Friday, November 27, 2020

Does the Discoverability Rule Apply to the Patent Act Limitations Provision?

Paid Search Engine Tools, LLC v Google Canada Corp 2020 FC 992 McVeigh J


In this motion McVeigh J declined to direct the proposed determination of a question of law relating to the limitations period in s 55.01 the Patent Act pursuant to Rule 220(1)(a), but in so doing she decided an equally important question of law—just not the one that was asked. This issue is also very interesting, and I’m afraid I went down the rabbit hole—this blog post is longer than the decision.

The patent at issue was published in January 2002 and granted in March 2017, and an action was brought by Paid Search against Google on January 12, 2018 [3]-[4]. The question presented for determination by Google was whether the six-year limitation period in s 55.01 of the Act applies to a claim for “reasonable compensation” pursuant to s 55(2) of Act, for acts of ‘infringement’ between the time the application was published and the time the patent was granted,“such that in the present action no remedy, including no reasonable compensation, may be awarded for any act of infringement committed prior to January 12, 2012?” [4]. Thus the answer to the question affects the claim to reasonable compensation potentially over a ten year period, depending on when any infringement began.

Rule 220(1)(a) allows the court to determine a pure question of law when that question may be answered without having to make any determination of fact [10]. McVeigh J held that the question was not a pure question of law because the discoverability rule applies to the s 55.01 limitation period [14], [23]. Under the discoverability rule, the limitation period does not begin to run until the material facts were reasonably discoverable: Pioneer Corp v Godfrey 2019 SCC 42 [31] cited at [16]; and see eg the s 5 of the Ont Limitations Act for a statutory implementation. The discoverability rule therefore turns on factual issues, including “the moment at which [Paid Search] learned of the patent infringement, the moment [Paid Search] was able to commence the action and the reasons for the delay, if any” [24]. So, if the discoverability rule applies, the question posed — as to whether reasonable compensation may be awarded for acts prior to January 2012 — is not a pure question of law [24]. While the question might nonetheless be decided under Rule 220 if the relevant facts were undisputed, that was not the case [25-26]. McVeigh J consequently dismissed the motion [29]. Her holding on this point was strictly not determinative, as she also held that determination of the question prior to trial would not be likely to save time and money, particularly given the likelihood of an appeal of the motion decision [33]-[46], but the central holding was that the discoverability rule applies to s 55.01.

Thus, while McVeigh J declined to answer the question of whether limitations period barred reasonable compensation prior to the relevant date, she did answer the even more important question of whether the discoverability rule applies to the limitation period set out in s 55.01 of the Act, which applies to any remedy:

55.01 No remedy may be awarded for an act of infringement committed more than six years before the commencement of the action for infringement.

This is a novel point of law, as McVeigh J noted: “The question of whether the discoverability principle applies to the limitation period found in section 55.01 of the Patent Act has not been yet resolved by the courts” [17].

Wednesday, November 18, 2020

You Can’t Have Your Non-infringing Alternative and Eat it Too

Hospira Healthcare Corporation v The Kennedy Trust for Rheumatology Research 2020 FCA 191 Gleason JA: Stratas, Laskin JJA aff’g 2019 FC 1252 & 2019 FC 1253 Phelan J

            2,261,630 / infliximab / INFLECTRA

In the liability phase of Hospira v Kennedy Trust 2018 FC 259 var’d 2020 FCA 30 Hospira and others were found to have infringed the 230 patent by making and selling INFLECTRA, an infliximab biosimilar of REMICADE [FC 16-17]. They also had a second drug, REMSIMA, also an infliximab biosimilar. During the liability phase Hospira took the position that REMSIMA was the same as INFLECTRA in material respects and the liability trial proceeded on that basis [2]. During the damages phase of the proceedings, Hospira sought to amend its Statement of Issues to assert that REMSIMA was a non-infringing alternative, which it claimed disentitled the patentee to damages [2]. Phelan J, in unreported decisions, held that the proposed amendments were abusive as being a radical departure from the position taken by Hospira in the liability phase, and undercut the basis upon which the proceeding had taken place [5]. The FCA has now affirmed. The FCA noted that “While there may well be cases where a party may set out an alternative for the first time as part of the ‘but for’ world in the damages phase of a patent infringement matter, this is not one of them” [5].

Tuesday, November 17, 2020

Filgrastim Patent Obviousness Upheld on the Facts

Amgen Inc v Pfizer Canada ULC 2020 FCA 188 Stratas JA: Gleason, Laskin JJA aff’g 2020 FC 522 Southcott J

1,341,537 / filgrastim / NEUPOGEN / NIVESTYM

Southcott J at first instance in this NOC decision found Amgen’s 537 patent to be obvious on an obvious-to-try analysis in a decision that turned almost entirely on the facts. The FCA has now upheld that the decision, largely on the usual basis that read holistically, there was no overriding error, and it is not the FCA’s role to re-weigh the evidence [12]. The FCA then went further and specifically approved Southcott J’s decision, saying that even if it had reviewed the evidence de novo, it would have come to the same conclusion [13]. The FCA commended Southcott J’s analysis, saying “we consider the Federal Court’s reasons worthy of recognition for their attention to detail, their careful analysis of the rival experts and the thorough analysis throughout.

Monday, November 16, 2020

Split Consent Effective under the NOC Regs

 Fresenius Kabi Canada Ltd v Canada (Health) 2020 FC 1013 Manson J

IDACIO / HUMIRA / adalimumab

AbbVie is the owner of several patents relating to adalimumab / HUMIRA. AbbVie and Fresenius Kabi entered into a confidential licensing agreement evidently allowing Fresenius Kabi to market its biosimiliar IDACIO. Fresenius Kabi then sought an NOC relying on s 7(2) of the PM(NOC) Regulations which permits the Minister to grant an NOC if the owner of the patent consents to "the making, constructing, using or selling of the drug." AbbVie wrote to the Minister consenting to "the making, constructing, and, on and after February 15, 2021, to the using and selling" in Canada by Fresenius Kabi of IDACIO [4]. Evidently the temporal split in the consent was to allow Fresenius Kabi to stockpile the drug for launch on February 15. The Minister refused to accept this as effective consent for the purposes of s 7(2), on the basis that the "or" should be read as "and" to avoid an absurd result [12]. Manson J reversed on reasonableness review [9], holding that "or" should be read as "or" [22]-[25] and that this did not result in any absurdity [31]-[33]. Manson J also noted that the Minister's interpretation failed to recognize that one purpose of the Regulations is to allow the timely market entry of generics [29]-[30]; if the temporal split in consent were not permitted, this would result in delayed launch [35].

Manson J’s analysis strikes me as being entirely compelling. The direct practical implication is that the NOC Regulations will not prevent parties from entering into an agreement that ensures launch on a specific date, but not before.

A broader point is that different judges of the Federal Court have consistently interpreted reasonableness review under Vavilov 2019 SCC 65 as endorsing a fairly robust review of Health Canada’s statutory interpretation decisions: in addition to this decision of Manson J, see also Natco 2020 FC 788 McHaffie J (here); ViiV Healthcare 2020 FC 756 Fuhrer J (here); Glaxosmithkline 2020 FC 397 Barnes J (here), all reversing Health Canada on statutory interpretation issues. (I’m not an admin law expert, so I don’t really know how different the results would have been prior to Vavilov.) Substantively, I’m pleased to see this, as Health Canada’s interpretation struck me as unreasonable in all these cases and the FC intervention has helped ensure that the law develops in the manner that would have been intended by the legislature. Of course, Health Canada isn’t always wrong in its stat interp decisions — see Janssen 2020 FC 904 (here) (though even there Health Canada was simply following an FCA decision)—but statutory interpretation just doesn’t seem to be one of Health Canada’s strengths. That is fair enough, given that their mandate is focused on “helping Canadians maintain and improve their health.”

Wednesday, November 4, 2020

Blogging Break

I'll be taking a break from blogging for a couple of weeks. I'll be back as usual sometime in mid-November. 

Tuesday, November 3, 2020

Variation of Injunction Refused

 Bombardier Recreational Products Inc v Arctic Cat, Inc 2020 FC 946 Roy J


After protracted litigation and a couple of trips to the FCA, Bombardier Recreational Products (BRP) finally prevailed in its patent litigation against Arctic Cat and was granted a permanent injunction. In this motion Arctic Cat and its dealers sought to vary that injunction using Rule 399. This is Arctic Cat’s third attempt to avoid the injunction. The final substantive decision in this litigation was the 15 June decision of Roy J in 2020 FC 691: see here. After prevailing on the merits of the 264 patent (one of several that had been asserted), BRP had requested the usual permanent injunction, which would have the effect of prohibiting Arctic Cat and all its dealers from selling Arctic Cat’s current model year snowmobiles. Arctic Cat had resisted vigorously, arguing that the injunction should not be granted at all. Roy J rejected Arctic Cat’s arguments [178-94], and granted a permanent injunction “to restrain the Defendants, their . . . distributors and dealers having knowledge of the injunction” from “selling or offering for sale, making, using or distributing in Canada any [infringing] snowmobile.” BRP notified all the dealers after the injunction was granted, [12]-[13], so there was no dispute that the inventors had knowledge of the injunction. Arctic Cat then sought a stay pending appeal, which was refused: 2020 FCA 116, discussed here and here.

In this motion Arctic Cat, as well as some of its dealers (who had not previously been directly involved in the litigation), tried again, bringing motions under Rules 399(2) and 399(1), respectively, seeking an order to vary the injunction [1]. The effect of the variation would be to allow dealers to sell infringing snowmobiles that they held in stock as well as pre-ordered snowmobiles. The motions were unsuccessful, largely because Rule 399 isn't a vehicle for varying an injunction that has been granted after full argument on the merits.

While I agree with Roy J’s holding in the context of Rule 399, I would suggest that Canadian courts should be more willing to consider staying or tailoring a permanent injunction (eg by carving out certain products) in appropriate circumstances. As I discussed in a recent post on Nova v Dow, sunk costs and the difficulty of doing full patent pre-clearance means that the patent system can hinder rather than advance innovation. In Patent Remedies and Complex Products: Towards a Global Consensus § 4.4.3, p155-56, we argue that tailoring of injunctive relief in appropriate circumstances can mitigate some of the worst effects. This case was arguably appropriate for tailoring. I must acknowledge that in my post on Roy J’s decision granting the injunction, I noted that “Roy J’s analysis was brief and I agree entirely.” However, because the analysis was brief I didn’t fully grasp the issues, and moreover, the argument was framed as denying the injunction rather than staying or otherwise tailoring it. After blogging on the more recent proceedings, I have a better handle on the issues, and while I won’t say that the injunction in this case should necessarily have been stayed or tailored, I will say that the possibility should have been taken more seriously.

I am the author of the Canada chapter in a forthcoming book on the comparative law of tailoring injunctions, Contreras & Husovec (eds) Injunctions in Patent Law: a Trans-atlantic Dialogue on Flexibility and Tailoring (Cambridge U Pr) (expected release in spring 2021). In their synthesis chapter, Professors Contreras and Husovec divide countries into four groups. In Group A injunctions are granted essentially as of right, while in Group B injunctions are in fact discretionary. There are two subgroups in each category: A1 with automatic issuance upon a finding of infringement, most prominently Germany; A2, with automatic issuance upon a finding of infringement owing to attitudes of judges, despite the fact that that the law gives them some discretion eg Poland; B1, in which injunctions generally issue, but there is an individualized assessment in some cases, most prominently the UK; and B2, with individualized assessment in all cases, comprising only the US. While injunctions are clearly discretionary in principle in Canada, the suite of decisions in the Bombardier v Arctic Cat litigation, as well as decisions such as Valence v Phostech 2011 FC 174 (see here) indicate that Canada belongs in Group B2. I would like to see Canada move closer to the UK position, where injunctions are normally granted, but there is a real possibility of tailoring after a principled analysis in appropriate cases.

This point is only tangential to the main holding in the decision at hand. The thrust of Roy J’s decision was that if the injunction was to be tailored, it should have been done at first instance or on the application for a stay pending appeal; the opportunity has now passed. That seems right to me. 

However, I raise the point because some of Roy J’s obiter remarks suggest tailoring or staying injunctive relief is almost never appropriate. I recognize that Roy J’s remarks are broadly consistent with those of Rivoalen JA in the stay application in this litigation, and also with Gauthier J’s brief analysis in Valence v Phostech. It is because precisely because this series of decisions from different judges indicates a general view in the FC/FCA that I feel the point is worth pursuing. At the same time, I should also point out that Roy J’s original decision does show the possibility of tailoring, as Roy J deliberately refused to order delivery up of infringing snowmobiles in possession of the dealers, so as to allow them to sell those machines after the expiry of the patent. It is just this kind of flexibility that I suggest should be more often considered.

With that long preface, I’ll turn to the decision itself.

The main substance of Roy J’s decision dismissing both motions was fairly straightforward. Rule 399(2), relied on by Arctic Cat itself, allows the Court to set aside or vary an order “by reason of a matter that arose or was discovered subsequent to the making of the order.” There simply wasn’t any new matter [30]. Arctic Cat tried to argue that the scope of the injunction was unclear and this was discovered after the order was made [31], but this argument failed because any lack of clarity did not arise subsequent to the making of the order, so Rule 399(2) was not applicable [30]. In any event, the order wasn’t actually unclear at all [31]. Citing Abbvie 2014 FCA 176 [43], Roy J noted that Rule 399 is applicable “[o]nly if there is specific, particularized evidence of significant, unforeseen difficulty in following the terms of an injunction” [27]. The motion sought to allow the dealers to sell infringing snowmobiles that they owned and that were in their possession, but this was clearly prohibited by the express terms of the order restraining “dealers having knowledge of the injunction” from “selling or offering for sale” any infringing snowmobile. This could hardly be clearer [41]. Moreover, the scope of the injunction was not a mistake. Roy J noted that dealers had not been ordered to deliver up infringing snowmobiles in their possession. Roy J made this order deliberately, so as to allow dealers to retain those snowmobiles and sell them after the expiry of the patent [33]. But this reinforces the point that Roy J intended that dealers be prohibited from selling during the term [41]. Arctic Cat also argued that the pre-ordered sleds were already sold to the final customers, or at least that there was ambiguity on this point. Roy J had no difficulty concluding that the title to the pre-ordered sleds—which had not yet even been manufactured—had not passed to the customers [21].

The motion made by the dealers raised essentially the same issues. It was brought under Rule 399(1), which allows the court to set aside or vary an order that was made “(a) ex parte; or (b) in the absence of a party who failed to appear by accident or mistake or by reason of insufficient notice of the proceeding.” Again, the motion did not fit within the scope of the rule as the order was not made ex parte, and the dealers were not parties who failed to appear by mistake, as they were not parties at all [53]-[54].

With that said, the motion by the dealers raises an interesting issue precisely because they were not parties and they are now bound by the injunction even though they never had a chance to argue its merits. As Roy J pointed out, non-parties may be bound by an injunction: MacMillan Bloedel [1996] 2 SCR 1048. But that being the case, it would seem all the more reason why third parties who are bound by an injunction should have the chance to challenge the injunction after it has been granted, as they will not be in a position to argue the merits before the fact. Roy J remarked that “the issues raised by the Dealers were defended by Arctic Cat with a great deal of vigour. In essence, the Dealers seek to litigate that which has already been litigated” [53]. In a practical sense there is a great deal of force to that observation. But in our legal system parties normally have a right to be heard, and I am not very comfortable by dismissing this right by saying “Don’t worry, someone else argued your case for you without telling you about it, and we think they did a pretty good job”—even if it is true that the case was well argued. Given that breach of an injunction may be sanctioned by contempt, it seems to me that there is a strong prima facie argument that any party bound by an injunction should have the opportunity to challenge it on the merits. I doubt that such an opportunity would be abused. If indeed the original party did argue the case well, then the third party seeking to re-argue the injunction would face an uphill battle; it would probably lose and then would have to bear its costs as well as some part of the plaintiff’s costs. None of this is to criticize Roy J’s holding. Even if such a mechanism is desirable, it seems clear that Rule 399 isn’t the right vehicle. I have to wonder whether there is a procedural gap in the law in this respect, though I have not researched the point thoroughly.

Thus, I do agree with Roy J’s analysis and holding in respect of Rule 399. But Roy J also indicated that he would not have been inclined to vary the order in any event [36]-[37]. In part, this was because doing so would be tantamount to a compulsory licence: “The monopoly conferred by a patent is gone: moral hazard is a thing of the past, as there is an incentive to increase one’s exposure to risk by infringing on a patent because the infringer will not bear the whole cost. The infringer does not have to abide by an injunction as it can be substituted for a compulsory royalty” [38]. To repeat a point I made in an earlier post, this litigation has been ongoing since 2011, and BRP has been in effect subject to a compulsory licence for that entire period, as we now know that Arctic Cat was infringing the entire time, with the only consequence that it is liable in damages. The reason for this is that the Federal Court will never grant an injunction in patent cases, on the view that damages are an adequate remedy. If an interlocutory injunction was refused because damages are an adequate remedy, how can we then say that a permanent injunction must be granted because damages are inadequate? Certainly, there is a stronger case for a permanent injunction because we now have a substantive holding on the merits that the patent was valid and infringed; but this is a separate consideration from the adequacy of damages.

Roy J also remarked as follows (my emphasis):

[38] In the context of an infringement of the Copyright Act (RSC, 1985, c C-42), the Federal Court of Appeal found in R. v James Lorimer & Co. [1984] 1 FC 1065 [77 CPR(2d) 262] [James Lorimer], that “the copyright owner is prima facie entitled to an injunction restraining further infringement” (p. 1073). The Court goes on to “find no authority for requiring a copyright owner to acquiesce in a continuing infringement against payment of a royalty. That is tantamount to the imposition of a compulsory licence. In the absence of legislative authority, the court has no power to do that”. There is no reason to depart from the principle described in James Lorimer.

With due respect, to the extent that the emphasized statement suggests that the court has no power to refuse an injunction, it is wrong. In the first place, the provision of the Patent Act authorizing injunctive relief, s 57(1), provides that a court “may. . . make such order as the court or judge sees fit.” This expressly gives legislative authority to grant or refuse an injunction. Moreover, as a matter of general principles, injunctive relief is inherently discretionary as being an equitable remedy: “The traditional rule is that an injunction will be granted only where damages would provide an inadequate remedy” Sharpe on Injunctions and Specific Performance § 1.60. Now, it is true that “[w]here the plaintiff complains of an interference with property rights, injunctive relief is strongly favoured,” and “the conventional primacy of common law damages over equitable relief is reversed. Where property rights are concerned, it is almost that damages are presumed inadequate and an injunction to restrain continuation of the wrong is the usual remedy.” However, “as always with equity, this must be understood to be a principle rather than a rule” Sharpe § 4.10. Thus it is perfectly clear that a court has the inherent jurisdiction to refuse injunctive relief. It is true that there is only one Canadian case refusing to grant a permanent injunction to a successful patentee, namely Unilever (1993), 47 CPR(3d) 479 (FCTD)(1995), 61 CPR(3d) 499 (FCA) (though injunctive relief was moot on appeal as the patent had expired). But the fact that injunctive relief is normally granted does not mean the courts do not have the authority to refuse it. Indeed, in the UK at least, injunctive relief has been refused even in the case of trespass to land: see Jaggard v Sawyer [1995] 2 All ER 189 (EWCA).

I hope I have not been unfair in dwelling unduly on an issue that was not central to Roy J’s holding. But his views, coming on the heels of those of Rivoalen JA, suggest there may be a widespread view in the Federal Courts that a permanent injunction should always be granted. I do agree that an injunction should normally and presumptively be granted, but it is quite clear that the courts do have the authority to tailor or stay a permanent injunction, in appropriate circumstances, and I would welcome a more rounded discussion of when tailoring might be appropriate.

Monday, November 2, 2020

Camso v Soucy Affirmed from the Bench

Camso Inc c Soucy International Inc 2020 CAF 183 Nadon JA: Boivin, Leblanc JJA aff’g 2019 FC 255 Locke J

            2,372,949 / 2,388,294 / 2,822,562 / 2,825,509 / ATV Track Assemblies

At first instance, Locke J held all the claims at issue to be all the claims in issue to be invalid for anticipation and/or obviousness. As discussed here, his decision turned on claim construction and the facts. The FCA has now affirmed in a brief decision from the bench.