2,378,424 / moxifloxacin / AVELOX
Warner-Lambert Company, LLC v Actavis Group Ptc & Ors  EWCA Civ 556 (28 May 2015)) rev’g  EWHC 249 (Pat) (indirect infringement)
EP 0 934 061 / pregabalin / LYRICA
Liability for inducing infringement raises the question of how the patentee’s rights should be protected when the defendant sells a product which is capable of non-infringing uses, but is likely to be put to an infringing use. This question often arises in the context of second medical use patents. The ‘424 patent at issue in Bayer v PPC / moxifloxacin is a formulation patent and PPC’s product can be used post-sale to make the formulation, so this case raises essentially the same question as second medical use patents. Lafrenière J struck the portions of Bayer’s application for an order of prohibition alleging that PPC would induce infringement of the ‘424 patent on the basis that Bayer had no reasonable chance of establishing inducement by PPC. The recent decision of the EWCA in Warner-Lambert v Actavis provides a helpful European perspective on the issue, albeit in the context of Swiss form claims. (An excellent summary is provided by the IPKat.) The comments in this post are tentative, as this issue deserves an article rather than a blog post.
The law of inducement seeks to encourage cost-effective enforcement of its rights by the patentee, while at the same time ensuring that the public is not impeded in engaging in non-infringing activity. The “cost-effective” part of the rationale is central. Inducement is not necessary to allow the patentee to enforce its patent rights, as inducement (normally*) requires an act of direct infringement and the patentee could in principle enforce its rights by proceeding against the direct infringer. But that is not always practical. It is often more efficient to pursue a single intermediary which in some way facilitates infringing activity, as Napster illustrates in the copyright context. But once we move away from direct infringement, we must be careful not to impede the defendant who facilitates non-infringing activity as well.
From this it follows that in order to establish inducement, it is not enough that infringement is the inevitable result of the defendant’s activity because the infringing uses, though inevitable, may be a small proportion of the overall sales. It is inevitable that some people will drive drunk, but we do not for that reason enjoin the sale of cars by auto dealers. So, the Canadian three prong test for inducement of infringement set out in Corlac v Weatherford 2011 FCA 228  is as follows:
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 inducement element – that the direct infringement was influenced by the inducer – and the knowledge element – that the inducer knows of the resulting infringing act – go beyond simple inevitability of infringement. The second branch in particular requires the defendant to actively encourage the infringement in some way: MacLennan v Produits Gilbert Inc 2008 FCA 35 ; 2009 FC 1102 ; Pharmascience 2006 FC 861 .
But UK law is less stringent. If I understand correctly, inducement liability can be established on the basis of inevitability of direct infringement combined with knowledge that infringement will ensure. In Grimme  EWCA Civ 1110 the EWCA held that “it is enough if the supplier knows (or it is obvious to a reasonable person in the circumstances) that some ultimate users will intend to use or adapt the ‘means’ so as to infringe,” and “[t]he knowledge and intention requirements are satisfied if, at the time of supply or offer to supply, the supplier knows, or it obvious to a reasonable person in the circumstances, that ultimate users will intend to put the invention into effect” (KCI  EWCA Civ 1260 , summarizing Grimme). In Grimme there was advertising () that would likely have constituted the necessary encouragement in Canadian law, but it is not evident that the inducement in Canadian law would have been established on the facts of KCI. The EWCA held that “[The defendants] have infringed because it is probable that from time to time some medical personnel using the [defendant’s] system have clamped the end of the inlet tube when changing the canister [which would result in infringement]. Further, it would have been obvious to a reasonable person supplying [defendant’s] canisters that that this would be likely to occur” .
Roughly speaking, in UK law the second element of the Corlac test has been eliminated. (The knowledge element is similar. In Canada it is not necessary that the inducer know the ultimate act is infringing (2010 FC 361 ) while in the US the rule is the opposite – Global-Tech Appliances, inc. v. SEB S.A. (USSC, 2011). The UK rule on this point is the essentially same as the Canadian approach.) The difficulty with the UK approach is that inducement may be established even if the infringing use is a very small part of the inducer’s sales, thus posing a real risk of interfering with non-infringing uses. It may be inevitable that 1% of sales would be used for infringing uses, but it is dubious policy to deprive the public of the benefit of lower prices in the 99% of remaining cases. In Warner-Lambert this issue was avoided to some extent because the case turned primarily on the intent requirement for direct infringement of Swiss form claims. In the context of direct infringement the EWCA insisted on an intent requirement precisely because of this problem: “To construe the claim as covering the manufacture of a drug merely because it was suitable for pain treatment would be to give it a scope which was far broader than the patentee’s contribution to the art” . Thus the EWCA has introduced an inducement element which is similar to the second branch of the Corlac test, but in the curiously narrow context of direct infringement of Swiss form claims. This is hardly a general solution to the problem, particularly as Swiss form claims are no longer allowed by the EPO.
The other response to this problem by the EWCA was remedial:
 [Counsel for Actavis] points out that, even if an injunction is not granted, the manufacturer may have to pay damages based on the patentee's profit margin, which, if on a sufficient scale, would potentially make his sales of the non-patented indication uneconomic. This is a justifiable concern, but it is not a basis for adopting the narrow claim construction for which he contends. The scope of the claim cannot realistically depend on a national rule about damages, so that it would mean something different in a territory where only royalty damages were available.