Alternatives to s 8 Damages

Apotex Inc v Pfizer Ireland Pharmaceuticals et al 2016 ONSC 4966 Lederman J

Under our patent linkage system, a patent that is ultimately held to be invalid can keep competitors off the market until the conclusion of the NOC proceedings. Section 8 of the NOC Regs provides a remedy in the form of damages to the generic that has wrongly been kept off the market. However, there are limitations to this remedy. Both the FCA and the ONCA have held that if the generic is successful in the s 8 proceeding, s 8 entitles it only to its own damages, and not disgorgement of the patentee’s profits: Apotex v Eli Lilly Canada 2011 FCA 358 (here); Apotex v Abbott Laboratories 2013 ONCA 555 JJA (here). The FCA has also held that if the generic is unsuccessful in the NOC proceeding, it cannot claim s 8 damages, even if the patent is subsequently held invalid in an infringement action: see Eli Lilly Canada v Apotex 2013 FCA 282 (blogged here). Undeterred, in a series of actions Apotex has sought a way around these limitations by pleading a bewildering variety of causes of action. None has so far proceeded beyond the pleading / certification stage. I haven’t blogged all of them and this decision presents an opportunity to try to summarize the holdings, though so many causes of action have been raised that I can’t guarantee that I have caught them all.

This decision itself is also noteworthy in a few respects. Most importantly, Lederman J refused to strike the claim for unjust enrichment [36]. In so doing, he declined to follow the BCCA decision in Low v Pfizer 2015 BCCA 506. As discusssed here, Low held that the claim for unjust enrichment had no prospect of success because there was a juristic reason for the infringement. Lederman J noted that Low was not binding on him [30], and he consequently held that jurisprudence is inconclusive [33]. He also distinguished Apotex v Eli Lilly 2015 ONCA 305 (here) on the basis that in that case Apotex had been seeking disgorgement of all of the patentee’s profits, whereas in this case, Apotex “claims only that portion of Pfizer’s revenues that represent the revenues Apotex was deprived of because of the delay in obtaining its Notice of Compliance” [35]. That is, in this case Apotex is in effect seeking its own damages in the guise of an unjust enrichment claim.

Lederman J also allowed a claim for damages in nuisance [39]. I believe this is the first time Apotex has advanced a nuisance claim.

A third point of interest is that Lederman J also struck Apotex’s claim for damages under s 8 [18]. This is not too surprising, as he was simply following [14] the FCA holding in Eli Lilly Canada v Apotex 2013 FCA 282 n this point but given his view of the BCCA decision in Low, it was not a foregone conclusion that he would accept the FCA’s reasoning.

Apotex also pleaded treble damages under the English and Ontario Statutes of Monopolies [1]. Pfizer did not seek to have this struck, in light of the prior jurisprudence allowing such a claim to stand. Lederman J also allowed the claim under s 7(a) of the Trade-marks Act to stand, in light of prior decisions [28]. He rejected the claim based on Ashby v. White, on the view that “The principle borrowed from that case – ‘no right without a remedy’ – is simply a phrase, a principle or a maxim. By itself, it does not disclose a cause of action and should be struck” [40].

To summarize (at least partially) the cases to date:

No prospect of success
            Disgorgement under s 8

Apotex v Eli Lilly Canada 2011 FCA 358 (blogged here); Apotex v Abbott Laboratories 2013 ONCA 555 (here) aff’g 2013 ONSC 356

Damages under s 8 if patent held valid in NOC proceeding

Eli Lilly Canada v Apotex 2013 FCA 282 (blogged here); Apotex v Pfizer Ireland 2016 ONSC 4966

            Unlawful interference with economic relations
                        Low v Pfizer 2015 BCCA 506 (here)

Waiver of tort

                        Low v Pfizer 2015 BCCA 506 (here)

            The “principle” in Ashby v White

Apotex v Pfizer Ireland 2016 ONSC 4966

Allowed to stand

Damages under the Trade-marks Act s 7(a)

Apotex v Pfizer Ireland 2016 ONSC 4966

Apotex v Eli Lilly 2012 ONSC 3808 leave to appeal refused 2013 ONSC 1135 (here)

Apotex v Schering 2016 ONSC 3407

Treble damages under the English and Ontario Statutes of Monopolies:

Apotex Inc. v. Eli Lilly, 2015 ONSC 5396; Apotex Inc v Schering Corp 2016 ONSC 3407

            Damages in nuisance

Apotex v Pfizer Ireland 2016 ONSC 4966

            Conspiracy
                        Apotex v Pfizer Ireland 2016 ONSC 4966

Unjust enrichment
            No cause of action in unjust enrichment

Low v Pfizer 2015 BCCA 506 (here) contra Apotex v Pfizer 2016 ONSC 4966

            No disgorgement of patent’s entire profits
                        Apotex v Eli Lilly 2015 ONCA 305 (here)
            Disgorgement of profits corresponding to generic’s damages

Apotex v Pfizer Ireland 2016 ONSC 4966 contra Low v Pfizer 2015 BCCA 506

Jurisdiction of the Federal Court and IP Related Contracts

SALT Canada Inc v Baker 2016 FC 830 Boswell J
            2,222,058

Section 52 of the Act gives the Federal Court “jurisdiction. . . to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.” SALT Canada brought an application for a declaration under s 52 that the register be varied to list SALT as the owner of the ‘058 patent. Boswell J dismissed the application for lack of jurisdiction. In so doing Boswell J reviewed a number of cases and provided a helpful and clear statement of the law related to the jurisdiction of the FC under s 52. However, he did not discuss Kellogg Co v Kellogg [1941] SCR 242, presumably because it was not cited to him. This omission is unfortunate, as that case might be taken to suggest a different result, and it would have been interesting to see how it would have affected his reasoning. Boswell J also emphasized the need for the court which does have jurisdiction hear the dispute to take into account s 51 of the Act, which establishes a priority scheme for patent title based on registration. But that same point, looked at from the other direction, suggests that the FC might have jurisdiction to begin with. So, while Boswell J’s holding initially appears to be a straightforward application of existing law, a closer look suggests there may be a reasonable argument for a broader interpretation of the Court’s jurisdiction.

The case involved two conflicting assignments of rights in the ‘058 patent from the inventor, Dr Markels. The first was a complex series of assignments which ultimately led to the Respondent, Baker. Baker registered his ownership with the Patent Office. Some of the assignments in this series included provisions requiring the ‘058 patent to be reassigned to Markels if certain conditions were breached. Apparently believing that the conditions had indeed been breached, in 2015 Markels assigned title to the Applicant, SALT. Markels also prepared a reassignment from Baker to Markels, which was, however, never executed by Baker. SALT sought to have its ownership registered, but the Patent Office refused on the basis that the assignment was not executed by Baker, the registered owner [3]-[9].

SALT then brought this application for a declaration under s 52 that the register be varied to list SALT as the owner of the ‘058 patent (as well as other additional and alternative relief). A key substantive question related to the interpretation of the various agreements, and whether the conditions in the first series of assignments had been breached, such that Markels was entitled to a reassignment [24].

Comments on the State of the Art for an Obviousness Attack

Pollard Banknote Limited v BABN Technologies Corp 2016 FC 883 Locke J
            2,752,551

“What is the State of the Art for the Purpose of an Obviousness Attack?” That’s the title of an article I wrote in 2012 (27 CIPR 385). The puzzle is this. Traditionally, under the old Act, the body of prior art which could be set up against the patent in an obviousness attack (the “state of the art”), included only the common general knowledge plus prior art which would be discovered in a reasonably diligent search directed to the problem at hand. But s 28.3, which codified the obviousness in the new Act, provides that the relevant information is that “disclosed before the claim date … in such a manner that the information became available to the public”. That includes all public prior art, not just prior art which would have been found in a reasonably diligent search. There is an open question as to whether s 28.3, which was generally thought to have simply codified the existing non-obviousness requirement, had extended the state of the art. In my article I concluded that “contextual and purposive considerations imply that s. 28.3 was not intended to change the law, and the state of the art remains limited to information that is reasonably discoverable,” but “the argument based on the text of the provision is sufficiently strong that case law directly addressing the question will be needed before the point can be considered settled.”

While a number of decisions under the new Act simply assumed that the relevant state of the art was the same as under the old Act, the first decision to address this question directly, albeit briefly, was Novartis v Teva / deferasirox 2015 FC 770 blogged here, in which O’Reilly J held that indeed the law had not changed. (The question was noted, but not addressed, in 2015 FCA 163 [21].) Now, in Pollard v BABN, Locke J has suggested that he may prefer the opposite conclusion [192-95]. The question was relevant in respect of the Camarato application, which was crucial to the holding that Claim 1 was obvious. As I read his decision, Locke J never directly held that the state of the art extends to all publicly available prior art. Locke J noted the problem and made some comments on it, but his only direct holding was “Even if I was of the view that this reference’s findability in a diligent search was a relevant consideration, I would nevertheless conclude that it is citable for obviousness,” because it was indeed have been found in a diligent search, and so would be part of the state of the art under either test [196]. The phrase “even if I was” is ambiguous. It might suggest that he was of the view and findability is not the test, and his holding that the Camarato application was findable was in the alternative; but it might also mean that it didn’t matter whether findability was the test, given that the reference was in fact findable.

Regardless of the precise holding, Locke J was clearly sympathetic to the argument that the state of the art should comprise all public prior art:

[194] [I]n order to obtain a valid patent, it is not enough for a skilled person simply to make an obvious change to what is known in the art. This principle should apply to any information that was available to the public, even if it would not have been located in a diligent search. For example, should a skilled person be able to obtain a valid patent by simply searching a dusty corner of a public library for a document that describes a forgotten invention and making an obvious change to it?

The problem with the final rhetorical question is that even under the traditional test a person cannot obtain a patent by “simply” searching a dusty corner and making an obvious change, because if the search was simple, by definition it would have been found in a reasonably diligent search. The proper question is whether a skilled person should be able to obtain a valid patent by making an obvious modification to a document that was found after a long and arduous search. The answer to that question is not so easy. The EWCA in Windsurfing [1985] RPC 59, 71 made a very similar argument, which I discuss at more length in my article at 391-93.

Protests Do Not Result in a Higher Burden in Subsequent Litigation

Pollard Banknote Limited v BABN Technologies Corp 2016 FC 883 Locke J
            2,752,551

Pollard v BABN raised two issues related to the standard of review. The more significant holding was that a party which protests or submits prior art during prosecution, pursuant to s 34.1, will not be disadvantaged by a higher burden of proof if it subsequently challenges the same patent in litigation. I believe this is the first decision to address this issue.

In Wellcome / AZT 2002 SCC 77 [42]-[44], the SCC apparently held that a challenge to the validity of a granted patent was somehow a form of judicial review of the Commissioner’s decision to grant the patent, and that decision should be treated with deference, so that the patent would only be held invalid if the Commissioner’s decision to grant it was unreasonable. The SCC’s conclusion was rejected by Gauthier J in Cefaclor 2009 FC 991 [350]-[370], who, after a devastating critique of the SCC’s reasoning, held that the correct standard was the traditional balance of probabilities. Subsequent decisions of the FC addressing this issue have consistently followed the lead of Gauthier J, essentially (and rightly, in my view) treating the SCC statements in Wellcome / AZT as having been made per incuriam. Locke J in this case did the same, citing Cefaclor and recognizing, as the SCC did not, that “[t]here is no standard of review applicable to Pollard’s challenge to the validity of the 551 Patent because this is not a judicial review of the decision to allow the 551 Patent to issue. . . . The standard is the balance of probabilities” [129].

The more interesting issue related to s 34.1. Pollard had been involved in challenging the patent during prosecution by filing 12 protests pursuant to s 34.1, including both prior art submissions and argument [128]. SG argued that “in view of the depth of Pollard’s involvement in challenging the patented invention during prosecution, it benefited from what was effectively a patent opposition process. For this reason, and because of the extraordinary delay SG experienced in obtaining allowance of its patent application, SG argues that a degree of deference to the examiner’s decision to allow the 551 Patent to issue should apply” [128].

Locke J rejected SG’s argument. He noted that SG could not be held accountable for the delay:

[131] Its protests contributed to the delay in the 551 Patent’s issuance only inasmuch as the examiner accepted the arguments contained in those protests and included them in the rejection letters that were sent to the applicant. A more direct reason for the delay in the issuance of the 551 Patent is that it took many exchanges with the patent examiner before the applicant found the claim language that would be accepted. I see no basis for criticizing Pollard for having filed its protests.

The delay should not be attributed to the protests, because if they are well-founded, the examiner should have raised them in any event, and if they are not, the examiner need not and should not require the applicant to respond.

Locke J also raised an important policy issue:

[133] Another concern I would have about raising the burden on Pollard for its validity challenge is that it would, as a result, have a higher hurdle than other interested members of the public who might wish to mount a similar challenge. It should also be noted that an impeachment action, if successful, is a benefit not just to the plaintiff, but also to the public as a whole since an unjustified monopoly is thereby removed from the patent register.

If a party faced a higher burden for issues it raised during prosecution, that would no doubt affect its decision whether to protest or submit prior art under s 34.1, and as Locke J pointed out, it is in the interest of the public as a whole to ensure that unjustified patents are not granted. The flip side of the coin is that a interested party like SG gets two kicks at the can – though that is perhaps not a serious problem if its contribution to the prosecution imposes no significant additional burden on the applicant, as Locke J indicated. 

Locke J also noted on the facts that the applicant was apparently not concerned about the delay, because it “responded at or near the end of the six-month deadline for responding to the examiner’s action in every case but one” [132]. Quare whether this would form the basis for a distinction in a future case? I think not, given the rest of Locke J's reasoning, but the fact that he mentioned this point leaves the question open. And of course, future judges might see the whole issue differently.

Claim Held Invalid for Ambiguity for the First Time in 40 Years

Pollard Banknote Limited v BABN Technologies Corp 2016 FC 883 Locke J
            2,752,551

Subsection 27(4) of the Act provides that the claim must define the invention “distinctly and in explicit terms.” A claim that fails to do so will be invalid for ambiguity [136]. However, as Hughes J has pointed out, the bar for holding a claim invalid for ambiguity is very high – the claim must be essentially incapable of being meaningfully interpreted – and as a consequence, an ambiguity attack is very rarely successful: 2005 FC 1725 [50]-[53]. Nonetheless, Claim 2 of  the '551 patent was held to be invalid for ambiguity – apparently for the first time in almost 40 years* (see 2005 FC 1725 [51], noting that the last time a claim was held invalid on this ground was 1977).

Recall from yesterday’s post that the invention was a security feature for lottery tickets, and Claim 1 was to a ticket comprising a non-play area on the ticket (containing the bar code), “spaced apart from” the play area (containing the prize information or "game data"). This is shown in Fig 3:



Claim 2 was a dependent claim to

2. The printed document of claim 1wherein the game data is printed around the bar code.

This was apparently intended to be illustrated by Fig 4:



It is not possible for the game data to be printed around the bar code at the same time as the play area, which contains the game data, is “spaced apart” from the non-play area, containing the bar code, as is required by the dependency [141]. This means that Fig 4 does not really illustrate Claim 2; while the game data is printed around the bar code, the play area is not spaced apart from the non-play area. 

Claim2 was therefore held invalid for ambiguity [144]. This holding of ambiguity is the exception that proves the rule that the bar for a successful ambiguity attack is very high; while the claim was held to be invalid, the claim was internally contradictory, and so was incapable of meaningful interpretation.

*See the comment to this post, noting that Apotex v Hoffman-La Roche (1989), 24 CPR(3d) 289 (FCA) the claims were held invalid for ambiguity, so it has really been 'only' 27 years since the last time an ambiguity attack was successful.

Is it Time to Revisit the Rule Against Using Extrinsic Evidence in Claim Construction?

Pollard Banknote Limited v BABN Technologies Corp 2016 FC 883 Locke J
            2,752,551

In this declaratory action brought by Pollard, Locke J declared both claims of the ‘551 patent, owned by Scientific Games (the successor to BABN), to be invalid (Claim 1 for obviousness 242], Claim 2 for ambiguity [144]). On the infringement counter-claim, he held that the claims were not infringed in any event [2]. The decision raises a number of interesting issues, perhaps the most of important of which relates to prosecution history estoppel.

The ‘551 patent relates to a security feature for instant lottery tickets. These tickets have a scratch-off layer covering the “game data” which the customer scratches off to reveal whether the ticket is a winner and the amount of any prize. (In cheaper tickets a paper pull-tab may be used to cover the prize instead of the scratch-off layer.) To prevent fraud, the tickets normally also have validation information, in the form of numbers and/or a bar code, which is checked against the lottery’s online system on redemption to confirm that the ticket had been legitimately sold, that it was indeed a winner, and that it had not previously been redeemed [12]. As additional security, the validation information may also be hidden by a scratch off layer. This was all part of the prior art.

Coordinating S 8 NOC and Infringement Actions

Apotex Inc v Alcon Canada Inc 2016 FC 720 Tabib J

            2,129,287, 2,606,370 / travoprost / TRAVATAN Z

NOC proceedings and infringement actions give rise to independent litigation over infringement and validity of the same patents, with potentially conflicting monetary remedies. This decision by Tabib J on a motion for bifurcation of a s 8 damages action deals with some of the complex procedural issues that arise in attempting to resolve this conflict. While appropriate procedural decisions may help reduce duplicative litigation and avoid inconsistent results, it is hard to avoid the conclusion that the remedial overlap is another illustration that the PM(NOC) Regulations’ well-intentioned attempt to create a simple and streamlined patent linkage system has not been a success.

The patent linkage systems operating in the US and Canada are functionally equivalent to giving an automatic interlocutory injunction to a pharmaceutical patentee threatened by generic entry. In a jurisdiction in which interlocutory injunctions are relatively easy to get, linkage is hardly necessary. So, as I understand it, in the UK a pharmaceutical patentee will normally be able to get an interlocutory injunction against a generic which seeks to launch at risk, and consequently the generic will normally bring a declaratory action to “clear the way.” The effect is that the generic cannot launch before it has been determined that the patents reading on the product are invalid or not infringed. In jurisdictions such as Canada and the US, where interlocutory injunctions are more difficult to obtain, the generic might be able to launch even though its product infringed a valid patent. The patent linkage system addresses this by effectively giving the patentee an automatic interlocutory injunction. In the US, the application for marketing authorization is a deemed infringement, giving rise to a statutory stay which is roughly equivalent to an interlocutory injunction. However, there is no separate hearing to assess the merits of this “injunction,” as there would be in an application for an interlocutory injunction as such. In the Canadian patent linkage system, embodied in the PM(NOC) Regulations, on applying for marketing authorization for a generic drug, the generic is subject to a statutory stay – the automatic interlocutory injunction – while validity and infringement are assessed in an NOC proceeding. The NOC proceeding is intended to be summary in nature, like the hearing in which a true interlocutory injunction application would be decided. And if the patentee is unsuccessful in the proceeding, under s 8 it must compensate the generic which has been wrongly kept out of the market during the period of the stay, just as a party who is granted an interlocutory injunction must normally give an undertaking in damages to compensate the defendant which has been prevented from exercising its legitimate rights. And just as with a traditional interlocutory injunction application, a subsequent infringement action can proceed to a potentially different result on the basis of a more complete record. The Canadian system is therefore intended to statutorily mimic a true interlocutory injunction application more closely than the US linkage system.

However, one feature distinguishes the Canadian linkage system from both a true interlocutory injunction application and the US-style linkage system, namely that the NOC proceeding and any subsequent infringement action are independent proceedings. This means that inconsistent results are possible, in principle and in practice. In the both the US and the UK, a patentee may be liable for foregone profits incurred by a successful generic which was kept off the market by the stay / interlocutory injunction, but in both systems the generic is entitled to compensation only if it prevails in the ultimate infringement action. Thus there can never be a conflict in which the generic is entitled to compensation for having been kept off the market by a stay based on a patent which was valid and infringed. In contrast, in Canada the generic may win the NOC proceeding, and so be entitled to compensation under s 8, and yet lose the infringement action, so that it would be entitled to 8 compensation under s 8 of the NOC Regulations for having been kept out of a market which, under the Patent Act, it had no right to enter.

This potential for conflict has begun to be addressed substantively. As Tabib J states “[t]he law as it stands is to the effect that hypothetical infringement is not a complete defence to a section 8 claim, but that it is a significant factor to be considered in assessing compensation, and that it can indeed reduce damages to zero” (citing 2012 FC 620, blogged here; and see also 2012 FC 559 aff’d 2013 FCA 77 blogged here and here), though as she notes the law “may continue to evolve” [11]. 

This decision by Tabib J on Apotex’s motion for bifurcation wrestles with the problem of how to deal with this issue procedurally. Alcon held two patents related to travoprost, the ‘287 and ‘370 patents. Alcon lost both NOC proceedings, and, after Apotex launched, Alcon commenced an infringement action based on the ‘370 patent only. At the same time, Apotex brought an action for s 8 damages, which Alcon sought to defend by alleging infringement of both the ‘370 patent and the ‘287 patent, as well as the ‘172 patent, which was not listed on the Patent Register and so was not at issue in the NOC proceedings [2], [3]. Apotex now seeks to bifurcate the s 8 action to have validity and infringement of the ‘287 and ‘172 patents determined separately. The parties agreed that validity of and infringement regardng the ‘370 patent were already effectively bifurcated as they will be determined in the infringement action and those findings would be binding in the s 8 action [6]. In some ways the bifurcation decision was quite easy. On the facts, Tabib J found that the issue proposed to be bifurcated were quite distinct, so bifurcation would not lead to wasteful duplication [10]. On the other hand, if bifurcation were refused, duplicative litigation of quantification between the infringement and liability phases might result [12]. Copnsequently, Tabib J granted the motion to bifurcate.

Two interesting points were raised. First, Alcon was apparently concerned that Apotex’s motion for bifurcation was a prelude to a move to consolidate the bifurcated infringement issues relating to the ‘287 and ‘172 patents with the infringement trial of the ‘370 patent, thus delaying the trial and Alcon’s hoped for injunction [7].While Tabib J gave some credence to this concern [7], in the end she considered that in this case bifurcation does not entail joinder, and so Alcon would not be disadvantaged in this manner [10]. The concern nonetheless illustrates the complex procedural considerations that arise because of the separate nature of these proceedings.

Secondly and more fundamentally, Tabib J suggested that if Alcon’s related infringement action was not already bifurcated, the best way forward might have been to consolidate both actions, without bifurcation [12]. This would solve the problem of the separate actions in the most straightforward way possible. However, as this case illustrates, consolidation is not always appropriate. And while consolidation might in some cases be possible, given the vagaries of timing of two independent actions, it is too much hope that this would be routine. It seems, therefore, that parallel s 8 and infringement actions will be coordinated only by ad hoc motions such as this one, with varying degrees of success in avoiding wasteful duplication. The procedural complexity created by our patent linkage system seems destined to endure so long as the system remains in its current form.

Uncontested Removal of Co-Inventor

Novartis AG v Canada (Attorney General) 2016 FC 229 McDonald J

            2,782,650

In this decision, decided in February but only recently released, McDonald J granted an uncontested application by Novartis to delete one of the named co-inventors on the ‘650 patent. The decision states that the application was made “pursuant to sections 31(3) and 52” of the Act [1]. This is a bit odd as was established in Micromass 2006 FC 117 that s 31(3) applies only prior to grant, and after grant, as in this case, s 52 is appropriate: accordingly, the judgment itself was made “pursuant to section 52" of the Act. The application also proceeded on the basis that the test to be met for removal of an co-inventor is that set out under s 31(3), which requires affidavits from the remaining applicant or applicants satisfying the Commissioner that they are the sole inventor or inventors [6]. At the time the application was made, there were some cases suggesting that in deciding whether to remove a co-inventor under s 52, the court should follow the test set out for the Commissioner of Patents in s 31(3) (see here). That view would also explain why the application was brought pursuant to both sections. Subsequently, however, in Qualcomm 2016 FC 499 (blogged here) Simpson J has held that such affidavits are not strictly required under s 52. The decisions are not inconsistent in the result, since the affidavits were provided in this case and the application was granted, and no doubt it was simpler for Novartis to provide those affidavits rather than argue the point, as the law was unsettled at the time of its application.