Saturday, March 21, 2020

Blogging Hiatus

I'll be taking a blogging break for a week or two as I try to get my courses set up for online delivery. When I get back, I'll start by catching up with any decisions that I've missed.

Monday, March 16, 2020

Hearsay Evidence Not Enough to Ground Stay Pending Appeal

Western Oilfield Equipment Rentals Ltd v M-I LLC 2020 FCA 3 Nadon JA refusing to stay 2019 FC 1606 O'Reilly J
            2,664,173 / Shaker and Degasser Combination

In this decision, Nadon JA refused Western Oilfield’s motion for a stay pending appeal of 2019 FC 1606, in which O’Reilly J found that Western infringed the 173 patent and had consequently granted an injunction, as well as awarding damages and costs against Western in the vicinity of $5 million [2]. Western moved for a stay on the basis that its assets, covered by security interests, are insufficient to cover the monetary award and that unless a stay is granted, its creditors will enforce their security interests and it will become insolvent [4].

While being put out of business is normally considered a type of irreparable harm sufficient to establish the second branch of the RJR-MacDonald test, [1994] 1 SCR 311 at 341, Nadon JA emphasized that any such harm must be established on the evidence [11-12]. In this case, the main evidence was provided by Western’s controller [13]. She testified that Western did not itself have adequate funds to satisfy the award [16], but the crucial issue was the position of its financiers. She gave evidence that should Western inform its bank of the decision against the it, the likelihood is that the bank will execute its security interests over Western’s assets [17]. She also gave evidence that Western’s venture capital backers would cease funding Western if Western were prevented from earning revenue as a result of the injunction [21].

The difficulty is that all this evidence as to what Western’s financiers would do, was hearsay [22]. Nadon JA held that Western should have produced “an affidavit from their bank outlining its position following the rendering of the judgment and its position in the event that a stay was not granted” [18] and a similar statement from the managing director of the venture capital companies as to “the impact of the Decision on their funding decisions and whether or not a stay of the Decision would lead to a different position on their part” [19]. This information was crucial to his determination regarding irreparable harm [19], and in its absence he was not satisfied that the irreparable harm branch of the RJR-MacDonald test was satisfied [24].

It seems that as of the time of the hearing, Western had not yet informed its bank of the trial decision, apparently out of a concern that had the bank been informed of the Decision, it might, irrespective of the possibility of obtaining a stay, have called in Western’s advance and exercised its security interests [17]. If that concern is well-founded, then this decision puts Western between a rock and a hard place.

Thursday, March 12, 2020

Correcting Inventorship Post-Grant

Inguran LLC dba STgenetics v. Canada (Commissioner of Patents) 2020 FC 338 Brown J

This decision concerned an uncontested application to remove six named inventors from several granted patents. Brown J followed Qualcomm 2016 FC 499 (here) in holding that an affidavit from remaining inventors to the effect that they are the sole inventors is not required, so long it is adequately established on the other evidence that the named inventors to be removed are not in fact inventors. The case also illustrates that the power of the FC to correct inventorship is post-grant pursuant to s 52 is broader than the power of the Commissioner to correct inventorship pre-grant pursuant to s 31.

In this case, the original application had twelve named inventors. After a unity of invention objection by CIPO, the application was divided into divisional applications relating separately to electro-mechanical subject-matter and biological subject-matter. All twelve inventors were left on the divisionals, even though the named inventors sought to be removed in this application had not contributed to electro-mechanical subject-matter claimed in the patents at issue. This application sought to remove those non-inventors.

Before a patent is granted, inventors can be removed by the Commissioner pursuant to s 31(3) and added by the Commissioner pursuant to s 31(4). The Commissioner does not have the authority to add or remove inventors after grant: Micromass 2006 FC 117. (The Commissioner can correct some essentially clerical errors under the Patent Rules, including a spelling error in the name of an inventor pursuant to Rule 109 (this was previously authorized by s 8, now repealed).)

Post-grant, grant, inventors may be added or removed on application to the FC pursuant to s 52, which gives the Court broad authority to “order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.” A number of decisions by the FC have invoked the test under s 31 in a decision pursuant to s 52, notwithstanding that on its face s 31 applies only to the Commissioner in respect of applications (see here). Presumably this is because s 31 provides more specific guidance regarding changes in inventorship specifically.

There is a bit of a concern regarding this practice, as s 31 is more restrictive than the broad powers granted to the Court by s 52. In particular, s 31(3) regarding removal of non-inventors (ie named inventors who in fact did not contribute to the development of the claimed inventions), specifies that the application may be carried on by the remaining inventors “on satisfying the Commissioner by affidavit” that they are the true inventors. S 31(4), regarding addition, provides that inventors may be added on satisfying the Commissioner that (i) they should be so joined, and (ii) that the omission of the further applicant or applicants had been by inadvertence or mistake and (iii) was not for the purpose of delay. The question is whether these—in particular (ii) and (iii) are all required under s 52 as well.

Brown J agreed with the submission that in an application under s 52 the Court “may apply” the tests set out for the Commissioner of Patents in subsections 31(3) and 31(4) [35], citing various cases. I’d quibble a bit on this point, at least to the extent that “apply” suggests that the test under s 31 is also the strict test under s 52. Section 31 was certainly considered in the cases cited by Brown J, but I’m not sure it was actually adopted as the test under s 52, rather than as identifying relevant considerations. While the application to correct inventorship under s 52 will certainly be granted when the test under s 31 is satisfied, the question is whether it is necessary to satisfy the test under s 31 to correct inventorship under s 52. Brown J’s decision suggests that the answer is no.

First, Brown J noted at [37] that in Imperial Oil 2015 FC 1218 Leblanc J set out two criteria for the removal of named inventors set out by subsection 31(3):

[15] Subsection 31(3) of the Act sets out two criteria for the removal of named inventors:
i. does it appear that one or more of the named inventors have no part in the invention?; and
ii. has an affidavit been provided to satisfy the Court that the remaining inventors are the sole inventors?

However, in this case, two of the six remaining true inventors could not be located [29] and so they did not provide affidavits. There was plentiful evidence from the other named inventors, including both the true inventors and the non-inventors, that the non-inventors were indeed not inventors, and Brown J followed Qualcomm 2016 FC 499 (here) in holding this was a housekeeping requirement that is “not relevant when an issued patent is being considered by the Court under section 52 of the Act” (Qualcomm [10], quoted at [39]).

Thus, whether or not affidavits from all remaining applicants are required under s 31(3), there is no such requirement under s 52. This indicates that the test under s 52 is not the same as the test under s 31(3).

This makes sense functionally. It may be much more difficult to find the remaining inventors post-grant, as is illustrated on the facts of this case. Further, while it may make sense for the Commissioner to want to be satisfied that the remaining applicants are in fact the inventors before the patent is granted to them, it is not clear why the FC would need to be satisfied that the remaining inventors are in fact inventors, given that the Commissioner was already satisfied of this fact on granting the patent. Surely, post-grant, that can be presumed. The real question post-grant is simply whether the inventors sought to be removed were not in fact inventors, and it would seem that affidavits from those non-inventors to that effect would normally be sufficient evidence. I suppose the point will really be tested if one named inventor is to be removed, on the basis of satisfactory evidence that the named inventor not in fact an inventor, in circumstances in which none of the remaining named inventors can be located. It seems to me that it would be clearly appropriate for the FC to order the non-inventor to be removed in such circumstances.

Wednesday, March 4, 2020

Patentee That Did Not Sue in the Real World Cannot Say it Would Have Done So in the “But For” World

Pfizer Canada ULC v Pharmascience Inc 2020 FCA 55 Laskin JA: Dawson, Stratas JJA aff’g 2019 FC 1271 O’Reilly J
            2,255,652 / pregabalin / LYRICA

The first half of this decision straightforwardly affirms O’Reilly J on an essentially factual point. The second half has some comments on legal points that I find quite puzzling, though I expect this is simply because the specific arguments the FCA was responding to were not fully set out in this brief decision.

The decision arises out of Pharmascience’s action for damages under s 8 of the NOC Regulations, brought after Pfizer lost in NOC proceedings aimed at keeping Pharmascience out of the pregabalin market. Such damages are assessed using the established “but for” test for causation, under which Pharmascience’s actual sales are compared with the sales it would hypothetically have made had it not been kept off the market during the statutory stay period triggered by NOC proceedings. Pfizer responded by arguing that Pharmascience was disentitled to damages “because the hypothetical sales of PMS-pregabalin would have infringed Pfizer’s patent” [FC 2]. However, Pfizer had never actually sued Pharmascience after Pharmascience launched, and the evidence was that it would not have done so even if Pharmascience had obtained its NOC at the outset of the statutory stay period [FC 3], [3]. Invoking the principle that “the but-for world should reflect, to the extent possible, what happened in the real world,” O’Reilly J held that Pfizer’s defence was not viable [FC 5, 23]. In my view, as discussed here, O’Reilly J’s holding was correct for the reasons he gave. The FCA has now affirmed, “substantially for the reasons given by the Federal Court” [6]. This much is straightforward.