Tuesday, February 18, 2020

The State of the Art Includes All Prior Art

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2020 FCA 30 Locke JA: Rivoalen, Nadon JJA var’g 2018 FC 259 Phelan J
            2,261,630 / infliximab / INFLECTRA

The third step of the Windsurfing/ Pozzoli approach to obviousness, as approved by the Supreme Court in Sanofi 2008 SCC 61 [67], requires the court to “[i]dentify what, if any, differences exist between the matter cited as forming part of the ‘state of the art’ and the inventive concept of the claim or the claim as construed.” But what is the “state of the art”? The FCA in this case has clarified a point which has been obscure since codification of the non-obviousness requirement a quarter of a century ago.

The requirement that a patentable invention must involve an inventive step first emerged in the English case law in the late nineteenth century. Originally conceived of as an aspect of novelty, it soon because recognized as a distinct requirement, often referred to as requiring proper “subject-matter.” The current requirement that the invention be non-obvious to a person of ordinary skill in the art originated as a test for inventiveness on the particular facts of the case, propounded by Sir Sanford Cripps as counsel in Sharp & Dohme v Boots Pure Drug Co (1928), 45 RPC 153 (CA) at 162-63 and adopted by Lord Hanworth MR at 173. So conceived, the obviousness inquiry was taken to be an essentially factual inquiry as to whether the invention would have been obvious to a person skilled in the relevant art. From this it follows directly that the state of the art does not comprise the entire body of publicly available information, but is restricted to that information which would actually be available to the skilled person. So, in General Tire [1972] RPC 457, 497-98, the English Court of Appeal considered the state of the art to include only that material that would be available to a skilled person after a reasonably diligent search.

This was well settled law prior to codification. A question then arose on codification because s 28.3 of the Act provides that obviousness is to be assessed in light of information disclosed “in such a manner that the information became available to the public in Canada or elsewhere.” On its face this states that the entire body of public information constitutes the state of the art. The operative wording is exactly the same as that in the novelty provision (though the novelty provision, in a separate paragraph, also includes prior patent applications, including unpublished applications, in order to implement the first-to-file priority regime). Thus, on the face of the Act, the state of the art for purposes of obviousness corresponds exactly to the prior art that is relevant to anticipation, excluding prior unpublished patent applications.

The issue arose in this case because Phelan J had excluded two items of prior art from consideration at step 3 of the Windsurfing / Pozzoli test on the basis that they would not have been located in a reasonably diligent search [FC 214]. The FCA held that Phelan J had erred on this point.

Locke JA reviewed the Canadian case law, and noted that while a number of cases, including some affirmed by the FCA, had indeed excluded some elements of prior art, that point had never been specifically affirmed or even commented on by the FCA, and the point therefore could not be considered to be settled. My sense is that notwithstanding the text of the act, the Canadian courts have generally operated under the assumption that the codification was not intended to substantively change the law, and it is because of that underlying assumption that courts had not previously been pressed for a decision. Locke JA also noted that some decisions, including Ciba v SNF 2017 FCA 225 (see here) had suggested that the state of the art was broader in scope. However, none of these cases had definitively resolved the issue.

Locke JA also noted at [85] that “commentaries by authors well-known in the field of patent law have expressed doubt as to whether it is appropriate to limit the scope of relevant prior art to the results of a diligent search since the wording of section 28.3 of the Patent Act is not so limited.” I must say that I am disappointed that my own short article on this topic, “What is the State of the Art for the Purpose of an Obviousness Attack?” (2012) 27 CIPR Review 385-94, was not cited. In that article I pointed out that exactly that question was before the House of Lords in Technograph [1972] RPC 346 and English Court of Appeal in General Tire and Windsurfing [1985] RPC 59 in interpreting the parallel English litigation, which raised the same issue. Lord Reid and Lord Diplock took opposing views in Technograph, and the Court of Appeal in General Tire preferred Lord Reid’s view, but sided with Lord Diplock in Windsurfing. The point was expressly obiter in all these cases, and the point was never definitively resolved in English law prior to the adoption of the EPC with the Patents Act, 1977. The division of opinion in these decisions illustrates that the text itself is not determinative and it is unfortunate that the FCA did not devote more time to discussing these cases, which presumably were not cited to it. (While I did not come to a firm conclusion in my article, I had argued that the context of the enactment, in particular the history of the relevant English decisions on which Canadian law was based, suggested that the codification was not intended to alter the state of the art, but was only intended to establish the relevant dates for assessing obviousness, in particular to implement the grace period.)

Locke JA then addressed the substantive issue. I’ll set out the sentences of the key paragraph one at a time:

[86] In light of section 28.3 of the Patent Act and the applicable jurisprudence and commentaries, I conclude that it is an error to exclude from consideration prior art that was available to the public at the relevant date simply because it would not have been located in a reasonably diligent search.

This is clear: all prior art must be consided under step 3 of the obviousness analysis.

[86] The likelihood that a prior art reference would not have been located by a PSA may be relevant to consideration of step 4 of the obviousness analysis (whether differences between the state of the art and the inventive concept constitute steps which would have been obvious to the PSA) in that the uninventive PSA might not have thought to combine that prior art reference with other prior art to make the claimed invention.

This indicates that there can be no mosaicing of prior art that is not available in a reasonably diligent search. Thus, obviousness can assessed over the common general knowledge alone, or over one item of broader prior art plus cgk, but not over two items of broader public art plus cgk. I believe that this is essentially the UK position.

Locke JA concluded with a policy point:

[86] However, excluding prior art simply because it is difficult to find is problematic because it would result in the possibility of a valid patent on an invention that had, but for some non-inventive tweak, already been disclosed to the public. In my view, that is not what Canada’s patent regime is intended to permit.

With respect, I do not find this persuasive. It is well-established that the mere fact that an item of prior art is “available to the public” does not mean that it is ever likely to be of any actual benefit to the public. “It is settled law that there is no need to prove that anybody actually saw the disclosure provided the relevant disclosure was in public. Thus an anticipating description in a book will invalidate a patent if the book is on a shelf of a library open to the public, whether or not anybody read the book and whether or not it was situated in a dark and dusty corner of the library.” Lux Traffic Controls [1993] RPC 107 at 133, quoted with approval in Baker Petrolite 2002 FCA 158 [42.6] (emphasis in Baker Petrolite). If there is prior art that would have made the invention obvious to a skilled person, but that would not be located in a reasonably diligent search, then it would only be located as part of an extended or arduous search. An invention may be found to be non-obvious because it would require experimentation that is “not routine, but rather was prolonged and arduous” Sanofi [89]. If that is true for experimentation, it is not clear why it should not be true for searching prior art. The traditional view is that the obviousness inquiry asks whether a person skilled in the relevant art would arrive directly at the invention when presented with the relevant problem. If the answer is no, I don’t see why it should matter whether that is the answer because discovering the invention would require prolonged and ardous technical experiments, or a prolonged and arduous prior art search plus routine experimentation.

On a related point, as noted above, the traditional inquiry was essentially factual, albeit focused on an objective skilled person, rather than any particular individual. The “state of the art” as being what would be discovered in a reasonably diligent search reflects what a skilled person would actually do when addressing the problem. If the state of the art includes all prior art, then we have moved away from this factual inquiry, into an odd hybrid, asking whether a skilled person would find the invention obvious in light of information which would not actually have been be available to them.

In any event, regardless of the policy issue, Locke JA’s conclusion is certainly supported by the text of the Act, and the point now seems to be settled.

Friday, February 14, 2020

Burden of Proving Priority

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2020 FCA 30 Locke JA: Rivoalen, Nadon JJA var’g 2018 FC 259 Phelan J
            2,261,630 / infliximab / INFLECTRA

An apparently novel issue raised in this appeal was the burden of proving priority. The application for the 630 Patent was filed on August 1, 1997, and a priority claim was made based on a US application filed in 1996 [59]. However, s 28.4(4) provides that where there are two or more previous applications on which priority could be claimed, the earliest must be used. The 1996 US priority application itself claimed priority from another US application which was filed in 1992. Hospira argued that the priority claim to the 1996 application was therefore invalid (with the result that the claim date would be the Canadian filing date, making additional prior art relevant) [60].

Per s 28.1, priority cannot be claimed from the 1996 application unless it discloses the same subject-matter as the 630 patent; and the effect of 28.4(4) is that priority must be claimed from the 1992 application if the 1992 application discloses the same subject-matter as the 630 patent. The question for both was therefore whether they disclosed the same subject matter as the 630 patent. Neither priority application was in evidence. Thus the argument, and Locke JA’s holding, turned on the burden of proof.

Hospira argued that the patentee had the burden to establish the priority claim, and it failed to meet that burden because it did not put the 1996 application into evidence. Kennedy Trust, on the other hand, argued that the burden of proof was instead on Hospira in light of the presumption of validity per s 43(2) of the Act.

Locke JA rejected both these positions [63]. He held that that Hospira’s reliance on the 1992 priority “is remote enough from the issue of the priority claim on the 630 Patent” that Hospira had the burden to prove the contents of the 1992 priority” [64]. It seems reasonable to me that the party asserting a particular priority date should have the obligation to prove it. Given that burden, there is a separate question of how to actually prove the contents of the earlier priority application. At trial Hospira seemed to have relied on the fact that Kennedy Trust had actually pursued an appeal to the USPTO to establish that the 1996 application was entitled to claim priority to the 1992 priority, essentially on the basis that it disclosed the same subject-matter [FC 157]. Locke JA did not specifically discuss why this was not sufficient to carry the burden (and it's not clear that issue was even raised on appeal). Given that the 1996 application was not in evidence, evidence that the 1992 priority disclosed the same subject matter as the 1996 application may not be sufficient proof that either disclosed the same subject matter as the 630 patent.

Turning to Kennedy Trust’s argument, Locke JA held that the presumption of validity does not extend to the priority claim because the claim date only affects the prior art, and does not go directly to validity [63]. That seems right to me on the text of s 43(2). But if the presumption of validity does not apply and the 1996 application itself was not introduced into evidence, what is the basis for holding that the 1996 priority claim was valid? Locke JA held that “With no dispute that the 1996 priority supports the subject matter of the claims in issue” and in the absence of evidence of the contents of the 1992 priority, he saw no error in recognizing the 1996 claim date [65]. I must say that this looks to me like the application of some kind of presumption of validity, given that there was no evidence at all about the contents of the 1996 application. (Hospira’s position at trial was that both the 1992 and the 1996 disclosed the same subject matter, but that doesn’t necessarily imply that either discloses the same subject matter as the 630 patent.) Would the result have been different if Hospira had asserted, without any evidence, that the 1996 application did not disclose the same subject matter as the 630 patent? Would that have been enough of a dispute to require the patentee to introduce the 1996 application? If not, it would seem that some kind of presumption is at work. But, as noted, Locke JA expressly held that the presumption of validity does not extent to a priority claim.

In any event, in either case it does seem that the best way of establishing the content of the priority application is directly, by introducing it into evidence.

Thursday, February 13, 2020

A Party Acting Entirely Outside of Canada Cannot Be Liable under the Saccharin Doctrine

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2020 FCA 30 Locke JA: Rivoalen, Nadon JJA var’g 2018 FC 259 Phelan J
            2,261,630 / infliximab / INFLECTRA

This point covers two issues related to the Saccharin doctrine: a party who conducts activities entirely outside of Canada cannot be liable under the Saccharin doctrine; and the Saccharin doctrine applies to Swiss-type claims.

As discussed here, Phelan J at first instance held that Hospira’s infliximab product INFLECTRA, infringed several valid claims of the 630 patent. One of the defendants was Celltrion, a South Korean group that makes biopharmaceutical products [FC 18]. Celltrion supplied the infringing INFLECTRA to Hospira, which imported it and distributed it in Canada [FC 17]. Several of the claims at issue were Swiss-type claims (ie claims “to the use of composition X for the preparation of a medicament to be used for Y” [16]), and at trial Hospira had argued that “as the Swiss-type claims refer to the manufacture of a medicament and Inflectra is not made in Canada and is not sold to Hospira in Canada, the Swiss-type claims are not infringed” [FC 294]. Phelan J rejected this argument on the basis of the Saccharin doctrine, holding that “Hospira cannot escape liability for infringement merely by housing its production overseas” [319]-[322].

The FCA held that Phelan J had erred in including Celltrion among the companies found to have infringed [37], because “the Judge made no finding that Celltrion conducted any activities in Canada” [33]. As Locke JA noted, the Saccharin doctrine holds that the imported product of a patented process is itself infringing, even though the process is used abroad and the product itself is not patented [34]. But he also pointed out that the Saccharin doctrine does not do away with the territorial limits on patent infringement; a party whose activities are entirely outside of Canada cannot infringe a Canadian patent: [36]. A party who is liable under the Saccharin doctrine may not have carried out directly infringing activities in Canada, but it will have carried out activities in Canada which profited from the invention (namely importation and sale of the product of the patented process). As Locke JA noted, this point was well-recognized in the English case law following the Saccharin decision itself, and had also previously been recognized by Gauthier J in Cefaclor 2009 FC 991 at [283-84]. It is helpful to now have the point affirmed by the FCA.

The puzzle for me on this point is that, so far as I can see, Phelan J never actually held that Celltrion infringed. Hospira’s argument, noted above, appears to be a general argument that the claims themselves were not infringed by any party, specifically including Hospira because they were to the use in manufacture, and manufacturing had been done outside of Canada. Phelan J rejected this argument on the basis of the Saccharin doctrine, holding that “Hospira cannot escape liability for infringement merely by housing its production overseas.” [FC 319]-[322]. This holding is expressly directed at Hospira, not Celltrion, and it was not disputed that Hospira acted within Canada by importing and distributing INFLECTRA [FC 17]. This holding therefore seems to be to be a correct application of the Saccharin doctrine, which helpfully clarifies that Swiss-type claims are subject to the Saccharin doctrine. Hospira’s liability for infringement on this basis does not appear to have been appealed.

While the FCA decision implies that Phelan J also held that Celltrion infringed, I couldn’t find any such holding in Phelan J’s reasons. Phelan J distinguished between Hospira [3] and Celltrion [17], rather than referring to them collectively as Hospira. As just noted, his holding regarding the Saccharine doctrine was directed at Hospira, as was his overall conclusion on infringement: “For all these Reasons, Kennedy’s claim against Hospira for infringement will be granted” [336]. With that said, I didn’t re-read every word of Phelan J’s decision, and perhaps I missed something, or perhaps there was such a holding in the formal judgment.

Tuesday, February 11, 2020

Patentability of Methods of Medical Treatment “Deserves Deep Analysis”

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2020 FCA 30 Locke JA: Rivoalen, Nadon JJA var’g 2018 FC 259 Phelan J
            2,261,630 / infliximab / INFLECTRA

Kennedy Trust’s 630 patent 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. As discussed here, Phelan J at first instance held that Hospira’s infliximab product INFLECTRA, infringed several valid claims of the 630 patent. This appeal, reversing Phelan J on several points, raises a number of interesting (and mostly unrelated) issues, which I'll cover in a series of posts, starting, in this post, with the FCA's desire to reform the law related to patentability of methods of medical treatment.

As I argued in this blog post, the law related to patentability of methods of medical treatment is incoherent. In Cobalt v Bayer 2015 FCA 116 [101], the FCA agreed that the current law on the issue “calls for full consideration by this Court or the Supreme Court in a case where the issue is squarely raised on the facts.” However, the issue was moot in Cobalt because the patent was not infringed [100], and the FCA devoted only a single paragraph to the issue.

In this case, Hospira again raised arguments related to patentability of methods of medical treatment. Locke JA devoted several paragraphs to reviewing the state of the law. He summarized the Federal Court jurisprudence as holding that a claim to “a substance intended for the treatment of a medical condition, can be good subject matter for a patent claim, but not if the claim encompasses the skill of a medical professional such as a dosage range rather than a fixed dosage” [51]. He remarked that “it is not clear to me that the decisions of the Supreme Court of Canada that form the basis of the principle that methods of medical treatment are not patentable justify a distinction between a fixed dosage (or interval of administration) and a range of dosages (or intervals)” [52]. He then cited Cobalt (and also my blog post, I am pleased to say) and stated that “I agree that this issue deserves deep analysis” [53]. He concluded by saying that “[u]nfortunately, this does not appear to be the case for such an analysis,” because the claims at issue are of a type that are clearly patentable even in the current state of the law.

I read this as a clear signal that the FCA is willing, and even eager, to undertake a review of the law on this issue itself, rather than leaving the matter to the SCC. Locke JA considered it “unfortunate” that the case did not lend itself to treating the issue in depth, and he clearly stated that he does not consider the current law to be determined by the SCC jurisprudence, so leaving leeway for the FCA. Even the fact that Locke JA devoted almost four pages to the issue indicates the FCA wants to deal with the issue. Hospira raised so many issues on appeal that “it will not be practical to address each one specifically,” so Locke JA generally did not address those that were without merit [15]. He did, nonetheless, choose to address methods of medical treatment at some length, even though it was ultimately without merit. The panel in this case was differently constituted from that in Cobalt (Pelletier, Stratas and Webb JJA), so we now have six judges on two different panels indicating a willingness to review the law related to the patentability of methods of medical treatment.

Wednesday, February 5, 2020

Lump Sum Costs Awarded

Packers Plus Energy Services Inc v Essential Energy Services Ltd 2020 FC 68 O’Reilly J

In this costs decisions following from Packers Plus 2017 FC 1111 aff’d 2019 FCA 96, holding Packers’s 072 patent to be invalid and not infringed, O’Reilly J awarded the prevailing defendants lump sum costs of 40% of their taxable costs, plus disbursements (with some minor adjustments). O’Reilly J’s reasons for awarding a lump sum rather than following the Tariff were brief: “I also do not agree with Packers that costs should be assessed according to the Tariff. A lump sum is more appropriate given the complex nature of this case.” This seems to reflect a general sense that the Tariff scale is outdated and no longer adequate. A collective costs award calculated under the Tariff, even at the upper end of Column IV, would have resulted in an amount of about $375,000, when actual costs were apparently closer to $10,000,000.*

Another point is that there were multiple defendants, and Packers argued that there should only be one set of costs as the defendants’ interests were aligned and they could all have been represented by the same counsel. O’Reilly J rejected this submission, noting that

It was Packers’ choice to pursue each of the defendants separately. It could have limited its costs exposure by proceeding only against the first defendant, Essential Energy Services Ltd, and pursuing the other defendants later if successful. Its approach complicated the proceedings and increased the costs incurred.

He also noted that the defendants, as competitors, were entitled to be represented separately, and that “defendants’ counsel made considerable efforts to divide their labours and reduce duplication throughout the trial.” Accordingly he held the defendants were entitled to individual costs.

*The amount of the defendants’ actual fees is not stated in the decision, but Packers proposed an alternative lump sum amount of $1,003,000 and O’Reilly J remarked that this approach “would effect an arbitrary discount of the defendants’ fees and yield a reimbursement of only 10% of the defendants’ taxable costs.”

Monday, February 3, 2020

Determining the Rate of Return for Compound Interest Damages

Eli Lilly and Co v Apotex Inc 2019 FC 1463 Zinn J [Cefaclor Interest] remitted from 2018 FCA 217 Gauthier JA: Gleason, Laskin JJA [Cefaclor Damages] aff’g 2014 FC 1254 Zinn J [Cefaclor Damages FC]
1,133,0071,146,5361,133,4681,150,725 [the Lilly Patents]
1,095,0261,132,5471,136,1321,144,924 [the Shionogi Patents]

Cefaclor Interest is devoted to assessing the proper rate of return for compound interest damages. While the determination was ultimately a matter of fact, it raises issues that will arise in any similar determination. I also suggest that an overarching lesson from the decision is that whatever particular approach is used, the determination of the rate of return as a matter of fact is likely to be a burdensome undertaking. As a matter of policy is might be desirable to amend the relevant statutory provisions to permit a successful party to claim compound interest at a modest rate as a matter of law, without the need for a fact intensive inquiry as to what exactly it would have done with the money.

As discussed here and here, the common law traditionally prohibited recovery of interest on a damages award. While that prohibition was reversed by statutory provisions permitting the award of pre-judgment interest, those statutes generally did not allow for compound interest. In Bank of America 2002 SCC 43 the SCC recognized that simple interest is not fully compensatory, and consequently, the SCC held that even if compound interest was not available under the relevant statute, it was available under the common law of contract as compensation, so long as it was claimed as such and proven.

In Cefaclor Damages FC, the damages portion of a bifurcated trial, Zinn J had awarded lost profits of just over $31m (the Lost Profits), with compound interest on the Lost Profits as damages: [4]. On appeal, In Cefaclor Damages the FCA confirmed that compound interest is indeed available in the patent context when interest is claimed as a head of damages: see here. However, Zinn J had held that the loss could be presumed, and the FCA reversed on this point alone, saying “a loss of interest must be proved in the same way as any other form of loss or damage” [158]. The FCA therefore remitted the matter to Zinn J for reconsideration of this point alone [164].

When compound interest is claimed as damages, the loss is the value of the lost opportunity to use the funds that the plaintiff would otherwise have had — in this case, the Lost Profits. The question in Cefaclor Interest therefore, was whether Lilly had proven a lost opportunity to use the Lost Profits, and how prove the applicable rate of interest: [18].