Thursday, March 22, 2018

Correction of Ownership Does Not Necessarily Require Direct Evidence from Assignor

Copperhead Industrial Inc. v. Canada (Attorney General) 2018 FC 311 Gleeson J
            2,614,533 / 2,919,266

Copperhead Industrial concerns a contested application to vary the ownership records of the Patent Office. The applicant’s legal corporate name is Copperhead Industrial Inc, and its Ontario Corporation Number is 002152706 [2]. The applicant’s sole director mistakenly believed that its legal name was 002152706 Ontario Ltd., and that Copperhead was its trade name [8]. Consequently, the inventor of the patents at issue assigned them to 002152706 Ontario Ltd, and that was the name reflected in the Canadian Patents Database. Copperheard subsequently commenced actions alleging infringement by Charger & Dresser, who responded in part by arguing that because 002152706 Ontario Ltd. is not a legal corporate entity, all the patent rights remain with the inventor. (The inventor was seriously ill when the action was commenced and is now deceased [11]-[12].) Copperhead therefore brought this application, pursuant to s 52, to have the records corrected to show Copperhead Industrial Inc. as the owner of the patents. While the Patent Office did not oppose the application, and did not appear, Charger & Dresser opposed the application as an intervener [5]-[6].

Gleeson J held that the Federal Court has jurisdiction, as there is no question of a contested interpretation of a contract of assignment [21]. He further held that while non-hearsay evidence from relevant inventors and assignors is commonly provided, and is of assistance to the Court, it is not required [22]-[23]. (The inventor was too ill to provide an affidavit before his death.)

Gleeson J also held that when the Patent Office records are varied, an effective date of variation is not required [34] . He explained that the effect of an order pursuant to section 52 is to correct an error or mistake; it does not serve to alter the effective date of the assignment or other underlying contractual documents, and consequently there is no requirement to identify an effective date for such an order [35].

On the facts, Gleeson J held that the error was due to an honest misunderstanding on the part of the applicant, and the intervener would not suffer any substantive prejudice in the related litigation as a result of the correction [36]. He therefore ordered the Patent Office records corrected to show Copperhead Industrial Inc. as the owner of the patents.

Friday, March 16, 2018

Legal Facts in the “But For” World: Does it Matter Who Might Have Been on the SCC in Calculating Damages?

Apotex Inc v AstraZeneca Canada Inc 2018 FC 181 Locke J
            2,139,653 / esomeprazole / NEXIUM / S 8 NOC

In AstraZeneca 2017 SCC 36, an action involving the 653 patent, the SCC abolished the promise doctrine (here). In so doing, it held the 653 patent to be valid,1 reversing the decisions in the courts below which had applied the promise doctrine to invalidate it. But before that action, in 2010 FC 714, Apotex had prevailed in the NOC proceeding. This decision, by Locke J, is the s 8 damages decision following from that NOC decision. Section 8 proceedings entitle the generic to recover damages for having wrongly been kept out of the market as a result of the statutory stay triggered by the NOC proceedings in which it prevailed. But what if ultimately, in the infringement action, the patentee prevails? The key question is whether Apotex should be entitled to recover s 8 damages for having been wrongly kept out of the market, when it turns out that it never had the right to enter the market. In AstraZeneca v Apotex 2017 FC 726 Barnes J held that the answer was no: see here. Locke J has now come to the same conclusion, and he therefore dismissed Apotex’s s 8 action [112]. While Locke J’s reasoning is somewhat different from that of Barnes J, the decisions are consistent. 

The relationship between s 8 damages and damages in a subsequent infringement action will soon be of historical interest only, as the new NOC proceeding will take the form of an action. This decision does, nonetheless raise a point of more general importance regarding the nature of hypothetical legal facts in the “but for” world. For example, does it matter who is on the Supreme Court of Canada in the but for world?

The technical point is that s 8 damages, like all damages, are assessed as the difference between the plaintiff’s actual position and the position it would have been in “but for” the wrong (ie but for the statutory stay in the case of s 8 damages). The patentee’s general argument in a case in which the patent is subsequently held to be valid is that in the but for world, the generic would have infringed, and would have liable to the patentee for infringement, and that liability in the “but for” world would offset any profits the generic would have made had the statutory stay not prevented it from entering the market. In effect, the generic did not suffer any lost profits as a result of the statutory stay, because the patent, which we now know to be valid, would have prohibited it from entering the market anyway.

It is clear from prior FCA decisions, in particular Lovastatin 2011 FCA 364 (here) and Omeprazole 2013 FCA 77 (here), that liability for damages for infringement should be taken into account in assessing s 8 NOC damages. There was a preliminary dispute in this case as to whether it should be taken into account under s 8(1), which establishes liability (AstraZeneca’s position), or under s 8(5), which allows the court to consider all relevant matters in assessing quantum (Apotex’s position). Locke J, relying on Lovastatin, held that Apotex’s “but for” infringement should be taken into account using s 8(5) [62]. I think that’s right as a matter of the interpretation of Lovastatin, but I have to admit that it is not entirely clear to me what difference it makes: as Locke J pointed out, it wouldn’t have made any difference on the facts of this case: [64].

The more interesting point was how to construct the “but for” world:

[76] . . .Apotex argues that there is no evidence that any of the following would have happened in the but-for world: (i) AstraZeneca would have sued Apotex for patent infringement, (ii) the parties would not have settled the matter before a trial, (iii) the SCC would have granted leave to appeal, or (iv) the SCC would have decided such an appeal the same way. Accordingly, Apotex argues that, for the purposes of constructing the but-for world, the 653 Patent should be treated as invalid just as it was in the real world during the Delay Period.

On the details, Apotex argued, for example, that the SCC would not necessarily have decided the same way because in the “but for” world, the matter would have come to trial at a time when Rowe J, who wrote the AstraZeneca decision, was not on the Court [88].

AstraZeneca’s position was that this should all be irrelevant:

[77] It argues that we now know that the 653 Patent was valid during the Delay Period, and that it should be treated as such for the purposes of the assessment of compensation under s. 8 of the Regulations, regardless of whether it would have been found valid in the but-for world.

Locke J found it unnecessary to decide the question. Relying in large part on the principle from Ramipril s 8 2014 FCA 67 [145] that “All steps that were taken in the real world should be assumed to have been taken in the but-for world unless there is evidence upon which the trier of fact may reasonably conclude that different steps would have been taken,” he concluded that all of Apotex’s hypotheticals should be resolved against Apotex. Since AstraZeneca prevailed on the facts, it was not necessary for Locke J address the legal argument.

The point is nonetheless an important, to the extent that different facts might warrant a different conclusion. In my view, AstraZeneca was right on this point. The reason for this is emphasized in an article by David Taylor: “reasonable royalties should reflect the value of patented technology rather than patent rights” (49 Ga Law Rev 79. 89, original emphasis). Taylor made that observation in the context of reasonable royalties, by way of explaining the established rule that in determining a reasonable royalty using the hypothetical negotiation approach, the patent should be assumed to be valid, even though in the hypothetical “but for” negotiations, the parties would not have known it to be valid. The same principle applies in the context of lost profit damages. To elaborate, the purpose of assessing damages for patent infringement is to preserve the incentive to invent. In order to promote socially beneficial inventions, the incentive to invent should be commensurate with the social value of the invention. That social value is equal to the incremental value of the invention over the best non-infringing alternative: see eg The Sedona Conference, Commentary on Patent Damages and Remedies, 23-24; David O. Taylor, David, Using Reasonable Royalties to Value Patented Technology,” 49 Ga Law Rev 79. 91-97; Lee & Melamed, “Breaking the Vicious Cycle of Patent Damages,” (2016) 101 Cornell Law Rev 385, 411-12. As I said in my article “A Remedial Benefit-Based Approach to the Innocent User Problem” 920014) 20 CIPR 79, “A patent is ‘nothing very special’ when it provides only a small advantage over the next best publically available alternative. The differential profit approach, by comparing the actual profits with those which would have been made with the next best alternative, provides a precise means of identifying a patent which is ‘nothing very special.’”

The “but for” world is a construct for determining the true social value of the patent invention. The “but for” world should therefore be sensitive to factors which affect the value of the patented technology. If a drug treats a disease that has become an epidemic, it should be more valuable than one that treats a disease that was anticipated but which never emerges. This gives the inventor a strong incentive to focus its efforts on inventions that it believes will be socially valuable. The “but for” world should not be sensitive to factors which solely affect the value of the patent rights, such as whether an injunction would have been granted, or whether the patent would have been held invalid. The grant of an injunction by a court may increase the value of the patent right to the patentee, but it does not increase the social value of the patented technology.

This suggests that legal facts about the “but for” world should be treated like past events: “past events must be proven, and once proven they are treated as certainties” (Athey v Leonati [1996] 3 SCR 458, [28]). This is consistent with Locke J’s observation in response to Apotex’s argument that the SCC’s decision to change the law and reject the promise doctrine was not foreseeable (my emphasis):

[96] Even accepting all of the facts asserted in the preceding two paragraphs, the fact remains that the 653 Patent is, and always was, valid. This is the case in the real world even if I accept Apotex’s allegations that the law on the Promise Doctrine would not have evolved in the but-for world as it did in the real world. Whether or not such allegations are justified, the fact is that Apotex claims compensation for loss as a result of being prevented from infringing AstraZeneca’s valid patent.

1There was a preliminary dispute as to whether the SCC in AstraZeneca had held the 653 patent to be valid, or merely that it is not invalid for lack of utility. Locke J held that the SCC had held the 653 patent to be valid [30].

Thursday, March 15, 2018

Promise Doctrine Zombie Watch: Part III

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2018 FC 259 Phelan J
            2,261,630 / infliximab / REMICADE / INFLECTRA

In this case (discussed more generally in my previous post), Hospira had initially based its utility argument on “promise of the patent,” but after the trial, AstraZeneca 2017 SCC 36 was released, abolishing the doctrine: [253]. Phalen J allowed the parties to make submissions on the effect of AstraZeneca [254], and Hospira "recast its argument to link 'promise of the patent' to the absence of sound prediction and to insufficiency and overbreadth" [255]. The exact nature of Hospira’s argument is not entirely clear, but what is clear is that Phelan J was having none of it:

[258] Hospira attempts to import the discarded “promise” doctrine into insufficiency and overbreadth. Certainly AstraZeneca does not do so and it would be inconsistent to discard that doctrine only to have it resurface under another principle without clear language to do so.

This is in line with the other post-AstraZeneca cases, which have consistently refused to entertain any attempt to resurrect the promise doctrine in another guise: see here and here.

Tuesday, March 13, 2018

More Support for Experimental Use Exception to Anticipation

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2018 FC 259 Phelan J
            2,261,630 / infliximab / REMICADE / INFLECTRA

The 630 patent, held by Kennedy Trust, covers the adjunctive use of methotrexate [MTX] and infliximab for the treatment of rheumatoid arthritis [RA] in patients who do not respond fully to MTX alone. Infliximab is only approved for treatment of RA when used in combination with MTX [16]. Kennedy Trust’s licensee, Janssen, markets infliximab for use in combination with MTX under the name REMICADE [18]. Hospira’s infliximab product INFLECTRA, is a biosimilar of REMICADE, sold for the same purpose [18] (and see the product monograph). Hospira brought an action for a declaration that Kennedy’s 630 patent is invalid, and that INFLECTRA would not infringe, while Kennedy brought a counterclaim to the opposite effect [5].

MTX was a popular prior art treatment for severe RA [111], but for some patients — “incomplete responders” — MTX alone did not adequately control their RA. The efficacy of infliximab was also part of the cgk [113], but the duration of effect was limited [11]. It turned out that the combination of MTX and infliximab, as claimed in the 630 patent, exhibited enhanced efficacy over either drug alone as well as a sustained duration of effect [15]. On the facts, Phelan J concluded that this particular combination therapy was not obvious or obvious to try [230].

Hospira argued “an astonishing number and veritable panoply of patent law issues.” [24], including standing, ownership, improper priority, and double patenting plus along with the full range of the usual attacks, including anticipation, obviousness, sufficiency, utility, and overbreadth (and this list isn’t complete). As an academic, I hesitate to comment on litigation strategy, but I can’t help but feel that Hospira’s scattershot approach undermined the strength of its better arguments, particularly given that several of the arguments were thinly argued, occasionally without any supporting authority (see eg [159]). On overbreadth, Phelan J remarked that “Its submissions seem to have been made in the hope that something would “stick” – the patent law equivalent of the Hail Mary pass” [249]. At the end of the day, nothing stuck: Phelan J held the 630 patent to valid and infringed. I won’t run through all of the arguments, but only those that raise a point of interest.

Experimental Use Exception to Anticipation

A couple of interesting points were raised by Hospira’s novelty attack. First, Phelan J endorsed the experimental use exception to anticipation, albeit in obiter [198]. Hospira argued that the patient consent forms used in Kennedy’s Phase II clinical trials were anticipatory. Phelan J rejected this primarily on the basis that confidentiality was established on the evidence (in part on the basis that the industry practice with clinical trials is to expect the maintenance of that confidence) [196i]. He also rejected it on public policy grounds, as it would effectively put an end to informed consent or to the patenting of medication [196i]. And he also suggested that “the experimental use exception is not as defunct as Hospira would have one conclude,” citing with approval Fothergill J’s decision in Bayer v Apotex 2016 FC 1013, discussed here (and see also Bayer v Apotex 2014 FC 436, Hughes J, discussed here). This experimental use defence to anticipation had some basis in the early case law, but it was not previously well-established; we now have three different Federal Court judges who have recently lent credence to the idea.

Speculative Anticipation

Hospira argued anticipation on the basis of a number of prior art documents which suggested trying infliximab or another anti-TNF-α antibody in combination with MTX, or referenced a trial in which that combination was being tried [196]. This is a bit of a twist on the usual anticipation attack, where the prior art says “We did X” and the question is whether X necessarily falls within the claims of the patent at issue. In this case (to oversimplify), the prior art says “Someone should try X” where X is exactly what the patent claims, namely combining MTX and infliximab to treat RA. (More precisely, the prior art references didn't all reference infliximab specifically.) Phelan J dismissed the prior art references as all being speculative [167], [191]. This calls to mind the case-law arising in the context of a conflict proceeding under the first-to-invent system, where in order to establish inventorship, it had to be shown that at the asserted date “the invention was no longer merely an idea that floated through the inventor's brain but had been reduced to a definite and practical shape” Ernest Scragg & Sons Ltd v Leesona Corp (1964), 45 CPR 1, 33. The allegedly anticipatory prior art in this case was really no more than “an idea that floated though the brain” of the proponents. It strikes me that just as a speculative idea cannot be an invention for the purposes of establishing priority over an inventor who had actually reduced the idea to practice, so it cannot be a disclosure sufficient to anticipate an invention that had actually reduced the idea to practice.

Blinding the Witness

Hospira’s experts were blinded. Phelan J gave little weight to this, saying “blinding alone is not a guarantee of reliability and it is not a sufficient reason to prefer the evidence of one witness over another” [203], consistently with 2016 FC 382 (discussed here). Phelan J also questioned whether blinding was even possible, at least on the facts of this case:

Further, given the involvement of the experts in this case in the development of RA treatments during the relevant time period, it is at least questionable whether blinding holds any value. It is impossible to believe that these experts were not aware of the development of Remicade prior to this trial.

Methods of Medical Treatment

Hospira argued that the 630 patent was invalid as being an unpatentable method of medical treatment [136]-55]. Phelan J recognized that “[t]he jurisprudence with respect to the unpatentability of methods of medical treatment is not entirely consistent” [141]. This is not very surprising, given that the FCA has also called for “full consideration [of the patentability of methods of medical treatment] by this Court or the Supreme Court in a case where the issue is squarely raised on the facts” 2015 FCA 116 [101]. Phelan J’s observation further emphasizes the need for reform in this area of the law.

On the facts, Phelan J held that the patent at issue was not a method of medical treatment, essentially because “the use of X in combination with Y to treat disorder Z” is no different in substance from “the use of X to treat disorder Z” and the latter is clearly patentable: [147]. A claim of that type was at issue in Wellcome / AZT, 2002 SCC 77; and see the discussion here.

Monday, March 5, 2018

Gillette Defence (Not Really) Applied

TearLab Corp v I-Med Pharma Inc 2018 FC 164 Manson J
            2,494,540/ TearLab System / i-Pen System

It was lucky for TearLab that its application for an interlocutory injunction was denied by Manson J 2016 FC 606 aff'd 2017 FCA 8 (see here), as TearLab has now lost the infringement action, on the basis that the asserted claims were infringed but invalid as being anticipated and obvious. (Had TearLab been granted the interloctory injunction, it would now be liable to I-Med on the undertaking in damages.) The result turned on a self-created squeeze between infringement and validity:

[183] That result flows directly from the dilemma created by the Plaintiffs urged broad construction for the asserted claims to include both in vivo and ex vivo applications of the invention, which, while I have agreed to that construction, leads to invalidity due to anticipation.

The Gillette defence was invoked, though not really applied. As Manson J explained, the Gillette defence is based on the House of Lords decision in Gillette Safety Razor Co v Anglo-American Trading Co Ltd (1913) 30 RPC 465 (HL), holding that “a defendant may plead that their alleged infringing actions are part of the prior art, and therefore the patent is either invalid for claiming subject matter included in the prior art or, if the patent is valid, the defendant cannot infringe” [179]. The key feature of the Gillette defence is that it obviates the need for the defendant to establish whether the patent is invalid or infringed; once it is estabblished that the defendant’s device was part of the prior art, one or the other must be true, and it is not necessary for the defendant to establish which. Indeed, in principle, it is not even necessary to construe the claims. As Lord Moulton explained at 480-81:

I am, therefore, of opinion that in this case the Defendants' right to succeed can be established without an examination of the terms of the Specification of the Plaintiffs' Letters Patent. I am aware that such a mode of deciding a Patent case is unusual, but from the point of view of the public it is important that this method of viewing their rights should not be overlooked. In practical life it is often the only safeguard to the manufacturer. It is impossible for an ordinary member of the public to keep watch on all the numerous Patents which are taken out and to ascertain the validity and scope of their claims. But he is entitled to feel secure if he knows that that which he is doing differs from that which has been done of old only in non-patentable variations, such as the substitution of mechanical equivalents or changes of material shape or size. The defence that “the alleged infringement was not novel at the date of the plaintiff's Letters Patent” is a good defence in law, and it would sometimes obviate the great length and expense of Patent cases if the defendant could and would put forth his case in this form, and thus spare himself the trouble of demonstrating on which horn of the well-known dilemma the plaintiff had impaled himself, invalidity or non-infringement.

In TearLab, while the Gillette defence was raised, it was not really applied, because Manson J did construe the claims, and held them to be infringed but anticipated (and also obvious). The advantages of the Gillette defence are likely more theoretical than practical, as it would be a bold defendant that would put all its eggs in one basket of proving that its product was the same as the prior art, without bothering to construe the claims, or address validity and infringement directly. It is perhaps worth noting that the Gillette defence was not put forward by the defendant in Gillette itself, but rather was developed by Lord Moulton on his own initiative: 477.