When Does a Submission for an NOC Trigger S 5 of the NOC Regulations?

Teva Canada Limited v Pfizer Canada Inc 2016 FCA 248 Dawson JA: Webb, Rennie JJA rev’g 2014 FC 1243 Gleason J
            2,409,059 / exemestane / AROMASIN
            2,261,630 / infliximab / REMICADE / INFLECTRA

Section 3.4.1 of the most recent (2012) Guidance Document: Patented Medicines (Notice of Compliance) Regulations, states that when a generic manufacturer of a drug that already holds an NOC licenses a second generic to sell “the identical drug,” the second / licensee generic need only file an administrative drug submission which does not trigger s 5 of the NOC Regulations. This reversed the prior policy, under which the second generic’s submission was considered to trigger s 5. The change in policy resulted from the Minister of Health’s interpretation of the term “submission” in s 5(1) of the NOC Regulations, and not from any change in the regulations themselves. In this decision, the FCA held that the Minister’s interpretation of the Regulations was owed deference, and that the new interpretation was reasonable, reversing Gleason J on both points. This means that a patentee cannot decide whether to respond to an NOA in light of the threat it perceives from the particular generic; instead, a patentee must respond to every NOA it receives, or take the risk that the generic in question will subsequently license. With that said, according to the Guidance Document, the submission by the second generic will only be considered administrative if the drug is “identical.” In the cases under appeal, the second generic certified that its product would be manufactured in the same location with identical specifications and procedures. That is, as I understand it, the first generic, which had received the NOC, was manufacturing the drug for sale by the second generic. The FCA decision suggested that when a drug is manufactured by the second generic in circumstances that give rise to a “to a new or different basis for asserting that a particular product is infringing” [89], the submission should not be considered administrative. I would imagine that manufacturing by the second generic in a different facility might by considered sufficiently different, even if under licence by the first generic, but the Guidance Document is not explicit on this issue. And regardless of this suggestion by the FCA, the Minister’s interpretation on this point would be reviewed on a deferential standard.

Housen Standard of Applies to All Types of Appellate Review

Hospira Healthcare Corporation v The Kennedy Institute of Rheumatology, 2016 FCA 215 Nadon JA: Pelletier, Rennie, de Montigny, Gleason JJA
            2,261,630 / infliximab / INFLECTRA

The Hospira decision, with Nadon JA writing for a unanimous five member panel of the FCA, is important in several respects. Most prominently, it changed the standard of review for discretionary decisions of prothonotaries, replacing the standard set out by the FCA in Canada v Aqua-Gem Investments Ltd [1993] 2 FC 425 with the Housen 2002 SCC 33 standard. Relatedly, Hospira held that the Housen standard should also apply to appellate review of a motions judge reviewing an order of a prothonotary, and to appellate review of discretionary decisions of judges [78], [83]. On the substantive point at issue, the FCA clarified the law relating to the limits on examination for discovery. Hospira also addressed broader jurisprudential questions. The Court considered when it could depart from SCC precedent, and it also implicitly overruled its own prior decision in Miller 2002 FCA 370, as to when its own decisions should be overruled. And the decision is also institutionally significant, as it was heard by a five judge panel – the first five judge panel since Aqua-Gem itself, more than 20 years ago [29]. This post will deal with the first issue.

In the underlying dispute Hospira is seeking a declaration that Kennedy’s ‘630 patent is invalid and not infringed [4]. Hospira requested two days for discovery of each of the inventors, but Kennedy refused, saying one day was sufficient. Hospira conducted one day of examination of each of the inventors, in London and New York (both inventors reside in the UK, but one happened to be in New York). At the end of the day, examination was terminated by Kennedy. Hospira then brought a motion seeking to continue the examination, in person, for one day per inventor [7], [104]. Prothonotary Milczynski heard the motion, and ordered the examination be continued for one-half day, by teleconference [8]. Hospira appealed, and the Motions Judge, Boswell J, applied the Aqua-Gem standard and dismissed the appeal [9]. Hospira then brought this appeal to the FCA.

Standard of review of discretionary orders of a prothonotary
A central question on the appeal was whether the standard of review set out in Aqua-Gem as applicable to discretionary orders of a prothonotary, should be abandoned and replaced by the standard of review set out in Housen v Nikolaisen 2002 SCC 33 [19]-[37] as being applicable to the decisions of trial judges. Under the Aqua-Gem standard, a discretionary order of a prothonotary ought not to be disturbed unless (1) the question is vital to the final issue, in which case it is subject to a de novo review; or (2) “the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts” [42]. Under Housen, factual conclusions reached by a trial judge are subject to deferential review for palpable and overriding error; for questions of law and questions of mixed fact and law, where there is an extricable legal principle at issue, the applicable standard is that of correctness [66]. The FCA held that despite the different language, there was no real difference between the second branch of Aqua-Gem and the deferential standard set out Housen [26], [68]. Thus the question was whether the first branch of Aqua-Gem, which provides for de novo review on questions that are vital to the final issue, should be abandoned [26].

The FCA held that the de novo review branch of Aqua-Gem should indeed be abandoned, most importantly because it was wrong in principle [51]-[55]. The FCA adopted the reasoning of Low J in Zeitoun v. Economical Insurance Group 2008 CanLII 20996 aff’d 2009 ONCA 415, which had effected the same change in Ontario law [51]-[55]. This point boils to recognizing “a presumption of fitness that both judges and masters were capable of carrying out the mandates which the legislator had assigned to them” [53]. Masters may once have been assistants to judges, but they are now independent judicial officers [63]. There is consequently no justification for applying a different standard of review based merely on notions of judicial hierarchy [51].

The FCA further held that the Aqua-Gem standard should be replaced by the Housen standard [79]. On this point, I take the Court to be saying that even though the first branch of Aqua-Gem was substantially the same as the Housen standard, it is the Housen standard itself which should be used, and not some alternative formulation, even if putatively equivalent. The FCA also held that the Housen standard should be applied in reviewing discretionary decisions of motions judges, as was held in Imperial Manufacturing 2015 FCA 100, and doing away with the possibly conflicting formulation set out in Turmel 2016 FCA 9 [74]-[78]. The FCA also held that the same standard applies to appellate review of a motions judge reviewing a discretionary order of a prothonotary pursuant to Rule 51 [80].

Consequently, the law has been significantly simplified. There is now only one standard of review for discretionary decisions of prothonotaries and discretionary decisions of judges, which is the Housen standard [79]: absent error on a question of law or an extricable legal principle, intervention is warranted only in cases of palpable and overriding error. 

Time for En Banc Review at the FCA?

Cobalt Pharmaceuticals Co v Bayer Inc / drospirenone (NOC) 2015 FCA 116 Stratas JA: Pelletier, Webb JJA aff’g 2013 FC 1061 Hughes J (blogged here and here)
            2,179,728 / 2,382,426 / drospirenone / YAZ

No new law was applied by the FCA in Cobalt / Drospirenone and the result itself is not surprising, but the decision is nonetheless very interesting. Stratas JA explicitly called for the SCC to provide advice in two different areas, namely the standard of review for claim construction [16] and whether methods of medical treatment should be considered patentable subject matter [101]. Stratas JA also provided an in-depth discussion, albeit in obiter, of whether construction of the claims should be considered a matter of law or fact [16]-[24].

That the FCA called for SCC clarification in two contentious areas of law raises the broader question of what institutional mechanisms should be used to clarify and advance the law. I suggest it is time to seriously consider instituting an en banc mechanism similar to that which is used in both the US appellate system, including the Federal Circuit, and in the EPO with the Enlarged Board of Appeal. In this mechanism, a court which normally sits in panels, will sit with a large number of judges (though not necessarily the full court) to review its own decision in appeals raising important points of law. As the EPO explains, the Enlarged Board of Appeal “clarifies and interprets important points of law . . . and ensures uniform application of the law.” The issues raised in this case illustrate the usefulness of a mechanism for clarification and interpretation of important points of law. An en banc procedure could also usefully address apparent divergences between different panels of the FCA. En banc review would have advantages over the options which are currently institutionally available, namely legislative amendment, review by the SCC, or allowing panels to overrule prior decisions of other panels.

The problem with legislative amendment is obvious: the legislature has a lot on its plate and even very important issues of patent law may not be important enough to warrant legislative action. This is so obvious that in his call for reform Stratas JA addressed himself only to the SCC: he did not bother to say “in the interests of the sound development of the law, I would like to offer certain observations for the legislature to consider.” But much the same can be said about the SCC. The SCC has a limited caseload and it grants leave only in cases which it considers to be “of public importance” (Supreme Court Act s 40; and see here for a general discussion of the factors considered in leave decisions.) As I noted in an earlier post, “The SCC only hears about 60 cases a year, including many as of right criminal appeals, and it has an understandable focus on constitutional and criminal law cases. With what remains it has to deal with every other area of private law. The SCC simply does not have the ability to deal with every confused technical area of law, no matter how important that area might be to some parties.” It is true that the SCC is more accessible than the legislature and it is certainly more likely to act on technical matters of law such as the nature of appellate review, but the fact remains that the SCC cannot deal with every area of patent law that requires clarification or reform.

The problem of accessibility does not arise if we look to individual panels of the FCA, but individual panels simply lack the requisite institutional authority. This is quite apart from any argument that a panel should not be permitted to change or depart from settled law in order to preserve the expectations of the parties. Even if we were to say that it is permissible for an individual panel to depart from settled law, doing so would be more likely to further confuse difficult areas of law. The views of any panel, even the most recent to opine on a particular issue, carry no more weight than the panels that went before it. If one panel purported to change or clarify the law, the next panel to hear the same issue would be perfectly justified in saying that the opinion of the panel that had changed the law deserved no more weight than any of the panels that went before it, and so the supposed change was ineffective. Certainly, a well reasoned opinion of one panel may be so persuasive that subsequent panels will follow it for that reason; and more broadly, mechanisms of comity can cause the law to evolve and become clearer through the decisions of multiple panels. Such a process often does work effectively to resolve difficult new issues of law. But sometimes even new issues prove intractable; and the mechanism of incremental change through the decisions of individual panels is much less effective to address the problem which arises when law which is taken to be settled in principle proves to be problematic in practice.

So, en banc review is more accessible than the legislature or the SCC and it is more authoritative and potentially quicker than the decisions of individual panels. With that said, I can think of a couple of objections to en banc review, though none which strike me as compelling. One is that the law once settled, should not be changed. But that is not an argument against en banc review; it is an argument against changing the law through any mechanism, including SCC review and legislative change. And if the issue is one of clarification or interpretation rather than change, then by definition there are no settled expectations to be disturbed.

The other objection is that en banc review will not be useful when the problematic law is SCC precedent. While it is true that not even an en banc panel of the FCA could overrule the SCC, that only limits the scope of en banc review in some cases. So, one of the areas addressed by the FCA was methods of medical treatment. As Stratas JA noted “The current law in this Court is that methods of medical treatment are not patentable. . . . The provenance of this is Tennessee Eastman Co. et al. v. Commissioner of Patents, [1974] S.C.R. 111, 33 D.L.R. (3d) 459, a decision based on former subsection 41(1) of the Patent Act, now repealed.” As Stratas JA points out, and as the SCC has affirmed, Tennessee Eastman itself was based on s 41. As discussed here, the notion that methods of medical treatment remain unpatentable despite the repeal of s 41 stems from the interpretation of Tennessee Eastman by the FCA itself in ICI (1986) 9 CPR(3d) 289, subsequently affirmed in other FCA decisions. While the law is settled, changing it would not require the FCA to overrule the SCC, but only to overrule its own prior decisions.

The question of the correct standard of appellate review of claim construction is different, because of the authority of the SCC in Whirlpool 2000 SCC 67 [61] holding that “claims construction is a matter of law for the judge.” I will discuss this in more detail in Monday’s post. For now I will just saw that I think the law could be considerably clarified and improved in this area without overruling Whirlpool. And even if I am wrong about that, if en banc review can authoritatively tackle even half the contentious patent issues that come to the FCA, that would be very helpful.

Deferential Review of Factual Findings of the Re-examination Board

Newco Tank Corp v Canada (Attorney General)2015 FCA 47 Ryer J: Webb, Near JJA, aff’g 2014 FC 287 Mosley J
            2,421,384

In this re-examination the Board cancelled three of the claims of the ‘384 patent as being obvious. An appeal to the FC was dismissed on the facts, as discussed here. On appeal to the FCA, the patentee argued that the Board had erred in law by construing the “information presented as background knowledge in the patent itself” as being an admission of the common general knowledge [7]. In particular the patentee argued that the invention lay in the identification of the problem (inefficiency in heating of liquid storage tanks at well sites) and so it was an error to conclude that the problem itself was known merely because it was identified in the patent.

The FCA dismissed the appeal on the basis that the Board’s finding that the common general knowledge of the skilled person included the information presented as background knowledge in the patent itself was simply a factual finding [10], and so was properly reviewed by the FC on a deferential (reasonableness) standard [12]. I do not take this as a holding that any statements in the patent are indeed to be considered to be admissions as to the state of the common general knowledge; as I read it, the FCA was only saying that in this particular case it was reasonable for the Board to have concluded that the statements in question described the common general knowledge.

Correctness Standard of Review for Minister's Interpretation of S 5 of the PM(NOC) Regulations

Pfizer Canada Inc v Canada (Attorney General) 2014 FC 1243 Gleason J
            2,409,059 – exemestane – AROMASIN.

Under s 3.4.1 of the most recent (2012) Guidance Document: Patented Medicines (Notice of Compliance) Regulations, if one generic has received an NOC by comparing its product with a patentee's reference product, and a second generic obtains a licence from the first, the licensee is not required to comply with s 5 of the PM(NOC) Regulations, which is to say that the licensee need not serve an NOA on the patentee and need not address the patents listed against the drug [33]. Prior to April 2012, when the new Guidance document came into effect, a licensee would have been required to comply with s 5 [31]. Under the new policy Health Canada will require only an “administrative” drug submission, such as is used when a party that has received an NOC changes its name as a result of a corporate restructuring [28].This change in policy was made as a matter of Health Canada’s changed interpretation of the Regulations; there was no change to the Regulations themselves.

In this case, Pfizer successfully challenged that new policy (though an appeal will no doubt follow). Note that counsel for the Attorney General carried the argument in this case [51], so Health Canada evidently (and rightly) views this as a policy issue of general significance.  

Generic Medical Partners Inc. [GMP] filed an ANDS with the Health Canada with respect to exemestane, using Pfizer’s exemestane product, AROMASIN, as the reference product [45]. In August 2013 GMP sent Pfizer an NOA with respect to the ‘059 Patent, which was listed by Pfizer against AROMASIN. Pfizer chose not to commence a prohibition application against GMP, apparently because GMP does not sell products in Canada [44]. The NOC was issued to GMP for exemestane in October [45]. On the same day, Health Canada also issued an NOC to Teva with respect to exemestane. This NOC was granted on the basis of an administrative ANDS filed by Teva, based on a licensing agreement with GMP. The NOC issued to Teva also shows AROMASIN as the Canadian Reference product [46]. Teva never served an NOA on Pfizer. Pfizer sought judicial review to set aside the NOC granted to Teva [1].

There were two main issues. The first was the standard of review applicable to the Minister’s interpretation of the PM(NOC) Regulations. I discuss that issue in this post. The second was the substantive interpretation of the relevant provisions. I will discuss that in tomorrow’s post.

There were three main issues relating to the standard of review: (1) whether prior case law of the Federal Courts applying a correctness standard to decisions of the Minister of Health under the PM(NOC) Regulations were still binding in light of recent SCC case law [58]; (2) whether it mattered that the decision-maker was the Minister as opposed to an administrative tribunal [59]; and third, whether the decision of the SCC in Canadian National Railway v Canada 2014 SCC 40 [CN] meant that a reasonableness standard is always applicable when an administrative decision-maker interprets its constituent statute or regulation, or a statute or regulation that is closely connected with its function, unless the decision falls into one of four exceptions which were not suggested to be relevant in this case [60].

On the first issue, Gleason J agreed with the Attorney General that pre-Dunsmuir 2008 SCC 9 case law of the FC and FCA [58] cannot be considered determinative, and that in light of Dunsmuir and subsequent SCC cases, the reasonableness standard is “presumptively” applicable whenever an administrative decision-maker interprets its constituent statute or a statute or regulation that is closely connected with its function [67].

While the conclusion that pre-Dunsmuir case law of the Federal Courts can no longer be determinative seems fair enough, I am puzzled by the fact that the SCC Biolyse 2005 SCC 26 decision was not discussed in this context. The question at issue in this Exemestane case was the Minister’s interpretation of “submission" for an NOC in s 5(1) of the Regulations [123]. The question at issue in Biolyse was the interpretation of the word “submission” in s 5(1.1) as it then was [Biolyse 40ff]. The changes to s 5 were aimed at addressing when a patentee's product is considered a reference product (when a comparison is made "directly or indirectly" in the current provision), and not what constitutes a "submission." That is, the question was the deference to be given to the Minister’s interpretation of the very same word, in functionally the same provision. This is the very next thing to being exactly the same question.

In Biolyse, the SCC held that “On the question of interpretation, the Minister's opinion is not entitled to deference. The Federal Court quite properly said that the standard of review on that point is correctness” [36]. The discussion was brief, but this is evidently because the SCC thought the point was clear, and in any event it was undoubtedly part of the ratio of the case. It is true that the FC’s 2002 FCT 1205 [20]-[29] assessment of the standard of review in Biolyse was based on the “ pragmatic or functional analysis” that is no longer the accepted approach. But my understanding is that Dunsmuir was intended to simplify the previous three-standard model (correctness, reasonableness and patent unreasonablness) that had proven too difficult to apply: “What is needed is a test that offers guidance, is not formalistic or artificial, and permits review where justice requires it, but not otherwise. A simpler test is needed” [Dunsmuir 43]. In particular, the crux of the difficulty was that "lower courts were struggling with the conceptual distinction between patent unreasonableness and reasonableness simpliciter" [40]. So, the problem is not that SCC itself was getting wrong answers, but that it was not providing sufficient guidance. I don't see this as saying that the highly contextual functional test which had been previously applied was wrong in principle, just that it was too difficult to apply. None of this calls into question the specific results of the contextual, functional analysis, properly applied. 

Given the difficulty of applying the previous test, we might well doubt whether it was properly applied by lower courts, but I don’t see why Dunsmuir should call into question the outcome of the functional analysis when the previous test was applied by the SCC itself. In this case, the SCC Biolyse decision was discussed at length in other parts of Gleason J’s decision, but not at all in the context of the standard of review, presumably because it was not argued. It seems that the parties must have thought it so clear that Biolyse was implicitly overruled that it was not worth even discussing the specific SCC holding in Biolyse. This is quite remarkable. Biolyse itself was not discussed in Dunsmuir, so if it is no longer good law on this point, it can only be because Dunsmuir implicitly over-ruled all prior SCC decisions, not just on the general approach, but on the specific holding of all those cases on their facts. This seems to me to be far-fetched, given that the SCC built its new approach by a synthesis of the strengths of its prior case law (see eg [54]). Moreover, all of the members of majority in Dunsmuir, except Bastarache J, were also members of the majority in Biolyse that held the standard of review to clearly be correctness. Could they really have changed their minds so dramatically about judicial review in the intervening three years as to want to repudiate their own specific holdings? 

I am not an administrative law expert, so I may well be missing something glaring. But it certainly looks to me like the SCC itself has already held that the appropriate standard of review for the Minister's interpretation of the word "submission" in s 5 of the PM(NOC) Regulations is correctness, and this holding is still good law.

Moving on, Gleason J also agreed with the Attorney General that the fact that the Minister was the decision-maker does not in itself alter that presumption [84], given that FCA case law was split on this point [80].

However, Gleason J rejected the view that CN implies that the presumption of a reasonableness standard can only be rebutted in the four enumerated exceptions [88]. After an extensive review of the SCC authorities, Gleason J held that while the SCC case law as a whole does establish a presumption that the standard is reasonableness, the SCC authority requires a contextual analysis as to whether the presumption has been rebutted [98]. The four exceptions in which a correctness standard applies are only four cases where it has been settled, by a contextual analysis, that the presumption of a reasonableness standard has been rebutted; they do not constitute an exhaustive taxonomy of the only times the reasonableness standard can possibly be rebutted.

Again, I am not an administrative law expert, but Gleason J’s analysis appears to me to be sound in light of the many cases she cites. Moreover, it seems to me that the four exceptions cannot be exhaustive. For example, if the relevant statute explicitly provided that the administrative decision-maker was not entitled to deference, then a correctness standard would necessarily apply, even though that situation is not one of the four enumerated exceptions. (The closest is the existence or absence of a privative clause, which is a contextual factor, not an enumerated exception.) The discussion of the standard of review in CN is quite brief – only eight paragraphs ([55] - [62]) – and it strikes me as nothing but an application of the established framework of analysis, resulting in a finding of a reasonableness standard on the facts of the particular case. I think Gleason J is right to say that “[i]t would take a much more deliberate treatment of the issue by the Supreme Court than that which is contained in CN” to effect a change in the approach endorsed by the SCC [98].

The question then was whether, on a contextual analysis, the presumption of a reasonableness standard should be considered to be rebutted in this case. Gleason J held that it was rebutted. One key point was that the Minister has no discretion as to when to issue an NOC [114], and indeed,

the Governor in Council left the ultimate determination of whether an NOC should be issued under the PMNOC Regulations to this Court as it is the Court that is required to rule on prohibition applications made by innovator companies who wish to forestall the issuance of an NOC to a generic company through an ANDS. The role assigned to this Court under the PMNOC Regulations is inconsistent with application of the reasonableness standard to interpretations of the Minister or officials at Health Canada of the Regulations. [115]

This latter point in particular strikes me as compelling. A purposive analysis plays an important role in the modern approach to statutory interpretation. The purpose of the provision must be considered, but it must be considered in light of the purpose of the legislation as a whole. That is particularly true in the case of the PM(NOC) Regulations, where both the case law and the RIAS accompanying the 2006 amendments make it clear that the PM(NOC) Regulations are intended to strike a balance between the goals of promoting timely entry of generics, and providing effective patent enforcement: [16], [134], Biolyse [2]. The Minister of Health has no particular expertise in the construction of the PM(NOC) Regulations as a whole. The various provisions have been heavily litigated before the courts, and often the Minister, though a party to the proceeding, does not participate. This is true even of cases which raise issues of the interpretation of the Regulations. So, for example, the Minister has no view as to whether the allegations in the NOA must be correct as of the date of the hearing or as of the date the NOA was served: 2009 FC 648 [7]. Indeed, some of the provisions will never be interpreted by the Minister, even nominally, because they are only applicable in an action between the generic and the patentee (eg the s 8 remedial provisions). Because the Federal Courts are called on to interpret and apply all aspects of the Regulations, they have a better understanding of the balance sought by the Regulations as a whole. When the legislative history insists that the Regulations must be understood as a whole, it seems to me very unlikely that when the legislature would have intended to give deference to an interpretation by the Minister, who actively engages with only a part of those Regulations.

Finally, on a personal note, Dunsmuir was the clerk of the court in Fredericton, New Brunswick (the full name of the case is Dunsmuir v New Brunswick), and my wife and I were married in 2004 at the Fredericton City Hall, by David Dunsmuir, about a year before he was removed from office. He did a brief Elvis impersonation, which my wife particularly enjoyed, but so far as I know he performed competently, and we are validly married.

Deferential Standard of Review of Re-examination Board

Newco Tank Corp v Canada (Attorney General) 2014 FC 287 Mosley J
            2,421,384

In Newco Tank the patentee unsuccessfully appealed a decision of a Re-examination Board cancelling three of the claims of the ‘384 patent as being invalid for obviousness [1]. The patentee raised a number of points which complained, in effect, that the Board had applied the obviousness test too stringently. The main points illustrated by Newco are that Canadian courts continue to apply “an expansive and flexible approach to an obviousness inquiry rather than an overly rigid rule” [27], citing Sanofi 2008 SCC 61, [61]-[63], and that a deferential “reasonableness” standard of review will be applied to decision by the Board on questions of mixed fact and law, such as the application of the test for obviousness to the facts [22].

Admissibility of Expert Evidence Must Be Raised at Trial

Pfizer Canada Inc v Apotex Inc / azithromycin (NOC) 2014 FCA 54 Gauthier JA: Stratas, Webb JJA aff’g 2013 FC 493 O'Reilly J
              ZITHROMAX / azithromycin / 1,314,876

This is an appeal from O’Reilly J’s finding of fact (blogged here) that Apotex’s generic product would not infringe Pfizer’s 876 patent. Pfizer attempted to turn this factual issue into a question of law by arguing that evidence of one of Apotex’s experts was not admissible under the test for the admissibility of novel scientific evidence set out in R v J-LJ, 2000 SCC 51. The FCA rejected this argument, holding first, that in this case the question was not one of the admissibility of novel scientific evidence, but merely the interpretation of recognized tests, so the R v J-LJ analysis was not applicable [6]; and secondly, objections of this sort must be raised at trial [7], in order to allow consideration of the evidence necessary to properly apply the R v J-LJ test [9].

Prizer also argued that O’Reilly J’s made a palpable and overriding error in giving weight to the disputed evidence [12]. The FCA readily dismissed this argument on the usual deferential standard applicable to factual findings.

Lovastatin Decision Affirmed on the Facts

Apotex Inc v Merck & Co Inc / lovastatin 2011 FCA 363, Gauthier JA: Evans, Stratas JJA aff’g 2010 FC 1265 Snider J

In a decision delivered last December, that has yet to be released on the FCA website, Gauthier J, writing for the court in what I believe is her first patent decision since being appointed to the FCA, has affirmed Snider J’s lovastatin decision in an appeal that essentially asked the FCA to reweigh the evidence. Leave to appeal to the SCC has been sought, but I would astonished if it were granted.

Legally, there are only two points of passing interest. First, Gauthier J’s opinion provides a brief but thorough discussion of the law related to the standard of appellate review. While this will not be a leading case in that it does not change the law, it will be a very useful reference decision on this issue.

Secondly, Snider J had interpreted s 55.1 (s 39(2) under the old Act), which provides that “In an action for infringement of a patent granted for a process for obtaining a new product, any product that is the same as the new product shall, in the absence of proof to the contrary, be considered to have been produced by the patented process,” as placing the persuasive burden of proving infringement on the patentee [FC 168- 184]. The FCA refused to endorse this interpretation, on the basis that the burden of proof was not determinative of the appeal, and Snider J did not have the benefit of full argument on the issue [9-10]. In my view, it is a wholly salutary principle that holdings of law are entitled to little weight if they are not essential to the case and are made without the benefit of full argument. Now, if only the SCC would take that principle to heart, and quit its bad habit of making new law in obiter on unargued points.

Federal Court Overrules Supreme Court on Presumption of Validity

Eli Lilly Co. v. Apotex Inc. / cefaclor, 2009 FC 991, 80 C.P.R. (4th) 1, Gauthier J. aff’d 2010 FCA 240

Valence Technology, Inc. v. Phostech Lithium Inc. 2011 FC 174, Gauthier J

In Wellcome / AZT 2002 SCC 77 [44], the Supreme Court held that the appropriate “standard of review” of a granted patent on a question of mixed fact and law, such as validity challenge based on utility, is “reasonableness simpliciter.” This was a importation of administrative law principles into what had previously been dealt with in terms of the statutory presumption of validity set out in ss 43(2). The novelty of the Court’s approach is reflected even in the heading to its discussion, “The Standard of Review,” in contrast to the traditional “presumption of validity.”

In Eli Lilly / cefaclor 2009 FC 991 Gauthier J refused to follow this holding. Gauthier J’s discussion on this point is one of my favourite passages of judicial reasoning from the past year, for two reasons. First, her analysis is crushing, in terms of law and policy. In my view it is quite clear that Gauthier J is right and the Supreme Court is wrong. I have nothing to add to her thorough reasons, which I have reproduced below. Of course, neither strong reasoning in the Federal Court, nor weak reasoning in the Supreme Court, are novel in themselves. What makes Gauthier J’s analysis stand out is her willingness to face the issue directly. The more usual course when a lower court is faced with unpalatable authority is to interpret that authority narrowly, or make factual findings that avoid its application, until the inconvenient doctrine fades away from lack of use. This strategy has the advantage of formally respecting binding authority, but the corresponding disadvantage that the problematic doctrine distorts the law as the courts frame their reasons so as to avoid the doctrine, rather than to illuminate the issues. (As another example, see here.) Of course, Gauthier J’s decision not to follow the Supreme Court’s decision can be criticized as going beyond the role of a trial judge. But, as she pointed out, she did have very recent Supreme Court authority on her side, which the Supreme Court in Wellcome / AZT had not taken into account, and, moreover, the point had not been argued by the parties in Wellcome / AZT. It seems quite likely that the SCC did not realize it was making new law.

Gauthier J’s position reflects the general trend at the Federal Court. In Valence Technology Gauthier J at [179] reaffirmed the analysis she had set out in Eli Lilly / cefaclor. In Novopharm Ltd. v. Eli Lilly & Co. / tomoxetine 2010 FC 915 [29-30], Barnes J expressly followed Gauthier J in declining to follow Wellcome / AZT. While his reasons were less elaborate, they were equally pointed: “It is not entirely clear to me what was meant by Justice Ian Binnie in the discussion in AZT, above, about the administrative standard of review,” and “any deference is owed to the Commissioner in cases like this one, it is completely subsumed by the presumption of validity created by ss. 43(2) of the Patent Act, and is essentially extinguished where any evidence to the contrary is placed before the Court.” As Gauthier J pointed out in Eli Lilly / cefaclor, Snider J had also declined to apply a more deferential standard in 2007 FC 358 and 2009 FC 676, albeit without expressly disagreeing with the Supreme Court. In Eli Lilly Canada Inc. v. Novopharm Ltd. / olanzapine, 2009 FC 1018, 78 C.P.R. (4th) 1 O'Reilly J stated a deferential standard [12], citing Wellcome / AZT, but then apparently applied a balance of probabilities standard [13]. On the other hand, in Blair v Canada (Attorney General), 2010 FC 227, 81 CPR(4th) 403, Mactavish J applied a reasonableness standard, but that was a review of the Commissioner’s decision to refuse a patent, and not a validity challenge to a granted patent. There is a stronger argument for deference in such a case, as the same record is before Court as was before the Commissioner. (However, the point must be considered open, as Mactavish J ultimately held the decision to be unreasonable, so the standard of review did not affect the outcome.)

The important lesson from this decision, I suggest, is one for the Supreme Court. It should stop deciding points of law that are not argued by the parties. This is a simple step that would save the Court, and the law, from this kind of error.

I note that the presumption of validity will be addressed by the US Supreme Court in i4i Ltd. v. Microsoft Corp., 598 F.3d 831 (Fed. Cir. 2010), cert. granted, 131 S.Ct. 647 (Nov. 29, 2010) (No. 10-290). US law has traditionally has a relatively high presumption of validity which requires a showing of invalidity on the basis of “clear and convincing evidence.” That standard is the point on which cert was granted. The current US standard is high relative to the traditional Canadian rule, expressed by Gauthier J, and closer to the standard expressed by the SCC in Wellcome / AZT. My own view is that the current Canadian law, as expressed by Gauthier J, is sound in policy. It will be interesting to see whether the USSC agrees.

The relevant excerpts from cefaclor are after the break.