Friday, December 13, 2019

Stay Granted in Favour of Provincial Superior Court

Thermolec Ltée v Stelpro Design Inc 2019 FCA 301 Locke JA: Boivin, Nadon JJA rev’g 2019 FC 363 St-Louis J

This brief but significant decision from the FCA clarifies the circumstances in which a patent action in a Federal Court should be stayed in favour of an action in a provincial superior court. While the outcome seems right in terms of economy of judicial resources, the whole problem may be an unintended, and unwelcome, side-effect of the Federal Court’s unwillingness to grant interlocutory injunctions in patent cases.

As discussed in my post on St-Louis J’s decision, while the Federal Court has exclusive jurisdiction to annul a patent, its jurisdiction in respect of infringement is concurrent with that of the provincial superior courts (in this case Quebec): under the Federal Courts Act s 20(1)(2). When actions are brought concurrently, which, if either, should be stayed? One important consideration is that only the Federal Court can rule on the in rem validity of the patent and dispose of it at a national level. This would strongly imply that the FC action should not be stayed. To address this difficulty, the practice has arisen of the patentee giving an undertaking that if the final result in the litigation in the provincial superior court is that the patent is invalid as between the parties, the patentee would agree to the striking out of the patent by the Federal Court. This practice has now been sanctioned by the FCA in this decision [6].

If such an undertaking is given, the question largely boils down to judicial economy, which will be driven by the relative stage of proceedings in each court. In this case, St-Louis J had refused to grant a stay of the FC action, and the FCA has now reversed, giving the following list of the “most important considerations” on the facts of this case:

1) The advanced state of the Quebec proceeding relative to the Federal Court action;

2) The fact that the patent in issue, the issue of the validity thereof, and the parties are common to the two proceedings;

3) The duplication of efforts and the inefficient use of resources, both private and public, if both proceedings were allowed to proceed; and

4) In the event that the Quebec Superior Court determines that the patent in issue is invalid and the Undertaking is exercised, third parties (including the respondent) would be assured that they would not have to defend themselves from allegations of infringement in any other Canadian jurisdiction.

While this list was directed to the relevant facts of the case, it also provides more general guidance.

St-Louis J had not emphasized different factors; his decision to refuse the stay turned on his view that “the proceedings on the merits are still at an early stage in both courts” [FC 47]. The FCA pointed out that this observation is factually incorrect, and in fact the Quebec action was substantially further advanced [4]-[5], and it was primarily for this reason that the FCA reversed. This means that only the Quebec action will proceed, avoiding wasteful duplication.

While this outcome certainly seems preferable on the facts of this case, there is a larger question. In terms of efficacy of the overall judicial system, no doubt it is preferable to have a single action in provincial superior court as opposed to one there and one in the Federal Court. But arguably it would be even better to have a single action in Federal Court, which is, in effect, a specialized patent court, with trial and case management judges who are expert in patent law and the management of complex patent cases. Why are patentees foregoing these advantages? The cases on this issue show that it is typically the patentees who are seeking to avoid the Federal Court. It was a patentee who came up with the idea of giving an undertaking to allow its patent to be struck out, and a patentee who prefers to litigate in the Federal Court can tilt the scales in that direction by refusing to give such an undertaking.

So why do some patentees prefer to litigate in provincial superior court? I suspect that the choice may be motivated by the potential availability of an interlocutory injunction in provincial superior court, as opposed to the firm unwillingness of the Federal Court to grant interlocutory injunctions. That was clearly the case in Safilo v Contour Optik 2005 FC 278, and may also have been true in this case, as the patentee, Thermolec, was granted an interlocutory injunction in Quebec). Whatever the substantive merits on the Federal Court’s position on interlocutory injunctions was directing litigation to a less suitable forum, thereby undermining the efficiency of the patent litigation system as a whole.

Tuesday, December 10, 2019

US Solicitor General Calls for Reconsideration of Mayo v Prometheus

Hikma Pharmaceuticals v. Vanda Pharmaceuticals, 16-2707, 1887 F3d 1117 (Fed Cir 2018) petition for certiorari No 18-817
            US 8,586,610

The patentable subject-matter jurisprudence of the Supreme Court of the United States is a train wreck of historic proportions. In the brief of the United States recommending that the Supreme Court of the United States deny certiorari in Hikma Pharmaceuticals v. Vanda Pharmaceuticals, 16-2707, 1887 F3d 1117 (Fed Cir 2018). the US Solicitor General has joined the chorus of voices calling for reconsideration of SCOTUS’s framework for assessing patentable subject-matter, especially as set out in Mayo v Prometheus 566 US 66 (2012) (hat tip to Patent Docs).

The 610 patent relates to the use of iloperidone to treat schizophrenia. The drug was already known for that use, but the inventors had discovered that people with a specific genetic variant, the “CYP2D6 genotype,” did not tolerate it well. The representative claim 1, in effect claimed testing a patient for the CYP2D6 genotype and administering a reduced dose to those who did not tolerate the drug. As pointed out by Patently-O, the claim at issue in Hikma v Vanda is substantively very difficult to distinguish from the diagnostic method claim at issue in Mayo. However, in Hikma it was framed as a method of treatment claim—”A method for treating a patient” comprising testing and then administering iloperidone at a low or high dose according to the results—while in Mayo the claim was to “A method of optimizing therapeutic efficacy for treatment” of the disorder at issue, comprising a step of “determining the level” of the relevant analyte, such that the result “indicates a need” to increase or decrease the drug. In the Fed Cir, the majority in Hikma nonetheless held the claim to be patentable subject matter, distinguishing Mayo on the basis that in Hikma the claims include specific treatment steps rather than merely directing the physician to consider the test results. Prost CJ, in dissent, was of the view that Mayo was not distinguishable.

In its brief, the Solicitor General has now argued that cert should be denied, on the basis that the majority had gotten the right result on the facts (21). However, the Solicitor General (12-13, 15) acknowledged the force of Prost CJ’s logic. More importantly, the Solicitor General did not confine itself to the particular claim at hand. Throughout the brief, the Solicitor General emphasized that the logic of Mayo calling into question the patentability of many types of inventions that have long been considered to be unquestionably good subject matter:

Nevertheless, as evidenced by the dissenting opinion below, it is arguably unclear how the longstanding and entirely correct rule that method-of-treatment claims are patent-eligible can be reconciled with mechanical application of Mayo’s two-step framework. (10)

Indeed, it is arguably unclear whether even a method of treating disease with a newly created drug would be deemed patent-eligible under a mechanical application of Mayo’s two-part test. (14, original emphasis).

The brief as a whole is a sustained critique of Mayo. The question is not if Mayo should be reviewed, but when; the brief argues that this is not the right case to address the “confusion” caused by the recent SCOTUS jurisprudence: “instead should provide additional guidance in a case where the current confusion has a material effect on the outcome,” in particular a diagnostic method case such as several where the Fed Cir has indicated that it might have gone the other way but for Mayo.

I wonder if the Solicitor General has another motive in recommending that cert be denied in Hikma. While the Solicitor General is of the view that Mayo needs to be rolled back, it’s not evident that SCOTUS will agree. If they take a diagnostic methods case and affirm that diagnostic methods are unpatentable, this would be bad, but only in the same way that the status quo is bad. If they took Hikma and reversed it, holding Mayo really does apply, the situation would be even worse than it is already.

I won’t say more than that: Patent Docs provides a longer review, and the brief itself is well worth reading for those with a real interest. (I might quibble with the analysis a little bit; the brief suggests that the root of the problem is Bilski, which marked a sharp departure from prior SCOTUS jurisprudence when it added expressly non-statutory exceptions to patentability (4, 8). In my view, the roots of the problem go deeper, back to Funk Bros: see The Rule Against Abstract Claims: A Critical Perspective on US Jurisprudence, (2011) 27 CIPR 3. But this is a minor point: I do agree that Bilski was a turning point and turning the clock back that far would be an improvement.)

Unfortunately, this debate remains relevant in Canadian law. The modern SCOTUS approach is clearly inconsistent with Shell Oil [1982] 2 SCR 536, the leading SCC decision on patentable subject matter. Unfortunately, CIPO has gone its own way on the issue of patentable subject matter, and diagnostic methods in particular, apparently inspired by US case law. It seems inevitable that the issue will be litigated in Canada, and when it does, the Solicitor General’s brief should give Canadian courts fair warning that the SCOTUS jurisprudence should not be followed.

Friday, December 6, 2019

No New Cases

No new substantive patent cases were released for the week of 2 December.

Friday, November 22, 2019

Expanded State of the Art Circumvents Inquiry re Inventiveness of Selection

Janssen Inc v Apotex Inc 2019 FC 1355 Phelan J
            2,661,422 / abiraterone acetate & prednisone / ZYTIGA / old NOC

My last post outlined the unusual facts in this case, and discussed the overarching problem that arose. This post looks at a few points of legal interest that were raised, though none impacted the final decision. Briefly, Phelan J’s claim construction analysis reflects the ongoing debate as to whether it is always appropriate to look to the disclosure in construing the claims, or only if the claims are ambiguous; the obviousness analysis illustrates a problematic consequence of the holding in Ciba v SNF 2017 FCA 225 [51]-[63], that the state of the art for the purpose of an obviousness attack comprises all the prior art; the “patentable subject matter” analysis is, in my view, properly part of the obviousness analysis; and the utility analysis raises the question of what the SCC meant when it said in AstraZeneca 2017 SCC 36 [55] that the utility must be “related to the nature of the subject-matter.”

(As an aside, Phelan J uses the abbreviation “POS” to refer to a person skilled in the relevant art. I’m not sure I can endorse that abbreviation, given its slang meaning.)

Claim construction
Phelan J’s claim construction analysis reflects the ongoing debate over whether it is always appropriate to look to the disclosure in construing the claims, or whether recourse to the disclosure is permissible only if the claims are ambiguous when read on their own: see eg here, here and here.

Claim 3 is representative of the asserted claims [38]:

3. Use of a therapeutically effective amount of abiraterone acetate or a pharmaceutically acceptable salt thereof and a therapeutically effective amount of prednisone, for the treatment of a prostate cancer in a human

Janssen argued that the claim should be construed as requiring that the combination be effective for treating cancer [117], which would encompass a combination where prednisone was used only to address side effects. Phelan J rejected this argument, holding that on a plain reading of the claim, anti-cancer efficacy of the prednisone itself was required.

The point of interest arises because the construction ultimately adopted by Phelan J was express in the disclosure: “[T]he amount of the additional anti-cancer agent [prednisone]. . . is an amount that is sufficient to treat the cancer whether administered alone or in combination with [abiraterone]” [Disclosure ¶ 44]. Phelan J nonetheless came to his conclusion without recourse to the disclosure: “Even if there was some confusion or ambiguity, recourse to the Disclosure confirms as reference that the amount of inhibitors or of steroid is an amount sufficient to treat cancer, whether administered alone or in combination. However, there is no need to refer to the Disclosure” [125, my emphasis]. This implies that Phelan J is of the view that recourse to the disclosure is improper unless the claims are ambiguous when read on their own. This is even though Phelan J, at the same time, considered it “essential” to refer to the express definitions set out in the disclosure at [23]-[33]. My own view is that it is always appropriate, and I would suggest that referring to the statement in [44] of the disclosure is no more or less appropriate than referring to the definitions set out ten paragraphs earlier. The point would have been truly interesting if Phelan J had arrived at the contrary construction without relying on the disclosure; but since the express statement in the disclosure confirmed the construction he had arrived at for other reasons, the issue was moot.

Patentable subject matter
Under the heading “Patentable Subject Matter” [128] - [142], separate from obviousness and utility, Phelan J held that “[t]o be a patentable combination, the 422 Patent must claim a combination with effects different from the sum of the effects of the elements” [132, original emphasis], citing R v American Optical Co [1950] Ex CR 344, 13 CPR 87 at 98-99 and Eli Lilly Canada Inc v Apotex Inc 2018 FC 736 at paras 71-72.

I have two concerns. First, it appears that Phelan J may be saying that the synergistic effect must be specified in the claims: “[t]he issue regarding patentability of the subject matter is whether the 422 Patent reads from the perspective of the POS as claiming a combination with synergistic effect or effects beyond those of either component drug” [132]; “[f]or the claimed combination to be patentable, the Asserted Claims supported by the disclosure of the 422 Patent from the perspective of a POS must claim that the combination of AA [abiraterone] and PN [prednisone] has a greater effect than either component alone” [133]. If that is what he is saying, it is not supported by the cases cited, which merely say that is essential to validity that “the combination should lead to a unitary result, and that such result should be different from the sum of the results of the elements” Eli Lilly [72], citing American Optical which is to the same effect.

The second point is one I have already expressed in my post on Eli Lilly here, but I’ll be a bit more direct. There is no requirement of “patentable subject matter.” The requirement is a matter of obviousness: “The real and ultimate question is: Is the combination obvious or not?: Albert Wood & Amcolite Ltd v Gowshall Ltd (1937) 54 RPC 37 at 40 (CA), quoted with approval in Wandscheer [1948] SCR 1 at 12; Bridgeview 2010 FCA 188 [51]. In most cases the result will be the same either way. If I take ibuprofen for my sprained ankle and calcium carbonate for my heartburn, and all that happens is that the pain in my ankle subsides, exactly as it would have with ibuprofen and no calcium carbonate, and my heartburn goes away, exactly as it would have with calcium carbonate and no ibuprofen, then there is no inventive step in putting the two together; to claim the combination would be a matter of arbitrary selection. But the issue really should be treated as a matter of obviousness, because there is a large body of law addressed to obviousness, and re-creating that law under a different name to address combinations cannot help, and it has the potential to do harm if the so-called law of collocation diverges from the established law of obviousness.

State of the art for the purpose of an obviousness attack
Under the “old” Patent Act the body of prior art that may be set up against the patent in an obviousness attack — the “state of the art” — did not include all publicly available information that could be set up in a novelty attack, but only that which was generally known to a person skilled in the art or which would be discovered in a reasonably diligent search. As Hughes J noted in Merck v Pharmascience 2010 FC 510 at [37], there is a “quaere” as to whether codification of the obviousness requirement in s 28.3 of the new Act, which requires a person skilled in the art to have regard to information “available to the public” as of the claim date —the same language used in respect of novelty in s 28.2— has changed the law in this respect, so that all publicly available prior art may be used in an obviousness attack, regardless of whether it would have been discovered by a reasonably diligent search. In my article, ‘What is the State of the Art for the Purpose of an Obviousness Attack?’ (2012) 27 CIPR 385, I reviewed the debate. Subsequently, as discussed here, in Ciba v SNF 2017 FCA 225 [51]-[63], the FCA, per Pelletier JA and Rennie JA, with Woods JA expressing no opinion on this point, held that the new s 28.3 had indeed changed the law, so that the state of the art for the purpose of an obviousness attack does indeed encompass all prior art that is available in a novelty attack.

Janssen Inc v Apotex is one of the few cases so far to actually consider this point in the obviousness analysis, with Phelan J accepting that the FCA in Ciba “confirmed that Apotex can choose the prior art elements that make the 422 Patent obvious as long as they were publically available prior to [the filing date]” [164].

The application to the facts illustrates a significant shortcoming of the new rule. The general problem facing the inventors was that “the primary treatment for metastatic prostate cancer has been androgen deprivation therapy [ADT] through medical or surgical castration to suppress androgen production in the testes” [17]. Unfortunately, in some instances the cancer would become castration resistant and the cancer would continue to progress [18]. The invention, to combine abiraterone acetate, which is a CYP17 enzyme inhibitor, and prednisone, with a putative synergistic effect, was aimed at addressing this problem. It appears that Janssen wanted to argue that focusing on a CYP17 inhibitor was itself inventive, as the mechanism for castration resistance was not known at the time, and there were multiple theories where a large number of different experimental compounds, representing different approaches, were being tested at the time [73]-[74], [148]. As I read this decision, this line of argument was effectively foreclosed because Apotex was able to base its attack on the specific prior art documents that focused on CYP17 inhibitors and abiraterone, without ever having to establish that these were part of the common general knowledge [164].

This means that the obviousness question turned from something like ‘Was it obvious to focus on CYP17 inhibitors?’ to ‘Given a focus on CYP17 inhibitors, was it obvious to combine a CYP17 inhibitor, specifically abiraterone, with prednisone?’ These are very different questions and one might easily imagine that the answer to the former is “No” at the same time that the answer to the latter is “Yes.” In that case, a combination that would not in fact have been obvious to a person skilled in the art because it was not obvious to select one of the components, might nonetheless be found to be legally obvious, because the question of whether it was obvious to select that component never arises. That strikes me as wrong in principle.

With all that said, on these facts the difference in these questions didn’t matter, as Phelan J found that even starting with abiraterone, it would not have been obvious to combine it with prednisone [192]. (I would also note that on the facts, it is not clear that it would have been non-obvious to select abiraterone as a starting point; given his holding on the law, Phelan J did not have to make that determination.)

(As an aside, at [97] Phelan J says “[t]he relevant date for obviousness . . . is the common general knowledge as of the Filing Date, August 23, 2007," and at [164] he states that it is proper to consider all prior art available prior to August 23, 2007— again, the filing date—and then he does go on to consider prior art that does appear to post-date the claim date. This is even though s 28.3(b) provides that the relevant date is the claim date, the patent’s “priority filing date based on a US Patent was August 25, 2006" [7], and priority does appear to have been claimed. I’m clearly missing something.)

Utility
Finally, in assessing utility, Phelan J required that there be a scintilla of utility in the sense of a synergistic effect, such that the combination has a greater effect than either abiraterone or prednisone on its own: see eg [219]-[221]. The alternative would be to ask whether there was a scintilla of utility in the sense that if the combination is given to a person suffering from prostate cancer, it has a scintilla of utility in treating that cancer—without requiring any synergistic effect. The question is what the SCC in AstraZeneca 2017 SCC 36 meant when it said that the utility must be “related to the nature of the subject-matter” [55]. I won’t go on about this, given this is already a very long post, but I will say that I consider it very much an open question as to whether a synergistic effect is required in a case such as this one. I am inclined to think it is not, and the question of synergy or lack thereof is really a matter that should be confined to the non-obviousness inquiry. The SCC in AstraZeneca at [55] went on to explain that “a proposed invention cannot be saved by an entirely unrelated use. It is not sufficient for an inventor seeking a patent for a machine to assert it is useful as a paperweight.” Even without a synergistic effect, the use of the combination to treat prostate cancer is clearly related to a claim “for the treatment of a prostate cancer in a human”; it is far removed from claiming the use of the compound as a paperweight, or landfill. Requiring a scintilla of a synergistic effect links utility to the inventive concept; that may be problematic, given how tricky it can be to identify the inventive concept. It also strikes me as unnecessary, as the need to establish synergy can be adequately addressed in the context of non-obviousness. With that said, perhaps a different set of facts will shed a different light on the issue. In this case, the point didn’t make any difference, as Phelan J held that there was evidence of a scintilla of a synergistic effect [221].

Wednesday, November 20, 2019

Patentable Utility and Practical Utility

Janssen Inc v Apotex Inc 2019 FC 1355 Phelan J
            2,661,422 / abiraterone acetate & prednisone / ZYTIGA / old NOC

The somewhat unusual facts in this case raise a difficult overall puzzle for which I have no good solution. Phelan J’s decision also tangentially raises several interesting points of law, though none are crucial to the outcome. This post will describe the facts and the overarching puzzle; a subsequent post will deal with the other points of law.

Abiraterone, in combination with prednisone, is approved for the treatment of prostate cancer. In general terms, the 422 patent claims abiraterone acetate in combination with prednisone for the treatment of prostate cancer. Apotex wants to sell its version of abiraterone, but because it is approved in combination with prednisone, Apotex’ product monograph will instruct that it be used in combination with prednisone. Thus, infringement by inducement was straightforward [232], [246]. In this NOC proceeding (under the old Regulations) Apotex also raised validity attacks based on obviousness, lack of utility, and lack of “patentable subject matter.” Phelan J rejected all of these attacks, and consequnetly issued the order of prohibition.

The trick in this case is that the 422 patent apparently contemplated that prednisone would be used for its anti-cancer effect; the inventors hypothesized that prednisone would reverse resistance to abiraterone and thus act synergistically with it [40]. But it seems that this hypothesis was mostly wrong. So, as Phelan J put it, “A significant problem in this case is that the anti-cancer role of [prednisone] that is claimed in the 422 Patent when used in combination with [abiraterone] appears to no longer be understood as the main role [prednisone] plays in cancer treatment. Instead, [prednisone] is now primarily understood to address the side effects caused by [abiraterone ]” [5]. Phelan J did find that there was sufficient evidence of “a scintilla” of utility of a synergistic effect to establish demonstrated utility [221]. But this is not a typical case in which the effect in question is now well established, and the issue is that there was only evidence of a scintilla at the time of filing. There was a scintilla of evidence of synergistic effect then – though barely – and there is no more evidence now than there was then. That's why I say the hypothesis was "mostly" wrong; it had enough merit to support the requisite scintilla of patentable utility, but not enough to be of practical clinical use.*

The result is that Janssen is able to prevent Apotex from marketing abiraterone in combination with prednisone to control side effects, on the basis of a mostly wrong ‘discovery’ that prednisone acts synergistically with abiraterone. This is intuitively troubling, given that the practice of prescribing abiraterone with prednisone owes nothing to Janssen’s discovery. Nonetheless, I don’t see any flaw in Phelan J’s reasoning. (I have a few quibbles that I'll discuss in my next post, but nothing that would affect the outcome.) The result stems from the fact that the standard for utility is low, so Janssen was able to demonstrate utility on the basis of a very modest effect. Normally the low standard for utility works well, as it allows the inventor to get patent protection relatively early in the product development cycle. This has practical advantages, such as enabling product development and testing, such as clinical trials, without fear of anticipating one’s own invention; and there are also theoretical advantages, in preventing a wasteful “patent race”. In the great majority of cases, the early promise either pans out after more development, and a product is brought to market, or it doesn’t pan out, the product dies, and the patent becomes irrelevant. But in this case, the early promise did not pan out, and the combination was developed for entirely different purposes. Now the patent on the defunct quasi-invention has popped up to give a monopoly over a product that owed nothing to the inventor’s contribution.

I don’t really know what to make of this. I’m inclined to think that probably this is just a case where unusual facts have given rise to a problematic result, but we should accept that no system is perfect and it is better to address the majority of cases well and accept that sometimes rules that are generally good will lead to unsatisfactory results. Or maybe I’ve overlooked some policy angle that provides a good justification for this specific result. It’s also possible that existing law really does address this problem and I (along with Apotex and Phelan J) have overlooked the answer. Or it may be that the law should be tweaked somehow to address this particular problem; but as the saying goes, hard cases make bad law, and I wouldn’t advocate any change to address these unusual facts without taking care to make sure it doesn’t do more harm than good.

*This summary is as I understand the facts. I must say that I found the facts a bit difficult to grasp, and I’m not entirely confident that I have understood the facts correctly.

Thursday, November 14, 2019

Obviousness Rejection Affirmed

Stukanov v Canada (Attorney General) 2019 FCA 278 Locke JA: Nadon, Rivoalen JJA aff’g 2018 FC 1264 Fothergill J
            Application 2,792,456 / Universal External Drive

This is a straightforward case in which the Commissioner and PAB refused the 456 application on the basis of obviousness. The issue was purely one of fact, not law, and, unsurprisingly, Fothergill J affirmed. The self-represented applicant appealed, and the FCA affirmed Fothergill J.

Tuesday, November 12, 2019

Contributory Infringement in Canadian Law

My latest article, Contributory Infringement in Canadian Law, is now available online at the CIPR. A print version will be published in 2020. Here is the abstract:

Contributory infringement arises when a party knowingly supplies a direct infringer with a product especially adapted for use in a patented invention. Canadian courts have regularly stated that there is no liability for contributory infringement in Canadian law, in the absence of inducement. This article shows that there are nonetheless few cases actually refusing to impose liability on a contributory infringer, and none at the appellate level. The article argues that the reasoning and results in almost all the leading cases support a rule that the supply of a product especially adapted to infringe, and with no substantial non-infringing use, constitutes indirect infringement, even in the absence of active inducement. The current shape of the law is a result of a misreading of the early leading case of The Copeland-Chatterson Company Ltd v Hatton, in combination with the problematic decision in Slater Steel Industries Ltd v R Payer Co, which is the only prominent case refusing to impose liability in such circumstances. Slater Steel has been confined to its facts in both subsequent Court of Appeal decisions to address it, and this article argues that Slater Steel was wrongly decided on its facts. The article concludes that it is open to the courts to recognize that liability for contributory infringement may be imposed in Canadian law.

Friday, November 8, 2019

Application of Principle of Arbitrary Selection Affirmed by FCA

Millennium Pharmaceuticals Inc v Teva Canada Limited 2019 FCA 273 Stratas JA: Webb, de Montigny JJA aff’g 2018 FC 754 Locke J
            2,203,936 / 2,435,146 / 2,738,706 / bortezomib / VELCADE

This FCA decision has an interesting point on arbitrary selection hidden in what is otherwise a routine application of the deferential standard of appellate review. In the decision under appeal, Locke J had granted Teva compensation under s 8 of the NOC Regulations for losses suffered during the time its version of bortezomib was kept off the market. Millennium and Janssen had defended on the basis, inter alia, that sales by Teva would have infringed the 936 and 146 patents. Locke J found both those patents to be invalid for obviousness [1], [FC 344]. Millennium and Janssen appealed this finding [2]. The appeal was dismissed on the basis that “the appellant is trying to transform adverse findings of fact and mixed fact and law into errors of legal principle to avoid the difficult standard of palpable and overriding error” [17]. While there is nothing new here, the FCA decision has a good brief general discussion of the standard of appellate review, noting that an appellate court must read the reasons of the court below “as a whole” in context, while keeping in mind the rebuttable presumption that the first-instance court reviewed and considered all of the evidence [11].

With that said, one novel point regarding arbitrary selection was touched on tangentially. The general problem is this. The prior art discloses a genus compound exemplified by a few specific species, but with many substitutions from a class possible at one location (or several). If the inventor selects a new component from that class that exhibits surprising advantages over the previously disclosed species, that is an inventive selection. But what if the inventor randomly selects a new component that has no advantages over those previously disclosed? In one sense, the component is not obvious, because there are many in the class that might have been selected, and a skilled person looking to develop a new member of the family of compounds would not have picked out that particular compound in advance. But on the other hand, there is no invention in picking out one compound at random that gives exactly the results one would have expected from any random selection from the class. On its face, the arbitrary selection is not obvious, but neither is it inventive. This is the problem of arbitrary selection.

Thursday, October 31, 2019

Hypothetical Infringement Cannot Be Set up Against S 8 Claim

Pharmascience Inc v Pfizer Canada ULC 2019 FC 1271 O’Reilly J
            2,255,652 / pregabalin / LYRICA

The recent amendments to the PM(NOC) Regulations converted an NOC proceeding from an application to prohibit the Minister from issuing an NOC into an action for patent infringement. The old regime created some difficult questions as to the relationship between an NOC proceeding and subsequent action between the same parties in respect of the same drug. In particular, a statutory stay on the issuance of an NOC is triggered by NOC proceedings (s 7(1)(d)), and s 8 of the Regulations allows the generic to bring an action to recover damages for sales lost as a result being kept out of the market by the statutory stay. But what if the generic was successful in NOC proceedings, but unsuccessful in a subsequent infringement action in respect of the same drug? The law is now settled that the generic is not barred from bringing a s8 claim, but it is not entitled to recover for sales that it would have made but for the statutory stay if those sales would have been infringing: Apotex v Merck 2011 FCA 364 (here); 2012 FC 620 (here); 2012 FC 559 (here); 2017 FC 726 (here); 2018 FC 181 Locke J (here). The logic is that the generic should not be entitled to recover damages for lost sales which it had no right to make.

This case presents a twist on that issue: what if the patentee never brought a subsequent action? Can that patentee argue as a defence / offset in the s 8 action that the generic’s hypothetical sales would have hypothetically infringed the patent at issue, even though validity and infringement was never established in an infringement action?

Pfizer holds the 652 patent related to the use of pregabalin for treating pain. Pharmascience sought to enter the market with a generic version, and in response Pfizer commenced NOC proceedings under the old Regulations, triggering the statutory stay. Pfizer was unsuccessful in its attempt to obtain an order of prohibition (see 2013 FC 120), and Pharmascience is now seeking damages under s 8 of the NOC Regulations for compensation for the time it was kept off the market [1]. In response, Pfizer alleged that Pharmascience is disentitled to damages because the hypothetical sales of PMS-pregabalin would have hypothetically infringed Pfizer’s patent—even though such infringement had never been established in an infringement action [3].

O’Reilly J pointed out that in all the cases establishing that the generic cannot recover damages for wrongful sales, the wrongfulness of those sales had actually been established in an infringement action:

[17] Pfizer’s authorities suggest to me that infringement is a factor that can and should be taken into account in assessing the quantum of s 8 damages, but only where infringement has been asserted and proved, or is not disputed. Otherwise infringement is not relevant to s 8, even when an infringement action is pending.

He relied on the principle that “the but-for world should reflect, to the extent possible, what happened in the real world,” [23] so that if the patentee did not bring an action in the real world, it must be presumed that it would not have brought an action in the but-for world [21] (citing Apotex v Sanofi [Ramipril (s 8)] 2012 FC 553 (here) var’d 2014 FCA 68 (here)). Consequently, hypothetical infringement cannot be raised to reduce or eliminate the generic’s damages [25].

In my view, O’Reilly J’s holding was correct for the reason he gave. It’s a relief that the new Regulations will render such questions moot.

Tuesday, October 29, 2019

Prosecution History and Summary Judgment

Canmar Foods Ltd v TA Foods Ltd 2019 FC 1233 Manson J
            2,582,376 / method for roasting oil seed

Canmar is the first case to invoke the new s 53.1, which provides that the prosecution history may be used in an action to rebut any representation made by the patentee regarding claim construction. As importantly, it is one of the first patent cases in many years to grant summary judgment on non-infringement / invalidity.

My previous post on Canmar discussed Manson J’s holding that foreign prosecution history may, in some conditions, be considered pursuant to s 53.1. I argued that despite this holding, Manson J did not actually consider the US prosecution history. He undoubtedly did consider the Canadian prosecution history, and moreover, he considered it in order to dispose of the action by way of summary judgment. In this post I will suggest that Manson J used summary judgment in order to side-step the restrictive approach to summary judgment that seems to have prevailed in patent cases for some time. The key claim construction question at issue is one that would often call for expert evidence, but invoking prosecution history turned the issue into a matter of law instead. In effect, Manson J solved a problem in the law relating to summary judgment by invoking prosecution history. The difficulty is that if indeed there is a problem with an overly restrictive approach to summary judgment, prosecution history is not a cure; it will work in only cases where the key prior art was the subject of an objection, and not where the applicant had drafted around it from the outset. Moreover, it is always risky to try leveraging one area of the law to fix a defect in another area, as that will often lead to law that is deficient in both areas.

Sunday, October 27, 2019

Loss in Old s 6 NOC Application Does Not Preclude Action under New s 6

Pfizer Canada Inc v Amgen Inc 2019 FCA 249 Nadon JA: Pelletier, de Montigny JJA aff’g 2018 FC 1078 Milczynski J
            1,341,537 / filgrastim / NEUPOGEN / NIVESTYM

I’ll have another post on Canmar 2019 FC 1233 later this week, but I don’t want to delay any more in posting on the decision of the FCA in Pfizer v Apotex, which raises a transitional issue arising out of the recent amendments to the PM(NOC) Regulations that converted an NOC proceeding from an application to prohibit the Minister from issuing a NOC into an action for patent infringement [8]. In this case Pfizer wanted to launch a biosimilar to Amgen’s Neupogen. Amgen had listed its 537 patent against Neupogen, and Pfizer accordingly served an NOA. Amgen responded by commencing an action under s 6 of the new Regulations, asserting the 537 patent.

The twist is that Amgen had previously asserted the 537 patent against Apotex in proceedings under the old Regulations, and lost before Hughes J: Amgen v Apotex 2015 FC 1261 [the Hughes Decision] aff’d as moot 2016 FCA 196. Under the former Regulations, a patentee that had lost an NOC proceeding against one generic would be prevented from bringing another NOC proceeding against a different generic in respect of the same drug, on the basis of abuse of process: Sanofi 2007 FCA 163. The question in this case was whether it was also an abuse of process for a patentee that had lost an NOC proceeding under the former Regulations to bring another NOC proceeding against a different generic under the new Regulations.

In this decision, the FCA held that this does not constitute an abuse, essentially because an action under the new s 6 (like a s 55 action), results in a determination of validity and infringement, while proceedings under the old s 6 only determined whether the Minister should be prohibited from issuing a NOC to the generic [63], [65]. In Pfizer Ireland 2011 FCA 77 the FCA clearly held that a s 55 action cannot be prevented by reason of a decision made under s 6 of the former Regulations; in this decision, the FCA pointed out that the same reasoning applies to an action under s 6 of the new Regulations, which is substantively identical to a s 55 action [83].

While “Pfizer cannot succeed on the motion now before this Court, it remains open to it to raise issue estoppel and abuse of process once Amgen’s action goes to trial. Whether or not Pfizer can succeed on those grounds in respect of factual findings and legal determinations made by the Hughes Decision, shall. . . depend on the trial judge’s assessment of these issues in light of the evidence” [84]. Note that this was also true under the old Regulations: Pfizer Ireland 2011 FCA 77 [19].

Tuesday, October 22, 2019

Foreign Prosecution History Admissible under S 53.1 — or Is It?

Canmar Foods Ltd v TA Foods Ltd 2019 FC 1233 Manson J
            2,582,376 / method for roasting oil seed

Canmar is the first decision of the Federal Court to interpret and apply the new s 53.1, which provides that the prosecution history may be admitted into evidence in an action to rebut any representation made by the patentee regarding claim construction. The defendant, TA Foods, argued that key limitations in the claims were added to overcome prior art cited by the USPTO [57]. A central issue in the case was therefore whether foreign prosecution history falls within the scope of s 53.1 [69]. This is a very important issue because Canada is typically a jurisdiction of second filing and, as Manson J noted, “Prosecution of Canadian patents often follows prosecution of corresponding patent applications in other jurisdictions” [73].

Manson J held that under certain circumstances, the foreign prosecution history should be admissible to aid in construction of the Canadian claims [77], though his holding on this point was expressly obiter, in that he stated that he would have found there to be no infringement “[r]egardless of the US Application prosecution history” [79]. In this post, I suggest that Manson J’s holding puts significant strain on the text of s 53.1. I also point out that not only was his holding technically obiter, it was substantively obiter, in that Manson J did not rely on the US prosecution history at all in his analysis on the facts. This will no doubt diminish the precedential value of this holding.

Friday, October 11, 2019

Blogging Update

I'm back from my break, but there is a lot of substance in Manson J's decision in Canmar Foods Ltd v TA Foods Ltd 2019 FC 1233, and writing on it is taking longer than usual. I'll have a couple of posts on that decision early next week. Then I'll turn to Pfizer Canada Inc v Amgen Inc 2019 FCA 249 (which I haven't yet had a chance to read).

Monday, September 30, 2019

Blogging Break

I'll be taking a short break from blogging this week. I'll be back next week, starting with any cases I missed in the interim.

Friday, September 13, 2019

Continuing Disagreement over Unessential Settlement Terms Is Immaterial

Betser-Zilevitch v Nexen Inc 2019 FCA 230 de Montigny JA: Stratas, Webb JJA aff’g 2018 FC 735 Brown J
            2,584,627

The parties in this case were engaged in settlement negotiations and advised the Court that “a settlement has been reached, subject to formalization, review and execution by the parties of a formal settlement agreement” [FC 26]. The parties were not able to agree on the details and Betser-Zilevitch purported to withdraw its offer. Nexen moved for a declaration that a settlement had been reached. In the decision under appeal, Brown J found that the parties had indeed entered into a binding settlement agreement covering all essential terms, and he determined the non-essential terms upon which the parties disagreed: see here. The FCA has now affirmed in a brief decision holding that Brown J made no reviewable error [4]. The FCA noted that “The mere fact that the parties disagreed on some of the terms of the agreement when they undertook to formalize it does not make those terms any more essential than those terms over which they agreed. As this Court stated in Allergan [2016 FCA 155, the leading case on when a settlement has been reached], ‘continuing disagreement over unessential terms is immaterial’” [5].

Tuesday, August 20, 2019

First Mover Exclusivity for First Generic to Serve an NOA Not Relevant to Procedure under PM(NOC) Regulations

Bayer Inc v Teva Canada Limited 2019 FC 1039 Pentney J
            2,547,113 / 2,624,310 / 2,823,159 / rivaroxaban

This motion to add defendants in a trial of common issues under the PM(NOC) Regulations raises the issue of whether the first generic to serve an NOA can get a practical head start in the market over later generics. Under the US Hatch-Waxman patent linkage system, the first applicant to challenge a drug patent is entitled to 180 days of exclusivity against subsequent generic applicants: 21 U.S.C. § 355(j)(5). The theory is that initiating and defending an action will be expensive for the first generic, but all subsequent generics will benefit at no cost or risk to themselves if the patent at issue is declared invalid with in rem effect. The 180 exclusivity is intended to provide an incentive for the first generic to bear the cost of litigation. There is no equivalent statutory exclusivity period in the NOC Regulations, but the first generic to get its NOC will nonetheless get a practical head start. This means that whether a generic gets any period of exclusivity turns on the procedural details under the Regulations.

The background to this motion is that Teva and Apotex served NOAs on Bayer arising from their applications for an NOC for a generic version of rivaroxaban. These NOAs were served within a month of each other, and Bayer responded by launching actions against Teva and Apotex, again within one month of each other [4]. The claims relate to the same drug, the same patents, and same issues of invalidity [1] and in Bayer v Apotex 2019 FC 191 Tabib J ordered a common hearing of the common issues [2]. A few months later, Taro and then Sandoz also served NOAs on Bayer relating to the same drug, and Bayer commenced actions against them as well [4]. The claims in all four actions are “virtually identical” [34].

In this motion, Bayer, Taro and Sandoz sought to have Taro and Sandoz added as defendants in the trial of common issues already set for Teva and Apotex [1]. Teva and Apotex objected, on the basis, inter alia, that Taro and Sandoz were late in serving their NOAs, and Teva and Apotex should not be required to cede the potential commercial advantage they might gain by having their action decided first. “Adding Taro and Sandoz now as defendants to the common hearing would allow them, in effect, to ‘leapfrog’ the expected sequence of events within the 24-month timeline fixed by the Regulations, and thereby re-gain the commercial advantage they have lost” [7].

Pentney J rejected this argument, agreeing with Tabib J’s remarks at [7] in Bayer v Apotex [13]. Tabib J made two main points. First, the Regulations themselves do not provide any exclusivity period for the first generic to serve an NOA. The US model, including its 180-exclusivity period, must have been considered when the new Regulations were drafted, and as Taro argued, “the Court should not create such a guarantee by its procedural rulings” [15]. Further, as a practical matter, refusing to order a common hearing would not guarantee that the first generic to serve would be the first to come to market.

These are both compelling points. The question remains whether the Canadian system provides an adequate incentive to challenge a patent by serving an NOA. The answer to this question is not clear. While the theory behind the US approach is logical, I’m not sure exactly how different the systems are in practice. I understand that a full 180 day exclusivity can be quite elusive in the US, with the exclusivity often shared among multiple generics; and conversely, in this case Taro and Sandoz are not simply free-riding off the efforts of Teva and Apotex, but will have to bear some of the litigation costs as well. No doubt the US 180 day exclusivity does create some real practical differences, but there is no simple theoretical answer to which system is better.

With this argument rejected, Pentney J decided the matter by reference to the usual considerations of balancing judicial economy against potential prejudice to the parties, and he concluded by adding Taro and Sandoz as defendants in the hearing of common issues.

Wednesday, August 14, 2019

Background Information in the Specifications May Be Evidence of the CGK

Corning Cable Systems LLC v. Canada (Attorney General) 2019 FC 1065 McVeigh J
            2,679,996 / 2,754,149 / Optical Splitter Module

In this decision McVeigh J, applying a reasonableness standard, upheld the Commissioner’s decision to refuse the 996 and 149 applications on the ground of obviousness [107]. The decision applied settled law to the facts.

The applications at issue relate to a “Local Convergence Point” which is a box that receives a cable supplied by an internet service provider as an input and splits and distributes that cable to several units in a building [5]. The claimed invention took advantage of recently developed “bend performance optical fibers,” which can be bent to a smaller radius than traditional fibers without incurring a marked loss in signal quality [6]. This permitted design of a smaller box. As the application explained as part of the “Background of the Invention” “Conventional LCPs . . . require large, expensive LCPs that may be difficult to install and/or transport. In addition, conventional LCPs often require skilled technicians to install the LCP and route the associated subscriber cables. Therefore, a need exists for LCPs that are cost-effective, are relatively small in size, and may be installed and maintained by relatively unskilled technicians” [15]. The Commissioner relied on this statement in finding that identifying the need for a smaller box was common general knowledge [47].

Corning argued that adopting information provided in the background of the patent applications as CGK, without some evidence beyond information in the patent applications themselves, was an error of law [51], [53]. While the decision was not entirely explicit on this point, as I understand it, this issue was important because Corning wanted to argue that identifying the problem – the need for a smaller box – was or contributed to the inventive step necessary to support a patent. I must say that arguing that it was inventive to thinking of trying to shrink the size of electronic equipment strikes me as pretty desperate. In any event, McVeigh J held, correctly in my view, that this point had been settled by Newco Tank 2015 FCA 47, which held, on essentially identical facts, that it was “open to the Board to conclude that the skilled person’s CGK was reasonably described by reference to the language presented as background information in the Patent” [62], quoting Newco at [13] (and see my post on Newco here). McVeigh J did note, however, that “This is not to say that it is always appropriate for the Commissioner to find that information presented in the specifications of a patent application is the CGK of a person skilled in the art. While I disagree with Corning that concluding that such information is CGK – without further evidence – necessarily amounts to a reviewable error, there may certainly be cases in which such a finding is unreasonable” [64].

Corning also argued that the Commissioner erred in finding that actually implementing the smaller box did not require inventive ingenuity. McVeigh J affirmed that this finding was reasonable, noting that “it was insufficient for Corning’s counsel to set forth, during the requisition process and at the hearing, a number of alleged experimental difficulties without concrete evidence” [105].

Friday, August 2, 2019

Should a PAE Be Entitled to Elect an Accounting?

T-Rex Property AB v Pattison Outdoor Advertising Limited Partnership 2019 FC 1004 Manson J
            2,252,973 / Digital Information System

In comparison to the US, we have not seen a lot of litigation by patent assertion entities (PAEs) in Canada, but some actions are now starting to work their way through the system. This decision of Manson J upholding a bifurcation order and affirming the scope of a protective order granted by Steele J, while routine in many ways, raises some interesting points as to how the Canadian litigation system will deal with PAEs.

A first point is that Manson J explicitly referred to the plaintiff, T-Rex Property, as a “non-practicing entity” [27] (NPE). It appears that T-Rex is not just an NPE, but more specifically a patent assertion entity (PAE). The distinction is that an NPE is any entity that does not practice the patent, while a PAE is an entity whose only business is enforcing patents. While PAEs are all NPEs, the converse is not true. Small research based firms and universities that develop new technologies and licence it to others for commercialization are NPEs but are generally not considered PAEs.

A second point is that Manson J noted that “the question of whether a non-practicing entity is entitled to elect between damages or profits appears to be a novel legal issue” [27]. This is interesting simply because Manson J explicitly framed the question as turning on the nature of the plaintiff as a PAE. I think this is the first time I have seen it suggested that a PAE should be treated differently in law, at least in Canada. In US practice “district courts appear to have adopted a de facto rule against injunctive relief for PAEs and other patent owners who do not directly compete in a product market against an infringer” (Seaman, “Permanent Injunctions in Patent Litigation After eBay: An Empirical Study,” 101 Iowa L Rev 1949 at 1953); but doctrinally, at least, this is not a distinction based on status, but is rather because it is more difficult for a PAE to prove irreparable harm in the eBay test.

Apart from the framing, the question of whether an NPE, and particularly a PAE, should be allowed to elect an accounting is very interesting. A successful patentee is entitled to damages as of right, but an accounting is discretionary. Patentees are typically permitted to elect an accounting more or less routinely, but it is not unheard of for an election to be refused. The principles governing whether an accounting should be permitted are quite underdeveloped: it is not even clear whether a successful patentee is presumptively entitled to elect an accounting (see here and here), nor is it clear what factors should be taken into account in the exercise of the court’s discretion. The question of whether a PAE, or an NPE, should be entitled to elect an accounting would not merely be a question of applying established principles, but rather one of developing those principles. Without expressing any view on this difficult issue, I would say that this is an issue where the distinction between a PAE and an NPE is potentially important one.

The procedural points at issue in the motion may also be significant in shaping PAE litigation. The defendant Pattison sought an order bifurcating the damages portion of the action, and T-Rex resisted. Bifurcation orders are commonly granted in patent cases to avoid wasting money and court resources on an issue that will be moot if the patentee loses on the merits. No new points were raised by Manson J in affirming Steele J’s decision to grant the motion. The more interesting question is why T-Rex opposed the bifurcation. Different PAEs have different litigation strategies (see this FTC Study), but one strategy that is used by some PAEs, especially when the case is weak on the merits, is to offer to settle for less than the defendant would need to spend to defend the case. In aid of this approach, some PAEs will try to impose substantial discovery costs on the defendant in order to gain settlement leverage; this strategy can work because discovery costs tend to be asymmetrical, especially when the patentee is a PAE, and so does not have information as to how the invention was developed. A PAE which uses this strategy might want to resist bifurcation in order to increase settlement pressure with discovery related to the damages issue. Perhaps that is what is going on here — though that’s pure speculation, as I don’t know anything about T-Rex apart from what I’ve read in this decision.

Costs are also an important aspect of PAE litigation, and I’ve heard it suggested that we have seen less PAE litigation in Canada because we follow the English rule of costs-in-the-cause. When the PAE’s case is weak on the merits and the PAE is aiming to settle on a litigation cost basis, costs on motions are even more important than any ultimate costs order. In this decision, Steele J required T-Rex to pay costs for the motion immediately, despite T-Rex having posted security for costs [41]. Manson J upheld this “quintessentially discretionary” decision [42], though remarking that “I may not myself have awarded costs payable forthwith in these circumstances” [44]. To the extent that T-Rex might be employing a litigation cost settlement strategy, the order to pay costs on the motion forthwith might help tilt the settlement leverage back in Pattison’s favour (or at least less against Pattison). While Manson J made no reference to T-Rex’s status as a PAE in this part of his decision, it strikes me that costs on motions might be an issue where the PAE status of the patentee is relevant, and Steele J’s order might be justified on that basis, even aside from its discretionary nature.

With all that said, I’m not sure if tailoring procedural rules to PAEs is desirable (though to be clear, I’m not sure it’s undesirable either). PAE litigation strategy highlights aspects of the patent system that arise to some degree in all types of patent litigation, so in principle, sound general rules should suffice. But PAE litigation may also highlight areas where the general rules need to be developed, as with the principles applicable to an election of an accounting.