Friday, June 29, 2012

No Contributory Infringement Without “But For” Causation

Apotex Inc v Nycomed Canada Inc / pantropazole 2012 FCA 195 Noël JA: Evans, Sharlow JJA aff’g 2011 FC 1441 Simpson J (blogged here).

Nycomed’s ‘748 patent claims a combination of pantoprazole with a heliobacter inhibiting anti-microbial agent. Apotex and Novopharm sell generic pantoprazole. Since the ‘748 patent does not claim pantoprazole itself, Nycomed sought to allege that the generics’ sale of pantoprazole constitutes contributory infringement. The theory is that pharmacists and physicians who dispense or prescribe pantoprazole and an anti-microbial agent are direct infringers, and the generics have “contributed to the infringing activities of these third parties through its product monograph, website and its marketing strategies to physicians and pharmacists” [FC 2].

The factual problem for Nycomed is that the combination of an antibiotic with a proton pump inhibitor (PPI), such as pantoprazole, is now the “gold standard” for the treatment of ulcers caused by H pylori (see 2006 FC 1411 at [30]), so it is very likely that substantial infringement would occur regardless of the generics’ marketing. Nycomed therefore sought to allege that the generics were liable for contributory infringement “distinct from the ‘but for’ allegation of inducement” [FC 2].

The legal problem with this claim is that contributory infringement is not recognized as such in Canadian law. As the FCA stated in Beloit Canada Ltee/Ltd et al v Valmet Oy (1988) 20 CPR(3d) 1 (FCA) (citations omitted):

Moreover, it is well established that there is no infringement of a patent in selling an article which does not in itself infringe the patent even when the vendor knows that the purchaser buys the article for the purpose of using it in the infringement of the patent. There seems to be only two exceptions to that rule, namely, that there is infringement:
(a) if the vendor, alone or in association with another person, sells all the components of the invention to a purchaser in order that they be assembled by him; and
(b) if the vendor, knowingly and for his own ends and benefit, induces or procures the purchaser to infringe the patent.

The second branch, inducement, is defined by the following three part test, set out most recently in Corlac v Weatherford 2011 FCA 228 at [162]:

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

Second, the completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place.

Third, the influence must knowingly be exercised by the inducer, that is, the inducer knows that this influence will result in the completion of the act of infringement.

The second part amounts to a requirement that the direct infringement would not have taken place “but for” the acts of the alleged inducer.

Consequently, Simpson J held that Nycomed could not amend its claim to allege contributory inducement distinct from the “but for” allegation of inducement. Nycomed argued that the SCC decision in Monsanto v Schmeiser, 2004 SCC 34 had changed the law. Simpson J disagreed, and the FCA affirmed, saying “we adopt the reasoning set out at paragraph 27 of her reasons for holding that the decision of the Supreme Court in Monsanto Canada Inc. v. Schmeiser, 2004 SCC 34, is not indicative of an intention to depart from the existing precedents and to recognize 'contributory infringement' as a cause of action under the Canadian law.” My own view is also that Simpson J’s interpretation of Schmeiser was entirely correct.

There is nonetheless a problem in this kind of situation, at least in principle. Assume that the physicians are directly infringing, as alleged. Suppose that most would have infringed in any event, but in a substantial minority of cases, say 40%, the generics were the “but for” cause of the direct infringement. In that case Nycomed would not be able to establish “but for” causation for physicians as a class, even though the generics marketing efforts were the “but for” cause of a substantial loss.

This is exactly the problem of mass torts, which was addressed at common law by permitting liability based on “material contribution” rather than but for causation: see McGhee v National Coal Board [1972] 3 All ER 1008 (HL). This solution is very unsatisfactory, as it raises the opposite problem, that the defendant might be liable for all the loss, even though it was only the “but for” cause of a part. Material contribution is consequently disfavoured: see, most recently, Clements v. Clements, 2012 SCC 32. In refusing to relax the causation requirement for contributory infringement to something approaching material contribution, the FCA holding in this case is consistent with this general trend. The problem is solved more satisfactorily by class actions, in which the defendant can be made liable for only the proportion of the harm that it actually caused. I am not suggesting that a class action would be appropriate in this case. Class actions allow a class of plaintiffs to sue a single defendant for what might be called “contributory” causation, rather than allowing a single plaintiff to sue a class of defendants, and in any event, Nycomed wants to sue the generics, not the doctors. The point is simply that there is a real problem in principle which is not satisfactorily addressed by “but for” causation.

At another level, the problem is that the only practical means of enforcing the patent at issue in this case, or a use patent, as was at issue in Abbott / lansoprazole (NOC) 2006 FC 1411 aff’d 2007 FCA 251, is by an action against the generic, and yet the generic is entitled to sell the individual compound. I can’t help but think that there must be a better way of sorting this out than disputing over whether 40% or 60% of doctors would be influenced by the product monograph, but I have to admit that I can’t think of what that better way might be.

Friday, June 22, 2012

Can Comity Rationalize NOC Litigation?

Allergen Inc v Apotex Inc / COMBIGAN (NOC) 2012 FC 767 Hughes J

In Allergen Inc v Apotex Inc / combigan (NOC) Hughes J faced an NOC proceeding involving the same product and the same patent, but a different generic, as was addressed by Crampton J in Allergan Inc v Sandoz Canada Inc / combigan (NOC) 2011 FC 1316 (blogged here and here). Crampton J held that Sandoz’s allegation that Allergan’s 764 patent was invalid for obviousness was not justified. In contrast, Hughes J concluded that Apotex’s allegation that the patent was invalid for obviousness was justified. Hughes J nonetheless granted an order of prohibition, citing the need for comity. He also expressed concern that “that this Court is overwhelmed at times with NOC Regulation proceedings,” [70] and that it is necessary for the FCA to give instruction on the question of “how, in an NOC context, previous decisions of a Court on the same issues respecting the same patent, should be considered” [193]. He concluded that “only practical way to get the matter before the Court of Appeal is for me to grant the Order for prohibition in the likely expectation that Apotex will appeal” [194].

Thursday, June 21, 2012

Refusal of Joinder Affirmed

Janssen Inc v Teva Canada Ltd 2012 FCA 137 Pelletier JA: Sharlow, Stratas JJA

In brief reasons from the bench, Pelletier JA affirmed the order of Hughes J in 2011 FC 1480, blogged here, dismissing a motion for the joinder of parties.

No Section 8 Recovery of Losses Incurred Outside Compensable Period

Teva Canada Ltd v Nycomed Canada Inc 2012 FCA 129 Evans JA:Dawson, Stratas JJA

In a brief decision upholding an order to strike portions of Teva’s statement of claim, the FCA has reaffirmed that in a claim for damages under section 8 of the NOC Regulations, losses incurred by a generic after the end of the compensable period are not recoverable, even if the losses were caused by the statutory stay. The rule was established in Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187 (old Regulations) and Teva Canada Ltd v Sanofi-Aventis Canada Inc / ramipril (NOC) 2011 FCA 149 (new Regulations, blogged here). This brief decision adds nothing, except to say that Sharlow JA’s dissent in the ramipril decision will not cause the FCA to reconsider: “Teva's remedy is to apply again for leave to appeal to the Supreme of Court of Canada where Justice Sharlow's dissent can be considered again, and not to re-litigate in the Federal Court and in this Court a matter that has already been decided” [11].

Wednesday, June 20, 2012

Is the Essentiality of a Claim Element a Question of Fact?

Hollick Solar Systems Ltd v Matrix Energy Inc 2012 FCA 174 Létourneau JA: Blais CJ, Pelletier JA aff’g 2011 FC 1213 Scott J (blogged here)

Hollick brought an action alleging that Matrix infringed its patent in a solar air heating system. Matrix defended on the basis that its system did not infringe, as the patent specified that the heated air is removed into the building through a plenum at “the top” of the panels, while the defendant’s device placed the air intake at the bottom of the panel. Since a patent may be infringed despite a substitution of a non-essential element of the invention (Free World Trust 2000 SCC 66 [55]), the question was whether the location of the air intake at the top of the panel was an essential element. Scott J’s opinion is one of the very few decisions to actually apply the three-step Improver test for essentiality that was approved in Free World Trust at [55]-[56]. The first step in that test is to ask whether the “variant” – the defendant’s device – has “a material effect on the way the invention works.” But what is meant by “the invention”? The inventive concept, or the invention as claimed? This question was raised directly on the facts (though it was not addressed specifically in the decision), as it appears that the defendant’s system was less efficient, and the placement of the intake at the bottom was intended to avoid the claims. Scott J at trial held that it was essential, and therefore the defendant’s system did not infringe, as the placement had a material effect on the way the invention worked: “The criteria is not whether the variant improves the performance of the invention but rather does it have a significant effect on how the device functions, be it positive or negative” [59]. Because Scott J considered only the claims, and not the inventive concept in coming to this conclusion, it is implicit that he took “the invention” in the Improver test to mean the invention as claimed.

The only question dealt with on appeal was whether Scott J erred in holding that the placement of the intake was an essential element. The FCA affirmed, noting that the determination of whether there was a material effect depended on the testimony of expert witnesses, and “[w]e are in effect asked to second-guess the judge on his appreciation of expert evidence on factual issues and issues of credibility, and then substitute our own appreciation” [17]. The FCA stated that it was not persuaded that Scott J had made an error of law or an overriding and palpable error on a question of fact or mixed law and fact.

This holding has two interesting implications. First, it indirectly affirms that “the invention” in the Improver test means the invention as claimed, not the inventive concept. However, it is not particularly strong authority on this point, as the question of the correct interpretation of the Improver questions point was not raised specifically either at trial or on appeal. As I noted in my post on Scott J’s decision, my own view is that the better interpretation of the Improver questions is that “the invention” means the inventive concept. With that said, the answer is certainly not easy to extract from the “mangle” of the Improver decision.

Second, the standard of review applied by the FCA implies that the question of whether an element is material is a question of fact, or at least mixed fact and law, and is therefore entitled to deference. Does this also mean that the question of whether an element is essential is a question of fact? Are the three different questions in the Improver test to be assessed on different standards? This question is not easy to answer, given that the Improver test is not consistently used. The FCA’s point that evaluation of technical evidence was required is certainly compelling on the facts in Hollick, but its approach may be contrasted with that taken by the FCA in Easton Sports Canada Inc. v Bauer Hockey Corp 2011 FCA 83, (blogged here). In Bauer the FCA affirmed the trial decision that the element was essential only after a detailed consideration of the evidence, and rather than affirming on the basis of lack of error, the FCA held affirmatively that the element in question “is an essential feature of the claim” [54]. With that said, it is not clear whether this reflects any difference in principle, or simply reflects differences in the way the cases were argued.

Monday, June 18, 2012

No New Cases for the Week of 10 June

No new patent / NOC / data protection cases were released by the Federal Courts in the week of 10 June.

Friday, June 8, 2012

Certification Not Required to Establish Start Date for Section 8 Compensable Period

Apotex Inc v. Merck & Co., Inc. / lovastatin (NOC) 2012 FC 620 Snider J on remand from 2011 FCA 364 (blogged here)

Section 8(1)(a) of the NOC Regulations provides that the presumptive start date for the compensable period under s 8 is “the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations.” In this case, there was no evidence that the Minister had certified a date. Snider J held that despite the absence of a certification, the appropriate start date was the date on which, on the facts, Apotex would have received its NOC:

[15] Merck is correct that there is no Ministerial “certification” of May 25, 1996 as contemplated by s. 8(1)(a). However, I am satisfied that, but for the Regulations, Apotex would have received its NOC for Apo-lovastatin no later than May 25, 1996.

Thus certification by the Minister is not a prerequisite to recovery of s 8 damages; the main consideration is when the generic would have received its NOC, but for the Regulations. In this case it was uncontroversial that the “patent hold date” was May 25, 1996 [14]. This conclusion is somewhat difficult to reconcile with the text of the Regulations, as even the discretion provided for in s 8(1)(a)(ii) refers to “the certified date.” However, the evident purpose of the Regulations is to permit recovery from the patent hold date, and it is reasonable to interpret the certification date as being a matter of evidence rather than substance. The 1998 amendments to the Regulations remedied many drafting problems in the notoriously obscure 1993 version, but it not surprising that more drafting issues will arise as s 8 cases are fully litigated.

Thursday, June 7, 2012

Resolution on Section 8 Claims re Valid Patents

Apotex Inc v. Merck & Co., Inc. / lovastatin (NOC) 2012 FC 620 Snider J on remand from 2011 FCA 364 (blogged here)

What happens if a generic is successful in NOC proceedings, but unsuccessful in a subsequent infringement action? Can the generic claim s 8 damages for being kept out of the market by the statutory stay, on the principle that the NOC proceedings and the infringement proceedings are independent? Or is the generic barred from claiming s 8 damages, on the principle that it would have been infringing a valid patent by entering the market? We appear to finally have resolution on this question as Snider J’s lovastatin decision and Hughes J’s omeprazole decision, blogged here, give consistent answers to this question.