Thursday, June 30, 2011

The Incentive Effect of Patents in Pharmaceutical Research

Astrazeneca Canada Inc. v. Apotex Inc. / esomeprazole 2011 FC 505 Crampton J affm’d 2011 FCA 211 

The third part of the Cyanamid test for an interlocutory injunction requires the court to consider the balance of convenience, including the public interest, if relevant.

The patentee, AstraZeneca argued that the assessment of the balance of convenience “should take into account the harm to the public interest in patent rights and the promotion of innovation and drug discovery” [155] (and see also [65]). Crampton J agreed that this “may well be a legitimate consideration” [156, 65], but declined to give it weight on the basis that “in this particular case, this claim is nothing more than a bald assertion. AstraZeneca has provided no evidence whatsoever of any adverse impact that would result from a decision not to grant the requested injunction” [156]. He did note that “counsel would be well advised to provide evidentiary support for this type of submission in future cases” [65].

It is interesting that Crampton J declined to give weight to the incentive effect of patents without evidence on the point. It has long been established that the purpose of the Patent Act is to provide incentives for useful innovations by providing the inventor with a limited term monopoly for that which he has invented and disclosed: Consolboard Inc. v. MacMillan Bloedel (Sask.) Ltd., [1981] 1 S.C.R. 504 at 517; Whirlpool Corp. v. Camco Inc. 2000 SCC 67 at [42]. It might seem natural to presume that a granted patent achieves that goal. The role of the non-obviousness requirement in particular is to ensure that patents are granted only for those inventions “which would not be disclosed or devised but for the inducement of a patent” Graham v John Deere (1966) 383 U.S. 1 at 11. If a granted patent is presumed to be valid, and therefore presumed to be non-obvious, it would seem to follow that it should be presumed that the patent incentive was necessary – unless the court were willing to undertake an assessment of the merits, which Crampton J declined to do.

The issue of whether there should be a presumption should be of little consequence to pharmaceutical patentees. As Rothstein J stated for the Court in Sanofi 2008 SCC 61 at [64] “The patent system is intended to provide an economic encouragement for research and development. It is well known that this is particularly important in the field of pharmaceuticals and biotechnology.” While Rothstein J did not cite any authorities, the empirical evidence is entirely uniform in showing that patents are crucial to innovation in the pharmaceutical industry: see my review of the research in Part 3 of my article The Structure of the Law of Patentable Subject Matter, 23(2) IPJ 167 (2011) (draft here).

Wednesday, June 29, 2011

Irreparable Harm in Interlocutory Injunctions

Astrazeneca Canada Inc. v. Apotex Inc. / esomeprazole 2011 FC 505 Crampton J aff’d 2011 FCA 211 

On the second branch of the Cyanamid test, which requires the applicant to show irreparable harm, Crampton J’s decision was entirely consistent with Federal Court jurisprudence. I have criticized this jurisprudence at length in my article Interlocutory Injunctions and Irreparable Harm in the Federal Courts, 88(3) Can Bar Rev 515, and here I will simply outline some of the main points.

The Federal Court jurisprudence uses irreparable harm as a strict threshold. That is, if the applicant cannot show irreparable harm, the application will be dismissed without the need to consider the balance of convenience [154]. This is not consistent either with the traditional practice in Chancery, or with the general position in other Canadian jurisdictions, or with Cyanamid itself. Chancery practice is discussed in detail in my article. With respect to other Canadian jurisdictions Sharpe on Injunctions and Specific Performance para. 2.450 states that “attempts to make irreparable harm, and hence a condition precedent, and hence a threshold test, have been rejected.” In Cyanamid, which was itself a patent case, the main harm alleged by the patentee was the “[loss] of its chance of continuing to increase its share in the total market” ([1975 AC 396 at 409-10). The Federal Court jurisprudence requires the applicant to prove irreparable harm on the basis of evidence that is “clear and not speculative” [56], while in Cyanamid the interlocutory injunction was granted merely on the trial judge’s common sense inference that there would be loss of market share “[a]lthough there is not at present any evidence to that effect in this case” ([1974] FSR 312). The injunction granted by the House of Lords in Cyanamid would undoubtedly have been refused on current Federal Court jurisprudence.

Tuesday, June 28, 2011

The Role of the Merits in an Interlocutory Injunction

Astrazeneca Canada Inc. v. Apotex Inc. / esomeprazole 2011 FC 505 Crampton J aff’d 2011 FCA 211

Though I haven’t done a search, my impression is that it has been quite a while since I’ve seen an interlocutory injunction motion on a patent case out of the Federal Court. Perhaps patentees have more or less given up in light of the restrictive approach taken in the Federal Court of Appeal from about 1990. If so, there is nothing in this decision to change their minds. This is a typical case of a patentee pharmaceutical company seeking an interlocutory injunction to prevent generic entry pending an infringement action. The main twist – an important one in my view, though not in the view of Crampton J – is that AstraZeneca had been unable to obtain a order of prohibition in the related NOC proceedings. The result also is typical: the interlocutory injunction was refused. Crampton J’s opinion is entirely consistent with Federal Court precedent, and it was affirmed by the Court of Appeal on the basis that the decision was heavily fact based and therefore subject to a deferential standard of review. There is little new law in the decision. Nonetheless, in my view, the decision illustrates problems with the current approach to interlocutory injunctions, both in general and in the Federal Court.

There are three points of note: first is the role of an assessment of the merits in an interlocutory injunction; second is the stringency of the irreparable harm requirement in the Federal Courts; third is the view taken by Crampton J regarding the need to prove that patents encourage innovation in the pharmaceutical industry.

Thursday, June 9, 2011

Will Microsoft v i4i Influence Canadian Law?

In its decision in Microsoft v i4i, released today, the USSC affirmed a strong presumption of patent validity, holding that an invalidity defence must be proven by “clear and convincing evidence.” The Canadian courts are very receptive to considering case-law from other jurisdictions as persuasive authority, but as Phelan J noted in 2010 FC 1011 “this must be done mindfully.” I suggest that the i4i decision is unlikely to be influential in Canadian law, for three reasons: the statute is different, the precedent is different, and the USSC expressly did not consider policy arguments.

In i4i the USSC noted that the US statute “includes no express articulation of the standard of proof,” so its holding did not turn on the text of the statute. The Court also refused to consider the policy arguments, on the basis that the case-law was too well established: “We find ourselves in no position to judge the comparative force of these policy arguments. For nearly 30 years, the Federal Circuit has interpreted §282 as we do today.” Thus the decision of the USSC in i4i was based entirely on affirmation of a consistent line of precedent in US law, which first as a matter of common law, and subsequently as a matter of interpretation of the statutory provision, which was understood as codifying the common law, has always required clear and convincing evidence to hold a patent invalid.

Compare this with the Canadian situation. The leading case is the decision of the FCA in Diversified Products Corp v Tye-Sil Corp (1991) 35 CPR(3d) 350 (FCA) in which the Court of Appeal held that the statutory presumption is only a prima facie presumption, which is to say that it will govern in the absence of any evidence, “but it can have no weight capable of being put in the balance against opposing evidence which is believed” (quoting Fox). Consequently, a challenge to the validity of a patent need only satisfy “the usual standard of balance of probabilities.” Prior to that decision, as the Court of Appeal explained, the preponderance of the cases applied, or at least articulated, a higher standard, but the cases were not consistent and the matter had been the subject of controversy. The standard set out in Tye-Sil has since been consistently followed in Canada. The only caveat is that in Wellcome / AZT 2002 SCC 77 at [43]-[44] the Supreme Court held that the appropriate “standard of review” of a granted patent on a question of mixed fact and law, such as validity challenge based on utility, is “reasonableness simpliciter.” This was a short discussion - two paragraphs - which had not been briefed by the parties; the Court failed to even cite Tye-Sil, the leading case. Since then, the Federal Court has refused to follow the Supreme Court on that point, with Gauthier J delivering a forceful explanation of where the Supreme Court went wrong. Of course a statement by the Supreme Court, even in passing, is strong authority in its own right. But the point is that there is not any consistent history of applying a high standard. The Supreme Court’s statement stands on its own merits, and not as affirmation of a consistent body of prior case-law. The decision of the USSC in i4i is entirely different in that respect.

The Canadian Act is also different from the US statute. The Canadian Act now provides that a granted patent shall be valid “in the absence of any evidence to the contrary.” Prior to the 1985 revisions it has similarly provided for “prima facie” validity. Both of these are consistent with a weak presumption. The US Act says simply that a patent “shall be presumed valid.” Even if the i4i decision turned on the statute, which it did not, these statutory differences are significant enough to reduce the significance of US law.

Further, while the USSC did not expressly consider policy issues, it indirectly acknowledged the force of the argument in favour of a weak presumption, at least in the context where the evidence before the court was not before the examiner. The USSC held it was bound by precedent to apply the same presumption of validity even in that context, but the Court went on to say “if the PTO did not have all material facts before it, its considered judgment may lose significant force. And, concomitantly, the challenger’s burden to persuade the jury of its invalidity defense.” It is evidently illogical to grant deference to an examiner who did not have all the facts. As Gonthier J explained, this is why the Supreme Court was wrong to consider a validity attack on a challenged patent as if it were an application for judicial review of an administrative body that had heard a full argument on the facts. This is a very strong point, and despite the US precedent, it persuaded the USSC to create a loophole in the nominally strong presumption in such a case.

Finally, it might be said that the fact of a consistent body of case-law in the US should be persuasive in itself, as reflecting the cumulative wisdom of the US courts. But against that, we should look to the cumulative wisdom of the English courts, where the standard of review is the same as that articulated in Tye-Sil.

While the strength of the presumption of validity in Canada is currently something of an open question in consequence of the SCC’s two paragraphs in the AZT decision, but I suggest that despite the high authority of the USSC, the basis for its decision in i4i decision means that that case should not and will not affect the resolution of this issue in Canadian law.

Tuesday, June 7, 2011

The CGPA Does Not Have Standing to Challenge a Listing on the Register of Innovative Drugs

Canadian Generic Pharmaceutical Association v Canada (Health) 2011 FC 465 de Montigny J aff’g 2010 FC 1211 (Lafrenière, Prothonotary)

The Canadian Generic Pharmaceutical Association (CGPA), sought to challenge the listing of a particular drug on the Register of Innovative Drugs by writing to the Minister requesting that the drug be removed from the Register. The Minister refused on substantive grounds. The CGPA sought judicial review. Lafrenière P struck the application for judicial review on the basis that the CGPA does not have standing, and de Montigny J affirmed.

de Montigny J held that the CGPA does not have standing under s 18.1 of the Federal Courts Act as a person “directly affected,” because it has never filed a new drug submission and does not intend to do so [42]; by way of analogy, under the PM(NOC) Regulations, a manufacturer does not have standing to challenge a listing on the Patent Register unless it has filed an ANDS [44].

On the question of public interest standing, de Montigny J agreed that there was a serious issue, but held that the CGPA failed on both the second and third prongs. On the second prong he held that public interest standing is intended to be used to challenge constitutional validity or general exercise of administrative authority, and not a discrete decision [60]-[61]. This distinguishes 2007 FCA 375 aff’g 2007 FC 154, which refused to strike the CGPA’s challenge to the vires of the data protection Regulations on the basis of standing. de Montigny J is an expert in this area, and his decision was thorough and well reasoned.

de Montigny J held that the CGPA also failed the third prong, which requires there is no other reasonable and effective way to bring the issue before the courts. In so holding de Montigny J usefully clarified that an individual manufacturer can challenge a listing, perhaps “merely through persuasive evidence of a genuine intention to file a drug submission” [68], or by filing an ANDS. On the latter point in particular, “it is clear from the procedure outlined above in the Guidance Document on Data Protection that it is not a criminal offence for a generic drug manufacturer to file an abbreviated new drug submission during the pendency of the data protection period” [71].

Thus the decision that the CGPA lacks standing to challenge an individual listing appears sound in law. With that said, the policy arguments advanced by the CGPA are interesting. The CGPA argued in effect that there is a collective action problem in challenging a listing. It is expensive to challenge a listing, but if the challenge is successful, all generics, not just the one that incurred the cost, will benefit. It is possible that no individual generic would find it worthwhile to challenge the listing; see generally [14]. There is a collective action problem in principle, though a similar collective action problem also arises under the PM(NOC) Regulations or indeed in a validity challenge in an infringement action. This does not prevent such challenges; presumably the generic bringing the challenge relies on a lead-time advantage to recoup its costs. (But see Pfizer Canada Inc. v Novopharm Ltd. / pregabalin (NOC), 2010 FCA 258 (Evans JA) aff’g 2010 FC 668 (Crampton J) aff’g 2010 FC 409, Milczynski Pr in which Novopharm sought to prevent free-riding off its NOA – in effect the generic was seeking data protection for the information contained in its NOA.) Nonetheless, even though the collective action problem may not preclude listing challenges, this decision, sound though it seems on current law, goes against the nascent trend of allowing collective challenges to monopoly rights, such as the Peer-to-Patent program.

On the other hand, the standing problem has another side to it. The requirement that a party must be directly affected serves to ensure that the party bringing the challenge has the motivation to present the case fully. The party who must respond should not have to endure multiple challenges from various parties with tangential interest and partial arguments. Of course the CGPA is not simply an officious inter-meddler, but on the other hand the innovator companies already face multiple attacks on their rights in a drug, first in NOC proceedings and then in infringement proceedings. The CGPA argued that denying it standing to challenge a listing would result in redundant litigation, since each manufacturer would be required to bring its own application for judicial review [66]. This would be far from the only redundant litigation in the pharmaceutical area. No doubt the process could be streamlined, but ideally this should be part of a holistic assessment.

This is not to say that there should not be a mechanism to allow some form of collective challenge to the listing, but it is just one part of a large problem of the multiplicity of actions and arises particularly in the pharmaceutical context.

Friday, June 3, 2011

No New Patent Cases

I haven't posted in almost two weeks, but that is simply because there haven't been any patent decisions released since Pfizer Canada Inc. v Mylan Pharmaceuticals ULC / donepezil (NOC) 2011 FC 547. Posts will resume as soon as a new decision comes out.