Wednesday, October 26, 2011

Amalgamation, Equitable Election, and Section 8 Claims

Teva Canada Limited v Wyeth LLC, 2011 FC 1169, Hughes J

The issue in this case is narrow and tricky, but it is also novel and interesting: what is the effect of a merger of generics when one of the generics was a licensee of the brand, and the other had a valid section 8 claim?

Wyeth entered into authorized generic agreement with Novopharm under which Wyeth licensed Novopharm to sell a generic version of a Wyeth drug. To protect Novopharm’s position as the authorized generic, Wyeth also agreed to make commercially reasonable efforts to enforce the patent against third parties. Ratiopharm then served an NOA on Wyeth. At Novopharm’s request pursuant to the agreement, Wyeth instituted NOC proceedings against ratiopharm. Wyeth lost, and ratiopharm brought a section 8 claim against Wyeth. So far there is nothing out of the ordinary. However, after Novopharm changed its name to Teva, Teva and ratiopharm amalgamated. What is the effect of Novopharm’s agreement with Wyeth on ratiopharm’s section 8 claim, in light of the amalgamation?

Friday, October 21, 2011

Double Costs under Rule 420 in Respect of Counterclaim

Eli Lilly Co. v. Apotex Inc. / cefaclor, 2011 FC 1143 Gauthier J (Costs)

This is a decision on costs related to 2009 FC 991 aff’d 2010 FCA 240, in which Gauthier J held in favour of Lilly in an infringement action against Apotex, and against Apotex in its Competition Act counterclaim against Lilly and Shionogi.

Gauthier J dealt with costs in the main action and the counterclaim separately. With respect to costs in favour of Shionogi on the counterclaim, the main question whether particular settlement offers triggered doubling of costs under Rule 420. Gauthier J affirmed that Rule 420 as amended requires only that the offer remain open until the start of the trial or hearing [25]-[36], and not until the matter is taken under advisement or judgment is rendered. Note that an offer that does not trigger Rule 420 may nonetheless be considered under the general Rule 400(3)(e).

Further, in an apparently novel point of general interest, Gauthier J held that “although there was only one scheduling order issued for the trial of the various proceedings in T-1321-97, the main action and the Competition Counterclaim were two completely distinct proceedings.” Consequently, a settlement offer in respect of the Competition Counterclaim had to remain open not just until the start of the trial as a whole, but until the start of the portion of the trial dealing with the counterclaim [27].

On the facts, one settlement offer made by Shionogi triggered Rule 420. Gauthier J declined to exercise her discretion to lower the amount payable under that Rule. She noted that Apotex had added Shionogi as a defendant two years after instituting the Competition Counterclaim against Lilly, and it had apparently done so primarily to get evidence from Shionogi [40]. Gauthier J stated that

[41] The Court should not be taken as condoning the practice of suing a party solely to facilitate the acquisition of evidence or to put pressure on a third party. There are more appropriate means to obtain evidence from a non-party, including a foreign company.

Gauthier J also noted that the Shionogi evidence was ultimately not particularly helpful [42], and while Apotex was entitled to “insist on the strict application of the rules of evidence with respect to the filing of documents,” and to obtain a procedural advantage in order to settle its Competition Counterclaim with Shionogi,” such decisions might have costs consequences: “it cannot expect to impose its choices on Shionogi or Eli Lilly” [49].

On the main action, Gauthier J was not able to assess whether Rule 420 was triggered. Rule 420 turns on a comparison between the offer and amount awarded, and at this point it remained too difficult to estimate the quantum [65]. Gauthier J noted that “in the context of bifurcated action, the application of Rule 420 can be difficult and will require more judicial consideration” [66].

Wednesday, October 19, 2011

Hints on Validity as a Defence to a Section 8 Action

Apotex Inc v Shire Canada Inc / modafinil (NOC) 2011 FC 1159 Near J aff’g 2011 FC 436 Tabib Pr

This motion raises, albeit tangentially, the important question of whether infringement is available as a defence to an action for section 8 damages under the PM(NOC) Regulations. By way of background, Cephalon is the owner of the patent in question and Shire is a licensee. Both were parties to NOC proceedings, 2008 FC 538, in which Apotex prevailed. Cephalon has since commenced an infringement action against Apotex (T-609-09), but Shire is not a party to that action [5]. Apotex is now seeking section 8 damages from Shire, and this motion arises from those proceedings. Shire had previously tried to raise infringement as a defence, but had wanted to base the defence entirely on the outcome of the Cephalon action, without bringing any independent evidence in the section 8 damages proceeding. This amendment was not permitted (2010 FC 828 affm’d 2010 FC 1001), on the basis that the Shire had not pleaded any material facts on which the court could make any direct determination. 

Shire then sought to amend its Statement of Defence to plead infringement as a defence and counterclaim. Prothonotary Tabib refused to allow this amendment on the basis that the amendment had not been sought in a timely matter. She therefore made no comment as to whether such a defence would be permitted substantively (see my post on that decision). In this decision, Near J, reviewing the matter de novo as raising a question vital to the final issue [16], has affirmed the decision of Tabib Pr, again primarily on the basis that Shire should have brought forward the issue of infringement earlier [24]. However, Near J also hinted at the substantive point, stating “the infringement aspect is not necessarily the ‘true substance’ of section 8 proceedings directed at damages of Apotex being kept off the market. Any potential basis for infringement could be pursued by way of a separate action or by Shire joining the Cephalon proceedings already in progress without delaying a section 8 resolution” [21]. This suggests that even if Shire had pleaded infringement as a defence in a timely manner, the pleading might have been struck. However, Near J also remarked that “Shire should have brought the issue of infringement forward in its initial pleadings” [24], suggesting that this defence would have been permitted if pursued in a timely manner.

Tuesday, October 18, 2011

Interlocutory Injunctions in Australia

Apple v Samsung Electronics [2011] FCA 1164 (Aus)

In my article Interlocutory Injunctions and Irreparable Harm in the Federal Courts, 88(3) Can Bar Rev 515, I argued that the threshold for irreparable harm imposed in the Federal Courts is too high. My review of the Chancery cases in which the concept developed showed that adequacy of damages did not have a distinct role: “[w]hen the courts of equity declined to provide a remedy to the plaintiff, they would often say that this was because the remedies at law were adequate, but this was in effect a statement of the conclusion on the balance of convenience, rather than a distinct condition precedent to taking jurisdiction.” Accordingly, it would be preferable to abandon the requirement of irreparable harm entirely.

Because my review was historical, I neglected comparative law. In particular, I am embarrassed to admit that I was entirely unaware of the extremely interesting approach long taken by the High Court of Australia, which was brought to my attention by the recent decision of the Australian Federal Court in Apple v Samsung Electronics [2011] FCA 1164, reported by IPKat here. The law applied in that case derives from the decision of the High Court in Beecham Group v Bristol Laboratories [1968] HCA 1, a patent case. Beecham established a two-part test for an interlocutory injunction, which considered the probability of success and the balance of convenience; irreparable harm is not a factor at all. It is notable that this test was based directly on an analysis of the original Chancery jurisprudence. In Australian Broadcasting Corporation v O’Neill [2006] HCA 46 Gummow and Hayne JJ at [65]-[72] affirmed this test. Their opinion explained further that the assessment of the merits did not require a showing that it was more likely than not that the plaintiff would succeed; in this the decision was consistent with Lord Diplock’s speech in Cyanamid [1975] A.C. 396. However, the High Court expressly rejected Lord Diplock’s holding that the court need only be satisfied that the plaintiff’s claim is not frivolous or vexatious, for the very good reason that Lord Diplock’s statements “obscure the governing consideration that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought.”

In my Irreparable Harm article I argued that the correct overarching principle is the “lower risk of injustice” stated by Hoffmann J in Films Rover International v Cannon Film Sales [1986] 3 All E.R. 772 at 780 (Ch.):

The principal dilemma about the grant of interlocutory injunctions. . . is that there is by definition a risk that the court may make the ‘wrong’ decision. . . . A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong.’

The general Australian approach, as I now understand it, is consistent with this principle, and seems entirely sound. The Beecham decision also had some very interesting specific guidelines regarding patent cases in particular. I regret that neglected this important jurisprudence when I wrote my article.

Monday, October 17, 2011

Relevance of Simultaneous Invention to Obviousness

Apotex inc. v. Warner-Lambert Company LLC 2011 FC 1136 Pinard J

This is an appeal from an order of Prothonotary Milczynski, compelling the defendant patentee to disclose when it became aware of patent filings by others that including claims related to the patentee’s invention. The grounds for the order were that such information was relevant to the prior art, and, more interestingly, that “one element of the obviousness of the patents in suit is the fact that other scientists in the field came to the same invention in and around the same time” [7]. In other words, the order raises the question of the relevance of simultaneous invention to the question of obviousness.

As I argued a post last week, so-called “secondary” evidence is not substantively secondary. With that said, not all secondary evidence is made equal. Failure of others is especially compelling evidence of inventiveness. As the High Court of Australia noted in Lockwood v Doric(No 2) [2004] HCA 58 at [119], “When skilled, non-inventive persons, and in this case also a skilled inventive person, looking for improvements, fail to arrive at the invention, it is impossible to suggest that it would have been obvious to the skilled and not necessarily inventive person.” The combination of long-felt need and commercial success, traditionally the strongest secondary evidence, is ultimately derived from this point, as those circumstances permit the inference that others tried and failed.

However, the converse is not true. Success of others – simultaneous invention – in itself, does not generally establish obviousness, as those others may also be inventive, particularly since invention does not require genius. As the English Court of Appeal noted in Mölnlycke v Procter & Gamble Ltd, [1994] RPC 49 (CA) at 132 “The inventive step may not have been large and it is not surprising to us that more than one inventor may have had broadly the same idea at around the same time.” This is especially likely in an active area of research. When several companies are pursuing a lucrative goal with talented researchers, it should not be surprising that several may arrive at the same solution, even though it requires invention. This is implicit in the old system of first-to-invent: as the Fed Cir has said 620 F.2d 1247 (1980): “Nothing should be more clear in the law of patents than the concept that the same patentable invention may be contemporaneously made by more than one inventor,” noting “The statute establishing interferences in the PTO, 35 U.S.C. s 135, is entirely premised on the concept that the same nonobvious invention may be contemporaneously made by a plurality of inventors.”

With that said, evidence of simultaneous invention may be relevant in light of the details of the circumstances of the invention. If all inventors had difficulty in arriving at the invention, simultaneous invention may reinforce a conclusion of non-obviousness; on the other hand, if several others arrived easily at the invention, this would be evidence of obviousness, even though the patentee might have struggled.

Wednesday, October 12, 2011

“Secondary” Evidence of Obviousness Is Not Secondary in Importance

Two types of evidence are normally adduced in the obviousness inquiry: evidence relating to the circumstances of the invention, such as long-felt need and commercial success, and evidence of expert witnesses as to how a person skilled in the art at the time would have approached the problem. It is now normal to refer to the former as “secondary” evidence. There is nothing wrong with this as a label, but in Mölnlycke v Procter & Gamble Ltd, [1994] RPC 49 (CA) at 113, the English Court of Appeal stated that “[t]he primary evidence will be that of properly qualified expert witnesses who will say whether or not in their opinions the relevant step would have been obvious to a skilled man having regard to the state of the art. All other evidence is secondary to that primary evidence,” and that secondary evidence “must be kept firmly in its place. It must not be permitted, by reason of its volume and complexity, to obscure the fact that it is no more than an aid in assessing the primary evidence.” In other words, “secondary” is not merely a label, but indicates that such evidence is intrinsically of lesser significance than the evidence of expert witnesses. This view, which has since been repeated in a some English decisions, is wrong both in principle and as a matter of Canadian law. The true rule, in Canada, as well as Australia, and indeed in England, is that the court must consider all relevant factors including circumstantial evidence, giving weight to each according to the circumstances of the case: see e.g. 2007 FCA 217 at [27]. It is nonetheless useful to distinguish these two types of evidence, as each is subject to different frailties: assessment of obviousness based on the evidence of expert witnesses is subject to the hindsight bias, while establishing causation is the main problem with circumstantial evidence. While there is no formal hierarchy of evidence in Canadian law, the general tendency is the opposite of that suggested by the “primary / secondary” labels. When circumstantial considerations point strongly in the direction of inventiveness, an argument in favour of obviousness based on expert opinion evidence will rarely prevail.

Friday, October 7, 2011

Computer Implemented Inventions in the UK

Halliburton Energy Inc’s Patent [2011] EWHC 2508 (Pat) Birss J

This recent decision of Birss J in the English Patents Court on the patentability of computer-implemented inventions is of some interest in light of the appeal pending before the FCA in 2010 FC 1011 under appeal A-435-10. While is about business methods, the decision of the FCA in Schlumberger 56 CPR (2d) 204 (CA), which dealt with computer-implemented inventions, it is relevant for its general approach to patentable subject matter, and it appears that the FCA in will consider the implications of Schlumberger: see communication of 2011-07-07. While Birss J’s decision is not high authority in itself, Birss J undertook a thorough review of the UK and EPO jurisprudence, which makes it clear that the application which was denied in Schlumberger would now be granted in England, despite the fact that the UK Patents Act, 1977 s 1(2)(c), following the EPC Art 52(2), expressly provides that “a program for a computer” is not patentable “as such.”

Because of the statutory difference, this conclusion is not directly relevant to Canadian law. Nonetheless, it is not unreasonable to look to international law, whether statutory or otherwise, as a guide to general principles. The Commissioner did exactly this in the decision under appeal in Schlumberger, CD 441. Because of the paucity of Canadian case-law, the Commissioner’s decision was based primarily on US Supreme Court decisions. In an article in the forthcoming issue of the CIPR (which has just gone to press), “The Rule Against Abstract Claims: A Critical Perspective on US Jurisprudence,” (2001) 27(1) C.I.P.R. 3 (draft here), I argue that Schlumberger was wrongly decided because the USSC decisions on which it was based are inconsistent with SCC jurisprudence. The Commissioner in Schlumberger also pointed at p.16 to the statutory restriction in English law as supporting its conclusion, upheld by the FCA, that a restrictive approach to computer-implemented inventions should be adopted. It is now clear that the Commissioner’s interpretation of the English provisions was overly simplistic, and consequently incorrect. That English law has now adopted a generous approach to the patentability of computer-implemented inventions, despite the statutory restriction, reinforces the conclusion that Schlumberger was wrongly decided.