Display to the Public Not Enabling

Bombardier Recreational Products Inc v Arctic Cat, Inc 2020 FC 691 Roy J

            2,350,264

This litigation originally concerned four patents, three rider position patents and one frame construction patent. In his initial trial decision, 2017 FC 207 Roy J held the rider position patents to be invalid for insufficiency (see here), and this was upheld by the FCA: 2018 FCA 172 (here). Roy J had held that the frame construction patent was not infringed, but the FCA reversed on a point of claim construction, held that the frame construction patent was infringed, and remanded to Roy J for determination of validity and remedies [3]. No new law was applied, but there are a few points of interest: Roy J was strongly disinclined to apply issue estoppel based on foreign litigation to a question of validity; he was inclined to view claim construction points that had not been appealed as res judicata; the prior art was not enabling because public display after races without opportunity for inspection was not disclosure to the public; and lost profits were refused because of the difficulty of establishing a causal link between the single infringed patent and the lost sales.

Foreign issue estoppel
An initial question arose because Arctic Cat sought to argue that the frame construction patent was anticipated as a matter of issue estoppel, which applies to preclude re-litigation of an issue which has been conclusively and finally decided in previous litigation between the same parties or their privies [23]. In particular, Arctic Cat argued that issue estoppel applied because of a jury verdict in US District Court in Minnesota, finding that the asserted claims were anticipated and obvious [23], [30]. After carefully reviewing the relevant cases on foreign issue estoppel, Roy J held that this argument had no reasonable prospect of success [71]. He noted that while some cases had suggested that issue estoppel based on a foreign decision might be potentially be applicable regarding purely factual findings [52], [64], no cases had actually gone so far as to apply foreign issue estoppel even on a factual issue. Further, the great weight of authorities is to the effect that determinations of validity of a patent in a foreign court are not helpful and cannot be the basis for an estoppel argument [51], [66]. In short, Arctic Cat “has not been able to refer to one patent case where the proposition it advances has had even a measure of success” [64]. Nonetheless, Roy J did not (quite) hold that foreign issue estoppel could never apply to a determination of validity, but rather that:

It would take, it seems to me, a very strong demonstration in order to accept that the issue has been conclusively decided by a jury in a foreign jurisdiction with its own law applied by its own courts, such that the verdict would bar litigation before a Canadian court, preventing it from considering the validity of a Canadian patent, using its own substantive and procedural laws, and hearing Canadian admissible evidence.

On the facts, there was not nearly enough evidence, in particular related to whether the US law of anticipation is the same as that in Canada, for the argument to have any prospect of success [68].

Reconsideration of claim construction on remand?
An interesting procedural issue was raised. The construction of several terms was at issue in the first trial [77], but only the term “engine cradle” was considered on appeal [FCA 13], and it was on the construction of that term that the FCA reversed. The question therefore arose as to whether the construction of other contentious terms should be reconsidered in light of the FCA’s construction of “engine cradle.” The issue was important because one element of prior art, the “T/S sled,” did not anticipate on the original construction of the key issues, but might if the construction of certain terms was reconsidered. Roy J was inclined to the view that the construction of the other terms was res judicata [79], but he did not need to decide as he concluded, after reconsideration of the other terms, that the outcome was the same [80], [103]. The argument that the T/S sled anticipated therefore failed in light of the claim construction [108].

Disclosure to the public
One interesting point arose in respect of anticipation. Roy J held that even if the T/S sled embodied the claimed invention (which it did not), it would not anticipate because the enablement branch of anticipation was not satisfied. This is because the evidence was that the T/S sled was only on display after races and the essential elements of the invention would not have been apparent to a skilled person on mere visual inspection [112]. This strikes me as correct; anticipation requires that the invention be made available “to the public,” and while it is enough that the public had opportunity to access the invention, in this case even that opportunity was not established. This case is quite similar to Bauer v Easton 2010 FC 361 aff’d 2011 FCA 83 in which hockey skates embodying the invention were worn in a public arena by skaters subject to an obligation of confidence; this was held not to anticipate as visual inspection at a distance was not sufficient to provide an enabling disclosure of the invention, and members of the public were not free in law and equity to carry out a close examination of the skates that would have disclosed the essential elements of the invention.

The obviousness attack failed on the facts [124]. Roy J therefore held the frame patent to be valid and infringed [125]. 

Remedies
Turning to remedies, BRP sought lost profits for sales that it would have made but for the infringement and a reasonable royalty in respect of the remaining sale. 

The claim for lost profits failed, because BRP’s case on damages “was largely built on the four patents-in-suit having been infringed.” In light of the holding that only one patent was infringed, it was too difficult to make out the necessary causal link between the infringement of that single patent and the lost sales, as the rider position patents that had been held to be invalid, were a major driver of the lost sales [128], [136], [138], [144], [151].

The parties agreed that the hypothetical negotiation methodology was appropriate for establishing a reasonable royalty with a 50% split of the incremental profits attributable to the infringed patent [166], [174]. The key issue was therefore the assessment of the incremental profit. On this point Roy J preferred the evidence of BRP’s expert.

BRP sought the usual permanent injunction. Unsually, Arctic Cat resisted, not merely on the basis that there was no prospect of future infringement; on the contrary, it appears that it was Arctic Cat’s position that it should be permitted to continue to infringe: [183]. Arctic Cat advanced a variety of reasons why a permanent injunction should not be granted [183], all of which were rejected by Roy J [184]-[191], noting that “(a)n injunction normally will follow once the Court has found that a patent is valid and has been infringed” [185], quoting Abbvie 2014 FC 489 [35]. Roy J’s analysis was brief and I agree entirely, so I won’t recap it. I will plug the recent book I co-edited with Brad Biddle, Jorge Contreras, an d Brian Love, “Patent Remedies and Complex Products: Toward a Global Consensus” (open access) and especially Chapter 4 on Injunctive Relief, where we recommend that a permanent injunction be refused “if the negative effects of the injunction on enjoined parties would be disproportionate to the nature of the infringement and any noncompensable harm that the patentee will experience as a result of the absence of an injunction.”

Foreign Issue Estoppel in Theory and Practice

AstraZeneca Canada Inc v Apotex Inc / omeprazole 2015 FC 322 Barnes J
            1,292,693 / omeprazole formulation / LOSEC

An overview of this litigation is given in yesterday’s post. Parallel litigation US had taken place between the parties and AstraZeneca argued that principles of issue estoppel and abuse of process should apply to prevent relitigation of a number of findings of fact made by the US court in that previous litigation. There is an interesting issue of principle, discussed here, here and here, as to whether issue estoppel in Canadian patent litigation can be based on foreign findings of fact. The theory in favour of accepting foreign issue estoppel is the same as for domestic issue estoppel: it will save judicial resources and save the embarrassment of inconsistent decisions.

Barnes J recognized this theoretical argument, but he had a powerful rejoinder:

[379 [T]he practical problems of applying estoppel in a way that will actually protect judicial resources cannot be ignored. Those problems were quite apparent in this case.

[380] Given the discretionary nature of the application of foreign issue estoppel, AstraZeneca could not prudently assume the doctrine would be applied. It, therefore, independently led evidence on all of the above evidentiary points required to make its case. The practical effect of this was that no time was saved. In fact, by pleading estoppel, the trial was substantially lengthened. In response to AstraZeneca’s plea of estoppel, Apotex led fact evidence from two attorneys involved in the United States omeprazole proceedings, Martin Endres and Robert Silver. It also led opinion evidence from two legal experts, Judge Benson Legg (retired) and Mr. John Whealan. That evidence described the approach that the United States District Court took to the management of its multi-party infringement actions including the separation of the proceeding into waves. The purpose of this evidence was to attempt to explain the differences between United States and Canadian procedures and substantive patent law and to show that the two systems are sufficiently distinct that the application of estoppel would work an injustice on Apotex.

The theory is that foreign issue estoppel will reduce litigation costs; the practical reality, at least in this case, is that costs were increased to no benefit. Consequently,

[381] Considering the somewhat unusual process that was followed in the United States second wave proceedings involving Apotex, the practical disadvantages of applying issue estoppel to only a handful of findings made in that proceeding, and the fact that it is not necessary to rely upon the doctrine to fill a gap in the evidentiary record, I decline to apply the principle here.

Liability Decision is Res Judicata in a Bifurcated Action

Merck & Co Inc v Apotex Inc 2014 FC 1058 Hughes J var’g 2014 FC 883 Lafrenière J
            1,275,350 – lisinopril – PRINIVIL

This motion to amend relates to the upcoming damages portion of a bifurcated action. In the underlying Liability decision, 2006 FC 524 aff’d 2006 FCA 323, the patent was held invalid and infringed, in part on the basis of the law set out in Boehringer (1962), 39 CPR 201. Subsequently, in its Viagra decision 2012 SCC 60 [57], the SCC reversed, or at least reinterpreted Boehringer on the relevant issue. In this motion Apotex argued that the law having changed, it should be able to amend its Statement of Issues to argue, in effect, that it should not be made to pay damages for infringement of an invalid patent. In the decision under appeal, Lafrenière J held that the amendment would not be allowed, on the basis of res judicata. In a brief decision, Hughes J has affirmed, largely adopting Lafrenière J’s reasoning [7]. My post on Lafrenière J’s decision discusses the issues in more detail. I noted that while Lafrenière J’s reasoning was strong, I was not convinced that the prior Canadian case law was entirely settled. In adopting Lafrenière J’s reasons, Hughes J’s decision clarifies Canadian law on this point.

In a point which I did not discuss in my previous post, Apotex had also sought an amendment alleging that Merck had breached provisions of the Competition Act. That amendment had also been refused by Lafrenière J. Hughes J allowed these amendments in light of certain concessions made by Apotex regarding their scope [14]-[15].

Res Judicata in a Bifurcated Action

Merck & Co Inc v Apotex Inc 2014 FC 883 Lafrenière J
            1,275,350 – lisinopril – PRINIVIL

This motion to amend a Responding Statement of Issues raises a very interesting and difficult issue respecting the application of res judicata to a bifurcated action when the law has changed between the liability and damages portions, though at the end of the day I doubt the resolution of that question would make any difference to the outcome.

In the underlying Lisinopril Liability decision, 2006 FC 524 aff’d 2006 FCA 323, Apotex argued that the ‘350 patent was invalid because it was improperly divided from the parent ‘340 application, which disclosed only one invention. Hughes J rejected this on the basis that he was bound by prior case law, including Boehringer (1962), 39 CPR 201, to hold that each claim constitutes a different invention [116]. The FCA affirmed on this basis [39]. Subsequently, in its Viagra decision 2012 SCC 60 [57], the SCC held that Boehringer “does not stand for the proposition that every claim in a patent application is a separate invention.” In this motion Apotex argued that the law having changed – or at least, the Liability decision having been based on a misunderstanding of the law – it should be able to amend its defence in the damages portion of the action to argue that the Merck did not suffer any damages as a result of Apotex’ activities [28.12].

Essentially, the argument is that even though Apotex has been found liable for infringement, it should not be made to pay damages for infringement of an invalid patent. In support, Apotex relied on the UKSC decision in Virgin Atlantic [2013] UKSC 46. In Virgin Atlantic, the EWCA had held the patent at issue to be valid and infringed, and ordered an enquiry as to damages [11]. Subsequently, the EPO held the patent to be invalid [12]. The effect of the EPO decision is that the patent on which the liability decision was based is deemed never to have existed [27]. However, the EPO decision could not be raised by way of an appeal of the liability decision, as the order of the EWCA was final and not subject to appeal [16]. The question before the UKSC was whether the defendant should be able to raise the invalidity in the enquiry as to damage [16]. The UKSC held that the invalidity could be considered in the damages enquiry [37].

Easterbrook J on Issue Estoppel Based on Foreign Proceedings

In Apotex v AstraZeneca / omeprazole 2012 FCA 68 Stratas JA: Dawson, Trudel JJA aff’g 2011 FC 598 Mosley J, aff’g 95 CPR(4th) 414 Lafrenière Pr (blogged here), the FCA refused to strike a pleading raising issue estoppel based on foreign litigation. In catching up on my law review reading, I came across the decision of Easterbrook J (sitting by designation) in Vas-Cath Inc. v. Mahurkar 745 F Supp 517 (ND Ill 1990), rev'd in part on other grounds, 935 F 2d 1555 (Fed Cir 1991), which actually applied issue estoppel based on the Canadian decision by Strayer J in Mahurkar v Vas-Cath of Canada Ltd(1988), 18 CPR(3d) 417 as determinative of some issues in the US litigation between the same parties involving the corresponding patent. In light of the recent FCA decision, I thought Easterbrook J’s decision was worth raising, as I do not believe it has been cited in the previous Canadian cases on this point.

In deciding to apply issue estoppel (or issue preclusion, the US terminology), Easterbrook J remarked

I do not read the Federal Circuit's cases as compelling courts of the United States to ignore informed decisions rendered abroad; the judges of that distinguished court are not xenophobes. Decisions from the Federal Circuit instead reflect the legitimate concern that, when considering what the first case settled, courts not disregard differences in law. If a foreign court renders judgment on a question of fact with significance in each system of law, there is no reason not to take over that decision. Despite Judge Weinstein's omens, I propose to do just that: to examine the Canadian judgments, to learn what has been decided, and to apply those decisions to this litigation to the extent-and only to the extent-they are legally relevant, and the findings are free of the influence of legal differences.

            . . .

I do not think it important that Canada does not afford parties the same discovery rights as the Federal Rules of Civil Procedure. Preclusion survives substantial differences in the rules of procedure (provided the differences are not so great that the original judgment was obtained without due process of law, as we understand that phrase). Even within the United States, some states are more stingy with discovery than are federal courts, yet their judgments are honored. Vas-Cath does not contend that the system of litigation in Canada is uncivilized or unlikely to produce sound judgments. Most nations of the world view our system of discovery as uncivilized. No case I could find declined to give force to a Canadian judgment on the ground that Canadian procedural rules differ from ours. Vas-Cath has not pointed to any fact that it wanted to bring to the Canadian court's attention but could not because of procedural rules. Even after extensive discovery in this case, Vas-Cath has not identified any fact that could have made a difference, if only it had been found in time for presentation to the Canadian court.

Easterbrook J’s analysis seems to be consistent with the approach adopted in prior Canadian cases refusing to strike pleading based on foreign issue estoppel, such as those reviewed by Layden-Stevenson J inJohnson & Johnson Inc v Boston Scientific Ltd, 2008 FC 552 at [260]-[268] (and see also my post here discussing a variant of this issue.) The difference is that Easterbrook J went so far as to actually apply the doctrine.

I came across Easterbrook J’s decision in Kyle Grimshaw, International Upheaval: Patent Independence Protections and the Hague Conference, 2001 Duke L. & Tech. Rev. 20. Grimshaw argues that Easterbrook J was wrong, and issue estoppel based on foreign decisions should not be allowed, on the basis that foreign substantive and procedural rules may be different. While that is true, both of these concerns were acknowledged by Easterbrook J, who held, in effect, that this would not preclude the application of issue estoppel if these differences were not significant in the context of the case at hand.

Pleading Issue Estoppel Based on Foreign Proceedings

Apotex Inc v AstraZeneca Canada Inc 2012 FCA 68 Stratas JA: Dawson, Trudel JJA aff’g 2011 FC 598 Mosley J, aff’g 95 CPR(4th) 414 Lafrenière Pr.

Can issue estoppel in Canadian patent litigation be based on foreign findings of fact? While we do not yet have a definitive answer to this question, the FCA has once again held that such a pleading will survive a motion to strike.

In early skirmishing in the omeprazole infringement action, AstraZeneca sought to allege that Apotex is estopped from litigating certain findings of fact made in US litigation respecting the equivalent US patent. AstraZeneca was careful in its pleading to exclude “matters regarding claim construction.” Despite opposition from Apotex, Prothonotary Lafrenière permitted these allegations to stand, and that decision was affirmed by Mosley J. The FCA has now affirmed, saying “it is not plain and obvious at this time that the facts alleged are inextricably bound or related to the foreign court’s construction of the claims and that these paragraphs cannot succeed in law” [9].

See here for a related discussion, including citations to earlier decision of the FC and FCA on point.

Issue Estoppel and Foreign Proceedings

Astrazeneca Canada Inc v Apotex Inc 2011 FC 862 Hughes J

Inconsistent results in litigation between the same parties over corresponding patents in different jurisdictions is embarrassing and the duplicative litigation is wasteful. While the results of litigation in a foreign jursidiction are not directly binding on Canadian courts, issue estoppel might in principle be invoked to promote comity and reduce wasteful litigation. While I am not aware of any decision actually applying issue estoppel based on foreign litigation to determine a point in a Canadian action, in Apotex Inc. v Wellcome Foundation Ltd. (1996), 68 C.P.R. (3d) 23 (FCTD) and Connaught Laboratories Ltd v. Medeva Pharma Ltd. (1999), 4 C.P.R. (4th) 508 (F.C.T.D.) Sharlow J. aff'd (2000), 4 C.P.R. (4th) 521 (F.C.A.), the Federal Court has refused to strike pleadings that argued issue estoppel based on foreign actions. However, such pleadings will not automatically be accepted. In Astrazeneca Canada Inc v Apotex Inc 2011 FC 862, Apotex pleaded that because the patentee Astrazeneca had elected not to raise certain claims of the US patent in US litigation, it was thereby precluded from asserting the equivalent claims in the corresponding Canadian patent in the Canadian litigation. (It should be noted that this was in response to Astrazeneca’s pleading that Apotex was bound by certain factual determinations in the US litigation: [6:Category 2.1].) Hughes J ordered these paragraphs struck.

The assertion that the patentee was bound not to assert claims that had not been asserted in a foreign proceeding was novel, but Hughes J’s reasoning was based on broader considerations. The principle underlying issue estoppel, which is a branch of res judicata, is to ensure finality by precluding re-litigation of the same issue. Accordingly, issue estoppel requires inter alia, that it must be the same issue that was decided in the other judicial proceedings: Angle v Minister of National Revenue, [1975] 2 S.C.R. 248 (S.C.C.). In patent law, it may be very difficult to determine whether the same issue was decided. This was pointed out in a decision relied on extensively by Hughes J, Johnson & Johnson Inc. v Boston Scientific Ltd., 2008 FC 552 at [260]-[268], in which Layden-Stevenson J refused to apply issue estoppel to settle a point in an infringement action. Even when the patents are based on the same priority document, the claims at issue may differ, and even if the claims are the same, claim construction is a matter of law to which res judicata cannot apply. Expert witnesses on foreign law would be required to establish whether the issue decided was the same. In short, invoking issue estoppel based on foreign actions is likely to be more trouble than it is worth. Hughes J emphasized at [7] that “litigation is costly and that unnecessary irrelevant or distracting matters should not be put in play simply because there is a possibility of relevance.” In the circumstances in which issue estoppel or res judicata is traditionally applied, it would normally reduce litigation cost by avoiding wastefully duplicative litigation of the same issue; in patent litigation it is more likely to increase litigation cost by requiring determination of whether the same issue had been determined in the foreign litigation. In Connaught, Sharlow J was aware of this problem, and responded by saying that “complexity by itself cannot justify striking pleadings that are worthy of the Court's attention.” In this decision, Hughes J has come down in favour of trying to place some limits on the cost of patent litigation, rather than exploring every issue of potential relevance.

Abuse of Process: The Door Opens

Apotex Inc. v. Pfizer Ireland Pharmaceuticals / sildenafil 2011 FCA 77 Sexton JA: Layden-Stevenson, Stratas JJA var’g 2010 FC 968, Hughes J

Pfizer Ireland / sildenafil 2011 FCA 77 is an important decision on abuse of process and other pleadings related to the fact that PM(NOC) proceedings and an infringement action are entirely distinct proceedings that nonetheless often raise the same issues between the same parties. The prior FCA case law had undoubtedly “taken a dim view of attempts to prevent relitigation of issues decided in NOC proceedings in subsequent actions” [12]. In Pfizer Ireland / sildenafil 2011 FCA 77 the FCA affirmed that a defendant is in no way estopped from relitigating any cause of action, whether by way of res judicata, issue estoppel, abuse of process or any other doctrine [19]. Indeed, on the pleadings in issue the FCA varied the decision of Hughes J only by striking some paragraphs that he had allowed to stand. This is not surprising.

What is striking and significant is that the FCA went to considerable lengths to hold, after an extensive review of the case-law, that issue estoppel and / or abuse of process may bar relitigation of subsidiary factual and legal issues [24]. The Court specified that this may be particularly “where the evidentiary record at trial was identical to that of the NOC proceeding,” [23] but the Court did not set out any strict rules in this regard, and it noted that more broadly “issue estoppel generally precludes parties from raising arguments or issues that could have been raised at the original hearing,” [25, emphasis added]. The FCA left to the trial judge the question of whether a discretionary bar should apply in respect of a particular issue or factual determination [29], cautioning one the one hand that “courts should be cognisant of the summary nature of NOC proceedings and the fact that no discoveries or live evidence are permissible,” [25], but also that “issue estoppel and abuse of process exist primarily as pragmatic rules intended to promote judicial economy and efficiency. Those who act in a way such that pragmatism, judicial economy and efficiency are adversely affected, may find that the judge exercises his or her discretion in order to prevent such conduct” [27].

The Court’s reasoning is persuasive on its face, both in the distinction between cause of action estoppel and issue estoppel, and in the policy point regarding judicial economy. Nonetheless, there are clearly problems with this approach. The Court “acknowledge[d] a risk that parties may be tempted to make submissions concerning issue estoppel and abuse of process witness by witness, document by document, thereby prolonging proceedings,” but felt that this risk could be controlled by the discretion of the trial judge [27]. Moreover, even if it true that the trial judge can deal more or less adequately with these concerns, it strikes me that this is a second-best approach as compared with a system in which the NOC proceeding, or its equivalent – namely an interlocutory injunction – was actually part of the same proceeding as the infringement action. The problem of duplicative proceedings is just one of the problems that stems, fundamentally, from the distinct nature of NOC proceedings. Of course, that is a problem which cannot be addressed by the FCA.

Another interesting point is that there may be a split in the FCA on this issue, or at least a shift in views, between Pfizer Ireland / sildenafil and Janssen-Ortho v Apotex / levofloxacin (NOC) 2009 FCA 212. In litigation between Janssen-Ortho and Novopharm, Hughes J had found the levoflaxin patent to be valid and infringed, and this was affirmed by the FCA: 2006 FC 1234 affm’d 2007 FCA 217. In subsequent NOC proceedings between Janssen-Ortho and Apotex, Shore J referred repeatedly to the decision of Hughes J in the Novopharm litigation, and, while he did (in my view) carry out an independent review of the evidence, he relied on abuse principles to say "[t]his Court . . . would require better evidence and more appropriate legal argument . . . to come to a different result” 2008 FC 744 [214]. The majority of the FCA in Janssen-Ortho v Apotex / levofloxacin (NOC) remitted the matter back to Shore J to assess the evidence before him “independently of any findings made by Hughes J. in the Novopharm trial.” [80] (See here regarding the eventual fallout.) In contrast, the Pfizer Ireland / sildenafil decision expressly allows the trial judge to consider whether the evidence in the subsequent proceeding is different from that in the prior action. It is perfectly clear that the principles elaborated on in the Pfizer Ireland / sildenafil decision apply equally whether it involves a prior NOC and a subsequent infringement action, as in Pfizer Ireland / sildenafil, or a prior infringement action and a subsequent NOC, as in Janssen-Ortho / levofloxacin (NOC). The decisions cannot be reconciled on this basis. Indeed, generally the weight given to a prior infringement action should be greater, as the proceedings are full rather than summary.

A more plausible distinction is that the levoflaxin litigation involved different parties – Novopharm in the infringement action and Apotex in the NOC proceeding – while the parties to the sildenafil litigation were the same. However, in Pfizer Ireland / sildenafil the FCA noted that one of the rationales for abuse of process is to “promote the integrity of the justice system [and] prevent inconsistent findings” [24]. Surely the system is embarrassed by inconsistent findings based on the same evidence and arguments, whether the parties are the same or not. Similarly, at some point judicial resources are wasted in repeatedly litigating the validity of the same patent, whether or not the parties are the same. If these really are the justifications for the abuse doctrine, Shore J’s requirement that the new parties raise different arguments or different evidence is not so unreasonable.

Layden-Stevenson JA was the only judge in common between the two panels, and she dissented in the levoflaxin decision. However, she concurred on the abuse of process point [81], and dissented only because she felt that this error did not taint his own assessment of the issues. Thus, this is not a case where we can say that there is an obvious split in the Court in the sense that Layden-Stevenson J was in dissent on a point of principle in levoflaxin. Nonetheless, the principled distinction between the cases is not obvious to me. I would be interested to hear how Layden-Stevenson J would reconcile these cases.