Wednesday, December 31, 2014

No Discretion to Extend Time Limits for Reinstatement of Abandoned Applications

Cloutier c Thibault 2014 CF 1135 St-Louis J
            2,437,612, 2,470,139, 2,553,144

Mr Cloutier invented a new type of crimping tool for use in plumbing. He entered into a partnership with Mr Thibault to patent the invention and commercialize it [5]. Mr Thibault filed three patent applications for the invention without informing Mr Cloutier, and naming himself rather than Mr Cloutier as the inventor [6], [9]. Mr Cloutier successfully moved to have the partnership dissolved and to establish his entitlement to the inventions [11], but during and shortly after that litigation the applications were abandoned for failure to pay maintenance fees, in accordance with s 27.1 and 73 of the Act [12]. No application for reinstatement was made within the 12 month grace period provided by s 98 of the Rules.

In this case, Mr Cloutier asked the court to reinstate the application, and to name him as the inventor. St-Louis J refused, on the ground that the court has no jurisdiction in law or equity to extend the mandatory time limits established by the Act [23-24]. That proposition is well-established by the authorities cited by St-Louis J: see in particular Hoffmann-La Roche AG v Canada (Commissioner of Patents), 2003 FC 1381 [41-45] aff’d 2005 FCA 399 [7-8].

Given the mandatory nature of the time limits, this conclusion would evidently follow regardless of whether Mr Cloutier would have been in a position to seek relief in a timely manner, but the court noted that the evidence suggested that Mr Cloutier could have taken steps before the applications were irrevocably abandoned [25].

The court also refused to order the application amended to show Mr Cloutier as the inventor, as this would have been pointless given the refusal to reinstate the application [27].

Friday, December 26, 2014

No New Cases for the Week of 22 December

No new patent / NOC / data protection cases were released for the week of 22 December 2014.

Sunday, December 21, 2014

Liability Decision is Res Judicata in a Bifurcated Action

Merck & Co Inc v Apotex Inc 2014 FC 1058 Hughes J var’g 2014 FC 883 Lafrenière J
            1,275,350 – lisinopril – PRINIVIL

This motion to amend relates to the upcoming damages portion of a bifurcated action. In the underlying Liability decision, 2006 FC 524 aff’d 2006 FCA 323, the patent was held invalid and infringed, in part on the basis of the law set out in Boehringer (1962), 39 CPR 201. Subsequently, in its Viagra decision 2012 SCC 60 [57], the SCC reversed, or at least reinterpreted Boehringer on the relevant issue. In this motion Apotex argued that the law having changed, it should be able to amend its Statement of Issues to argue, in effect, that it should not be made to pay damages for infringement of an invalid patent. In the decision under appeal, Lafrenière J held that the amendment would not be allowed, on the basis of res judicata. In a brief decision, Hughes J has affirmed, largely adopting Lafrenière J’s reasoning [7]. My post on Lafrenière J’s decision discusses the issues in more detail. I noted that while Lafrenière J’s reasoning was strong, I was not convinced that the prior Canadian case law was entirely settled. In adopting Lafrenière J’s reasons, Hughes J’s decision clarifies Canadian law on this point.

In a point which I did not discuss in my previous post, Apotex had also sought an amendment alleging that Merck had breached provisions of the Competition Act. That amendment had also been refused by Lafrenière J. Hughes J allowed these amendments in light of certain concessions made by Apotex regarding their scope [14]-[15].

Sunday, December 14, 2014

No New Cases for the Week of 8 December

No new patent / NOC / data protection cases were released for the week of 8 December 2014.

Monday, December 8, 2014

No New Cases for the Week of 1 December

No new patent / NOC / data protection cases were released for the week of 1 December 2014.

Tuesday, November 25, 2014

A New Framework for Determining Reasonable Royalty Damages in Patent Litigation

Following a jury trial in 2012, a US federal district court entered judgment in the amount of $1 billion in favor of Monsanto in a patent infringement dispute against DuPont. The strange thing about this case is that DuPont had not sold any infringing product at all; yes, you are reading correctly – $1 billion in royalties on zero sales. The $1 billion damages award reflected the jury’s best estimate of the lump-sum royalties that would have been agreed to in a hypothetical negotiation taking place just before the infringement began, in which the parties would only have had information available to the parties at that time (“ex ante information”) That DuPont ultimately did not actually sell any infringing product was ignored as being information that would not have been available to the parties at the time of the negotiation (“ex post information”).

Professor Tom Cotter and I have just posted a draft paper on SSRN, "A New Framework for Determining Reasonable Royalty Damages in Patent Litigation," arguing that this result is wrong. More generally, we argue that the hypothetical negotiation used for assessing a reasonable royalty should be assumed to take place at the time of first infringement (or, more precisely, first reliance), but the parties should be assumed to have available to them all the information that was available at trial. We call this the “contingent ex ante” approach; the hypothetical negotiation takes place ex ante, but it is contingent on all information available ex post. We apply our analysis to a variety of contexts, including standard essential patents; unexpected exogenous events (the market value of the invention changes because of unforeseen factors); separate and distinct infringements (when should damages be assessed on the basis of two distinct hypothetical negotiations, rather than one); regulatory uncertainty (when the patented invention received regulatory approach after the time of the first infringement); non-infringing alternatives (when a patent covering an NIA is held to be invalid after the time of the first infringement, but prior to trial), as well as in the context of lump-sum versus running royalties (which raises considerations of risk-shifting, strategic considerations in licensing and the time value of money).

While our discussion focuses entirely on US law, in my view the principles we discuss are equally applicable to Canadian law. Indeed, I suggest the argument is even stronger in Canadian law, for two reasons.

First, our basic argument is that using all available information, including ex post information, better serves the purpose of the Patent Act, which is to provide an incentive to develop inventions for the benefit of the public. Using ex post information allows more accurate determination of the true value of the invention, and so better aligns the patent incentive with the purpose of the Act. While patent damages are often analogized to a species of tort, they are ultimately statutory, and under the modern Canadian approach to statutory interpretation, the statutory provisions should be interpreted in a manner that it consistent with the purpose of the Act. (This makes our argument stronger than in the US, which has not yet fully embraced a purposive approach to statutory interpretation.)

Secondly, our argument is fully consistent with the Canadian approach to tort damages. In Athey v Leonati [1996] 3 SCR 458, the SCC said “past events must be proven, and once proven they are treated as certainties” [28]. This refers to all event prior to trial: “In this case, the disc herniation occurred prior to trial. It was a past event, which cannot be addressed in terms of probabilities” [30]. Most obviously, special damages are assessed on the basis of reasonable expenses that were actually incurred prior to trial, not what expenses the parties might have anticipated would be incurred. The fact that the plaintiff had not in fact suffered any harm as a result of a tort, perhaps because of a miraculously quick recovery, or that she had suffered unusually severe harm (the thin-skull rule), would certainly be considered in a Canadian tort case; we argue that in a case like Monsanto v DuPont, the fact that the infringer had not in fact made any sales should also be taken into account, for essentially the same reasons.

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 ex post switching 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.

The paper is available at SSRN. It is a draft, so comments are welcome.

Monday, November 24, 2014

“The reasonable person thinks in terms of economics, not principle"

Apotex Inc v Canada 2014 FC 1087 Hughes J
            Trazodone

This decision emerged from a test case in which Apotex and Health Canada battled over the question of whether a generic could apply for an NOC on the basis of a foreign reference product. The case settled on terms favourable to Apotex, but HPB did not live up to the settlement agreement. In this decision Hughes J held Canada liable for breaching that agreement (though because of quirks in the pleadings, the formal ground of liability was in tort rather than contract). In an interesting part of the decision, Hughes J held that Apotex was subject to a duty to mitigate, which would essentially have required it to abandon its test case and leave the question of legal principle unanswered. Hughes J held that the duty to mitigate was nonetheless applicable, because “the reasonable person thinks in terms of economics, not principle” [159].

In the late 1980s, the attitude of what was then the Health Protection Branch (HPB) of Health Canada towards the use of a foreign drug product as the reference product in a generic’s application for an NOC was uncertain. It was the usual practice to use a product approved in Canada as a reference product, but occasionally an NOC would be granted on the basis of a foreign reference product. Apotex wanted a test case to establish whether it was entitled to use a foreign reference product [105]. It picked trazodone, and in January 1988 Apotex filed a New Drug Submission comparing its Apo-Trazad product to the innovator’s US product. On the particular facts, the use of a foreign reference product was scientifically sound, but HPB was concerned that allowing the use of a foreign reference product might set a precedent for circumstances in which the comparison was not appropriate [39]. Consequently, HPB “insisted on a Canadian standard, unless the United States reference product could be ‘conclusively proven to be identical’ to the Canadian product” [44]. The requirement of identicality made it effectively impossible to use a foreign reference product [44]. In other words, both Apotex and HPB were treating this as a test case. In light of this impasse, in 1990 Apotex sought judicial review of the Minister’s position. That litigation was settled on terms favourable to Apotex by a Settlement Agreement in November of 1990 in which HPB agreed to assess the application on the basis of “equivalency” rather than identicality [51].

Friday, November 14, 2014

No New Cases for the Week of 10 November

No new patent / NOC / data protection cases were released for the week of 10 November 2014.

Tuesday, November 4, 2014

It Is Not Necessarily an Abuse of Process for an Innovator to Switch Positions Across NOC Proceedings

Apotex Inc v Pfizer Canada Inc and G.D. Searle & Co / celecoxib (NOC) 2014 FCA 250 Noël CJ: Trudel, Boivin JJA aff’g ) 2014 FC 38 and NOC) 2014 FC 314 Harrington J
            2,177,576 / celecoxib / CELEBREX

The decisions under appeal, Mylan / celecoxib (NOC) 2014 FC 38 and Apotex / celecoxib (NOC) 2014 FC 314 (blogged here and here, respectively), turned primarily on the construction of the promised utility of the ‘576 patent. In both cases Harrington J interpreted the promise of the patent modestly and granted an order of prohibition to Pfizer. In a decision which is primarily an application of Plavix FCA 2013 FCA 186 (blogged here), the FCA has now affirmed both of Harrington J’s decisions. (While Harrington J’s decisions were separate, the reasoning was common, and the appeals were heard together [3].) While the FCA decision elaborates on some points relating to the promise of the patent, it is perhaps more noteworthy in its treatment of abuse of process, particularly the holding that it is not necessarily an abuse of process for an innovator to switch positions across NOC proceedings.

Monday, November 3, 2014

Ex Turpi Causa Not Relevant to Patent Litigation

Les Laboratoires Servier & Anor v Apotex Inc & Ors [2014] UKSC 55 aff’g [2012] EWCA Civ 593 (IPKat) rev’g [2011] EWHC 730 (Pat) (here and IPKat)
            perindopril; Ex turpi causa

Patent protection is national, but trade and innovation incentives are international. This case begins to address that tension. The UKSC held that ex turpi causa is not applicable in the patent context, and so will not affect litigation where goods sold in one country were infringing in another country. Instead of using the blunt hammer of ex turpi causa, the tension should be resolved with the finer sword of damages. The result is to make Canadian damages law more relevant to foreign disputes; the damages portion of the bifurcated Canadian Perindopril, 2008 FC 825 aff’d 2009 FCA 222 litigation, in particular, has taken on added significance.

In 2006 Servier commenced an action in the UK against Apotex for infringement of its European patent for a crystalline form of perindopril. Servier obtained an interlocutory injunction, subject to the usual undertaking in damages. Servier's action was ultimately dismissed, as the patent was declared invalid, and Apotex sought damages on the undertaking for the loss of UK sales. However, the perindopril which Apotex would have sold in the UK would have been manufactured by Apotex in Canada, and Servier also held a Canadian patent for the compound perindopril itself. In proceedings paralleling the UK litigation, Servier sued Apotex in Canada for infringement of the Canadian compound patent. An interlocutory injunction was denied, but Servier was ultimately successful. Thus it became clear that manufacture in Canada of the product which Apotex would have sold in the UK but for the interlocutory injunction, would have infringed the Canadian patent. In the UK proceedings on the undertaking, Apotex conceded that the award on the undertaking should be reduced by an amount equal to the liability that Apotex would (hypothetically) have faced under Canadian law for manufacturing the perindopril which it would (hypothetically) have sold in the UK had the interlocutory injunction not been in place [EWCA 22]. Servier, on the other hand, argued that Apotex should be entirely precluded from collecting on the undertaking because the Canadian infringement constituted sufficient "turpitude" to engage the doctrine of ex turpi causa. (This summarizes a somewhat complex procedural history, described in more detail at [2]-[8]; and see also my IPKat post on the EWCA decision.)

Friday, October 31, 2014

STELARA / Anti-IL-12 Antibody Decision Set Aside

Janssen Inc v AbbVie Corporation, 2014 FCA 242 Trudel, Webb, Boivin JJA (for the Court) rev’g 2013 FC 1148 Hughes J and setting aside 2014 FC 55 Hughes J

Janssen Inc v Abbvie Corporation 2014 FCA 241 Trudel, Webb, Boivin JJA (for the Court) setting aside 2014 FC 489 Hughes J
2,365,281 / anti-IL-2 antibodies

In 2013 FC 1148 Hughes J dismissed Janssen’s motion to amend its Schedule A to its Defence and Counterclaim so as to remove some and add other prior art references. The decision of the FCA in 2014 FCA 242 reverses that decision of Hughes J. Consequently, because the amendments in question “go to the heart of one of the major invalidity issues” [15], the FCA also set aside Hughes J’s subsequent decision in the infringement action itself, 2014 FC 55 (blogged here and here). In light of the intimate relationship between the validity and infringement issues, the FCA declined to order a new trial solely on the issues most directly affected by the prior art in question; instead, it acceded to Janssen’s request for a new trial of all the issues [32]. The FCA also ordered that the trial would be before a new judge [32].

In 2014 FCA 241 the FCA set aside the injunction that had been granted by Hughes J in 2014 FC 489 (blogged here) in consequence of his liability decision. While the reasons were very brief, it is evident that the injunction was set aside purely in consequence of the setting aside of the liability decision, and not on its own merits.

In 2014 FC 863, Janssen was held to be prima facie in contempt of that injunction, as blogged here. Presumably the setting aside of the injunction would provide a defence to the prima facie contempt.

Thursday, October 30, 2014

Res Judicata in a Bifurcated Action

Merck & Co Inc v Apotex Inc 2014 FC 883 Lafrenière J
            1,275,350 – lisinopril – PRINIVIL

This motion to amend a Responding Statement of Issues raises a very interesting and difficult issue respecting the application of res judicata to a bifurcated action when the law has changed between the liability and damages portions, though at the end of the day I doubt the resolution of that question would make any difference to the outcome.

In the underlying Lisinopril Liability decision, 2006 FC 524 aff’d 2006 FCA 323, Apotex argued that the ‘350 patent was invalid because it was improperly divided from the parent ‘340 application, which disclosed only one invention. Hughes J rejected this on the basis that he was bound by prior case law, including Boehringer (1962), 39 CPR 201, to hold that each claim constitutes a different invention [116]. The FCA affirmed on this basis [39]. Subsequently, in its Viagra decision 2012 SCC 60 [57], the SCC held that Boehringer “does not stand for the proposition that every claim in a patent application is a separate invention.” In this motion Apotex argued that the law having changed – or at least, the Liability decision having been based on a misunderstanding of the law – it should be able to amend its defence in the damages portion of the action to argue that the Merck did not suffer any damages as a result of Apotex’ activities [28.12].

Essentially, the argument is that even though Apotex has been found liable for infringement, it should not be made to pay damages for infringement of an invalid patent. In support, Apotex relied on the UKSC decision in Virgin Atlantic [2013] UKSC 46. In Virgin Atlantic, the EWCA had held the patent at issue to be valid and infringed, and ordered an enquiry as to damages [11]. Subsequently, the EPO held the patent to be invalid [12]. The effect of the EPO decision is that the patent on which the liability decision was based is deemed never to have existed [27]. However, the EPO decision could not be raised by way of an appeal of the liability decision, as the order of the EWCA was final and not subject to appeal [16]. The question before the UKSC was whether the defendant should be able to raise the invalidity in the enquiry as to damage [16]. The UKSC held that the invalidity could be considered in the damages enquiry [37].

Monday, October 27, 2014

No New Cases for the Week of 20 October

No new patent / NOC / data protection cases were released for the week of 20 October 2014.

Keep in mind that I generally only blog on substantive patent / pharma cases. If you want to keep abreast of all new Canadian decisions, including procedural decisions and cases outside that core substantive area, I recommend subscribing to the Daily Intellectual Property News service from Alan Macek's IPPractice.

Tuesday, October 14, 2014

More on the Perfect Match Requirement of Listing on the Patent Register

ViiV Healthcare ULC v Teva Canada Ltd 2014 FC 893 Hughes J aff’g 2014 FC 328
Milczynski J (here)
            abacavir & lamivudine. / KIVEXA & TRIZIVIR / 2,289,753

Hughes J applied the “perfect match” requirement for listing of a patent on the Patent Register, as set out by the FCA in the leading case of Gilead / COMPLERA 2012 FCA 254 (blogged here), to uphold Milczynski J decision (blogged here) that the ‘753 patent cannot be listed on the Patent Register against KIVEXA or TRIZIVIR. There is not really any new law in this decision, though Hughes J does provide a thorough review of the case law at [47], and a list of principles emerging from those cases at [48]. The main point of interest is that in this litigation, the Minister of Health had argued that while a perfect match is required to list a patent claiming a formulation under 4(2)(b) of the NOC Regulation, a perfect match is not required to list of a patent claiming a medicinal ingredient, which is governed by 4(2)(a). However, as Milczynski J held, in Gilead the FCA clearly held that the perfect match is required under 4(2)(a), and Hughes J has now affirmed. In other posts on the listing requirement I have argued that the perfect match requirement is rigid formalism, because eligibility for listing turns on how the claims are drafted rather than on the substantive scope of the claims. I can understand how the “relevant” standard developed by the courts under the old Regulations was too liberal, but requiring a perfect literal match strikes me as too strict; it seems to me that a “would necessarily infringe” standard would strike a better balance. But the point is settled law now.

Here is the summary of the law provided by Hughes J:

[48] I draw the following principles respecting the interpretation of the various subsections of 4(2) of the NOC Regulations having regard particularly to the Federal Court of Appeal decisions and the Reasons of Justice Russell in Bayer, as affirmed by the Federal Court of Appeal:
• There is no sound reason to adopt different legislative requirements of product specificity for the various subparagraphs of subsection 4(2) of the NOC Regulations (Gilead, paragraph 39);
• absent precise and specific matching between what the patent claims and the product/use/dosage forms for which the NOC has been granted to the first person, the Minister cannot properly list the patent (Purdue, paragraphs 43; Abbott, paragraph 49; Gilead, paragraphs 37-38);
• a claim for a formulation means a claim that includes both medicinal and non-medicinal ingredients. A claim directed to medicinal ingredients, without claiming also non-medicinal ingredients, does not qualify for listing as a formulation under subsection 4(2)(b) of the NOC Regulations (Gilead, paragraphs 27 to 32, 49; Bayer, paragraphs 67 to 69).
• where a patent claims only one medicinal ingredient, it cannot be listed as against an NOC obtained for two (or more) medicinal ingredients; at least where, to use the words of Russell J, at paragraph 69 of Bayer, where “…a drug with one medicinal ingredient will have a different effect from a drug where two medicinal ingredients are combined “to achieve the desired effect [emphasis added].” This same distinction appears in Gilead, where Trudel JA wrote at paragraphs 31 and 32:
31 Finally, the overall inventive step of the '475 Patent, as found by the Judge, is the combination of chemically stable medicinal ingredients. The '475 Patent emphasizes the beneficial effects of combining chemically stable combinations of medicinal ingredients.
32 Thus, I conclude that the '475 Patent falls under paragraph 4(2)(a), as the relevant claims consist of chemically stable combinations of medicinal ingredients.

As the last bullet point indicates, Hughes J considered whether the prior case law left open the possibility that a patent claiming one medicinal ingredient might be listable against a drug with two medicinal ingredients if there was no synergy between drugs. However, he ultimately held that

[89] In my view, it is not productive when considering the listing requirements of subsection 4(2) of the NOC Regulations to consider synergy or not. The decision of the Federal Court of Appeal in Gilead is sufficiently clear. A patent claim for only one medicinal ingredient cannot support a listing under the NOC Regulations where the underlying NOC is for a combination (synergistic or otherwise) of two or more medicinal ingredients.

For a discussion of the facts related to KIVEXA, see my post on Milczynski J’s decision, here. This appeal also consolidated a closely related proceeding in which Apoex also challenged the listing of the ‘753 patent against KIVEXA [9], as well as a third proceeding in which Apotex challenged the listing of the ‘753 patent against TRIZIVIR. The legal issues were substantially the same in all the proceedings.

Tuesday, September 30, 2014

Prosecution History Estoppel Meets Section 53

NOV Downhole Eurasia Limited v TLL Oil Field Consulting 2014 FC 889 Mosley J
            2,255,065

The pigeons are coming home to roost from the SCC’s ill-advised holding in Free World 2000 SCC 66, [66], that prosecution history is not to be used in claim construction (for my critique of the SCC decision, see here).

The invention at issue in NOV Eurasia v TLL Consulting is a downhole oilwell tool which comprises a valve. The defendant alleged that during patent prosecution the applicant had amended the application to restrict the claims to embodiments which included a transverse valve, and they now sought to assert the patent against the defendants even though the allegedly infringing tool does not have a transverse valve [9].

If we had a doctrine of prosecution history estoppel, this would be a straightforward matter. If indeed the applicant had given up the scope in question during prosecution, then the patentee would be estopped from reclaiming that scope in litigation, and the patent would be construed accordingly. The claim, and the patent, would remain valid, but the defendant’s tool (assuming it did not in fact contain a transverse valve), would not infringe. This is an eminently fair and sensible result.

But because the SCC in Free World held that prosecution history cannot be considered as a matter of claim construction, the defendant in this case pleaded that the applicant’s statements were made “with the intention of misleading the Patent Office,” and so the entire patent is void pursuant to s 53(1) [9], which provides that:

A patent is void if any material allegation in the petition of the applicant in respect of the patent is untrue, or if the specification and drawings contain more or less than is necessary for obtaining the end for which they purport to be made, and the omission or addition is wilfully made for the purpose of misleading.

The patentee in this case brought a motion to have the paragraphs pleading s 53 struck. Prothonotary Milczynski granted the motion, but Mosley J reversed, holding, after a review of the case law, that “[i]t remains a live issue whether section 53 of the Patent Act may void an entire patent due to steps taken in the application process” [32]. I think Mosley J is right on this point, but given the low threshold for allowing the pleading to stand I will not review the case law in detail.

The broader point is that the SCC’s Free World holding has created an unpalatable dilemma for the lower courts. If s 53 cannot be used in this manner, then a patentee may be able to narrow the scope of its claim during prosecution to obtain the patent and then try to reclaim that scope in subsequent litigation. On the other hand, if s 53 can be used, then what would have been a battle over claim construction turns into an atomic bomb of patent invalidity. This will increase uncertainty, as opposed to the option of admitting prosecution history in claim construction, because the intent element of s 53 is inherently uncertain. Moreover, to the extent that there is any justification for excluding prosecution history, it is to simplify the claim construction exercise; but to introduce exactly the same evidence under s 53 means that while claim construction is simpler, the litigation as a whole is at least as complex. Indeed, it will be more complex, because the stakes have been raised from scope to validity, ensuring that all the more money will be put into this uncertain issue.

It is not unlikely that in this case the s 53 issue will ultimately become moot, even if it does go to trial. The claims themselves refer to “the valve member being transversely movable,” and the court may well construe the claims to exclude tools without a transverse valve even without the aid of the prosecution history. That will be all the more unfortunate, as parties in future litigation will have to engage the s 53 issue, instead of what could have been a much simpler matter of claim construction. The SCC in Free World feared opening the “Pandora’s box” [66] of file wrapper estoppel. By refusing to do so, it opened the far more dangerous box of s 53.

Friday, September 26, 2014

Form and Function in the Law of Utility

I have criticized the promise doctrine, both in this blog and in my article “The False Doctrine of False Promise” (2013) 29 CIPR 3. In their article published in the most recent issue of the CIPR, “The Promise of the Patent in Canada And Around the World” 30 CIPR 35, Richard Gold & Michael Shortt defend the promise of the patent. My reply article, “Form and Function in the Law of Utility: A Reply to Gold & Shortt,” has been accepted by the CIPR. A good draft, subject to copy-editing, is available from SSRN. Here is the abstract:

In a recent article, “The Promise of the Patent in Canada And Around the World,” Richard Gold and Michael Shortt argue that the law relating to the controversial “promise” branch of the Canadian law of utility is justifiable as a matter of policy, that it is long established in Canadian law, and that promises are enforced in a number of other jurisdictions. In this article I argue that Gold & Shortt fail to appreciate the functional distinction between the two branches of the utility requirement, which are consequently conflated throughout their article. The points they make in respect of the promise doctrine actually relate, for the most part, to the traditional “scintilla” branch of the law of utility, though they also conflate the promise of the patent with obviousness, sufficiency and overbreadth. This article uses Gold & Shortt’s article as a foil to explore the functional nature of the two branches of the law of utility and the differences between them. I will also contrast utility with sufficiency, obviousness and overbreadth.

Wednesday, September 24, 2014

Inventorship in a Combination Invention

Drexan Energy Systems Inc v The Commissioner of Patents and Thermon Manufacturing Co, 2014 FC 887 O'Keefe J
            2,724,561

In 2006 Steve Makar, Konrad Mech, Wells Whitney and Umesh Sopory perceived some deficiencies heating cables used to keep pipes from freezing in cold environments, and they decide to create a new type of heating cable without those defects [3]. Their collaboration resulted in the ‘561 patent, for which Dr Whitney and Mr Sopory were the only listed inventors. By 2010 the relationship between the men had broken down. The interest of Dr Whitney and Mr Sopory was assigned to Thermon, and Mr Makar and Mr Mech was assigned to whatever rights they had Drexan, one of Thermon’s competitors. In this application Drexan sought to have Mr Makar and Mr Mech added to the ‘561 patent as co-inventors [6]. The court noted that s 52 of the Act gives the court the authority to make such an order, and that the burden lay on the applicant [23].

The court reviewed established law on inventorship and noted that the question is whether Mr Makar and Mr Mech were in some way responsible for the inventive concept, though it is not necessary for them to be wholly responsible for it, “so long as his or her ingenuity is applied to the original inventive concept and not just verification” [24, 26 citing inter alia Wellcome / AZT, 2002 SCC 77, [96]). 

The main legal point of interest is that the heating cable was a combination of elements known in the prior art, and the inventive concept lay in the combination of particular elements, not in the elements themselves [27].

[29] This means that the focus has to be on whether Mr. Makar’s and Mr. Mech’s contributions were directed not only to suggested features (see Weatherford (FC) at paragraph 260), but to how they could actually be combined. Put another way, if there are two competing products that have different advantages and disadvantages, it takes no ingenuity at all to suggest that it would be great if there could be a product that has the advantages of both without the disadvantages of either. If there is any inventive concept at all in combining those two products, it lies in discovering how to make a product that has the desired attributes of both and it is to that process that the inventive contribution must be made.

The case then came down to an issue of credibility [30], and ultimately O’Keefe J held that Mr Makar and Mr Mech were not co-inventors: “Undoubtedly, Mr. Makar and Mr. Mech had useful input into the design of the cable, but the applicant has not proven that it was anything more than suggesting desired features and communicating feedback from potential customers” [56]. The application was therefore dismissed [57].

(Thanks again to IPPractice for posting this case - that's six in a row.)

Thursday, September 18, 2014

Thanks to IPPractice!

I’d like to give a big thanks to Alan Macek’s IPPractice for providing timely access to recent judicial decisions, as the Federal Courts have gotten increasingly slow about releasing new decisions on their website. The last five cases I’ve blogged about have come to my attention via the IPPractice Daily Email service, and four of those are recent FC decisions which have still not been released on FC website, and so are only publicly available through IPPractice. (The fifth is a BCSC case, available on Canlii, which I don’t check on a regular basis.)

Timely access to recent caselaw is essential to keep up with the latest trends and developments. Alan’s service helps us all, and I urge you to help him; if you have a copy of unreleased public reasons that you wouldn’t mind making public, consider sending it to Alan so he can make it available to the rest of us.

Wednesday, September 17, 2014

What is "the" Inventive Concept?

Alcon Canada Inc v Apotex Inc 2014 FC 791 Kane J
            2,606,370 / travoprost formulation / TRAVATAN Z / NOC

The ‘370 patent relates to formulations of travoprost, an anti-glaucoma drug, with a non-conventional preservative system, based on zinc ions. The motivation for the invention was to avoid the potentially harmful effects on the cornea of conventional preservatives such as benzalkonium chloride (BAK). In this NOC proceding Apotex successfully attacked the ‘370 patent as being obvious, though a inutility attack failed.

The conclusion that the claims at issue were obvious ultimately turned on the facts. One of Alcon’s own prior art products, the tear replacement product Systane Free, also used a non-conventional preservative system which very similar, even in the specific components, to the claimed formulation [236], [342]. The evidence accepted by Kane J was to the effect that it would have been obvious to extend the same preservative system to travoprost, given the acknowledged motivation to avoid the use of BAK [348].

Inventive Concept
There is, however, one aspect of Kane J’s opinion which I find disquieting. A substantial part of the obviousness analysis concerned the identification of the inventive concept [163]-[197], including extensive testimony from the experts, and a thorough parsing of the specification. (Kane J noted that because the claims were to a bare chemical formula, the inventive concept cannot be identified without looking at the specification [180], which, in my view, is clearly correct.) Kane J’s ultimate identification of the inventive concept drew heavily from elements identified in the specification itself. 

None of this analysis is objectionable in principle; certainly, expert evidence and the specification should be considered in assessing the putative inventive contribution. But the overall tenor of the analysis suggests a focus on identifying “the” inventive concept from the specification, which then becomes the focus of the obviousness analysis. This would be problematic in two respects. First, by focusing on the specification, this analysis could turn the obviousness inquiry into a subjective analysis, in which the question is whether the inventive contribution identified by the applicant is obvious. This is contrary to the principle that the obviousness analysis is objective. It would be evidently be wrong to hold an invention to be non-obvious because the applicant asserts in the specification that it is a work of genius, but it is also wrong to hold a patent obvious because the contribution identified by the applicant turns out to be obvious. For example, the inventor may believe that she has discovered a whole new class of compounds with unexpected properties, and she has claimed both the genus and some particular species. It may turn out that the inventor had overlooked some relevant prior art, and in fact it was obvious or anticipated that some members of the class had the properties in question, but it was nonetheless surprising that the particular claimed species had those properties. The question is not whether what the inventor thought she had contributed is truly inventive; it is whether what she actually contributed is inventive: see Nichia Corporation v Argos Ltd[2007] EWCA Civ 741 at [14]-[19].

Second, as a corollary, it would be wrong to focus on identifying “the” inventive concept, which is thereafter the sole focus of the obviousness analysis. If a putative inventive concept is examined and found to be wanting, the objective nature of the obviousness analysis makes it necessary to ask whether some other aspect of the invention might be inventive. So, if an invention claims a solution to a problem, it may be non-obvious either because the solution was non-obvious, or because the problem itself was non-obvious; it is necessary to ask both questions, not just one. As the EPO Guidelines explain, the question is the formulation of the objective technical problem:

The objective technical problem derived in this way may not be what the applicant presented as "the problem" in his application. The latter may require reformulation, since the objective technical problem is based on objectively established facts, in particular appearing in the prior art revealed in the course of the proceedings, which may be different from the prior art of which the applicant was actually aware at the time the application was filed. In particular, the prior art cited in the search report may put the invention in an entirely different perspective from that apparent from reading the application only. Reformulation might lead to the objective technical problem being less ambitious than originally envisaged by the application.

It is true, of course, that the WindsurfingPozzoli approach as approved by the SCC in Sanofi 2008 SCC 61 [67] refers to identification of the inventive concept as one of the steps, but the inventive concept is by no means the focus of the analysis. Indeed, the test is very casual about the inventive concept: “Identify the inventive concept of the claim in question or if that cannot readily be done, construe it.” That is, don’t worry too much about the inventive concept – the crucial question [67(4)] is whether the differences between the state of the art and the invention as claimed were obvious.

This is a long-winded discussion for a point that probably had no real effect on the result, but there was a similar problem with Kane J’s analysis in the earlier Travoprost case, 2014 FC 699 discussed here. I am concerned that this may signal a new trend that has the effect of improperly turning the obviousness analysis into a subjective inquiry, in the same way that the promise doctrine has made utility a subjective inquiry.

Utility
Turning then to utility, the issue turned entirely on the construction of the promise. Apotex argued that the patent promised minimization or reduction of side effects [352], while Alcon argued that the utility is simply to be useful and to meet the USP preservative efficacy testing standards [351]. Like O’Keefe J in the recent decision Dow v NOVA decision, 2014 FC 844 (blogged here), Kane J relied both on the leading FCA decision, Plavix 2013 FCA 186, for the proposition that the promised utility must be explicit [408], and that “not every statement of advantage in the specification rises to the level of promised utility” [356], and also on Zinn J’s statement in Fournier / Fenofibrate 2012 FC 741 (discussed here), for the proposition that the focus should be on the claims [360]. In light of this jurisprudence, and noting in particular the absence of any promise of reduced side effects in the claims [416], Kane J held in favour of Alcon’s interpretation of the promise [417]. This construction of the promise effectively decided the issue of utility in favour of Alcon, because Apotex’s argument was focused entirely on the promised utility as Apotex had construed it [427], and did not address the issue of demonstrated or soundly predicted utility from the perspective of “simple utility” [440]. The unchallenged evidence led by Alcon was therefore sufficient to establish utility on the basis of sound prediction [446].

Note: see also 2014 FC 699 in which the claims of a different patent, 2,129,287, were to the use of travoprost for the treatment of glaucoma, as opposed to the travoprost formulation. Kane J held the claims of the '287 patent were obvious and anticipated, though the utility attack also failed: see here.

Tuesday, September 16, 2014

Commissioner Not to Be Named as a Party in Appeals from Refusal of Application

Blair v Attorney General of Canada, 2014 FC 861 Strickland J
            Application 2,286,794 / “SUBWAY TV MEDIA SYSTEM”

The ‘794 application claims a subway car with video screens mounted at the junction of the sidewall and ceiling [6]. The Commissioner rejected the claims as being obvious, and Strickland J, applying a deferential standard of review to the Commissioner’s application to the facts of the (correct) obviousness test, affirmed.

The most interesting aspect of this decision is Strickland J’s holding that the Commissioner should not be named as a respondent in the appeal [42]. This seems to be a departure from past practice, though as Strickland J pointed out, in cases such as Harvard College v Canada (Commissioner of Patents), 2002 SCC 76, and The Attorney General of Canada and The Commissioner of Patents v Amazon.com, Inc 2011 FCA 328, the issue of the Commissioner being named as a party does not appear to have been disputed [49]. I don’t have a good sense of what the practical implications of this holding will be, but it was Attorney General which sought to have the Commissioner removed, so presumably the government is satisfied that it can properly conduct such appeals without the participation of the Commissioner.

Monday, September 15, 2014

Janssen Prima Facie in Contempt of STELARA Injunction

Abbvie Corp v Janssen Inc / Contempt 2014 FC 863 Brown J
2,365,281 / anti-IL-12 antibodies / STELARA

After Janssen’s STELARA had been held to infringe AbbVie’s ‘281 patent (2014 FC 55, blogged here), Hughes J granted an injunction, with important exceptions, prohibiting Janssen from making, selling or promoting STELARA (2014 FC 489). In this decision, Brown J has held that Janssen is prima facie in contempt of that injunction. Brown J’s interpretation of the injunction strikes me as strict, but not unreasonable. If there is a general lesson here, it is perhaps that a limited injunction may be a better outcome for the defendant than a complete injunction, but compliance may be less straightforward, and it seems that the courts will not be inclined to give the infringer much leeway.

As discussed here, STELARA is used to treat psoriasis (as well as psoriactic arthritis). AbbVie sells HUMIRA, a competing product for psoriasis treatment, but HUMIRA has a different mechanism of action from STELARA. For most patients, the two drugs are equally effective, but for some patients STELARA may work when HUMIRA does not. Consequently, the injunction granted by Hughes J permitted Janssen to continue selling STELARA, but not to continue promoting its use [18]:

[2] The injunction set out in paragraph 1, above, shall not prohibit Janssen from:
. . .
B. doing any act solely intended to provide STELARA for the treatment of psoriasis to a person who has not previously received STELARA for that purpose, provided that such person’s own physician has determined that such treatment is necessary for that purpose.

Provided that Janssen shall not communicate directly or indirectly with any such physician for the purpose of influencing the decision to initiate or continue such treatment.

[3] For greater certainty and without restricting the generality of the injunction provided herein:
A. Janssen shall not, directly or indirectly, detail, advertise, promote or make any representations or claims, in Canada, respecting the use of STELARA for the treatment of psoriasis;
. . .

[4] For greater certainty, and without restricting the generality of the injunction provided herein:
. . .
D. Janssen’s Medical Information Group may respond to enquiries about STELARA;

After the injunction was granted, Janssen anticipated that its sales representatives (“detailers”) who had previously been marketing STELARA to dermatologists would be asked about STELARA by those physicians. Janssen accordingly prepared a “script” to be used by detailers in responding to such inquiries. The script was to be proactively delivered by detailers (apparently by reading it verbatim), on their next visit with the dermatologist [30].

The script referred to the litigation, and stated that detailers could not provide much information, though information could be provided by Janssen’s Medical Information Group [29]. The script also contained the following contentious language:

It is important to note that this court order does not impact your ability to prescribe STELARA® to your patients. The product itself has not changed and there are no changes from a safety and efficacy standpoint. The court order does not impact the BioAdvance® program.

(The BioAdvance program helped patients secure funding to cover the cost STELARA.)

After a complaint by AbbVie, that language was changed to the following [33]:

It is important to note that this court order permits your existing Stelara patients (those that have already received at least one injection of Stelara) to continue to receive Stelara. Patients who have not previously received Stelara for the treatment of psoriasis may receive Stelara if you determine that Stelara is necessary for the treatment of their psoriasis.

The product itself has not changed and there are no changes from a safety and efficacy standpoint. The court order does not impact the BioAdvance® program.

Brown J held that all of these statements constituted a prima facie contempt [59]. He held, in effect, that whether or not these statements were true [68], there were representations that were promotional and marketing in nature because they sought to influence the physician’s treatment decisions [67], contrary to the terms of the injunction. The fact that Janssen took a proactive approach and that it was the detailers that delivered the message, also appears to have been important [63].

While Brown J’s decision strikes me as a reasonable interpretation of the terms of the injunction, I wonder how Janssen should have handled the anticipated inquiries by dermatologists. It is clear that the sales representatives should not have broached the subject at all. Since Janssen’s Medical Information Group was expressly permitted to respond to enquiries about STELARA, presumably, if asked about STELARA, a sales representative would be permitted to instruct a dermatologist to call the Information Group. But what would the Information Group be permitted to say? Would the statements made in the script constitute contempt if made by the Information Group in response to a physician inquiry? It seems to me they would still be representations intended to influence the physician’s prescribing practices, no matter who makes them. While it is true that Hughes J’s order was intended to stop Janssen from promoting STELARA, it was also clearly intended that dermatologists could and should prescribe STELARA when medically necessary: As Hughes J said:

[66] I propose to have faith in the integrity of our medical profession in Canada. New patients may be prescribed STELARA, provided that such patient's own physician has determined that prescribing STELARA is necessary for treatment of the patient's psoriasis. I will not require that the physician sign a form or check off a box.

Presumably someone should be permitted to tell physicians that they can prescribe STELARA if necessary, but it is not clear to me how that information can be communicated, and by whom.

Friday, September 12, 2014

"Scintilla" Standard for Utility Applied

The Dow Chemical Co v NOVA Chemicals Corp 2014 FC 844 O'Keefe J
            2,160,705 / film-grade polymers / ELITE SURPASS

In this action, O’Keefe J found Dow’s ‘705 patent related to film-grade polymers to be valid and infringed by Nova. The result turned largely on the evidence, and no novel points of law were raised. The decision does exemplify a modest approach to the construction of the promise of the patent – indeed, O’Keefe J held that there was no promise at all, and the “scintilla” standard for utility should be applied – and the treatment of the inventive concept of the patent in the context of obviousness is also of some interest.

Claim Construction and Infringement
Dow’s ‘705 patent relates to film-grade polymers, used to make products such as plastic bags. Toughness is a desirable property of such films, and the patent taught that a blend of two different types of polymers would produce compositions with good properties. The claims were to a polymer composition, comprising a blend of homogeneously branched polymers (with specified properties) and heterogeneously branched polymers (also with specified properties).

A large part of the case is taken up with claim construction. Dow prevailed on all points. No new points of law were raised. O’Keefe J applied the established principle of claim consistency, that is, the same words are given the same meaning throughout the claims [45]. He also adopted the standard interpretation of the term “comprising,” as meaning "including but not limited to" [54]. This is particularly welcome in light of the FCA’s disappointing holding in Purdue Pharma 2011 FCA 132 that “comprising” does not have a standard meaning (see here).

O’Keefe J then held that Nova’s product infringed. A variety of issues were raised in the infringement context, but these were all resolved either on the basis of the claim construction, or on the facts.

Utility
Turning to validity, the key question with respect to utility, not surprisingly, was the construction of the promise of the patent. While O’Keefe J’s opinion does not make new law, it is noteworthy in not only construing the promise modestly, but in expressly holding that there is no promise at all, so that the “scintilla” standard is applicable.

The key phrase in the specification was [185]:

Surprisingly, we have now discovered compositions useful in films and molded parts having synergistically enhanced physical properties, which compositions comprise . . .

The question was whether this constituted a promise of “synergistically enhanced physical properties.” O’Keefe held it did not. He quoted the leading FCA decision, Plavix 2013 FCA 186, but he relied particularly on Zinn J’s statement in Fournier / Fenofibrate 2012 FC 741, discussed here. As O’Keefe J accurately summarized it:

[183] The Fournier case and other cases tell us that we should look for the elevated promise or claimed utility in the claims of the patent. Further, any statement found elsewhere should be taken as a mere statement of advantage unless the inventor clearly and unequivocally states that it is part of the promised utility of the invention.

O’Keefe J concluded that the statement in question was not a promise; nor was there an promise anywhere else in the patent [192]. This is significant, because the phrase in question is the kind of statement which might well have been construed as being a promise under a more aggressive approach. In my view, the the introductory word “surprisingly” makes it clear that this statement is intended to identify why the invention is non-obvious, and not to make a promise of utility. However, it should be emphasized that O’Keefe J’s conclusion that the patent did not make any promise was not a matter of law. As is standard in construing the promise, extensive evidence was heard from experts, and this evidence was reviewed at length by O’Keefe J.

O’Keefe J then held that:

[195] Since I have found that the inventors did not make an explicit promise of a specific result, the test for utility will be a “mere scintilla” of utility.

This is significant, because in prior cases, even post-Plavix, which take a modest approach to the construction of the promise, the general practice has been to assess utility against a modestly construed promise, rather than expressly holding that the scintilla standard applies.

This conclusion with respect to the promise of the patent was determinative of utility, as all of NOVA’s arguments that the invention lacked utility turned on its claim of an enhanced promise [197].

Overbreadth and Anticipation
Attacks based on overbreadth and anticipation were rejected largely on the facts.

One point of some interest relates to the prior art Garza patent. As noted, the 705 patent claimed a blend of homogeneously and heterogeneously branched polymers. As O’Keefe J explained

[214] The Garza patent provides the reader with a broad description of compositions and asks the reader to pick polymers from a number of broad categories to make the blend.

[215] Indeed, by making a choice of certain polymers, a person would obtain a composition that was outside the claims of the ‘705 Patent.

O’Keefe J held that this did not make the Garza patent anticipatory, because “the jurisprudence explicitly states that the prior patent must disclose subject matter that if performed would 'necessarily result in infringement of that patent.' In this case, you could perform the Garza patent and not arrive at the invention of the ‘705 Patent” [217]. This conclusion is entirely in accordance with the established jurisprudence cited by O’Keefe J, and it would not be in the least noteworthy, but for Kane J’s recent holdings to the contrary (see here and here).

Obviousness
O’Keefe J’s conclusion that the claimed invention was not obvious turned largely on the facts, and on his identification of the inventive concept:

[244] In my view, the inventive concept of the ‘705 Patent is that you can use the SHC [of strain hardening coefficient] characteristic of the polymer used as component A in the claims of the ‘705 Patent, to predict that the composition would have the desired characteristics.

This statement of the inventive concept is interesting, as it is very far from the mere paraphrase of the claims which we often see. My own view, stated in previous posts, is that it is normally necessary to look to the disclosure, and indeed to the common general knowledge, to properly identify the inventive concept. It seems that this is what O’Keefe J has done. Unfortunately, it is not clear, at least to me, how he arrived at this inventive concept. My sense is that it turned on the expert evidence (see eg [261], [269]). I would consider this to be sound, but it would have been useful if O’Keefe J had elaborated on how he had arrived at this statement of the inventive concept.

There are a couple of other points of interest. One is that while O’Keefe J adverted to the controversial (in my view) proposition that so-called secondary factors such as commercial success should be given less weight in assessing obviousness [252], he nonetheless said that “one cannot ignore”the fact that NOVA had designed the infringing product in response to Dow’s patented product [252]. In my view, he was right to do so: see Secondary” Evidence of Obviousness is Not Secondary, (2012) 28 CIPR 279.

On another point, O’Keefe J held that an expert witness for NOVA, Dr Speed, has applied the wrong standard in his analysis because in response to the question as to whether the notional skilled work “has an imagination,” Dr Speed replied “I expect so.” [240]. O’Keefe J held this was inconsistent with the Beloit description of the “notional person” as a “technician skilled in the art but having no scintilla of inventiveness or imagination” [241]. While O'Keefe J was right as a matter of law, I have considerably sympathy for Dr Speed, who was tripped up by a conceptual problem with the standard obviousness analysis. On the one hand, it purports to be an essentially factual inquiry as to whether a person with certain characteristics – in this case at least an undergraduate degree in chemical engineering or a related field, and two years experience – would in fact have arrived at the invention without difficulty. This is nominally a factual inquiry, which turns on expert evidence. And yet, it is clear enough that no actual skilled person with an engineering degree and two years experience would be without any scintilla of imagination. Engineering, and science generally, are not fields in which automata can keep a job for two years, except perhaps as bottle washers. Dr Speed’s assessment that a skilled person, as defined in this case, would have some imagination, was no doubt correct as a matter of fact, but it was not right as a matter of law – which highlights the artificiality of the inquiry. 
 
Remedies
Dow was successful in establishing that its patent was valid and infringed. O’Keefe J allowed Dow to elect between an accounting and damages [283.2], without making any comment. An accounting is discretionary, and while it was for a long time allowed routinely, some recent cases have suggested that it should not be granted as a matter of course. O’Keefe J’s willingness to grant an accounting so readily may be significant, though it may simply be that the request was not opposed.

Thursday, September 11, 2014

Cause of Action for Class Action for Excessive Prices due to Invalid Patent

Low v Pfizer Canada Inc, 2014 BCSC 1469

There is an interesting policy question as to whether a patentee should be somehow held accountable for higher prices charged for a product that is protected by a patent which is ultimately held to be invalid. The basic argument in favour of such liability is that if the patentee can retain the excessive profits made between the time of grant and the time the patent is held invalid, it will have substantially benefited from patent protection without having delivered a new, useful and non-obvious invention which is the quid pro quo for patent exclusivity. Some form of liability for invalid patents will provide an incentive for the patentee to take care to ensure that any patents it does obtain and enforce really are valid. The basic counter-argument, as I see it, is that patent examination already provides substantial protection against the issuance of invalid patents, and liability on top of that protection would create uncertainty that would chill legitimate use of the patent system.

This question is raised in class action proceedings in Low v Pfizer. Pfizer’s patent for Viagra has been held to be invalid: Pfizer v Apotex 2014 FCA 13 (here). This implies that until the patent was invalidated, and Pfizer lowered its prices to match those of the generics, the price of Viagra in Canada was higher than it would have been had the patent never been granted. The plaintiff in Low v Pfizer seeks to certify a class action against Pfizer to recover the loss to the class members due to the higher price and seeking disgorgement of Pfizer’s profits under a waiver of tort theory.

The sole issue in the application was whether the plaintiff’s claim discloses a cause of action for the purposes of s. 4(1)(a) of the BC Class Proceedings Act [3]. The threshold is low [54]; the test is satisfied unless, assuming all facts pleaded to be true, it is “plain and obvious” that the plaintiff’s claim cannot succeed [20].

Three causes of action were pleaded [18]:

i. unlawful interference with economic relations;
ii. waiver of tort; and
iii. unjust enrichment.

Smith J held that the first and third points disclosed a cause of action for the purposes of certification, but that it is plain and obvious that a claim in waiver of tort could not succeed [72].

With respect to unlawful interference with economic relations, the SCC in Bram 2014 SCC 12, [86], held that the defendant’s means are unlawful if “they support a civil action for damages or compensation by the third party, or would do so except for the fact that the third party did not suffer any loss as a result of the defendant's acts” [(quoted at [41]). Smith J held that in this case this requirement was “arguably” [44] satisfied by the patentee’s potential liability to the generic under s 8 of the NOC Regulations.

Smith J pointed out that this tort has an intent element, which may be difficult to establish at trial [52]-[53]. Nor is it entirely clear that this claim will succeed as a matter of law, as there is some question as to whether the statutory cause of action will support this tort. Smith J stated that “the claim now advanced arguably falls precisely into the category of “parasitic” claims referred to in Bram” [44, my emphasis], and similarly he was “not satisfied that the requirement in Bram that there be a ‘civil action’ available to the third party necessarily excludes a purely statutory cause of action” [49, my emphasis]. I take this to mean the point is arguable as a matter of law.

One implication of this analysis is that this cause of action can only be raised against pharmaceutical patentees. An invalid granted patent in any field of technology can result in artificially high prices and exactly the same kind of harm to consumers that is alleged in Low, but because only pharmaceutical patentees are liable under s 8, other patentees do not face the statutory liability to third party that would allow this type of “parasitic” action. Whether or not recovery against patentees for losses caused by invalid patents is desirable from a policy perspective, as a matter of policy and principle, it is troubling that substantively the same complaint could be tortious or not depending on the field of technology. Also, the liability under this cause of action would be limited to period for which NOC liability arises, which is only the period starting when the generic is placed on “patent hold,” and not the entire period for which excessive prices were charged [43]. To the extent that the policy rationale for patentee liability for invalid patents is to ensure that patentees have an incentive not to abuse the patent system, this temporal limitation on recovery, which is a direct consequence of the parasitic nature of the action, is unsound.

Smith J also held that the pleadings disclosed a cause of action in unjust enrichment. This cause of action, if established, would not be confined to pharmaceutical patentees, nor would it be limited to the period during which the generic would have been subject to a statutory stay under the NOC Regulations. Again, even though Smith J held that a cause of action was disclosed for the purposes of certification, it is not clear that this cause of action will be ultimately be sustained as a matter of law. The key issue is whether there was a “juristic reason” for the patentee’s enrichment, and Smith J noted that “The fact that the defendant was operating under statutory rights or authority will usually, but not necessarily, provide a juristic reason” [80]. Whether reliance on the patent system provides an adequate juristic reason will no doubt be a central issue on the merits.

Smith J also noted that “The question of whether Pfizer’s reliance on the patent provides a juristic reason may involve a fact specific inquiry into Pfizer’s knowledge and intention” [84]. This will involve an investigation into the patentee’s good faith and intent [84]-85].

Thus, either of the certified causes of action, if sustained as a matter of law, will lead to a fact specific inquiry into the patentee’s subjective motivation and intent. From a policy perspective, this has two drawbacks. One is that the prices charged under an invalid patent are excessive regardless of the patentee’s intent, and strict liability would provide a strong incentive for patentees to take care that the patents are valid. Another problem is that the fact specific nature of the inquiry means that the litigation will be expensive and protracted. On the other hand, despite these drawbacks, an intent-based approach may be necessary to prevent a chilling effect on legitimate use of the patent system.

This litigation raises a number of very difficult legal and policy problems, from the high level question of whether such liability is sound at all, to the details of how it should be implemented if it is indeed desirable. This will be interesting and important litigation.