The State of the Art for the Purposes of Obviousness

This is a plug for my most recent article, “What is the State of the Art for the Purpose of an Obviousness Attack?” which has just appeared in 27(2) CIPR 385. Traditionally the body of prior art which may be set up against a patent in an obviousness attack includes only that prior art which is common general knowledge or reasonably discoverable by a person skilled in the art. However, the codification of the obviousness requirement in s 28.3 refers to information disclosed “in such a manner that the information became available to the public in Canada or elsewhere,” which is almost exactly the same wording as used in respect of anticipation, in s 28.2. On its face this implies that the entire body of public information is available in respect of an obviousness attack, as it is for an argument of anticipation: see AD Morrow, “Patent Update” (2003), 20 CIPR 237 at 248 suggesting that in consequence of the codification, the prior law has been “swept away, and everything available to the public is now to be considered.” Less dramatically, as Hughes J noted in Merck & Co Inc v Pharmascience Inc 2010 FC 510 [37], there is a “quaere” as to whether the codification of the non-obviousness requirement in section 28.3 of the new Act has changed the law, so that all publically available prior art may be used in an obviousness attack, regardless of whether it would have been discovered by a reasonably diligent search. My article reviews the debate, including the English case law, which addressed exactly the same question, inconclusively, under the Patents Act, 1949. In considering the purpose of the provision, I argue that the English Court of Appeal in Windsurfing v Tabur Marine [1985] RPC 59 – the source of the Windsurfing / Pozzoli test approach to obviousness – was wrong in principle when it held that the prior public, but isolated, use of a sailboard by Peter Chilvers, a 12 year old boy, was part of the state of the art for purposes of an obviousness attack. I conclude that the best view is that the codification has not changed the law, but the textual argument is strong enough that a judicial decision will be required to settle the question definitively.

Bifurcation Restored

Dywidag Systems International, Canada, Ltd v Garford Pty Ltd 2012 FCA 50 Layden-Stevenson JA: Gauthier, Stratas JJA

As noted in yesterday’s post, Garford commenced an action against Dywidag based on alleged infringement of Garford’s patents, as well for alleged breaches of the Competition Act. Prothonotary Milczynski ordered bifurcation of the action, which was reversed by Zinn J 2010 FC 581 on the basis that the financial information necessary at the remedy phase would be relevant to the proof of the claim for lessening of competition under the Competition Act [FC 16]. Now that the Competition Act claim has been dismissed as being out of time, that basis for setting aside the bifurcation no longer exists [5], and the FCA accordingly restored the bifurcation order.

It is not always reasonable to pursue all reasonable points

Today’s EWCA costs judgment in MMI Research Ltd v Cellxion Ltd & Ors [2012] EWCA Civ 139 raises an interesting point of principle, as the Court of Appeal declined to award costs to the defendants, which had ultimately prevailed on a question of obviousness, because they had raised so many issues on which they lost. Notwithstanding that the points raised may have been individually reasonable, the sheer number was not:

We think the defendants were indeed profligate in the number of points they took. A defendant cannot take as many "reasonable" points as it likes and not have to pay for any of them if they are unsuccessful. If he has a large number of potential such points he should make a judgment as to which are the better ones. A good test to apply is not merely "is this point a reasonable runner?" but also "which of my reasonable runners are the best few?" If only a few such points are run and all but one fails, the court may deprive the party of its costs of the unsuccessful points. But there comes a point when more sanction is called for. This is particularly important in a patent action where very often a host of possible defences could be run. A reasonably strict costs regime should make a defendant concentrate on his best – which may indeed also give him a better chance of winning.

The English and Canadian rules are different, and I am not an expert on either, but so far as I can tell, the Federal Courts Rules would permit a similar result, at least in principle. Has this question been raised in the Canadian Federal Courts?

Limitations Period Ends Garford's Competition Act Claim

Garford Pty Ltd. v. Dywidag Systems International, Canada, Ltd. 2012 FCA 48 Layden-Stevenson JA: Gauthier, Stratas JJA

The latest chapter in the saga of procedural wrangling between Garford and Dywidag tells us that this book will not, after all, be about the relationship between patent law and competition law. Garford commenced an action against Dywidag based on alleged infringement of Garford’s patents, as well for alleged breaches of the Competition Act. In 2010 FC 996 Russell J granted Dywidag’s motion for summary judgment and dismissed Garford’s claim under the Competition Act on the basis that it was out of time. The Court of Appeal has now affirmed, essentially for the reasons given by Russell J.

Garford’s claim was based on s 36 of the Competition Act, and the applicable limitation period is established in s 36(4)(a)(i) as being two years from a “day on which the conduct was engaged in … .” Gardford itself had specified the conduct as being Dywidag entering into certain purchase agreements [FC 16]. Two years from the latest agreement was March 2008, and the action was commenced in August 2008. Garford had argued that the period running of the limitation period did not run from the date of the last agreement because of the reasonable discoverability rule. Russell J held that the rule did not apply to subsection 36(4) of the Competition Act [FC 32], and even if it did, it was not relevant on the facts of the case as, inter alia, Garford was fully aware of all the relevant facts by April of 2006. The Court of Appeal affirmed on the latter basis, without any indication as to its view on the legal question of whether the discoverability rule applied to subsection 36(4).

Garford also argued that the cause of action was continuing, essentially on the grounds that even though the purchase agreements were entered into on a specified date, these agreements had ongoing consequences. Russell J held that the offence (if any) was complete at the date the agreements were entered into, even if the agreements had continuing consequences [FC 42]. The Court of Appeal affirmed [19].

One More Time: No Reach-back under Section 8 of the NOC Regulations

Apotex Inc. v. Warner-Lambert Company LLC / quinapril 2012 FC 202 Lemieux J

The patentee was successful in NOC proceedings relating to two patents. Apotex then brought an impeachment action in respect of the same patents. One of the patents has now expired, and the patentee sought to have the action dismissed in respect of that patent on the ground of mootness. Apotex argued that the action was not moot, and even if it was, the court should exercise its discretion to hear the action because it would affect Apotex’s right to damages under s 8 of the NOC Regulations, and a possible future action under the Ontario Monopolies Act.

Applying very well established FCA jurisprudence, Lemieux J held that the action was moot, and the court should not exercise its discretion to hear it. Entitlement to s 8 damages requires success in the s 8 action itself. Success in a subsequent infringement or impeachment action is irrelevant: “The jurisprudence established by the FCA is clear that in the circumstances of this case there is no reach-back under section 8 of the NOC Regulations” [50].

Lemieux J’s analysis did not address the argument that the action should be heard because it would impact on a possible future action under the Ontario Monopolies Act. Presumably he accepted the patentee’s submission that this basis was too speculative to justify hearing an otherwise moot appeal, as there have been no reported cases under that Act [10].

Apotex also argued that the action should be heard in respect of the expired patent, as the action would proceed in respect of the related unexpired patent. Lemieux J pointed out that new evidence would have to be heard, as the invalidity of the expired patent had not been considered in the NOC proceedings (only non-infringement had been argued), and in any event there was no point to adding any complexity to the trial in respect of an issue which would have no practical effect on the parties rights [52].

A Purposive Interpretation of “Innovative Drug”

Celgene Inc. v. Canada (Health) / THALOMID 2012 FC 154 de Montigny J

In his decision in THALOMID de Montigny J has held that thalidomide is an “innovative drug” under the Data Protection Regulations, and so Celgene is entitled to have it listed on the Register of Innovative Drugs. While thalidomide has a very unusual history, and de Montigny J himself stated that “the present decision will have a limited impact in the foreseeable future” [47], the reasoning underpinning de Montigny J’s interpretation marks an important and welcome development in the interpretation of the Regulations.

SCC Decision on Access to NDS Information

Merck Frosst Canada Ltd v Canada (Health), 2012 SCC 3 var’g 2009 FCA 166 var’g 2006 FC 1201, 2006 FC 1200.

The litigation in this case concerned a request made under the Access to Information Act by a competitor of Merck’s [FCA 4], for access to information submitted by Merck as part of the regulatory approval process for Singulair®. While the Supreme Court dismissed Merck’s appeal in 6 - 3 split, the decision as a whole is not hostile to the interests of innovator pharmaceutical companies. It should remain possible for an innovator to protect all significant information in an NDS, though it will be more burdensome to do so than if the dissenting view had prevailed. In some important respects the Supreme Court decision is clearly more favourable to innovator pharmaceutical companies than was the decision of the FCA.

An Accounting Really Is Difficult in Some Cases

Eurocopter v Bell Helicopter Textron Canada Limitée 2012 FC 113 Martineau J

In Eurocopter Martineau J held that the successful patentee was not entitled to an accounting of the defendant’s profits. Martineau J began his discussion of this point with what is becoming a standard assertion of the complexity of an accounting as a reason that courts “have been very reluctant to grant such remedy. Perhaps such complexity does not prevent the Court from exercising its discretion, but there must exist good reasons to do so” [411], citing the decision of Snider J in Merck & Co Inc v Apotex Inc / lovastatin 2010 FC 1265, [615]-[616]. It may be that an accounting is a difficult calculation, but the real question is whether it is more difficult than the damages calculation. As I commented in my post on the lovastatin decision, the courts have often remarked on the difficulty of an accurate calculation of damages (see cases cited in that post), and I fail to see why an accounting of profits is generally more difficult that a calculation of lost profits damages. The former compares the profits the defendant actually earned with the hypothetical profits that would have been earned using the best non-infringing alternative, while the latter compares the profits the plaintiff actually earned with the hypothetical profits the plaintiff would have earned had the defendant not infringed. Both require discovery of similar kinds of information, and both require construction of a hypothetical “but for” scenario.

Moreover, an accounting has at least two advantages. As between an accounting and lost profits damages, if the remedial order is going to require one competitor to open its books to the other, surely it is more equitable to order the wrongdoer to open its books to the successful patentee, rather than the other way around. And as between an accounting and reasonably royalty damages, an accounting provides a better deterrent, as the reasonable royalty amounts to a compulsory licence. As Zinn J has pointed out in Monsanto Canada Inc. v. Rivett 2009 FC 317 at [23], “[a]t the level of principle, there is no deterrent from infringing the patent if what the infringer is required to hand over is the sum he would otherwise have paid to Monsanto to buy the seed and the licence. In fact, this would almost be counter to the purpose of deterrence. It is much like saying, as the plaintiffs put it in their oral submission, ‘Catch me if you can’. If caught, the defendant would be required to pay the sum he would have paid to use the patent in any event. When not caught, he is left with a windfall.”

This does not mean that an accounting is always preferable; it does mean that question of whether an accounting is justifiable as compared with the damages remedy will turn on the facts of the particular case, not on broad generalizations.

In this particular case, Martineau J pointed out that an accounting would be complex because “landing gear, although essential for the proper functioning and security of a helicopter, represents just a small part of the total cost of a helicopter” [412]. While it is often possible to prove sales (whether by the infringer, in an accounting calculatin, or by the patentee, in a lost profits calculation), attributable to some patented feature, that is an easier inquiry when the patented feature is an important selling point. Further, in this case, Bell did not actually sell any helicopters at all that were equipped with the infringing landing gear; the argument for an accounting of profits would be that it had secured extra sales of models equipped with non-infringing gear on the basis of marketing of prototype models equipped with infringing gear. This is an particularly speculative inquiry. It is true that Eurocopter’s lost profit damages would be just as speculative – it would be require exactly the same inquiry – but the consequence would very probably be that Eurocopter would be confined to reasonable royalty damages, which would likely be a significantly easier calculation.

In this case I am entirely persuaded that on the facts Martineau J’s decision to refuse an accounting was correct for the reasons he gave, but I hope that dubious generalizations about the relative complexity of an accounting do not become entrenched through repetition.

When Should Entitlement to Punitive Damages be Determined?

Eurocopter v Bell Helicopter Textron Canada Limitée 2012 FC 113 Martineau J
 
Yesterday’s post addressed the question of whether it appropriate to hold that Eurocopter was entitled to punitive damages. A preliminary question is whether it appropriate to make this determination prior to the actual assessment of damages. In Apotex v Merck / Vasotec 2003 FCA 291, [34], Sharlow J stated(emphasis added):

The purpose of punitive damages is to punish, to deter the wrongdoer and others, and to denounce wrongful behaviour. Punitive damages are awarded only where compensatory damages and other normal civil remedies are insufficient to accomplish those objectives, and in an amount that is no greater than necessary to accomplish that objective: Whiten, supra; Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130. It is axiomatic that until all the ordinary civil remedies are finally determined (which in this case would include a determination as to whether the remedy is an award of damages or an accounting of profits, and the quantum), it is impossible to determine whether punitive damages are required to meet the objectives of punishment, deterrence and denunciation.

Martineau J distinguished Vasotec on the basis that in that case there had been a de facto bifurcation of liability and remedies generally, not just quantum. That is true, but it is not clear that this distinction addresses the FCA’s point, which is that the court cannot tell whether compensatory damages are sufficient for deterrence until the court knows the quantum of those compensatory damages. Martineau J responded by stating that in his view of the evidence, ordinary damages were likely to be minimal and “will simply not be enough to achieve the goal of punishment and deterrence” [455]. In other words, even without a full determination of damages, he was nonetheless in a position to make the determination that ordinary damages would be insufficient for deterrence. I have argued in yesterday’s post that this is not persuasive.

Martineau J also justified his decision on the much more persuasive ground that entitlement to punitive damages was dependent in large measure on the conduct of the infringer. This was a matter that had been thoroughly canvassed at trial, and delay would make determination of this issue all the more difficult [454], and therefore he was best placed to make the determination. This is a compelling point which is complementary to, rather than inconsistent with, the FCA’s point in Vasotec: whether punitive damages are appropriate depends on both the quantum of compensatory damages and the conduct of the parties, so in principle a determination as to entitlement should not be made until both have been addressed. The problem remains, as Martineau J pointed out, that because of the bifurcation, both factors cannot be determined in the same proceedings. In principle, perhaps the best course would have been for Martineau J to have made findings as to whether the conduct is of the type that would warrant punitive damages, and then leave it for damages phase to determine whether punitive damages are warranted, in light of those findings and the quantum awarded as compensatory damages. In practice, given that Martineau J did not actually specify the quantum, which will only be determined at the damages stage, his holding that Eurocopter is entitled to punitive damages is not so different from merely making findings as to the relevant facts.

For an overview of this decision, see here.

Problematic Entitlement to Punitive Damages

Eurocopter v Bell Helicopter Textron Canada Limitée 2012 FC 113 Martineau J

In Eurocopter v Bell, Martineau J, having held one claim of Eurocopter’s patent to be valid and infringed, went on to hold that Eurocopter is entitled to punitive damages, though the quantum was left for determination pursuant to the order bifurcating damages assessment. This holding is the most legally novel aspect of Martineau J’s decision, and in my view it is also the most problematic.

The factors that Martineau J pointed to in holding that punitive damages were warranted were that Bell intentionally copied “the unique and new patented technology developed by Eurocopter” [430], without any attempt to avoid infringing the patent [431], with knowledge of the patent [432]. From this Martineau J concluded that:

[ 433] On a balance of probability, the Court finds that there is clear evidence of bad faith and egregious conduct on the part of Bell. This is not a case where the infringement is small, trivial or isolated, or where the defendant is unsophisticated or ignorant. This is a case of wilful blindness or intentional and planned misappropriation of the claimed invention. Eurocopter has proven that the infringement of the '787 Patent by the making and use of the Legacy gear was not innocent or accidental.

In short, intentional copying of a product that the defendant knows to be patented is conduct warranting punishment. This is an entirely novel concept in Canadian patent law, and it is very worrying as a matter of policy.

Eurocopter v Bell Overview

Eurocopter v Bell Helicopter Textron Canada Limitée 2012 FC 113 Martineau J

Eurocopter v Bell is a familiar case name from numerous visits to the Federal Court on discovery matters, but now the infringement decision itself is available. It has not yet now been posted to the Federal Court website, but Alan Macek has made it available through his IPPractice site. Eurocopter’s patent in question, 2207787, relates to sled-type helicopter landing gear which was known as “Moustache” gear. Matineau J held that one claim was valid and infringed by Bell’s prototype “Legacy” landing gear, but no valid claims were infringed by Bell’s current “Production” gear. The most interesting legal aspect of the decision is that Martineau J held that Eurocopter as the successful patentee was entitled to punitive damages, which is extremely unusual in Canadian patent law. I will deal with that issue in a separate post. This post will provide a synopsis of the remainder of the decision.