Tuesday, February 27, 2024

Tension in the Sanofi Disclosure Analysis

Takeda Canada Inc v Apotex Inc 2024 FC 106 Furlanetto J

2,570,916 / dexlansoprazole / DEXILANT / NOC

Proton pump inhibitors (PPIs) are a class of compounds that decrease gastric acid level in the stomach [5]. PPIs are now a well-established treatment for GI disorders related to increased gastric acid [7]. It is desirable to have a once daily dosing regimen, but the formulations known at the time of the patent could result in nocturnal breakthrough events if used on a once-daily basis, resulting increased gastric acid production [12]. Takeda’s 916 patent aimed to address this problem with a “pulsatile” release formulation, comprising a PPI with “a first and a second dose,” which are released from the dosage form as “discrete pulses,” resulting in specified blood plasma concentrations [90], [92]. Takeda’s DEXILANT product is a pulsatile release formulation of the claimed type, which includes two types of delayed-release beads containing dexlansoprazole [6]. Apotex sought to sell a dexlansoprazole oral dose capsule product and Takeda brought this NOC action in response [2].

Furlanetto J addressed three claim construction issues, which all turned on the evidence. One question in particular turned on the meaning of “a first and a second dose” in the claims. Apotex argued that this means distinct amounts of PPI in the dosage form itself [97], as with the two types of delayed-release beads in DEXILANT. Takeda argued that the reference to two doses was not the amount of PPI in the formulation, but the amount of PPI released from the formulation [97]. In other words Takeda argued that even if there was only one form of PPI in the product, if it was released in two waves resulting in two distinct blood plasma peaks, that would fall within the claims. Furlanetto J accepted Apotex’s construction, for reasons that strike me as being straightforward and compelling [98]–[104]. (Her conclusions on the other two claim construction issues also strike me as being sound.)

In light of that construction, Apotex prevailed on infringement because it does not contain two different types of dexlansoprazole: “Characteristic of a single continuous, delayed release dosage form, each of the mini-tablets in the Apotex Product are identical” [119]. There was also an extended discussion of various labs tests which was a bit difficult to follow because of redactions. My impression is that Takeda was arguing that if you squint really hard, you can see two peaks in the plasma concentration curves. In any event, in the end Furlanetto J held that Apotex’s product would not infringe as Takeda failed to established that Apotex’s product comprised a first and a second dose of dexlansoprazole from the dosage form as two discrete pulses: “Rather, the evidence indicates that there is only one dose of dexlansoprazole in each 30 mg or 60 mg capsule of the Apotex Product that is released from the Apotex Product in a single, continuous delayed release fashion” [147].

To this point, the decision turned on the facts with no novel points of law. The conclusion on claim construction and infringement would have been sufficient to dismiss the action [148]. Furlanetto J nonetheless went on to address Apotex’s validity arguments, “which formed a significant portion of the parties’ arguments at trial” [148].


The anticipation argument raised a tricky point which turns ultimately on a tension in Sanofi 2008 SCC 61.

The focus was solely on the disclosure branch of the two part test for anticipation [151]. The key piece of prior art was Application 2,499,574, and in particular Example 57 which “provides a formulation that is close to DEXILANT® except that it includes the excipient PEG as part of the formulation” [168]. Apotex introduced evidence that the PEG would not affect the pharmacokinetics and that the blood plasma reached would exceed the threshold specified in the claims [169]–[170]. Furlanetto J held that Example 57 did not anticipate because “the heart of the invention of the 916 Patent is the recognition of the threshold plasma concentration and how to achieve and maintain it,” and “There was no suggestion in the 574 Application of any recognition of these properties, nor of their significance” [176]. Moreover, Example 57 did not disclose the blood plasma concentrations that would result, and for that to be determined, the capsules of example 57 would have had to be administered to humans and the PK properties would have to be identified and studied” [176]. It is not entirely clear to me if Example 57 comprised two different types of granules (see [202], suggesting it did), but it is clear that Example 11 did have two types [161], and Furlanetto J held that Example 11 did not anticipate because, inter alia, “there was no disclosure of any plasma concentration being a threshold which must be surpassed for pharmacological effect” [166].

So, Furlanetto J is saying that these examples did not anticipate because they did not disclose the properties of the compound described in the examples. This is contrary to the basic rule that “what infringes if later, anticipates if earlier”: Consolboard [1981] 1 SCR 504, 534. There is no requirement that anyone at the time would know of all the properties. As Lord Hoffmann said in Synthon [2005] UKHL 59 [22], in a passage quoted with approval in Sanofi 2008 SCC 61 [25], “whether or not it would be apparent to anyone at the time, whenever subject matter described in the prior disclosure is capable of being performed and is such that, if performed, it must result in the patent being infringed, the disclosure condition is satisfied.” So, if a pharmaceutical company were to market a pill that in fact had two types of PPI and resulted in plasma concentrations that were in fact above the specified thresholds, that pill would infringe if sold after the patent issued, regardless of whether anyone had measured the plasma concentrations prior to litigation. By the same token, such a pill would anticipate if sold prior to the date of the patent, also regardless of whether anyone had ever measured the plasma levels. As Lord Hoffmann explained in Merrell Dow [1995] UKHL 14 [47], “whether or not a person is working a product invention is an objective fact independent of what he knows or thinks about what he is doing”; similarly in Synthon [2005] UKHL 59 [22], quoting Merrell Dow, Lord Hoffmann noted that “[t]he flag has been planted, even though the author or maker of the prior art was not aware that he was doing so.”

All of this is settled law, with Sanofi as the leading case, and indeed, it was expressly recognized as such by Furlanetto J [153]. Why then did she hold that the plasma concentrations had to be disclosed in order to anticipate? The problem lies in Sanofi itself. The quotes from Sanofi that I have given above are all from the discussion of general principles relating to anticipation. When the SCC in Sanofi discussed the disclosure requirement in particular, and in applying those principles to the facts, the SCC did indeed imply that the properties have to be disclosed in order to anticipate.

Recall that the question in Sanofi was whether the prior art disclosure of the racemate anticipated the claim to the enantiomer. The answer was no. But why? Under the general principles set out in Sanofi, the answer would have been that making the racemate would not infringe a claim to the enantiomer, and so the test that “the matter relied upon as prior art must disclose subject-matter which, if performed, would necessarily result in an infringement of the patent” (Sanofi [25], quoting Synthon [2005] UKHL 59 [22]) would not be satisfied. More broadly, the question in Sanofi was framed as being whether disclosure of the genus can anticipate the species. The answer is no, because someone practising the genus would not inevitably infringe, as the genus might be practised without infringing, by selecting another species from the pool: see Sanofi [21].

But while that answer would have been straightforward on the general principles set out in Sanofi, the SCC changed its approach when it came to the discussion of the disclosure requirement specifically. The SCC said:

[31] Section 27(1) of the Act requires as a condition for obtaining a patent that the invention was not “known or used” and was not “described” in any patent or any publication more than two years before the patent application was filed. In the context of genus and selection patents, in E. I. Du Pont de Nemours & Co. (Witsiepe’s) Application, [1982] F.S.R. 303 (H.L.), Lord Wilberforce stated, at p. 311:

It is the absence of the discovery of the special advantages, as well as the fact of non-making, that makes it possible for such persons to make an invention related to a member of the class.

The compound made for the selection patent was only soundly predicted at the time of the genus patent. It was not made and its special advantages were not known. It is for those reasons that a patent should not be denied to the inventor who made and discovered the special advantages of the selection compound for the first time.

This is all true, but it runs together anticipation and obviousness.

The general point of Witsiepe’s Application is that a species may be patented over the genus. It is now understood that two separate hurdles must be overcome. The prior art disclosing the genus must not have specifically disclosed the species, or it will be anticipated. This is true even if it turns out that the species had special properties that were not appreciated in the prior art. Suppose that the genus patent specifically disclosed five especially preferred compounds by structure, and disclosed in vitro tests showing they were all effective in treating a disease. One of those, the lead compound, was commercialized and sold. It would not be possible to get a subsequent species patent on that compound, even if it was subsequently discovered, surprisingly and unexpectedly, that it had no side effects at all, while every other known member of the genus had significant side effects. That would be true even if no one had known that this was the only compound with no side effects (perhaps because the lead compound was the only one which was commercialized and the others had never been tested in humans). The same is true if the especially preferred compound had not been commercialized, but merely specifically disclosed, as there is no difference in principle between prior sale and prior publication. (If it were surprisingly and unexpectedly discovered that the compound was useful in treating an entirely different disease, it would be possible to get a patent on the use to treat that disease. That is not because the prior art must disclose the properties to anticipate; it is because making and using the compound for uses known in the prior art would not infringe the new use patent.) On the other hand, even if the species was not specifically disclosed, it must also have special properties. There is no “invention” in picking one member of the genus at random and finding that it has exactly the same properties as all the other known members. If it does not have special properties, it will be obvious, even if it is not specifically disclosed.

The quoted passage from Witsiepe’s Application’s runs these together: “It is the absence of the discovery of the special advantages [non-obviousness], as well as the fact of non-making [anticipation], that makes it possible for such persons to make an invention [new, useful and non-obvious subject matter] related to a member of the class.” And the following sentence from the SCC is to the same effect: “It was not made [not anticipated] and its special advantages were not known [not obvious].” It is true that both of these requirements must be satisfied for a selection patent to be valid. The problem is that in the heading to that section — “i. Disclosure” — and in the following paragraph, the SCC in Sanofi identified both of these separate requirements with the disclosure branch of anticipation:

[32] Where there is no such disclosure [of the special advantages], there is no discovery of the special advantages of the selection patent as compared to the genus patent, and the disclosure requirement to prove anticipation fails.

The SCC also ran obviousness and anticipation together in dealing with the disclosure requirement when applying the law to the facts. The special properties of the enantiomer were better activity and lower toxicity. The SCC said there was no anticipation because “[t]here was no evidence that the person skilled in the art would know from reading the [prior art genus patent] that the more active dextro-rotatory isomer would be less toxic than the racemate or levo-rotatory isomer or any of the other compounds made and tested” [40] and “[s]ince the ‘875 patent did not disclose the special advantages of the dextro-rotatory isomer and of its bisulfate salt, as compared to the levo-rotatory isomer or the racemate and their salts, or the other compounds made and tested or otherwise referred to in the ‘875 patent, the invention of the ‘777 patent cannot be said to have been disclosed” [41]. The approach set out on the facts in Sanofi was picked up in comments in Novo Nordisk 2010 FC 746 [170]–[174] and in Allergan 2022 FC 260, which were relied on by Takeda and quoted by Furlanetto J at [174], [175].

So, the reason that Furlanetto J’s analysis of disclosure in this case was inconsistent with the general test set out in Sanofi, is that the SCC’s analysis of disclosure in Sanofi was also inconsistent with the general test that it had just set out. The reason for this internal inconsistency in Sanofi is that it was a selection patent case. When the SCC addressed the broad principles of anticipation, it relied on the leading cases on anticipation generally. But when it got to the specifics, it turned to cases on selection patents specifically, which run anticipation and obviousness together.

I can’t fault Furlanetto J for following the SCC’s lead. But this case illustrates the problem with the view that the special properties must be disclosed in order to anticipate. The focus on disclosure of the properties didn’t make any difference in Sanofi itself because the enantiomers were not specifically described in the prior art in any event. But in this case, the focus on the properties may have made the difference. Because Furlanetto J held that the claims were not anticipated because the plasma concentrations were not disclosed, it is not entirely clear to me whether she would have held them to be anticipated on the “what infringes if later, anticipates if earlier” test. So suppose that the prior art did indeed disclose a formulation that would indeed infringe, so that the claims would be anticipated on that test. In particular, suppose that even though the plasma levels were not disclosed, the formulation disclosed in the prior art would in fact result in clinically effective plasma levels, exceeding the threshold set out in the claims. And since there is no difference between a prior publication and prior practice, suppose that the prior patentee had marketed its product to thousands of patients, who had taken it to successfully treat their GI disorders, all without measuring the plasma levels. Would the 916 patent be valid, so that the prior manufacturer would have to withdraw its product and turn the market over to Takeda? That can’t be.

Friday, February 23, 2024

The Junk Folder Ate my Patent

Taillefer v Canada (Attorney General) 2024 FC 259 Furlanetto J

2,690,767 / Wide Ice Resurfacing Machine

A patentee must pay annual maintenance fees to maintain its patent in effect: s 46(1). If the annual fee is not paid in time, the patentee has a six month grace period during which it can pay the maintenance fee plus a late fee: s 46(2). If the fees are not paid during the grace period, the patent will lapse: s 46(4). However, the patent can be reinstated on request if the Commissioner determines that the failure occurred in spite of “the due care required by the circumstances having been taken”: s 46(5). This case discusses what “due care” looks like in the context of email communications.

The patentee’s arrangement with its Agent was that the Agent required instructions from the patentee before paying the annual maintenance fee [10]. For many years the fees were paid on time pursuant to those instructions [11]. In 2020 the Agent reminded the patentee that the fees would have to be paid, a full five months before the deadline [12]. The Agent heard nothing from the patentee. The Agent sent many email reminders to the patentee, but never heard anything back, and so did not pay the fee. The Agent sent more email reminders about the possibility of reinstatement, but still did not hear anything. The six month deadline expired, and on October 20, 2020, the Agent sent the patentee an email notifying him of this fact. Finally, nine days later, the patentee found this correspondence in his junk mail folder [16]. The evidence indicates that this was the problem all along – even though the Agent and the patentee had been successfully communicating by email for almost a decade, for some reason, in 2020 the Agent’s email started going to the patentee’s junk mail folder.

The patentee sought to have the patent reinstated pursuant to s 46(5). The Commissioner refused, on the basis that the “due care” standard had not been met. Furlanetto J affirmed.

The take-away is that if an Agent has been relying on email for years to communicate with their client without any problem, and the client stops responding, the Agent needs to double check that the emails are still getting through:

[41] In the circumstances applicable here, on a substantive review, it is my view that it was reasonable for the Commissioner to have looked at steps that could have avoided the communication failure and to have expected that the Agent would have additional communication mechanisms in place to make sure they could always correspond with the Applicant. It was likewise reasonable to have expected that in circumstances where numerous notices from the Agent had gone unanswered and where non-compliance could lead to expiry of patent rights that these alternative measures would have been used to ensure that the patentee was aware of the deadlines at issue. Particularly as there had been a consistent pattern of payment since 2012.

[42] Similarly, in my view it was reasonable for the Commissioner to expect that a reasonably prudent patentee would have a system in place to make sure that their email was operating effectively if they were relying on this as the primary communication means to pay their maintenance fees. This is especially so as the Applicant retained the responsibility to instruct the Agent on a yearly basis to pay the maintenance fee. Having retained this responsibility, it was reasonable for the Commissioner to find that it was incumbent on the Applicant to exercise due care to ensure that his email was properly receiving messages so that he could provide instructions to the Agent in a timely manner.

Tuesday, February 20, 2024

Is a Sale Accompanied by an Unrestricted Implied Licence to Use?

Pharmascience Inc v Janssen Inc 2024 FCA 10 Locke JA: de Montigny CJ, Goyette JA affg Janssen Inc v Pharmascience Inc 2022 FC 62 Manson J

2,655,335 / paliperidone palmitate / INVEGA SUSTENNA / NOC

This decision addresses a tricky and interesting point regarding implied licences in the context of the first prong of the Corlac 2011 FCA 228 [162] test for inducement, which requires that “the act of infringement must have been completed by the direct infringer.” Janssen’s 335 Patent relates to a dosing regimen for long-acting injectable paliperidone palmitate formulations for the treatment of schizophrenia and related disorders. It claims a dosage regimen comprising a first loading dose of 150 mg-eq of paliperidone palmitate on day 1; a second loading dose of 100 mg-eq on day 8; and subsequent maintenance doses of 75 mg-eq monthly thereafter [2]. Pharmascience proposed to sell the loading doses, but not the maintenance doses, which would be supplied by Janssen [17]. In this NOC proceeding, Pharmascience brought a motion for summary trial on the basis of non-infringement, arguing that even though the end-users, such as physicians and patients, would practice the invention, there would be no direct infringement because any end-user must be taken to have an implied licence from Janssen to use the maintenance dose for any purpose, including using it as part of the patented combination.

At first instance, Manson J held in favour of Janssen, finding that Pharmascience would induce infringement of the 335 Patent with its generic version of INVEGA SUSTENNA [3]: see here. The action proceed to trial on the patent validity issues raised by Pharmascience. Janssen again prevailed at trial, 2022 FC 1218. An appeal has been heard and is under reserve [3]. In my post on Manson J’s decision, I had noted that his decision in this case was essentially a companion case to Janssen v Apotex 2022 FC 107, which involved the same patent and the same type of generic product. However, the issues raised on appeal were quite different, as the Apotex appeal turned on the second prong of the Corlac test: see here.

This appeal therefore turned on whether the end-users, who purchased the maintenance doses from Janssen, should be taken to have an implied licence to use those maintenance doses to practice the invention in combination with the loading doses supplied by Pharmascience.

Locke JA started by summarizing the basic rule as follows: “it is clear that the sale of a patented article without restriction includes the right to use that article as the purchaser pleases,” unless a restriction is brought home to the purchaser on sale. He cited ample authority for this proposition [16], [15]. While Janssen did not dispute this rule, Janssen relied on MacLennan 2008 FCA 35, in which the patent related to “a saw tooth and tooth holder combination.” The tooth and tooth holder were separate parts, and the combination was attached to the periphery of a circular saw disc for feller heads in the forestry industry: MacLennan [4]. If the saw struck rocks while logging, individual teeth and sometimes also the holders would be broken without damaging the saw disc. The patentee sold both the tooth holder and the teeth themselves, and the defendant manufactured and sold replacement teeth to be used by the patentee’s customers with tooth holders purchased from the patentee [24]. Janssen argued that MacLennan was “on all fours” with the case at hand [25]. Pharmascience tried to distinguish MacLennan on the basis that the issue concerned the extent of the implied right of a purchaser to repair [26]. Locke JA quite rightly rejected this as being a misreading of MacLennan [26], [27].

How then can we reconcile MacLennan with the rule that the purchaser of an embodiment of the patented invention has the right to do as they please with it? Janssen argued that “the jurisprudence concerning implied license is limited to the patented article itself” [17]. Locke JA accepted this argument, saying that in MacLennan and similarly in Angelcare 2022 FC 507 (here), “the patented invention constituted a combination invention and therefore, the sale of a mere component of it was insufficient to grant the implied right to use the entire combination” [29]. He therefore held that:

[29] [T]he sale of a mere component of [a combination invention is] insufficient to grant the implied right to use the entire combination. To grant an implied licence, the sale of the entire combination had to occur, or at least, as in Slater Steel [(1968) 55 CPR 61 (Ex Ct)], the parties’ intended use of the component at the time of sale contemplated its use in the patented combination.

So, no implied licence arose in this case because Janssen sold the maintenance doses separately and this does not imply a licence to use the combination. That justifies the result in this case, as it means that the prescribers or patients who use the Pharmascience loading doses in combination with the Janssen maintenance doses are direct infringers.

But there is a problem. When does an implied licence arise? What about when Janssen sells a maintenance dose that is used in combination with a Janssen loading dose? Surely the users are not infringers. Under the first clause of Locke JA’s statement, the sale of the maintenance dose does not grant an implied licence to the use the combination, for the same reason as when the loading doses are sold by Pharmascience. Perhaps an implied licence is granted under the second clause, since it is certainly true in that case that “the parties’ intended use of the component at the time of sale contemplated its use in the patented combination.” The problem is that is also true when Janssen sells a maintenance dose that is then used in combination with a Pharmascience loading dose. If the second branch saves the user when the loading dose is sold by Janssen, it also saves the user when the loading dose is sold by Pharmascience. The only way that it is an infringement to use the Janssen maintenance doses in combination with the Pharmascience loading doses, but not with the Janssen loading doses, is if the sale by Janssen is accompanied by a restricted implied licence, which allows the use of the Janssen product only with another Janssen product.

The root of the problem is the notion that when a licence is implied, it is a licence “without restriction [that] includes the right to use that article as the purchaser pleases.” The licence that arises in MacLennan, Angelcare and in this case, is a restricted licence, to use the article in combination with another article that is also sold by the patentee. There is no way to reconcile these cases with the notion that a sale implies an unrestricted licence to use the article, no matter how the conditions of the sale itself are qualified. If the licence to use the product is unrestricted it doesn’t matter whether we say it arises when the product is sold, or only when the combination is sold, or what the intent of the parties is; the only way to get an answer that is consistent with the cases such as MacLennan is if the implied licence is restricted. Moreover, we can’t even say that the general rule is that the sale in the context of a combination invention grants a restricted implied licence to use the article in combination with other articles sold by the patentee, because in Slater Steel the patentee only sold one component of the combination (namely a power line reinforcing rod), and the other part of the combination (the power line) was supplied by third parties. In Slater Steel, the sale did convey an unrestricted implied licence.

Thus, I would suggest that the basic rule that “the sale of a patented article without restriction includes the right to use that article as the purchaser pleases,” while well supported by the authorities cited by Locke JA, is not sound as a general proposition. The sale of a patented article will often imply a licence to the use the article on the particular facts, but this is not the same as saying that it necessarily implies an unrestricted licence to use.

The difficulty arises because the proposition that the sale implies a right to use is based on logic that conflates ownership rights with patent rights. Consider the following passage from the decision of Pratte JA in Eli Lilly v Apotex (1996), 66 CPR (3d) 329, 343 which was quoted with approval by the SCC in Eli Lilly [1998] 2 SCR 129 [99]:

A patentee has a monopoly. By virtue of his patent, he has, says section 42 of the Patent Act, "the exclusive right, privilege and liberty", during the term of the patent, "of making, constructing and using the invention and selling it to others to be used". If a patentee makes a patented article, he has, in addition to his monopoly, the ownership of that article. And the ownership of a thing involves, as everybody knows, "the right to possess and use the thing, the right to its produce and accession, and the right to destroy, encumber or alienate it" [quoting Jowitt's Dictionary of English Law]. If the patentee sells the patented article that he made, he transfers the ownership of that article to the purchaser. This means that, henceforth, the patentee no longer has any right with respect to the article which now belongs to the purchaser who, as the new owner, has the exclusive right to possess, use, enjoy, destroy or alienate it. It follows that, by selling the patented article that he made, the patentee impliedly renounces, with respect to that article, to his exclusive right under the patent of using and selling the invention. After the sale, therefore, the purchaser may do what he likes with the patented article without fear of infringing his vendor's patent.

The logic is that ownership of the thing includes the right to use it, and therefore the transfer of the thing transfers to the right to use it. But ownership rights in the tangible product and patent rights relating to that product are distinct, as Pratte JA himself recognizes, and as a consequence, transfer or ownership of tangible product embodying the patent rights does not necessarily imply any transfer of patents rights.

This is illustrated by Eli Lilly itself. The SCC held that “it is clear that, in the absence of express conditions to the contrary, a purchaser of a licensed article is entitled to deal with the article as he sees fit, so long as such dealings do not infringe the rights conferred by the patent” [101] (my emphasis). The SCC accepted that “the rights of use and sale” are inherent in the unrestricted purchase of a licensed article [98], but this does not necessarily extend to the right of making. The purchaser had bought bulk product from a licensed vendor and reformulated it into final-dosage form. The SCC held that this reformulation did not constitute “making” [101], but it is clear that if it had, that would have constituted infringement. On its face, Eli Lilly holds only that a licence to use and sell are implied by an unrestricted sale, not a licence of all patent rights. Now, this is not inconsistent with the rule stated by Locke JA, which was only that the right to use is implied. The cases cited usually include the right to sell as well. But Eli Lilly shows that transfer of ownership in the tangible property embodying a patented invention is separate from the patent rights.

If the transfer of ownership in the thing does not necessarily transfer the right to make, as is clear from Eli Lilly, on what principle does it necessarily transfer the right to use? One answer is that the right to use is inherent in the right of ownership. This was the position taken by the JCPC in National Phonograph v Menck (1911) 28 RPC 229 (JCPC) 245, in which Lord Shaw began with the principle that the owner of “ordinary goods” is entitled to “use and dispose of these as he thinks fit,” so that a transfer of the right of ownership transfers that right to use and sell the goods. An implied patent licence to use and sell was seen as a way of reconciling that principle with the patentee’s patent rights: Menck 245.

But it is not strictly true that the owner of ordinary goods has the right to “use and dispose of these as he thinks fit,” because many rights and obligations distinct from the ownership right may constrain the owner’s right to use the goods they own. For example, if I own a car, I do not have the right to drive over the speed limit on the highway, and by the same token, if I sell the car to you, you do not acquire the right to exceed the speed limit. Similarly, if I own a quantity of an unpatented drug, I nonetheless do not have the right to use it for a patented purpose, unless I have a licence from the patentee. If I sell that drug to you, I clearly do not transfer the right to use it for the patented purpose, because I am not the patentee.

In response to this, it might be said that the prohibition on speeding is imposed by the state, not by me. My sale to you does not imply that no one else will interfere with your use of the car, but only that I will not interfere with your use of the car. But if I park my car in my own driveway, my sale of the car to you does not give you the right to park in my driveway, even if you might find it convenient to do so. That is because my ownership rights in the car and my rights in my land are separate, and a grant of one does not imply a grant of the other.

The general point is that the transfer of ownership rights in a tangible product good does not generally imply a licence to use those goods free of any other rights that the vendor might have that potentially restrict what the purchaser wants to do with the purchased goods. And it is clear my sale of a tangible thing that I own cannot transfer patent rights I do not own. But what if I do own the patent rights as well as the ownership rights? Is there something special about patent rights such that an unrestricted licence to use must always be implied in such a case?

Suppose P discovers a new drug, call it ‘tramifloxin,’ which P discovered is useful in treating ulcers. P gets a patent on the drug per se and successfully markets it for treating ulcers under the brand name ULCEX. P’s product patent on tramifloxin ultimately expires and P exits the market entirely, leaving it to the generics. But because P has expertise in tramifloxin, it continues to research new uses, and discovers, surprisingly and unexpectedly, that tramifloxin is also useful in treating psoriasis. P then get a second patent for the use of tramifloxin in treating psoriasis. P then successfully markets and sells tramifloxin, under the brand name PSOREX, for treating psoriasis. In that case, P’s sale of tramifloxin would not grant anyone else a licence to use tramifloxin to treat it psoriasis. But suppose P did not exit the market for ulcer treatment after the product patent expired, but instead continued to sell ULCEX. Would P’s sale of ULCEX be accompanied by an implied licence to use it to treat psoriasis? Would it matter if P sold ULCEX through an authorized generic?

What if P discovered and patented the psoriasis use before its patent on the tramifloxin per se expired, and while it was still actively marketing ULCEX. Would it matter if ULCEX was the bigger market? Would the sale of tramifloxin under the ULCEX brand imply a licence to use it to treat psoriasis? It might be said that the answer is yes, unless P gives notice that it is to be used only for treating ulcers. But that is not desirable either for P or for society. P does not want the use of ULCEX to be restricted to treating ulcers. It is in the interest of both P and society for purchasers to develop new off-label purposes, as that will expand P’s market and cure more diseases for the benefit of society. What P wants is for ULCEX not to be used to treat psoriasis. In response to that, it might be said that P should give notice on the ULCEX that it is not to be used to treat psoriasis. But how could P have given such notice before P knew that tramifloxin could be used for treating psoriasis? Does that mean that the stock of ULCEX that was in circulation before P obtained the patent can now be used to treat psoriasis? Further, if it was a third party, not P, that had obtained the psoriasis use patent, the person purchasing ULCEX from P would not get an implied licence to use it to treat psoriasis, regardless of whether P gave any kind of notice on the ULCEX. Why should P be in a worse position than that third party? Whether P holds the patent or a third party does makes no difference to the purchaser, who in either case will be is ‘surprised’ (or not) to discover that ULCEX cannot be used to treat psoriasis. Patent rights are strict liability, and the mere fact that a purchaser might not know that it does not have unrestricted rights to use has never been sufficient grounds to imply a licence. For example, if P sold the ULCEX to a intermediary subject to an express restriction that it could not be resold or used for the purpose of treating psoriasis, a purchaser from the intermediary would not acquire a right to use it for the patented use: Isler (1906) 1 Ch 605, 611 (CA). Of if P had assigned the use patent to a third party before selling the ULCEX, the purchaser would clearly not acquire a licence to use it to treat psoriasis: Betts v Willmott (1871), LR 6 Ch App 239, 244.

I am not arguing for any particular answer to these questions. My argument is only that these are difficult questions and it is not obvious that a simple rule that the sale of the product implies a licence to use the patent. Whether a licence should be implied is a question that should be answered on the facts, and not on the basis of a broad rule. These examples are somewhat artificial, but that is because it is true that a sale of a product will often imply a right to use the patented technology embodied in that product.

On that note, it might be said that the true rule is that if P sells V a product that can only be used in a way that would infringe P’s patent, then a licence to use should be implied. Most of the leading cases relied on by Locke JA were of this type — the patent at issue claimed a product, and the use of the product would necessarily infringe, so when the patentee sells that product, it would necessarily be accompanied by an implied licence to use the product. But this theory runs right into MacLennan, as the patentee in that case sold the tooth holder which could only be used in the patented combination. That is why Locke JA was forced to restrict the rule to a case in which the entire product was sold, or the entire combination was sold, or in which the patentee sold only one component but intended it to be used in the patented combination. At this point, we do not have much of a general rule left. What is the difference between stating a general rule that is tailored to a set of very specific circumstances, and simply saying that a licence will be implied when it is reasonable to do so on the facts?

This brings me back to my original point. Patent rights and rights of ownership of an embodiment of the invention are separate rights. The transfer of ownership does not necessarily imply any transfer of the patent rights. It is clear from Eli Lilly that the sale does not imply a licence to make. There is no difference in principle in respect of a right to use. It may be that it is more common that a licence to use will be implied from a sale on the facts, but that is not a matter of principle. In the context of combinations, an implied licence to use may be restricted, or unrestricted; that turns on the facts, and is not a matter principle. I suggest that the general point that emerges from all this is simply that there is no general principle that sale of a product implied a licence to use. Whether an implied licence accompanies the sale is a matter for the specific facts.

Locke JA was in a difficult position. The basic rule that “the sale of a patented article without restriction includes the right to use that article as the purchaser pleases,” is supported by ample authority. But that rule is inconsistent with MacLennan, which was clearly correctly decided. Locke JA had to find some way to restrict the scope of the general rule. The distinction he chose is intuitively appealing, but I have argued that it is ultimately unsatisfactory. With that said, I can’t think of a better approach, short of recognizing that the basic rule is itself unsound as a general proposition.

Thursday, February 15, 2024

Nova v Dow: What is to be Done?

Nova Chemicals Corp v Dow Chemical Co 2022 SCC 43 Rowe J: Wagner CJ, Moldaver, Karakatsanis, Brown, Martin, Kasirer and Jamal JJ concurring; Côté J dissenting affg Nova Chemicals Corporation v Dow Chemical Company 2020 FCA 141 Stratas JA: Near, Woods JJA affg Dow Chemical Co v Nova Chemicals Corp 2017 FC 350, 2017 FC 637 Fothergill J

2,160,705 / film-grade polymers / ELITE SURPASS

The Intuition / The Legal Background / Causation as a Matter of Fact / The Concession / What Role for “But For” Causation in Identifying the NIO? / Summary of the Summary / Causation Concept in the Absence of an NIO / What is the NIO? / The Value of the Invention / Rivett on the Facts / Three Policy Arguments / The Source of the Chilling Effect / Miscellaneous Policy Issues / Doctrinal Implications / Will Nova v Dow Create a Chilling Effect?

This is the last in a series of posts summarizing my two-part article in the IPJ on Nova v Dow: 35 IPJ 249 and 36 IPJ 81. The accounting remedy as it had developed since Schmeiser 2004 SCC 34 was a useful tool that could dissuade ‘catch-me-if-you-can’ tactics, in which the infringer intentionally avoids taking a licence, knowing that if caught the only remedy will be damages equal to the royalties it would have agreed to if it had taken a licence in the first place. That tool has now been broken beyond repair: as summarized in previous posts, Nova v Dow is unprincipled and incoherent, and is likely to have a chilling effect that will impede innovation.

What is to be done?

The best response would be to abolish the accounting remedy entirely in the patent context. Any attempt to use it will almost certainly do more harm than good. An accounting remedy is not an essential part of the patent system. It was abolished in US law in 1946 and has not been missed. It is available in the UK, but is rarely used. The main difficulty with this solution is that the formal abolition of an accounting would require legislative action, which is unlikely, certainly in the short term.

An alternative response would be for the courts to restrict an accounting to cases in which the infringer is trying to game the system by avoiding taking an ex ante licence. An accounting under Nova v Dow is quasi-punitive in effect, in that it puts the infringer in a worse position — potentially very dramatically worse — than it would have been in had it never infringed. The risk of the chilling effect arises because innocent infringers may avoid an entire field rather than risk exposure to such a remedy. The chilling effect can therefore be avoided if the remedy is confined to cases in which the infringer actually knew of the patent or was willfully blind as to its existence. And the best justification for an accounting is to deter the catch-me-if-you-can problem, which only arises if the infringer actually knew of the patent or was willfully blind as to its existence. That implies that the chilling effect can be avoided by confining the accounting remedy to that specific context.

This implies that an accounting should not be granted against infringers who did not know of the patent and had no reasonable grounds for knowing of it. But it is not enough to condition the remedy on the infringer’s knowledge of the patent. A party that actually knew of the patent but chooses to infringe, knowing an action will be brought, with the intention of launching a validity action in response, is not trying to game the system. A party who challenges a patent which it reasonably believes is invalid is doing an important public service by invalidating patents that otherwise result in unjustifiably high prices and restrictions on improvements. We do not want to disincentivize socially beneficial challenges of that type.

In order to ensure that the accounting remedy does not have a chilling effect on innocent infringers or dissuade challenges to suspect patents, an accounting should not be granted unless two criteria are satisfied: (1) the infringer actually knew of the patent or was willfully blind to its existence, and (2) the infringer did not have a reasonable belief that the patent was potentially invalid. This is essentially the US requirement for awarding treble damages; the parallel makes sense, since an accounting under Nova v Dow is essentially punitive, and may result in substantially more than treble damages. The problem with this proposal is that we know from the US experience with treble damages that such an inquiry is likely to be very unsatisfactory, Establishing subjective belief in the validity of the patent is very difficult. An objective test may devolve into the formality of getting an appropriate opinion letter, and a more rigorous subjective test risks error and arbitrariness.

But we need not follow the US treble damages approach exactly. Rather than using those criteria as a test, so that the patentee would be entitled to an accounting when those two criteria are satisfied, we should use those criteria as a threshold, so that an accounting may only be granted when those criteria are satisfied, but will not necessarily be granted when those criteria are satisfied. That would leave the courts the discretion to award an accounting only when it is abundantly clear on the particular facts that the infringer was trying to game the system.

Now, this can already be done with punitive damages. Moreover, punitive damages allows the court to tailor the punitive element of the award to the degree of fault, while the punitive element under a Nova v Dow accounting is essentially random, as it depends on whether there is a non-infringing option, and on the difference between the award under ‘but for’ causation and the award under Nova v Dow causation. Because Nova v Dow causation is unprincipled, that difference is arbitrary. That is why I am of the view that it would be better to abolish the accounting remedy entirely.

As noted above, it would require legislative intervention to formally abolish the accounting remedy. But this could be done de facto if the courts were to use their discretion inherent in the award of an equitable remedy such as an accounting to restrict an accounting to cases of egregious bad faith by the infringer. That, in my view, is the best course available to the courts.

I’ll finish with these observations of Edelman J, in his book on Gain-Based Damages (2002) 85–86, writing academically before his appointment to the High Court of Australia, who pointed out that there is an important difference between disgorgement as a remedy for breach of fiduciary responsibilities and as a remedy for infringement of property rights:

[T]he high degree of institutional protection afforded to fiduciary relationships can be justified as necessary to place the fiduciary on constant alert even to the possibility of innocent breach. Such vigil is necessary in relationships characterised by vulnerability and susceptibility to abuse. In comparison, the possibility of an innocent commission of a property wrong is not something against which a vigil can be maintained. The existence of property rights is not as obvious to a defendant as the existence of a relationship of trust and confidence or the vulnerability of the claimant. An innocent recipient of property, no matter how alert, often has no means to determine whether rights are held in the property by some unseen future claimant.

Consequently, Edelman argued that there is no justification for disgorgement damages for innocent breach of property rights. He noted also that in fact disgorgement is generally not available for innocent breach of property rights. Edelman’s comment regarding the difficulty of determining whether a property right has been infringed applies a fortiori to patent rights. Accordingly, with respect to patent rights in particular, Edelman wrote that “disgorgement damages should not be awarded for the infringement of a patent unless the infringement is shown to be wilful or cynical.”

Monday, February 5, 2024

What Is the Threshold for Influence in Inducement?

Apotex Inc v Janssen Inc 2024 FCA 9 Locke JA: de Montigny CJ, Goyette JA affg Janssen Inc v Apotex Inc 2022 FC 107 Manson J

2,655,335 / paliperidone palmitate / INVEGA SUSTENNA / NOC

This decision addresses the second prong of the Corlac 2011 FCA 228 [162] test for inducement in the pharma context. In some ways it is perfectly straightforward. Manson J found as a fact that Apotex’s product monograph (PM) was the ‘but for’ cause of direct infringement and the FCA affirmed on that basis. Locke JA’s decision nonetheless raises two notable issues. First, there seems to be an unresolved tension between this decision and Teva v Janssen 2023 FCA 68 as to the standard for influence on the second prong of the Corlac test; while this decision endorses a high threshold of ‘but for’ causation, Teva v Janssen apparently endorses a lower threshold. Second, while Locke JA explicitly endorsed a test of ‘but for’ causation, some of his comments imply a different approach.

Manson J’s decision was heavily redacted and I did not fully appreciate the issues when I wrote my post on it. The FCA decision has not been redacted and the key issues are much easier to understand. With that said, some aspects of the FCA discussion remain obscure to the extent that they turn on redacted discussion of the facts at trial. In my earlier post I had noted that Manson J’s decision in this case was essentially a companion case to Janssen v Pharmascience 2022 FC 62, which involved the same patent and the same type of generic product. However, the issues raised on appeal were quite different, so I’ll deal with the Pharmascience decision in a separate post.

Janssen’s 335 Patent relates to a dosing regimen for long-acting injectable paliperidone palmitate formulations for the treatment of schizophrenia and related disorders. It claims a dosage regimen comprising two loading doses of 150 mg-eq and 100 mg-eq, and subsequent monthly maintenance doses of 75 mg-eq [2]. In this NOC proceeding, Apotex brought a motion for summary trial on the basis that it would not infringe because it would not provide the 75 mg-eq dose, which is an essential element of the claimed invention [3]. That is, Apotex intended to market the loading doses but not the maintenance doses, which would be supplied by Janssen: see Pharmascience [8]. This looks like a strategy to get part of the market while trying to avoid infringing. At first instance, Manson J held in favour of Janssen, finding that Apotex would induce infringement of the 335 Patent with its generic version of INVEGA SUSTENNA [3].

The direct infringers would be the prescriber (eg a physician or a nurse practitioner) or patient [24] and Janssen therefore relied on inducement. Infringement by inducement is governed by the three part Corlac test, which Manson J correctly summarized as follows [4]:

There is a three “prong” test for inducement: (1) direct infringement by a third party; (2) the inducer influenced the third party to the point that the infringing act would not have occurred without the influence; and (3) the defendant knew that its influence would bring about the infringing act.

All three prongs were disputed at trial, with Janssen prevailing on all three [5]. On appeal, Apotex only took issue with Manson J’s decision on the second prong.

The second prong of the Corlac test is normally satisfied if the defendant supplies a non-infringing product accompanied by instructions to use that product in an infringing manner. So, in a typically skinny label case in the pharma context, the drug itself is unpatented but a use is patented. Direct infringement and knowledge are normally conceded, and the case will turn on the second prong, and in particular whether the generic has managed to scrub its product monograph (PM) clean of any reference to the infringing use. This case is different, as Apotex’s PM “would essentially be a copy of that for INVEGA SUSTENNA” [14]. I take it from all this that Apotex did intend to supply its non-infringing product — the loading doses — accompanied by instructions to use it in an infringing manner, which is to say as part of the patented regimen. The FCA decision isn’t more explicit than the phrase I have just quoted, and the FC decision isn’t clear on this because of the redactions, but on appeal in the Pharmascience case, it was no longer disputed that Pharmascience’s PM contained instructions concerning the use of the 75 mg-eq. dose (Pharmascience [11]) and while that is of course a difference case, my understanding is that the facts were essentially the same. This post therefore proceeds on that assumption.

Given that defendants are regularly found to be inducing infringement by supply of an unpatented product accompanied by instructions to use it in an infringing manner, and Apotex did just that, how did Apotex try to avoid liability?

Apotex’s main argument was to the effect that no one will read Apotex’s PM and therefore no one will be induced by it. This argument has been made before, and always failed: see generally my paper “Is 'But For' Causation Necessary to Establish Inducement?” But the point turns on the evidence, and it is at least plausible — no one is arguing that physicians always consult the generic PM and prescribe strictly according to it—so it is always worthwhile for a generic to try the argument again, to see if it can get a better result on the facts.

The legal aspect of the argument turns on the threshold for causation at the second prong. Corlac [162] itself put the test this way: “the completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place.” This implies a test of “but for” causation. While there is certainly considerable caselaw that articulates the test this way, I have argued that other caselaw supports a less stringent test, along the lines of “encouragement to infringe,” and that there is very little caselaw in which the result actually turns on the precise test for causation at the second prong: see “Is 'But For' Causation Necessary to Establish Inducement?

The threshold is important because if it is simply “encouragement to infringe,” then any party who sells a product along with instructions to use it in an infringing manner will be liable for inducement (if the other prongs are satisfied). But if the threshold is “but for” causation, then it matters whether the direct infringer actually pays any attention to the instructions. If no one actually reads the instructions and therefore no one changes their behaviour as a result of the instructions, then any direct infringement would have happened in any event and it cannot be said that “without the influence, the direct infringement would not take place.”

So, consider a hypothetical case where the patent relates to the use of ammonia, an unpatented bulk commodity, for a novel purpose, namely to encourage growth of subterranean bacteria to aid in fracking. The patentee, P, sells ammonia for that purpose. In Scenario 1, the direct infringer, DI, goes to P to buy ammonia for fracking, and discovers it is priced at $2000/t, while the market price for bulk ammonia is $400/t. DI politely walks out of P’s establishment and instead buys ammonia from a different vendor, V, who sells bulk ammonia to clients who mostly use it for fertilizer production. V does not have a licence from P to sell ammonia for fracking. DI nonetheless uses the ammonia purchased from V for fracking. DI is therefore a direct infringer. V did not influence the direct infringer at all. V had no idea what DI planned to do with the ammonia; indeed, V had no idea that ammonia could be used for growing subterranean bacteria and would have mocked the idea. It is clear law that V is not an indirect infringer, even though V supplied the ammonia used by DI to infringe. Doctrinally, it is the second prong—the influence requirement—that relieves V from liability in this example, because V did not induce influence DI’s plan. This would be true even if DI had told V what he was going to use the ammonia for, and V had replied “Sure, buddy, whatever. It’s yours once I sell it to you.” That is why the influence prong is separate from the knowledge prong.

Now, in Scenario 2, suppose that DI did not initially know that ammonia could be used for fracking, but V did. DI goes in to buy ammonia for another purpose, and V says “Do you know ammonia can also be used for fracking.” DI is curious and V hands DI an instruction sheet on how to use ammonia for the infringing purpose. DI says “That sounds great! I can make a bundle” — and buys some ammonia and uses it to infringe. In that case, V is clearly inducing infringement, even on the high “but for” threshold, since DI would not have infringed but for V’s influence.

Finally, in Scenario 3, suppose that both DI and V knew that ammonia could be used for fracking. DI goes in to buy ammonia for that purpose. At the time of sale, V hands DI an instruction sheet entitled “Three great things to do with ammonia.” The first thing on the list is fracking, with detailed instructions. DI takes the sheet, glances at the title, and thinks “I don’t need tips — I know perfectly well what I’m going to do with this ammonia.” DI scrunches the sheet into a ball and throws it away, without reading anything past the title. In that case, the instructions do not actually influence DI. The test from Corlac is “without the influence, direct infringement would not take place.” In this scenario, direct infringement would take place, even without the influence, and so, on its face, the second prong of the Corlac test is not satisfied.

Apotex’s basic argument, as I understand it, is that this is a Scenario 3 situation. Yes, it supplied instructions to infringe, in the form of its PM, but the direct infringers never paid attention. They got their information from Janssen’s PM, or from the scientific literature, but not from Apotex’s PM.

This argument rests on two pillars. The first pillar is legal. The threshold for influence has to be high; on an encouragement standard, it is enough that Apotex sold the product with instructions to use it in an infringement manner and it does not matter if no one paid attention to Apotex’s PM. The second pillar is factual. It has to be established on the evidence that the users did not pay attention to Apotex’s PM. If at least one person was (or would be, in an NOC action) actually influenced to infringe by the PM, then it does not matter whether the threshold is high or low.

Turning to the first pillar, what is the threshold for influence? In this case, Manson J clearly endorsed a strict “but for” causation:

[127] The “but for” influence required in the second prong of the Corlac test sets a high bar – higher than “encouragement to infringe,” a “subtle reference” to the infringing use, or “attempting to induce others to infringe.”

Locke JA affirmed this high threshold:

[13] Apotex urges this Court to treat the threshold as a “but for” test, and it cites jurisprudence that calls this a causation test. I have no objection to Apotex’s characterization of the test, but I do not find it to be more helpful that the “would not have occurred without” and “sine qua non” characterizations provided in the jurisprudence of this Court. In my view, these are merely different ways of describing the same threshold.

This clearly affirms a high “but for” threshold, pointing out some equivalent ways of stating the same test.

While this statement is clear, there is a problem. In Teva v Janssen 2023 FCA 68 revg Manson J’s decision in 2020 FC 593, the FCA apparently endorsed a lower threshold, calling the “but for” threshold which Manson J had endorsed [FC 264] “unduly onerous” [FCA 82]: see here for my discussion. As just noted, in this case Locke JA clearly endorsed a “but for” causation threshold for influence, so it looks to me like there is a tension between these cases. Perhaps I misunderstood Teva v Janssen and read too much into it. I am not going to try to sort this out in this post, except to say that it is not clear to me how reconcile the decisions. Presumably the FCA will clarify matters in due course. I note that the panels were different — Stratas, Gleason, Woods JJA (for the Court) in Teva v Janssen, with Locke JA, de Montigny CJ and Goyette JA concurring, in this case. Locke JA was clearly aware of the Teva v Janssen decision, as he referred to it, albeit not directly on this point [8].

In any event, it is clear that the high “but for” threshold applies for the purposes of this case. One pillar of Apotex’s argument is in place.

What about the second pillar? Apotex argued that the evidence was that the direct infringers did not pay any attention to the PM. This is how Manson J described it:

[132] The crux of Apotex’s argument related to this second prong is that the experts all agree that the ultimate dosing decision is based on physician skill and judgment, not the language in the product monograph. Further, physicians have been steeped in the claimed dosing regimen throughout their training, clinical experience, and use of the INVEGA SUSTENNA® product. As such, the introduction of the product monograph for the APO Product will not influence or change their prescribing practices and will not amount to the level of influence necessary to meet the second prong of the Corlac test.

This argument was rejected by Manson J, who said the following:

[147] Notwithstanding the exercise of skill and judgment by prescribing physicians in selecting the dosing regimen for patients, the evidence before the Court in this case establishes that acts of infringement will be influenced by the acts of the alleged inducer, Apotex, to the point that, without the influence, direct infringement will not take place. Apotex’s product monograph will influence prescribers and patients to implement the claimed dosage regimen, thereby directly infringing the 335 Patent.

[148] I am satisfied, on the evidence before the Court that Janssen has proven, on a balance of probabilities, that at least some prescribers of the impugned APO Product will be sufficiently influenced by the Apotex product monograph to induce infringement by those prescribing physicians.

The details of the evidence are not clear due to the redactions, but this conclusion certainly looks like a finding of fact that some direct infringers would be influenced, even on a ‘but for’ test.

Apotex tried to challenge this finding, arguing that “none of the experts went so far in their testimony as to state explicitly that any direct infringement using Apotex’s product would not occur without Apotex’s influence” [26]. Locke JA rejected this on the straightforward basis that this is a factual finding that Manson J was entitled to make:

[25] As indicated at paragraph 11 above, the Federal Court concluded at paragraphs 147 and 148 of its reasons that such infringement would be influenced by Apotex to the point that, without the influence, direct infringement would not take place. It is in this sense that the Federal Court was entitled to conclude that the second prong of the test for inducing patent infringement was met.

[27] In my view, this is a factually suffused issue on which Apotex would have to establish that the Federal Court made a palpable and overriding error. The Federal Court did not err in law.

That all seems to say that in fact, on the evidence, the direct infringers would be influenced by Apotex to the extent that the influence prong is satisfied even with a legal threshold of “but for” causation. Thus, Apotex succeeded on the legal pillar of its argument, but failed on the factual pillar. That is what I had understood to be the basis for Manson J’s decision when I wrote my post on it.

That much is very straightforward, and I would not normally have devoted so much space to it. But it is necessary context to some further, more puzzling remarks by Locke JA. Apotex’s central argument on appeal was as follows:

[14] Apotex relies on the fact that its product monograph would essentially be a copy of that for INVEGA SUSTENNA, and the assertion that prescribing practices of physicians would not change if Apotex were allowed to market its generic version of INVEGA SUSTENNA. In light of the foregoing, Apotex argues that any influence that its product monograph could have on any ultimate act of direct infringement could not rise to the level required in Corlac.

As we’ve just seen, Locke JA rejected this argument on the facts. Here is the puzzle — he also rejected it on the law:

[23] The main weakness of this argument is that it depends on there being a requirement that prescribing practices of physicians be altered because of Apotex’s activities. In fact, this is not necessary.

I’m not sure how to reconcile this statement with the “but for” threshold which Locke JA endorsed. The test from Corlac is “without the influence, direct infringement would not take place.” This clearly states that the influence must cause a change in outcome — with the influence, there is infringement, without it, there is not. If nothing changes as a result of the influence, how can it be said that the influence caused anything?

Locke JA continued (original emphasis):

[23] What is required is that the ultimate act of direct infringement occur because of Apotex’s activities. . . .

[25] It follows that, even if the practices of prescribing physicians were to remain unchanged following the introduction to the market of Apotex’s generic version of INVEGA SUSTENNA, the fact would remain that activities by patients (and by prescribers) that had previously been non-infringing (because the drug was sourced from Janssen) would be infringing once the drug was sourced from Apotex, an unlicensed supplier.

Here, Locke JA seems to be saying that indirect infringement is established because the direct infringers would use Apotex’s product instead of Janssen’s. That is undoubtedly true. But that is not enough to establish infringement by inducement. It is also true in Scenario 1. DI’s activity, that would have been non-infringing if the ammonia had been sourced from P, is infringing because it was sourced from V instead. But that in itself does not make V liable for inducement. It is uncontroversial and long-established law that a party who does no more than supply a non-infringing product that is used to infringe is not thereby an infringer, even if it causes the direct infringer to change suppliers; that is why the second prong of the Corlac test requires influence by the indirect party. This is entirely apart from the question of the specific threshold for influence.

What was motivating these remarks? Why did Locke JA not simply affirm Manson J on the factual finding of “but for” causation, and leave it at that? I would speculate that Apotex’s argument on the facts was quite strong, notwithstanding Manson J’s finding. (As noted, the evidence supporting his finding is unclear due to the redactions.) My impression from the evidence in the pharma inducement cases generally is that the substantial majority of physicians and pharmacists really do not rely on the generic PM and the courts are struggling with the evidence to make the result come out the way it ‘should’ by finding that at least some do rely on the generic PM. Perhaps Locke JA wanted to provide an alternative basis for the decision that would not turn on the factual finding alone. Perhaps this was to set the stage for the day that a trial judge finally decides on the facts before them that physicians do not read the generic PM. If so, I sympathize with Locke JA’s dilemma, but the statements in these two paragraphs seem to go beyond endorsing a lower threshold and seem tantamount to removing the influence requirement altogether.

With that said, I do not disagree with the result. In my view, there are two sound and principled bases by which the same result could be arrived at, even if it had been established on the facts that the direct infringers did not pay any attention to Apotex’s PM. One would be contributory infringement, a US doctrine under which the mere supply of good especially adapted to infringe, constitutes indirect infringement, without any need for inducement. For reasons I explain in my article “Contributory Infringement in Canadian Law” (2020) 35 CIPR 10, I am of the view that contributory infringement is a sound doctrine which is consistent with the bulk of Canadian caselaw. However, it is not recognized in Canadian law: see MacLennan 2008 FCA 35 [33], [38], [40]. And is most certainly not the basis for Locke JA’s decision in this case. The other basis would be under a lower “encouragement” threshold for influence. But that was not used by Locke JA in this case.

I’ll end this post on a different point entirely. As noted in my post on Manson J’s trial decision, this was essentially a companion case with Janssen v Pharmascience 2022 FC 62, also before Manson J, in which Pharmascience sought to launch the same kind of product as Apotex, ie the loading doses but not the maintenance doses. There was considerable overlap between Manson J’s two decisions — indeed, too much. Parts of para 138 of his Apotex decision were “lifted” from his Pharmascience decision, and consequently contained some factual inaccuracies; for example, para 138 referred to four experts, when there were in fact five in the Apotex case [17]–[18]. While Apotex tried to make something of this on appeal, Locke JA concluded that this was a “slip of the pen” error which did not demonstrate that Manson J had failed to fully consider the issues [20].