Monday, August 31, 2015

Non-Infringing Alternative Must be Instantaneously Available on the Market

Apotex Inc v Merck & Co, Inc / Lovastatin Damages 2015 FCA 171 Dawson JA: Stratas, Boivin JJA aff’g 2013 FC 751 Snider J
            1,161,380 / lovastatin / MEVACOR

In Lovastatin Damages the FCA has addressed the question of whether the availability of a non-infringing alternative (NIA) should be considered in assessing damages for patent infringement. As discussed here, Snider J had held that a non-infringing alternative cannot be considered. The FCA has now reversed on this point, holding that as a matter of law, the availability of a non-infringing alternative is a relevant consideration [1] if the infringer can establish that it “could and would” have sold an NIA but for the infringement [49], [50]. However, the FCA went on to hold that Apotex had not established that it either could or would have sold non-infringing product [88], [95]. Consequently the FCA affirmed Snider J’s decision that damages should be calculated on the basis that but for the infringement, Apotex would not have made any sales and Merck would have captured the entire market.

In my view, the FCA’s explanation of why the availability of a non-infringing alternative should be legally relevant to the calculation of damages is entirely correct. However, its holding that the NIA should not be considered relevant in this case is more problematic. On the “could” branch, dealt with in this post, the FCA held that as a matter of law, an NIA must be instantaneously available on the market at the time of infringement [79]. In my view, that holding is inconsistent with the general case law on causation, as well as US authority on point and the FCA’s own holdings in related areas. It is also inconsistent with the rationale given by the FCA for considering the NIA in the first place.

I consulted for Apotex at both the FC and FCA level. The views expressed in this post are my own.

Friday, August 28, 2015

Deduction for Fixed Costs in an Accounting Denied

ADIR v Apotex 2015 FC 721 Gagné J
            1,341,196 / perindopril / COVERSYL

I wrote two posts (here and here) on Gagné J’s Perindopril Accounting decision several weeks ago, but there is one more point from the decision worth mentioning. As discussed in my blog post on Harrington J’s Escitalopram decision 2013 FC 192, there is a difficult question as to whether to allow an infringer to deduct some part of its fixed costs (such as general overhead or rent) from the profits to be disgorged. On the one hand, fixed costs would have been incurred in any event and so are not costs caused by the infringement, but on the other hand a business cannot run profitably without covering its fixed costs. If the business produced 20 different products, all of which infringed patents held by different patentees, and deduction of fixed costs was not permitted, the infringer would be required to account for far more profit than it actually made. In Escitalopram Harrington J held that fixed costs should not be deducted. In Perindopril Accounting Gagné J [68]-[77] followed that decision without providing significant additional analysis. Nonetheless, her decision reinforces the trend against allowing deduction of fixed costs, which now appears quite well established at the FC level. Even so, there is a real issue as to whether refusing to allow deduction of any fixed costs is consistent with “but for” causation. This is a question that at some point should be addressed at the FCA level.

Wednesday, August 26, 2015

Restrictive Interpretation of Materiality Requirement under S 53 Wilful Misleading

SNF Inc v Ciba Specialty Water Treatments Ltd, 2015 FC 997 Phelan J

Phelan J's decision holding Ciba’s patent invalid for obviousness turns entirely on its facts [195-96]. The main point of interest in the decision is his obiter discussion of the argument that the 581 patent was invalid under s 53 for wilfully misleading statements.

The 581 patent concerns a method of treating mine tailings. Tailings are commonly disposed of by pumping aqueous slurry to an open lagoon and allowing it to dewater. To limits the area occupied by the tailings, it is desirable to deposit them in multiple layers. This requires that the lower layers are sufficiently solid to support the material deposited on top. One way of speeding up the process of solidification or “rigidification” is to add a polymer to the slurry which helps bind the waste particles together. Such polymers were well known in the art.

Ciba’s 581 patent claimed a process of rigidifying the tailings by adding an aqueous solution of polymer to the fluid slurry during transfer [24]. A key piece of prior art was the Gallagher patent, WO-A-0192167, which was also owned by Ciba. The Gallagher patent claimed a process of rigidifying the tailings by adding a polymer to the fluid slurry during transfer. The Gallagher patent did not anticipate the 581 patent because its disclosure focused on adding the polymer in powdered form rather than in aqueous form [169]. Nonetheless, the Gallagher patent evidently presented a validity problem for Ciba’s 581 patent, if not on anticipation, then on obviousness, as the 581 patent merely substituted an aqueous solution for powder [222] and both forms were well known in the prior art. (In the end, the 581 patent was held invalid over the common general knowledge alone, as it was not established that the Gallagher patent was part of the cgk.) Ciba, as the owner of the Gallagher patent, was well aware of this problem when the 581 application was filed.

The 581 patent directly addressed the Gallagher patent, stating (581 p6, [223]) that:

the importance of using particles of water soluble polymer is emphasised and it is stated [in the Gallagher patent] that the use of aqueous solutions of the dissolved polymer would be ineffective.

The s 53 attack was based primarily on this statement.

As summarized by Phelan J, a patent is invalid under s 53 if the impugned statement is [216]:

a) untrue;
b) material;
c) made in the drafting of the Patent with wilful intent to mislead; and,
d) the statement would be likely to mislead the Skilled Person.

In this case the statement were untrue – there was no statement to that effect in the Gallagher patent [224-25]. The statements were known by Ciba to be untrue [222] and the statement was made in order to make it seem as though the 581 invention was not obvious over Gallagher when Ciba knew it was an obvious modification to the Gallagher patent [225].

Nonetheless, the s 53 attack failed on the materiality requirement:

[229] Ciba is saved only by the issue of materiality. A statement is material if it affects how the public makes use of the invention taught by the 581 Patent (see Procter & Gamble Co v Bristol-Myers Ltd, [1978] FCJ No 812 (QL) at para 37, 39 CPR (2d) 145; Weatherford Canada Ltd v Corlac Inc, 2011 FCA 228, 95 CPR (4th) 101). 
    (my emphasis)

This is a very narrow definition of materiality which seems to make materiality almost co-extensive with sufficiency. The sources cited by Phelan J do not support such a narrow definition. The relevant statement from Procter & Gamble is that “it is really immaterial to the public whether the applicant is the inventor or one of two joint inventors as this does not got to the term or to the substance of the invention nor even to the entitlement.” To my mind this supports a much broader definition of materiality, to the effect that a statement is material if it would likely have affected the examiner’s decision to allow the patent, or at least to whom the patent should be granted. In Corlac v Weatherford 2011 FCA 228, (blogged here) in holding that the misstatement at issue was not material, the FCA did state that “Finally, the appellants have not demonstrated that inventorship is somehow relevant to the public's use of the invention in this case” [129], but this was a concluding remark in a long discussion citing a variety of factors all pointing to the same conclusion. Consequently, Phalen J’s definition is unlikely to become widely accepted as definitive, particularly given that the discussion of s 53 was expressly obiter [202].

Tuesday, August 25, 2015

Purposive Construction Does Not Support “Any Arguable Interpretation That Would Uphold the Patent”

ABB Technology AG v Hyundai Heavy Industries Co, Ltd, 2015 FCA 181 Stratas JA: Webb, Near JJA aff’g 2013 FC 947 and 2013 FC 1050 (costs) Barnes J

In my post on Barnes J’s decision in ABB v Hyndai 2013 FC 947, I remarked that it is “a fairly straightforward case which turned largely on its facts.” It is therefore not surprising that the FCA has affirmed the holding that both patents at issue are invalid, largely on the basis of a deferential standard of review.

The most interesting point was one of claim construction, which the FCA reviewed for correctness. The invention was a viewing window to allow visual inspection of the position of the grounding switch in gas-insulated switchgear. The crucial claim term used to describe the grounding switch was "a moveable switch-contact element" [32]. The patentee, ABB, acknowledged that the prior art disclosed the use of viewing windows to observe the position of knife blade switches [33] and argued that this term should be construed to encompass only sliding contact switches [33]. ABB argued that the principle that a claim should be required to “afford the inventor protection for that which he has actually in good faith invented” Consolboard ([1981] 1 SCR 504, 521) implies that an interpretation should be adopted which favours validity [50].

My post on the decision of Barnes J had a long (and now that I re-read it, somewhat convoluted) discussion of the possible tension between a purposive and textual analysis* of the claim. Whatever the merits of that discussion, the case at hand does not raise any such tension, because as Barnes J held and the FCA affirmed, all considerations point in the same direction [46].

The important principle emphasized by the FCA is that “Redrafting [the claims] would undermine the public notice function of patents, which entitles readers to clear and definite guidance concerning the extent of the monopoly conferred” [51]. If a construction favouring validity had to be adopted, then the claims could never be construed without a search to identify potentially invalidating prior art. It is reasonable to say that the patentee should be construed in light of the common general knowledge which a skilled reader already possesses, but prior art for the purposes of anticipation, as was at issue in this case, is not necessarily part of the cgk.

More broadly, the statement that a patent should be construed to give protection to that which the inventor had actually invented was not intended as an overriding rule of law, but rather as a reminder that patents serve a public good in providing an incentive to invent, and consequently, “There is no occasion for being too astute or technical in the matter of objections to either title or specification” (Consolboard 520). But that is not to deny that obscure or poorly drafted patents can be a disservice to the public, regardless of the merits of the invention. While the inventive function of patents should not be ignored, neither should the notice function; the construction must be “reasonable and fair to both patentee and public” (ibid).

Barnes J’s costs award 2013 FC 1050 was also appealed. As described in my blog post, Barnes J awarded costs with a slight premium above Column IV of the tariff. The FCA affirmed. The main point of legal interest is that the FCA affirmed that its decision in Imperial Manufacturing 2015 FCA 100 sets out the appropriate standard for a review of a discretionary order, which is the same as the standard for a ruling of mixed fact and law [88]. On the facts, Barnes J's departure from the tariff was justified [90].

*It is somewhat confusing that the modern approach to claim construction is referred to as “purposive construction.” There is a distinction to be made between an overall "approach" to interpretation, and an analysis which may be part of that approach. So, the modern approach to statutory interpretation considers text, context and purpose, and seeks to arrive at a harmonious interpretation of the legislation in light of all three analyses. The portion of that analysis which looks to the purpose is referred to as the purposive analysis, while the approach as a whole is usually referred to simply as the “modern approach.” The approach to interpretation which would consider purpose of the statute as the overriding consideration, rather than merely one component, was referred to as a “purposive approach.” The modern approach to claim construction, like the modern approach to legislative interpretation, also considers text, context (in the form of the skilled readers cgk) and purpose. It is referred to as purposive interpretation because Catnic emphasized the need to consider purpose as a reaction to an excessive reliance on parsing the text. But Catnic never said the text should be ignored, and indeed the text of the claim itself remains of dominant important, just as the text of the legislation is the most important consideration in legislative interpretation. Thus “purposive construction” is not the same as a “purposive approach,” nor is it the same as a purposive analysis. It would be easier simpler if the current approach to claim construction were simply referred to as the “modern approach” to claim construction.

Wednesday, August 19, 2015

Obviousness and “Blinding” an Expert

E Mishan & Sons, Inc v Supertek Canada Inc 2015 FCA 163 Webb JA: Ryer, Near JJA aff’g 2014 FC 326 Hughes J
            2,779,882 here

In Mishan v Supertek the FCA has affirmed Hughes J’s finding that the 882 patent is invalid for obviousness. As discussed here, the trial decision largely turned on the the factual issue of whether a particular piece of prior art would have been found in a reasonably diligent search and it is not surprising that the FCA affirmed, using a deferential standard of review [25]. The case does raise an interesting legal point regarding the role of hindsight in the obviousness analysis.

The invention at issue is a lightweight expandable and contractible garden hose, comprising an elastic inner tube and an inelastic outer sleeve. When the hose is empty, the elasticity of the inner tube causes it to contract. When it fills with water, the inner tube expands; since the diameter is constrained by the outer sleeve, it elongates [3]. The key prior art was the McDonald patent, which disclosed a very similar hose, albeit one that was intended as an oxygen hose for an aviation crew oxygen mask. Hughes J found that the 882 invention was obvious over the McDonald patent.

On appeal, Mishan argued [35] that Hughes J had erred by using his knowledge of the 882 Patent to identify the differences between what is claimed in the 882 patent and the McDonald patent and to determine that the differences were obvious, on the basis that this is contrary to the fourth step of the Windsurfing / Pozzoli  test, adopted in Sanofi 2008 SCC 61 [67], which asks whether the invention would have been obvious in light of the state of art “viewed without any knowledge of the alleged invention as claimed.” There is considerable force to Mishan’s argument. As Lewison J explained in Virgin Atlantic 2009 EWHC 26 (Pat) [271-72]:

at the third stage of the structured approach it is necessary to focus on the differences between the prior art and the patent in suit; but at the immediately succeeding fourth stage it is necessary to erase all knowledge of the alleged invention from the mind. That is not an easy task. . . . If an expert approaches his own task in the manner set out in Pozzoli, he will almost inevitably expose himself to a charge of having approached the final question with the aid of hindsight.

The FCA nonetheless rejected Mishan’s submission, pointing out that the difficulty is inherent in the Windsurfing / Pozzoli framework:

[36] In applying the fourth step of the Sanofi test, in my view, the requirement that this step be completed “without any knowledge of the alleged invention as claimed” does not mean that the differences that were identified in step 3 would be forgotten for step 4. These differences are an essential part of step 4. Without knowing the differences between the relevant prior art and the inventive concept, step 4 could not be completed. The differences are based on the inventive concept of the claims in issue and the relevant prior art and, therefore, are determined based on some knowledge of what is claimed in the patent in issue. Therefore, some knowledge of the alleged invention will be reflected in the differences that are analyzed in applying step 4 of the Sanofi test.

Thus the statement that the fourth step of the test must be undertaken “without any knowledge of the invention as claimed” cannot be understood literally. It is really just an awkward way of repeating the standard warning against being influenced by hindsight: see eg Wandscheer [1948] SCR 1 at 12.

Though the FCA was bound to reject this objection as a matter of law, what about as a matter of policy? Is there any alternative? Lewison J said in order to avoid the problem of hindsight bias, “[t]he structured Pozzoli approach is a series of steps directed to the court; not to experts” [272]. But this does not solve the hindsight bias, as it is empirically well-established that judges are also subject to the hindsight bias – if anything, to a greater extent than experts in the art.

One alternative approach would be to “blind” the expert to the invention, by asking them to answer the problem addressed by the inventor without knowing the inventor’s solution. In this case, we would simply ask the experts – or rather a skilled person – to design a lightweight expandable and contractible garden hose, and see if they come up with the invention. This would avoid hindsight by asking each expert to fully replicate the inventive process faced by the inventor. But if done faithfully, this would often be unworkable, as the cost of litigation could exceed the cost of invention. With that said, “blinding” the expert to the solution might be workable in some cases, such as where the question is whether the invention is obvious to try; if the expert is blinded and yet readily suggests a route that in fact worked without difficulty, this would be good evidence that the proposed route was indeed obvious to try: see eg Esomeprazole 2014 FC 638 [321].

This relates to the question of whether experts should be blinded in claim construction. As discussed here, in her Rasagiline 2014 FC 1070 decision, Gleason J indicated at [94]-[97] that the blinding of the Apotex experts in that case was reason to prefer their evidence over that of Teva’s experts. But more recently, in Apotex / Tadalafil 2015 FC 875 [166], she explained in effect that both her Rasagiline decision and Rennie J’s Esomeprazole decision turned on the facts. That is, blinding is not always preferred, though in some circumstances it might be preferred. This seems right to me. There is a tradeoff between avoiding the hindsight problem and keeping costs of litigation manageable by focusing on “where the shoe pinches,” and how that balance is best achieved will depend on the facts. Unfortunately, that means there is no easy way to for a litigant to decide whether to blind its experts in a particular case.(Note that Rasagiline concerned claim construction while Esomeprazole and Tadalafil concerned obviousness.)

Monday, August 17, 2015

No More Perfect Match Requirement for Patent Register Listing

Eli Lilly Canada Inc v Canada (Attorney General) 2015 FCA 166 Nadon JA: Boivin JA; Dawson JA concurring rev’g 2014 FC 152 Bédard J
            2,379,329 / TRIFEXIS

In Gilead / COMPLERA 2012 FCA 254 the FCA apparently held that a perfect literal match between the claims of a patent and the compounds set out in an NOC for a product is required before the patent can be listed on against that product on the Patent Register. In Lilly / TRIFEXISFC Bédard J, following Gilead, refused to allow the 329 patent to be listed against TRIFEXIS. The FCA has now reinterpreted Gilead and consequently set aside Bédard J’s decision. While this FCA decision evidently abolishes the perfect match requirement, it is not entirely clear what the new test is.

The facts in Lilly / TRIFEXIS are fairly simple. TRIFEXIS is authorized as an oral dosage form of a drug that contains two active medicinal ingredients: spinosad and milbemycin oxime. The 329 patent claims an “oral formulation” comprising spinosad [9]. “Oral formulation” was defined in the disclosure to include spinosad in combination with other compounds including “milbemycins” [9]. Consequently Bédard J construed the relevant claims to be directed "not only to a formulation including spinosad as the only active ingredient, but also to formulations that includes other active ingredients such as, but not restricted to, milbemycin oxime" [FC 69]. Thus she in effect held that a generic version of TRIFEXIS would necessarily infringe the 329 patent. She nonetheless refused to allow the patent to be listed against TRIFEXIS because in her view (and in my view as well, as discussed here), the FCA Gilead decision interpreted the product specificity requirement of s 4(2) of the PM(NOC) Regulations as requiring that all the ingredients be listed in the claims themselves.

The FCA has now reversed that decision. Dawson JA’s concurring opinion is straightforward. She was of the view that Gilead is not distinguishable from the case at hand, but that it was wrongly decided and should be reversed [100]. In her view, there is a sufficient nexus between the patent and the subject of the NOC if the patent claims the approved medicinal ingredient, in the sense that the approved product falls within the “boundaries” set out by the claims [107]. In my view Dawson J is entirely correct on all counts.

Friday, August 14, 2015

Disagreement on Date for Assessing Obviousness-type Double Patenting

Eli Lilly Canada Inc v Apotex Inc (NOC) 2015 FC 875 Gleason J
            2,226,784 / tadalafil /CIALIS

In this decision dealing with Lilly’s CIALIS patent, Gleason J disagreed with de Montigny J’s earlier Mylan / tadalafil decision 2015 FC 17 as to the appropriate date for assessing obviousness-type double patenting. In my blog post on Mylan / tadalafil I had agreed with de Montigny J’s reasoning, but on reviewing Gleason J’s decision, I have realized that there are some holes in that logic. At the end of the day, this point was not determinative and so Gleason J expressly declined to come to any firm conclusion on this legal issue. I have spent considerably longer on the blog post than I usually do, and I haven’t come to any firm conclusion either; all I can say is that the law is unsettled, and that is just as well, as the point is a difficult one.

The judicially created doctrine of obviousness-type double patenting precludes an inventor from obtaining a second patent for an invention which is an obvious modification of an invention for which the same inventor holds a prior patent. While the “obviousness” aspect of this doctrine is the essentially same as the obviousness analysis generally, it is a distinct doctrine because it may be raised in circumstances in which the first patent would not constitute part of the state of the art for the purposes of an obviousness attack on the second patent. In particular, obviousness-type double patenting essentially permits a prior unpublished patent application to used as prior art against a subsequently filed application, even though the unpublished application is not part of the statutorily defined state of the art: [60]; s 28.3. Prior unpublished applications were particularly problematic under the old Act, under which patents were not published until issued: for example, in Whirlpool 2000 SCC 67, decided under the old Act, the second patent (734) was filed 2 ½ years after the first patent (803) application was filed, but two years before it was granted. The problem is reduced under the new Act, but it may still arise because patents are not published until 18 months after the priority date. So, in this case the priority date of the 784 patent was two weeks before the publication date of the earlier 377 patent which was the basis for the double patenting attack.

The date for assessing obviousness-type double patenting is important if the common general knowledge has advanced in the interim. Suppose the inventor invents the wheel and files an application at a time when wood is the only known material. Bronze then becomes a widely known material. The same inventor then develops an improved wheel made of bronze and files a second application, before the first application is published. If the date for assessing obviousness is the filing date of the first application, then the bronze wheel is non-obvious; but if the crucial date is the second filing date, then it is obvious over the wheel claimed in the first application. The basic dilemma is that the inventor has already received a reward for inventing the wheel, in the form of the first patent, and it seems wrong that she should be rewarded with an additional term of protection for a bronze wheel, when she did not invent bronze. But on the other hand, the improved bronze wheel would not be obvious to a skilled person even at the time of the second application; the skilled person would know nothing about the wheel, as the first application was still unpublished. If the inventor had waited to file her application until the later date, she would have been entitled to claim both the wheel and the bronze wheel, because neither would be obvious to a skilled person at that time; it seems perverse to say she should not be permitted to obtain a patent for the bronze wheel for the sole reason that she had previously filed the application for the wheel.