A Party Acting Entirely Outside of Canada Cannot Be Liable under the Saccharin Doctrine

Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research 2020 FCA 30 Locke JA: Rivoalen, Nadon JJA var’g 2018 FC 259 Phelan J
            2,261,630 / infliximab / INFLECTRA

This post covers two issues related to the Saccharin doctrine: a party who conducts activities entirely outside of Canada cannot be liable under the Saccharin doctrine; and the Saccharin doctrine applies to Swiss-type claims.

As discussed here, Phelan J at first instance held that Hospira’s infliximab product INFLECTRA, infringed several valid claims of the 630 patent. One of the defendants was Celltrion, a South Korean group that makes biopharmaceutical products [FC 18]. Celltrion supplied the infringing INFLECTRA to Hospira, which imported it and distributed it in Canada [FC 17]. Several of the claims at issue were Swiss-type claims (ie claims “to the use of composition X for the preparation of a medicament to be used for Y” [16]), and at trial Hospira had argued that “as the Swiss-type claims refer to the manufacture of a medicament and Inflectra is not made in Canada and is not sold to Hospira in Canada, the Swiss-type claims are not infringed” [FC 294]. Phelan J rejected this argument on the basis of the Saccharin doctrine, holding that “Hospira cannot escape liability for infringement merely by housing its production overseas” [319]-[322].

The FCA held that Phelan J had erred in including Celltrion among the companies found to have infringed [37], because “the Judge made no finding that Celltrion conducted any activities in Canada” [33]. As Locke JA noted, the Saccharin doctrine holds that the imported product of a patented process is itself infringing, even though the process is used abroad and the product itself is not patented [34]. But he also pointed out that the Saccharin doctrine does not do away with the territorial limits on patent infringement; a party whose activities are entirely outside of Canada cannot infringe a Canadian patent: [36]. A party who is liable under the Saccharin doctrine may not have carried out directly infringing activities in Canada, but it will have carried out activities in Canada which profited from the invention (namely importation and sale of the product of the patented process). As Locke JA noted, this point was well-recognized in the English case law following the Saccharin decision itself, and had also previously been recognized by Gauthier J in Cefaclor 2009 FC 991 at [283-84]. It is helpful to now have the point affirmed by the FCA.

[*See Update below] The puzzle for me on this point is that, so far as I can see, Phelan J never actually held that Celltrion infringed. Hospira’s argument, noted above, appears to be a general argument that the claims themselves were not infringed by any party, specifically including Hospira because they were to the use in manufacture, and manufacturing had been done outside of Canada. Phelan J rejected this argument on the basis of the Saccharin doctrine, holding that “Hospira cannot escape liability for infringement merely by housing its production overseas.” [FC 319]-[322]. This holding is expressly directed at Hospira, not Celltrion, and it was not disputed that Hospira acted within Canada by importing and distributing INFLECTRA [FC 17]. This holding therefore seems to be to be a correct application of the Saccharin doctrine, which helpfully clarifies that Swiss-type claims are subject to the Saccharin doctrine. Hospira’s liability for infringement on this basis does not appear to have been appealed.

While the FCA decision implies that Phelan J also held that Celltrion infringed, I couldn’t find any such holding in Phelan J’s reasons. Phelan J distinguished between Hospira [3] and Celltrion [17], rather than referring to them collectively as Hospira. As just noted, his holding regarding the Saccharine doctrine was directed at Hospira, as was his overall conclusion on infringement: “For all these Reasons, Kennedy’s claim against Hospira for infringement will be granted” [336]. With that said, I didn’t re-read every word of Phelan J’s decision, and perhaps I missed something, or perhaps there was such a holding in the formal judgment.

*Update: I've now seen a copy of Phelan J's Judgment, and he did find that Celltrion infringed, even though, as the FCA noted, there was no basis for that finding in his reasons. This entirely explains FCA decision on this point, as there was nothing in Phelan J's reasons to support a finding of infringement by Celltrion.

Unclear Whether Location of Server Outside Canada Avoids Infringement

Canadian National Railway Co v BNSF Railway Co 2018 FC 614 Locke J
            2,922,551 / 2,880,372 /2,958,024

CNR’s patents at issue claim a system for conducting an online rail-shipment inquiry system, which CNR alleges are infringed by two of BNSF’s online rail-shipment tools. The claims are variously framed as being to a method, a server arrangement and a computer [15]. BNSF brought a motion to strike based in part on the fact that its server is located in Fort Worth, Texas, where it is based, and consequently many of the steps in the claims in issue would be performed outside Canada [36]. Locke J held that this argument would not sustain a motion to strike, on the basis that it is not clear as a matter of Canadian law whether such claims may be infringed even if the server is located outside Canada:

[46] I agree with CN that the debate over whether all steps of the claims in issue must be put into effect in Canada for there to be infringement is a question of law, which should not be decided on a motion to strike. In my view, the jurisprudence on this question is not sufficiently settled that CN should be prevented at this stage from advancing its position. BNSF relies on Varco Canada Limited v Pason Systems Corp, 2013 FC 750 at paras 265-266, for the principle that patents are territorial and that Canadian patents cannot be infringed outside Canada. I agree with this general principle, but there remains the more specific question of whether infringement of a claim to a method (or a sever arrangement or a computer) can be avoided by locating one component thereof (a server) outside Canada. BNSF cites a US authority (Home Gambling Network, Inc v Piche, 2013 US Dist Lexis 141595 at 5-6 (D Nev)) in support of its view that this is indeed sufficient to avoid infringement. However, CN cites a UK authority (Menashe Business Mercantile Ltd v William Hill Organisation Ltd, [2002] EWCA Civ 1702, [2003] 1 All ER 279 at para 32) for the opposite conclusion. There does not appear to be a Canadian decision directly on point. BNSF argues that the UK law concerning the territoriality of patents is different from Canada’s, and that the US authority should be preferred. Having considered the authorities cited by the parties, I am not convinced that it is plain and obvious that CN’s position is without merit.