be insufficient as requiring “undue experimentation” even if the effort exercised by the skilled person does not rise to the level of invention. Annis J’s restrained interpretation of the SCC’s Viagra 2012 SCC 60 decision is also of interest, as are his comments on the proper approach to experiments intended to simulate the efforts of a skilled person.

Gilead v Idenix Table of Contents

Gilead Sciences, Inc v Idenix Pharmaceuticals, Inc 2015 FC 1156 Annis J
            2,490,191 2,527,657 / sofosbuvir / SOVALDI

Gilead v Idenix does not contain the Table of Contents which was recently been a welcome feature in longer FC decisions. I have compiled one which is available here (though it is not hyperlinked to the decision itself).

Wednesday, November 4, 2015

Gilead v Idenix: Overview and Utility

Gilead Sciences, Inc v Idenix Pharmaceuticals, Inc 2015 FC 1156 Annis J
            2,490,191 2,527,657 / sofosbuvir / SOVALDI

In his first outing as a judge in a patent case, Annis J has delivered a decision of Arnoldian proportions (outstripping Arnold J’s own effort in the parallel UK case by 313 paragraphs). The case turned largely on the facts, with the bulk of the decision taken up with a meticulous review of the evidence on each point. The decision is primarily concerned with Gilead’s attack on the validity of Idenix’ 191 patent, which was held to be invalid for lack of utility and insufficiency (though Annis J did hold the 191 patent would have been infringed by Gilead’s product SOVALDI (sofosbuvir) had it been valid). Idenix’ counter-claim challenging Gilead’s 657 patent for lack of novelty and wilful misleading was dismissed. This post provides background and discusses the utility attack on the 191 patent. Legally the most interesting point is that Annis J followed Rennie J’s holding in Apotex / esomeprazole 2014 FC 638 (blogged here), that the requirement to disclose the basis for a sound prediction in the patent itself applies only to claims for a new use, and not to compound claims.

In the early 2000s both Idenix and Pharmasset (which was subsequently bought by Gilead), were working on nucleosides for the treatment of the Hepatitis C virus. Idenix discovered that some known nucleoside analogues with a 2’-C-Me/OH structure had activity in in vitro assays against the HCV class of viruses [27]. In 2002 and 2003 Idenix filed the US applications which were the priority documents for Idenix’s 191 patent [18]-[21]. Despite having only synthesized and tested compounds with a 2’-C-Me/OH structure, Idenix’ application also claimed compounds with a 2’-C-Me/F structure. CIPO objected to the application for lack of unity of invention, with the examiner having identified 15 different genera encompassed by the 23 “Forumlas” identified in the application. Indenix responded by narrowing the scope to the class of “Formula IX” compounds, claiming the 2’-C-Me/F genus. However, the disclosure was not amended [22]-[24]. (Presumably these compounds were selected because by that point – 2009 – it was apparent the the flouro compounds had the most promise.) The application was then granted as the 191 patent. The important point to take form this history is that none of the compounds claimed by the 191 patent had even been synthesized, much less tested, by Indenix as of the priority date, and they were barely discussed in the disclosure. Idenix started trying to synthesize the 2’-C-Me/F nucleosides in early 2002, but did not clearly succeed until March of 2005.

In the meantime, Pharmasset, having spotted an apparent gap in an earlier Idenix application, also set about synthesizing a 2’-C-Me/F nucleoside in early 2003 and succeeded a few months later (in May 2003) [42]-[43]. In the same month, Pharmasset filed the US application which ultimately matured to the 657 patent (now owned by Gilead after its acquisition of Pharmasset). Gilead subsequently commercialized SOVALDI, which is covered by the 657 patent. Anticipating an infringement action by Idenix based on the 191 patent, Gilead sought a declaration under s 60(1) that the 191 patent was invalid on the basis of lack of utility, overbreadth and insufficiency. Idenix counterclaimed for infringement and for a declaration that Gilead’s 657 patent is invalid.

Utility of the 191 Patent
It was common ground that utility of the patent had not been demonstrated as Idenix admitted that it did not test any compound falling within the scope of the claims of the ‘191 Patent until March 2005. Idenix therefore relied on sound prediction [221].

Annis J began the utility analysis by noting if the patent contains a promise, utility will be measured against that promise, though he noted that such a promise must be clear and unambiguous [227]. I must admit, though, that it is not entirely clear to me what standard for utility was actually applied. The parties agreed that the 191 patent contained a promise that the compounds “are useful” in the treatment HCV infections, in humans and other hosts [231], and this is evidently higher than the minimum scintilla necessary to establish utility in the absence of a promise (potential use against HCV would likely suffice). Annis J also held that the patent promised a satisfactory therapeutic index [238], and effectiveness in combination with low toxicity [240]. All of this suggests that utility was assessed against a standard which is higher than the minimum which would otherwise be necessary. But Annis J then stated explicitly that “the ‘191 Patent makes no promise of any specific result or level of treatment,” and “Gilead must therefore, prove that Idenix has not demonstrated or soundly predicted a scintilla of utility” [241].

In any event, this point was moot because Annis J concluded on the facts that there was no basis for a sound prediction of any antiviral activity in a 2’-C-Me/F nucleoside prior to its synthesis [255]; the patent would therefore lack utility whether the standard for utility was a mere scintilla or something higher.

The key question on the facts is whether the activity of the 2’-C-Me/F compounds could be predicted from the known activity of the 2’-C-Me/OH compounds [253]. The evidence was “overwhelming” that the answer was no, largely because the 2’ down position was recognized as a highly conserved and selective position, and fluoride is an unpredictable substituent particularly regarding potential toxicity [284], [376]. This case illustrates that the fact that a particular candidate compound is worth trying does not amount to a sound prediction of success [319].

More interesting in terms of the development of the law is that Annis J, following Rennie J’s holding in Apotex / esomeprazole 2014 FC 638 (blogged here), held that the requirement to disclose the factual basis and line of reasoning for sound prediction in the patent itself applies only to “new use” inventions [378]-[381]. Because the claim in the ‘191 patent was to a compound, the heightened disclosure requirement did not apply [380]. (Annis J went on to hold that if he was wrong, and there was such a requirement, the disclosure in the 191 patent was not adequate to support a sound prediction of utility [412].) The holding that there was no such disclosure requirement was strictly obiter (as was Rennie J’s), as Annis J had already determined there was no factual basis at all, disclosed or not. Nonetheless, while Annis J’s discussion was brief, he did not adopt Rennie J’s position out of comity, but because he agreed with the reasoning [380]. This adds to the weight of authority, though the point will ultimately have to be decided by the FCA.